Strategic purchasing:An emerging agenda in Africa for

Universal Health Coverage

30 September 2016

RabatInke Mathauer, MSc., PhDHealth Financing Policy Team WHO, Geneva

What is purchasing?It is the process of paying for services:

relates to the relationship between purchaser and provider

refers to the allocation of resources from the purchaser to health service providers and concerns:

– Benefit package design: Which services and drugs to finance, and at what level?

– Resource allocation and provider payment methods: how are providers paid and at what rates?

– Selection of providers: from which types of providers?

occurs in all countries and in all types of health financing systems

Medicines: underuse of generics, higher than necessary prices

Services: medical errors, sub-optimal quality of care

Medicines: inappropriate or ineffective use

Services: inappropriate hospital size (low use of infrastructure)

Medicines: use of sub-standard and counterfeit medicines

Services: inappropriate hospital admissions and length of stay

Services and products: oversupply and overuse of equipment, investigations, procedures

Health workers: inappropriate or costly staff mix, unmotivated workers

Interventions: inefficient mix or inappropriate level of strategies

Leakages: waste, corruption, fraud

Ten leading sources of inefficiency

Source: World Health Report (2010), Chapter 4

An estimated 20-40% of health resources are wasted

Medicines: underuse of generics, higher than necessary prices

Services: medical errors, sub-optimal quality of care

Medicines: inappropriate or ineffective use

Services: inappropriate hospital size (low use of infrastructure)

Medicines: use of sub-standard and counterfeit medicines

Services: inappropriate hospital admissions and length of stay

Services and products: oversupply and overuse of equipment, investigations, procedures

Health workers: inappropriate or costly staff mix, unmotivated workers

Interventions: inefficient mix or inappropriate level of strategies

Leakages: waste, corruption, fraud

Ten leading sources of inefficiency

An estimated 20-40% of health resources are wasted

Some of these inefficiencies can be addressed through

better purchasing, others are to be addressed by

improved procurement.

Addressing efficiency requires several entry points

• Buying goods/supplies and medicines

• Determining the type of goods to buy

• Price and volume negotations

• Paying service providerso Provider payment

methods and rates• Contracting with public

and private providers

Purchasing ProcurementPurchaser(s) Purchaser(s), hospitals

central procurement agency

Human resource management

Infrastructure planning

At stewardship level:

What is strategic purchasing?

• «Linking payments to information on performance and health needs of the population»

• «Active, evidence-based engagement in defining the service-mix and volume, selecting the provider-mix, and deciding how to purchase»

through

– Payment methods and payment rates that create incentives for providers to manage their expenditures and/or focus on quantity or quality performance metrics

– (Selective) contracting, accreditation, performance monitoring

Moving from passive to strategic purchasing

“Passive”– resource allocation

using norms– little/no selection of

providers– little/no quality

monitoring– price and quality taker

Passive Strategic

• “Strategic”– payment systems

that create deliberate incentives for efficiency and quality

– selective contracting– quality improvement

and rewards– price and quality

makerSlide from WHO Advanced HF training, Tunis 2014

Align funding and incentives with promised health services

Promote quality in

service delivery

Promote accountability of

providers and purchasers to the

population

Enhance equitable

distribution of resources

Manage expenditure

growth & promote efficiency

Objectives for strategic purchasing

No progress towards UHC without efficient spending

“more health for the money” (WHO 2010, Ch. 4)

Align funding and incentives with promised health services

Promote quality in

service delivery

Promote accountability of

providers and purchasers to the

population

Enhance equitable

distribution of resources

Manage expenditure

growth & promote efficiency

Objectives for strategic purchasing

Countries “cannot simply spend their way to UHC” (Kutzin et al. 2016)

Closed-ended/budget-neutral

provider payment

Incentives to limit high-cost services

Emphasis on Primary

Care

Procurement: e.g., negotiation of drug prices

What does effective strategic purchasing look like in practice?

Source: Japan-WB Partnership Program on UHC 2014

But we often spend without knowing what we buy

Would you support a system that purchases– A very vaguely defined benefit package or a wide package that is

effectively not deliverable?

Would you support a system that purchases– Ineffective services, ineffective drugs– High volume of expensive diagnostic and curative services at the

expense of cost-effective public health measures and low cost curative services?

Would you support a system that pays for– Services without information on need and effectiveness

Many systems do the above to some extent!Slide from WHO Advanced HF training, Tunis 2014

Current challenges to moving towards strategic purchasing (1)

Weak stewardship for reform in general, and weak or absent governance of purchasing functions in particular

Unclear mandates of purchasing agencies and inadequate levels of autonomy of providers and purchasers;

Piloting mode of reform efforts with insufficient orientation towards institutionalization

– E.g., stand-alone performance-based financing mechanisms

Current challenges to moving towards strategic purchasing (2)

Existing public financial management regulations as a hurdle to implementing more output-oriented payment mechanisms;

Inadequate generation and use of data related to provider payment for wider system monitoring and for informing decision-makers;

Inadequate global information sharing on strategic purchasing experience and best practices, what works and does not work.

2. Mixed provider payment systems

4. Information management systems for effective purchasing

Some key topics and issues we think need more attention

3. Benefit package design and alignment with PPM

1. Governance around the purchasing function

1. Governance around the purchasing functions Need for clear mandates of purchasing agencies and adequate

levels of autonomy of providers and purchasersCoherent decision making structure (and division of labour

in decision-making) on purchasing aspectsOversight and accountability of purchasers, citizen

participation(Institutional) leadership to shift to more strategic

purchasingEnsuring effective purchasing market (e.g., single or

multiple) and institutional setup for purchasing (e.g. purchaser-provider split)

2. Mixed provider payment systems

Seeing the ‘mixed’ in mixed provider payment systems– Shifting from a messy mix to a coherent mix

Finding a context-appropriate mix of provider payment methods with aligned incentives

Let’s not forget: Improving budget execution

Integrating Performance Based Financing mechanisms into the system

3. Benefit package design and alignment with PPM

Realising the principle of “whatever is promised, can be delivered”

– based on a transparent process that determined which specific health services are included and which ones are excluded

– People are aware of what is covered

Finding the right specificity level in BP design– Institutionalization of BP revision and role of HTA

Focus on pricing and less on costing of BP (need to be clear on the purpose of costing)

Need to align BP and provider payment methods

4. Information management systems

Need for data and information to – improve purchasing and provider payment– improve planning to meet population needs– monitor and evaluate

Clarity in what data is needed and how to make use of it

Need to set up national, integrated (non-fragmented) health information management systems

Thank you very much!

Questions? Comments!

Purchasers and patients

Providers and industry

Policy makers

“I’ve got a strange feeling we’ve been

going round in circles”

Source of slide: A. Maynard