Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Reforms in purchasing in Central/ Eastern Europe and ex-USSR: pay for performance? Joseph Kutzin Head, WHO Barcelona Office for Health Systems Strengthening Incentives for Health Provider Performance Network 11 May 2011, Clermont-Ferrand, France

Main sources for this presentation And the publications produced by the Kyrgyz Health Policy Analysis Center (see for more)

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Overview Motivations for reform of purchasing and some key messages from our analysis of financing reform implementation The (mostly) Kyrgyz experience General lessons learned from the region, and possible lessons for low and middle income countries elsewhere in the world

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Motivations for reform of purchasing Inheritance of excess capacity, low productivity, and unresponsive systems Growing recognition of poor quality in service provision, especially primary care Expectation that with “new formulas” by which only good and efficient services would be purchased, the problems could be solved

Key alignment issues (coordination, not magic bullets or “schemes”) 1.Revenue collection and pooling - Explicit coordination/pooling of budget and payroll tax revenues 2.Revenue collection and purchasing - Predictable, stable revenues to the purchaser 3.Pooling and purchasing for redistribution and efficiency gain - Not only new provider payment methods; need both 4.Revenue collection and benefit package 5.Benefit package and purchasing - Explicit links to avoid merely declarative entitlements 6.Financing and service delivery - Incentives alone not enough: need changes on provider side and political will to implement

Our list of pitfalls – errors in conception as well as implementation 1.Treating the benefits package as the solution to an accounting problem rather than as a policy instrument 2.“Solving” informal payments simply by legalizing them as co-payments 3.Undertaking incomplete or “half-hearted” reforms 4.Implementing contradictory policies 5.Having unrealistic expectations in terms of effectiveness of health financing instruments to improve quality of care 6.“Starting insurance” with the formal sector and hoping that economic growth will bring eventual progress towards universal coverage, as it did historically in many west European countries 7.Ignoring public health services and public health programs in health financing reform and policy analysis

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Aligning benefits with purchasing to enable realization of entitlements Reducing out-of-pocket spending for defined exempt groups in Kyrgyzstan

How benefit categories, co-payment obligations, and purchasing are linked by the Kyrgyz MHIF Self-referred Uninsured Insured Partially exempt Fully exempt Patient pays: co-payment Max High Mid Low Zero Purchaser pays: hospital base rate None Little Mid High Most

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Unique research on informal payment Data on informal payment is based on patient surveys There have been 5 complete survey waves between 2001 and 2006 Interviews conducted 4-6 months after discharge Detailed record of payment is taken without mentioning the word ‘informal’ or ‘illegal’ Survey data is merged with the case-based data of the MHIF to obtain administrative data on case characteristics

From declaring benefits to purchasing them: changes in OOPS by exempt patients Source: WHO surveys of discharged hospital patients

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Informal payments declined most for pregnant women and children…  For children<5, the net reduction in total patient payments was KGS 736 or 52% in real terms  For pregnancies, the net reduction in total patient payments was KGS 363 or 37% in real terms -19% -52% -37%

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011  For pensioners>75, the net reduction in total patient payments was KGS 397 or 28% in real terms  For medically exempt, the net reduction in total patient payments was KGS 732 or 33% in real terms  For socially exempt, the net reduction in total patient payments was KGS 181 or 13% -19% -28% -33% -13% … and show significant improvement for pensioners and other exempt categories

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Aligning purchasing with service delivery in an attempt to improve quality and outcomes Well conceived, but yet to deliver the results in Kyrgyzstan

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Motivation In analyzing its hospitalization data, MHIF determined there were a lot of cases for conditions that could be effectively managed at primary care level (“primary care-sensitive conditions”) IF treatment was appropriate and the population had access to the relevant medicines

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Aims of Kyrgyzstan’s additional drug package Promote use of new family physician groups by expanding their services (i.e. raise their credibility) Reduce unnecessary hospitalizations by supporting outpatient management of key conditions (asthma, hypertension, anemia, ulcers) Improve quality by link to new clinical guidelines, especially improved prescribing practices Reduce cost of outpatient drugs for beneficiaries

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Features of the drug package Funded out of FGP capitation payment Covers limited list of prescribed items; targets 4 causes of avoidable hospitalization for which clinical guidelines were developed Prescribing by generic name required Purchaser (MHIF) contracts with qualifying private pharmacies Patient pays difference between reimbursement rate and retail price

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Initial results were encouraging All PHC physicians have been re-trained Monitoring studies show that adherence to guidelines is high in PHC Additional Drug Benefit is widely used and HTN drugs are “top sellers”

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 But detailed survey analysis revealed problems in effective coverage Kyrgyz Health Policy Analysis Center and WHO study of health system effectiveness in Hypertension Control included hypertension monitoring as part of the health module –Nationally representative sample –12,438 respondents 18 years or older in KIHS –10,170 completed HTN measurement

The Additional Drug Package is a good program but not enough ADP provides subsidy to insured people for the purchase of drugs for primary-care sensitive conditions incl. HTN Generic prescription rate is very high Patients switch to brand name drugs at the time of purchase Cannot afford brand- name drugs continuously Result: intermittent use of HTN medication % of generic versus brand name HTN medication in ADP Source: MHIF

Why did people not take their HTN medication in the last 24 hours?

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Major problem of provider quality “If my physician had emphasized the importance of taking drugs for high blood pressure, I would have taken it on a regular basis, and maybe I would have avoided getting a stroke.” (Man, 50 years old, Jalal-Abad oblast) Akunov, Ibraimov, Akkazieva et al “Is the Kyrgyz health system effective in preventing and treating cardio-vascular disease?” CHSD Policy Research Paper No 45.

Measuring the effectiveness of the health system in HTN control Aware: 26.5% Treated: 17.1% Controlled: 13.9% 2.4% of hypertensives whose blood pressure is controlled

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 So even this comprehensive approach was not adequate Provider behavior resistant to change Generic prescribing built into the ADP was undermined by switching to more expensive branded drugs in the pharmacy Repeat of study in 2010 showed improvements in population awareness of their condition and care seeking behavior (especially in rural areas and for women), but little change in provider behavior and population behavior with regard to taking their HTN medications

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Some conclusions and possible lessons for other low and middle income countries

Lessons learned - general New health purchasers have been critical in transforming (some) health systems –Several countries demonstrated gains in “structural” efficiency, redistribution, and targeting of entitlements –However, little documented success in actually improving quality through purchasing –We’re still better at purchasing things we can count Accountability and governance structures did not receive sufficient attention Management autonomy and skills have been critical success factors Step-by-step implementation was important to give time for institutions to mature

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 RBF/strategic purchasing as a key step in process of building domestic health financing systems and institutions Need to consider the purchasing institution(s) as well as the technical mechanisms used to pay providers Creating a strong purchasing agency as the “change agent” in the reform process –Requires consolidating fund pools –Technical development on payment methods, information management, provider autonomy, … –And it takes time!

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 A contextual challenge? How to attract and retain people with the (scarce) skills needed to implement relatively sophisticated purchasing and M&E systems? –Kyrgyz hospital payment system was designed by former rocket scientists(!), and availability of mid-level technicians to run it who had little choice but to take public sector job –How to create enabling conditions for effective purchasing on behalf of the entire population of most LMIs, when it probably is not possible at civil service salaries?

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Thank you

An illustration of the problem: government health spending by input (prior to financing reforms) Moldova 2000Kyrgyzstan 2001 Salaries and social benefits 47%52% Utilities 27%20% Drugs and supplies 14%9% Food 6%9% Capital and repairs 6%5% Other 4%

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Aligning pooling and purchasing for efficiency gain The single payer reform and downsizing in Kyrgyzstan

Fragmentation and inappropriate incentives as sources of efficiency problems Input-norm-based budgeting Fragmented and overlapping pooling and purchasing, vertically integrated with provision Inherited clinical practice patterns Rising energy prices with transition to market economy, combined with energy inefficient buildings Difficulty in reducing staff numbers because of social consequences of unemployment Inefficiencies had distributional consequences –They manifested as the need to pay/provide own inputs, which hit the poor hardest

Source/ collection Pooling Purchasing Provision Population Oblast, rayon and city administrations Bishkek City Finance Dept. Republican budget RayonsOblast RFD rayon hospitals, polyclinics, SUBs, FAPs OHD OFD Oblast hospitals and polyclinics Each oblast city health depart- ment CHD City hospitals and polyclinics City MOH Republican health facilities Bishkek (and nearby) Coverage RFD OHD OFD

Social Fund MHIF Covered persons contracted FGPs & hospitals Source/ collection Pooling Purchasing Provision Population Bishkek City Finance Dept. Republican budget RayonsOblast CRH, FAPs, SVAs, SUBs, FGPs, polyclinics Oblast hospitals and polyclinics CHD City hospitals, polyclinics, FGPs Bishkek MOH Republican health facilities Bishkek (and urban Chui) Coverage Each of Six Oblasts Oblast, rayon and city administrations CRH RFD OHD OFD CRH RFD OHD OFD 1997 compulsory insurance fund adds new player but doesn’t address underlying structure

Republican MHIF (national pool) Population of each Single Payer region Coverage contracts Source/ collection Pooling Purchasing Provision Population Social Fund Oblast, rayon and city administrations Republican budget FGPs, oblast and rayon hospitals, private pharmacies, etc. Coverage Oblast level TDMHIF Mandatory Health Insurance Fund 2001 “Single Payer Reform” eliminates fragmentation within oblasts

Summary of Single Payer features Sources: local budgets, Republican budget, payroll taxes, formal co-payments Pooling: Single pool for each territory (oblast), and complementary national pool for “insured” Purchasing: purchaser-provider split; capitation payment for PHC, case-based payment for inpatient care Benefits: universal entitlement funded from local budgets, complementary contribution-based entitlement for insured funded from payroll tax and Republican budget

Planned for years, but downsizing only began after the incentives changed Source: Socium Consult (2002)

Share of hospital expenditures spent on patients increased Direct medical expenditures (medicines, medical supplies, and food) as a share of total public expenditures at the hospital level in the SGBP Source: Mandatory Health Insurance Fund, Kyrgyzstan

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Aligning pooling and purchasing for redistribution Centralization of pooling and change to output-based payment for redistribution in Moldova and Kyrgyzstan

Insured population Coverage contracts Source/ collection Pooling Purchasing Provision Population Central budget revenues Payroll taxes Health care providers National Health Insurance Company Moldova also eliminated fragmentation with single national pool of funds 2/31/3

Centralized pooling combined with shift from input to output-oriented payment reduced geographic inequity in spending Source: Shishkin et al. (2008). Evaluation of Moldova’s 2004 Health Financing Reform. Copenhagen: WHO/EURO Health Financing Policy Paper 2008/3.

Centralization of pool and continued output-based payment in Kyrgyzstan led to similar results in 2006 Source: Financial Management Reports on execution of the State Guaranteed Benefit Package and 2007 MOH Performance Indicator Report

Lessons learned – primary health care Capitation payment is a good start to equalize resource allocation when moving away from historical budgets –Provider autonomy and improved management skills are key –Age, sex and other need adjusters in capitation formula are important Not sufficiently powerful incentive to encourage expansion of PHC task profile –Limited patient switching weakens competitive drive –Inherent incentive is to prescribe and refer  weak early detection and chronic disease management

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Lessons learned - hospital care The trend towards case-based payment was driven by efficiency considerations and need for purchasers to have activity information Case based payments indeed drive efficiency improvement at the hospital level mostly through volume increase Purchasing reform alone did not trigger reduction of physical infrastructure To achieve better balance between different levels of care, additional instruments needed

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Data Month of hospitalization Number of interviewsAs share of hospitalization* in month of survey 2001 February2,9137.4% 2001 July3,7319.9% 2003 April4,4409.5% 2004 April4,5348.0% 2006 October5,3379.4% * Among hospitals contracted by the MHIF

Pay for performance: lessons from central/eastern Europe and ex-USSR 11 May 2011 Total volume of informal payment decreased +18% -54% -63% +37% -22% In real 2001 prices