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Performance-based financing and changing the district health system: experience from Rwanda.

by Robert Soeters, Christian Habineza, Peter Bob Peerenboom
Bulletin of the World Health Organization ()

Abstract

Evidence from low-income Asian countries shows that performance-based financing (as a specific form of contracting) can improve health service delivery more successfully than traditional input financing mechanisms. We report a field experience from Rwanda demonstrating that performance-based financing is a feasible strategy in sub-Saharan Africa too. Performance-based financing requires at least one new actor, an independent well equipped fundholder organization in the district health system separating the purchasing, service delivery as well as regulatory roles of local health authorities from the technical role of contract negotiation and fund disbursement. In Rwanda, local community groups, through patient surveys, verified the performance of health facilities and monitored consumer satisfaction. A precondition for the success of performance-based financing is that authorities must respect the autonomous management of health facilities competing for public subsidies. These changes are an opportunity to redistribute roles within the health district in a more transparent and efficient fashion.

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884 Bulletin of the World Health Organization | November 2006, 84 (11) Abstract Evidence from low-income Asian countries shows that performance-based financing (as a specific form of contracting) can improve health service delivery more successfully than traditional input financing mechanisms. We report a field experience from Rwanda demonstrating that performance-based financing is a feasible strategy in sub-Saharan Africa too. Performance-based financing requires at least one new actor, an independent well equipped fundholder organization in the district health system separating the purchasing, service delivery as well as regulatory roles of local health authorities from the technical role of contract negotiation and fund disbursement. In Rwanda, local community groups, through patient surveys, verified the performance of health facilities and monitored consumer satisfaction. A precondition for the success of performance-based financing is that authorities must respect the autonomous management of health facilities competing for public subsidies. These changes are an opportunity to redistribute roles within the health district in a more transparent and efficient fashion. Bulletin of the World Health Organization 2006 84:884-889. Voir page 888 le r��sum�� en fran��ais. En la p��gina 889 figura un resumen en espa��ol. Introduction Contractual relationships are variously termed as ���contractual approach���, ���cont t tracting��� and more recently, ���perfort t mancetbased financing��� or ���P4P��� (payt t ment for performance). The generic term ���contracting��� is too general to define this relationship in the health sector. This is because contractual arrangements in the health sector should not only focus on the judicial aspects of rigid contracts and profit orientation (as in the private for profit sector), but also emphasize supportive partnerships between differt t ent actors, who share similar social aims such as the Millennium Development Goals.1,2 Several studies from lowtint t come Asian countries have shown that performancetbased financing had better outcomes for improving health services than the traditional ���input��� approaches which are characterized by centralized planning and the distribution of inputs such as salaries, essential drugs, medical equipment.3,4 While exhaustive ext t amples of performancetbased contracts from Africa are still rare, Rwanda started several promising initiatives of perfort t mance financing from 2001. We describe the experience with performancetbased Performance-based financing and changing the district health system: experience from Rwanda Robert Soeters,a Christian Habineza,b & Peter Bob Peerenboom c .889 �������� ���� ���������������� ������������ ������ �������������� �������� a Public health and financing consultant to Cordaid, Kramsvogellaan 22, 2566 CC Den Haag, Netherlands. Correspondence to this author (email: Robert_Soeters@hotmail.com). b Cordaid, Rwanda. c Public health and institutional development consultant to Cordaid, Netherlands. Ref. No. 06-029991 (Submitted: 1 March 2006 ��� Final revised version received: 22 August 2006 ��� Accepted: 23 August 2006) contractual relationships in Cyangugu province, Rwanda, and the changes that were made in the organization of the district health system to facilitate the process. Background After the 1994 genocide, Rwanda bet t came an impoverished country with a largely destroyed health infrastructure dependant on international assistance for providing health services free of charge. Rwanda has subsequently made substantial progress in stabilizing and rehabilitating its economy to pret1994 levels. Rwanda has one of the best economies in Africa (with the exception of African countries that experienced oil windfalls) with a growth rate of 9.9% in 2002.5 The country is businesstfriendly, has strengthened property rights and purt t sued sensible fiscal and monetary policies. The government seems to be genuine in its efforts to seek improvements for the population. Rwanda is largely poor, with about 90% of households engaged in subsistence agriculture.6 After the war, the new government retadopted the district health model to rebuild the health system along the 1987 orientations of the Regional Comt t mittee of Africa of the World Health Organization.7,8 Provincial health offices and district health teams obtained the responsibility for, or monopoly on, all aspects of the health system including planning, provision, regulation and input disbursements. Each health district had an office, a hospital and governmentt or churchtowned health centres providing services to an average of 20 000 people. Nevertheless, there were no formal planning procedures or health plans. By 2000, the Rwandan Governt t ment shifted its health policy towards decentralization, leaving health service supply and demand to market forces. These major changes were triggered by decreasing international assistance and limited government health expenditure. The meagre government funding was characterized by centralized allocation, parallel vertical health programmes such as immunization and unclear linkage with intended results. When the demand for health services started to exceed the capacity of health facilities to meet this demand free of charge, the government allowed health facilities to set user fee levels autonomously and spend the
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885 Bulletin of the World Health Organization | November 2006, 84 (11) Special Theme ��� Contracting and Health Services Performance-based financing: Rwanda Robert Soeters et al. revenues at their own discretion. As a result, health service quality improved, but costtsharing put an unreasonable financial burden on the predominantly poor population, and consequently, utilization rates dropped. In 2001, the annual government health expenditure amounted to US$ 3 per person, of which only US$ 1 reached the frontline health providers, while the health centres gent t erated 60���80% of their revenues from costtsharing. From 2001 several contracting init t tiatives were started in Butare,9 Cyangugu and Kigali provinces. Cyangugu provt t ince, with 620 000 inhabitants, is situt t ated between a high mountain range, Burundi, and the Democratic Republic of the Congo. Roads and education improved considerably and the estabt t lishment of mobile phone networks was helpful for development activities. Authorities promoted the involvement of religious/churchtowned health facilit t ties, covering 40% of the population and receiving the same public funding as government health facilities. The private fortprofit health sector in Cyangugu is small by African standards. The meagre government and aid agency support for the health services in 2001 helped create an enabling environment for int t novation. Health providers learned to run their facilities autonomously, but eagerly accepted any new support. Comt t munities and local authorities had high user fees and welcomed new approaches. As administrative restrictions were few, it was an excellent opportunity to field test innovative ideas. Other favourable factors in the health system were the existence of a computerized health management information system and a nontmonopot t listic essential drugs distribution network involving both government and private wholesalers. The international nongovernmental organization (NGO) Cordaid, operating in Cyangugu since 1998, responded to the favourable conditions for change in the health sector. In 2001, Cordaid comt t mitted itself to innovative performancet based financing. It started contracting in 2002 and by January 2003, all 24 health centres and four district hospitals had signed contracts. Institutional setup for contracting Based on best practices from the litt t erature and pragmatic considerations, a new institutional setup was proposed for contracting in Cyangugu province (see Fig. 1). Its main aim was to create checks and balances at the district level between the four main stakeholders: (1) health service providers, (2) consumers, (3) a purchasing organization and (4) the regulators. This implied reinforcing the autonomy of the health provider mant t agement, strengthening the consumer voice, and the creation of a fundholder organization that was independent of the regulatory and administrative authorit t ties. The new settup had the following main functions and responsibilities. Health service delivery. After signing the contracts, the health centres and hospitals delivered health services autonomously as organizational ent t tities instead of as individual health workers. Health committees with community representatives helped in linking to the population, while management teams coordinated int t ternal planning and implementation. Strengthening the consumer voice. Patients using the health services int t fluenced provider behaviour directly by paying user fees and indirectly through membership in pretpayment schemes, as well as by providing feedback through patient satisfaction surveys. Fundholding. An independent wellt equipped fundholder operating from a district location negotiated cont t tracts with health providers, monit t tored output and disbursed the pert t ��� ��� ��� Fig. 1. The institutional set-up for performance-based financing, Cyangugu province, Rwanda ��������������������������������������������������������� ��������������������������������������������������������������� ������������������������������������������������������������������������������ ��������� ������������������������ ������������������������������ ��������������������������������������������������������������� ��������������������������������������������������� ��������������������������������� ������������������������������������������������������������ ������������������������������������������������������������ ��������������������������������������� ��������������������������������� ������������������������ ������������������������������������������ ��������������������������������������������������� ������������������������������������ ��������������������������������������������� ��������������������������������������� ��������������������������������������������������������� ������������������������������������������������������ ��������������������������������������� ��������������������������������������������������� ��������������������������������������������������������������� ��������������������������������������������������������������������������������� ������������������������������������������������������������������������������������������ ��������������������������������������������������������� ��������������������������������������������������������������������������� ������������������������������������������ ������������������������������������������������������������������������ ��������������������������������������������������������������������������������� formance subsidies. Regulation, planning and quality asss surance. Decisiontmakers at the natt tional level defined the priorities based on the complex task of balanct t ing political priorities with technical rationale, such as identifying costt effective interventions for essentt tial health packages or Millennium Development Goals. At the peripht t eral level, the district health teams assured the implementation of natt tional health policy and conducted quality reviews. In Cyangugu province, the authorities played a decisive role in supporting the programme financially, and successfully advocated the introduction of perfort t mancetbased financing at the national level. The newly emerged district health system was guided by a coordination committee of provincial and administt trative district authorities in which the health providers and fundholders also participated. The fundholder was act t countable to a committee in which all stakeholders participated, including the Ministry of Health and the Ministry of Local Government. This committee was also responsible for arbitration on contractual issues and the application of penalties in worsttcase scenarios. The performancetbased financing management cycle in Cyangugu province was conducted in four phases (Fig. 2). During the first phase of the contractt t ing process (planning), the fundholder ���

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