Effective resource Management: The Optimal Provider Payment Mix

1. Cheryl Cashin Senior Felllow, Results for Development Institute November 4, 2013 Effective resource Management: The Optimal Provider Payment Mix

2. Overview of the Presentation

3. Revenue Resources available to expand and sustain effective coverage Revenue and Expenditure: 2 sides of the Universal Coverage Coin • Expenditure • Benefits package (service and medicines guaranteed) • Subsidies • Payment to providers

4. Revenue Resources available to expand and sustain effective coverage Revenue and Expenditure: 2 sides of the Universal Coverage Coin Does revenue generation get more attention than expenditure management? • Expenditure • Benefits package (service and medicines guaranteed) • Subsidies • Payment to providers

5. Raising revenue for UHC is not enough Ghana’s NHIA has achieved a growing and diversified revenue base But the gap between revenue/member and claims/member is closing

6. Help balance system revenues and costs and create incentives for providers to improve quality and deliver services more efficiently • Health care provider payment systems--the way providers are paid to deliver the covered package of services—are an important strategic lever in universal health coverage What role does provider payment play? • This ultimately makes it possible to expand coverage within limited funds

7. What are the options?

8. What are the options? There is no perfect payment method. They all have strengths and weaknesses. They all can create undesirable incentives and adverse consequences. They all can be useful at different times depending on the objectives.

9. What is the optimal mix? Messages emerging from the Japan-World Bank Partnership Program for Universal Health Coverage

10. Overview of the Study • The Japan-World Bank Program on Universal Health Coverageis a joint effort by the Government of Japan and the World Bank to support the Low and Middle Income Countries in their aspirations for UHC, following the 50th anniversary of Japan’s own achievement of UHC in 1961.

11. Countries Participating in the Study • The countries have been selected to represent: • different stages of UHC • different geographic regions • diversity in the type of health systems in place • willingness to explore key policy questions in the analytical framework

12. The countries included in the study Group 1: Early Adoption Bangladesh Ethiopia Group 2: Coverage Expansion Ghana Indonesia Peru Vietnam Group 3: UHC—Deepening Coverage Brazil Turkey Thailand Group 4: Sustaining Coverage/Adaptive Systems France Japan

13. Coverage-enhancing vs. Coverage-eroding Expenditure Management • Expenditure management that frees up resources to expand coverage is “coverage-enhancing.” • E.g. better negotiated medicines prices and well-targeted subsidies “Countries that have achieved universal population coverage and financial protection have balanced revenue generation efforts with coverage-enhancing expenditure management.” • Controlling expenditure by limiting benefits, increasing cost-sharing, or under-paying providers can reduce access to necessary services and financial protection and is therefore “coverage-eroding.”

14. Countries relying on fee-for-service payment are facing coverage-eroding cost escalation and inefficiencies (except Japan)

15. What is different about fee-for-service in Japan? • Strong governance • Biennial revision of the fee schedule • Prices adjusted downward for services and medicines with large volume increases • Set tighter conditions for billing/payment • Example: Fee for diagnosing MRI image can only be billed once every calendar month • Strict enforcement of cost containment measures • On site audits to check claims with medical records • Unified payment system across providers and insurers makes the mechanisms more effective and efficient • Only option: Play by the rules, or exit

16. Some countries are using coverage-eroding expenditure management approaches

17. What does coverage-enhancing expenditure management look like?

18. What does coverage-enhancing expenditure management look like? Spending targets Closed-ended provider payment

19. Key Features of “Optimal Provider Payment Mix”?

20. Key Features of “Optimal Provider Payment Mix”? • Closed-ended payment systems impose a cap at some level (usually the provider) • For example, • Capitation • DRG with global budget—pay for admissions until volume targets are exceeded • [e.g. Thailand] • Challenge: what happens when volume target is exceeded and cap is reached?

21. Key Features of “Optimal Provider Payment Mix”? • For example, • Pay providers below cost for some high-cost/low priority services (e.g. MRI) • Limit volume • [e.g. Japan] • Higher cost-sharing for self-referral • [e.g. France, Thailand, Turkey] • Challenge: requires a high degree of monitoring and information

22. Key Features of “Optimal Provider Payment Mix”? • For example, • Primary care gate-keeping • “Ring-fencing” or setting targets for share of expenditure for primary care • Paying relatively higher rates for primary care • [e.g. France, Thailand, Turkey] • Challenge: primary care system is still weak in some countries • Resistance to gate-keeping

23. Key Features of “Optimal Provider Payment Mix”? • For example, • Reference pricing • Budget caps [e.g. Turkey] • Mandatory rebates and discounts [e.g. Turkey] • Health technology assessment to expand medicines covered [e.g. Thailand] • Challenge: the pharmaceutical industry is a powerful interest group • Challenge: pushing drug prices too hard could limit market participation and innovation • Negotiation of drug prices

24. Examples of Provider Payment Mix Thailand UC Scheme Turkey SSI Payment for inpatient services DRG with Global Budget Global Budget (pay-for-performance/ FFS) Payment for outpatient specialty services Payment for primary care Capitation (FFS for some preventive services) Capitation (pay-for-performance/ salary deduction)

25. Ongoing process of analysis, revision, and response • Ongoing process-there is no endpoint • Good provider payment systems require a high degree of institutional capacity and information  takes time to build • Involvement and negotiation with providers is key • Some coverage-enhancing expenditure management strategies can eventually put too much pressure on the system and begin to erode coverage—so it is an ongoing process • Countries take steps, gain experience, do analysis, and revise

26. Role of the Joint Learning Network • These big picture messages require detailed technical action • Technocratic solutions have to get implemented in the real world with interest groups and politics • Sharing experience with countries who are facing the same challenges can provide innovative ideas and help avoid some pitfalls

27. JLN PPM Diagnostic and Assessment Guide How it all fits together Share country experience with JLN members PPM Reform Proposal Stakeholder consultations and data analysis Country process General JLN events, knowledge products and community interaction Joint learning input Topic specific joint-learning activities (e.g. JLN Health Services Costing Collaborative) JLN targeted country support 27

28. Co-production of knowledge  Practical guidance “Soon after the costing work is commissioned, the costing team should identify and prioritize stakeholders and develop a strategy to engage them throughout the costing exercise. “ “Adopt the least expensive and labor-intensive data collection and management plan that is necessary to get valid results.” 28

29. Joint learning in action

30. Final Thoughts • Revenue generation is important, but using expenditure management and provider payment levers early on or at key junctures of system refinement is critical for coverage expansion. • Sustaining UHC is a constant balancing act. • Countries that have been most successful make choices that are coverage-enhancing, learn from past challenges, and continuously adjust and adapt. • Learning from other countries can help make better technical decisions and navigate real-world implementation challenges.

31. Thank you