Output-based payment to boost staff productivity in public health centres: contracting

Objective In many low-income countries, public health systems do not meet the needs and demands of the population. We aimed to assess the extent to which output-based payment could boost staff productivity at health care facilities. Methods We assessed the performance of 15 health care centres in Kabutare, Rwanda, comparing productivity in 2001, when fixed annual bonuses were paid to staff, with that in 2003, when an output-based payment incentive scheme was implemented. Findings Changes to the structure of contracts were associated with improvements in health centre performance: specifically, output-based performance contracts induced sharp increases in the productivity of health staff. Conclusion Institutional configurations of health care organizations deserve more attention. Those currently in place in the public sector may not the most suitable to meet current challenges in health care. More experiments are needed to confirm these early results from Rwanda and elsewhere, since risks associated with output-based incentive schemes should not be ignored

Output-based payment to boost staff productivity in public health centres: contracting

Objective In many low-income countries, public health systems do not meet the needs and demands of the population. We aimed to assess the extent to which output-based payment could boost staff productivity at health care facilities. Methods We assessed the performance of 15 health care centres in Kabutare, Rwanda, comparing productivity in 2001, when fixed annual bonuses were paid to staff, with that in 2003, when an output-based payment incentive scheme was implemented. Findings Changes to the structure of contracts were associated with improvements in health centre performance: specifically, output-based performance contracts induced sharp increases in the productivity of health staff. Conclusion Institutional configurations of health care organizations deserve more attention. Those currently in place in the public sector may not the most suitable to meet current challenges in health care. More experiments are needed to confirm these early results from Rwanda and elsewhere, since risks associated with output-based incentive schemes should not be ignored. Introduction Public health systems in low-income countries do not always live up to expectations. Poor performance in terms of coverage of needs, equity, quality of care, responsiveness to users and efficiency has been extensively documented. 1-3 Without major changes, especially in the delivery of primary health care, the health status in most rural populations will not achieve the significant improvements that are needed to meet the Millennium Development Goals. 8 Before poor performance can be addressed, the extent to which the problems can be remedied by staff at the health facilities should be ascertained. Obviously, some aspects related to the Before trying to tackle a problem, it is appropriate to view it in a broad context. One must be fair towards the health staff. Many problems that are observed at the level of the public health facilities are also reported in other governmentrun bodies such as schools and the civil administration. 3 Some pro-market proponents may see these problems as an opportunity to discredit any role for the state in service provision. Opponents to this argument may instead place blame on poverty and limited capacity within the country; they will invite us to have patience and, in the meantime, to accept that some problems have their roots beyond the health sector. In this paper, we discuss a third way for problem resolution, exploring the extent to which the performance of public health facilities could be enhanced by reform of some key institutions that establish them as organizations. We focus on only one dimension of performance, that of staff productivity and present results of the performance initiative, an output-based payment approach currently being trialed in the Kabutare district of Rwanda. Methods Institutional configurations in health care Institutional arrangements, contracts and organizations have been very dynamic fields of research for economists in the past 40 years. Today, economists have a much better understanding of the influence of factors such as asymmetry of information, transaction costs and property rights on institutional shape and performance of organizations. ‫املقالة.‬ ‫لهذه‬ ‫الكامل‬ ‫النص‬ ‫نهاية‬ ‫يف‬ ‫الخالصة‬ ‫لهذه‬ ‫العربية‬ ‫الرتجمة‬ As far as institutional arrangements are concerned, there are probably two key factors that determine the performance of a health care organization. 1 First, there is the whole set of contracts that establishes the way an organization accesses the physical resources necessary to produce health services (hereafter called "physical resource contracts"). There has been much written about methods by which an organization accesses its cash income (e.g. fees-forservice, capitation, budget-line items). 17 Yet, cash is only one of many types of resource. For example, receiving standard drug kits free of charge is not equivalent to paying the full price for drugs that one has ordered. 2 The second key determinant of performance is the set of contracts that establishes the way in which those who hold discretionary authority over the allocation of resources mainly the owner, manager and health staff are remunerated by the organization (hereafter called the "governance and employment contracts"). The combination of both sets of contracts establishes a nexus that makes up the institutional configuration of the health care organization. There are as many possible institutional configurations as there are possible combinations of different contracts. Yet, from the perspective of the organization's stakeholders, some configurations are better than others, which explains why some configurations occur more frequently than others. One must note that creativity is not limited to the design of contracts; the distribution of roles is also a variable. An illustrative case is that of the single private practice, characterized by an individual who occupies the positions of owner, manager and employee. This arrangement has not occurred by chance: economists have shown that such an institutional configuration solves several problems that arise when one party (e.g. an employer) engages another party (e.g. an employee) to act on their behalf and in their interest -the so-called "principal-agent problem". This configuration contrasts with the situation of public health centres, which are owned by the state (with the citizens as the ultimate owners), managed by a civil servant affiliated with the ministry of health and operated by other civil servants with fixed salaries. There is no miracle solution; each configuration has its advantages and disadvantages. Typically, a configuration will be particularly well suited for one dimension of performance (e.g. the efficient use of resources) but less suited for another (e.g. quality of care). The existing literature on provider payment contracts has brought attention to this trade-off. Yet, the existence of tradeoffs should not mean acceptance of the status quo. Our intuition, not only as researchers but also as workers who have been directly involved in the operation of public health systems, is that the configurations in place today in many low-income countries have more disadvantages than advantages. We wonder whether more powerful incentives for the health staff could provide the way forward to improved services in health care. We use the case of an experience in Rwanda to illustrate our proposition. Before the introduction of the performance initiative, staff at the 15 health centres had benefited from a fixed-bonus system (in addition to salaries). This system, inherited from post-war reconstruction strategies, had been taken over by HNI from the previous NGO that was supporting the district. The rule was that health centres received a budget that was calculated according to the number and qualification of employed individuals. Under the new scheme, individuals kept their base salaries (paid by the government or the health facility with revenue raised through user fees), but an output-based remuneration to the health centre replaced the fixed-bonus system. Payments for services were set for some key services delivered by the health facility (see Box 1). The performance initiative in Formalization and the data source With some simplifications, we can use a mathematical formulae to compare the two institutional configurations. We have limited our analysis to the health centre (we did not analyse the whole health system and institutional changes at that level). Furthermore, our focus is on the two contracts that have changed significantly: (1) the support in cash funds provided by the NGO to the health centre; and (2) staff remuneration. We have simplified these contracts to their core logic (i.e. we do not formalize the complementary rules and restrictions in the actual contracts). To avoid the issue of differences between individual staff members with respect to bonuses, we have used average amounts per worker at each centre. Box 1. Fees paid to health centres under the performance initiative The performance initiative remunerates the health centres on a payment-for-service model (with a purchaser that is different from the user). In 2003, the payments for purchased services were as follows: -RWF 40 per consultation (new case); -RWF 250 per pregnant woman who received between 2nd and 5th dose of tetanus toxoid (TT); -RWF 1 000 per new acceptor of family planning; -RWF 500 per fully immunised child; -RWF 2 500 per assisted delivery. No change. Vaccines and vertical programme items They are supplied for free by the national programme. No change. Cash The health centre charges users for (i) drugs (with a mark-up), and (ii) for curative consultations and acts. (i) and (ii) no change. A third-party payer (a "steering committee") pays a feefor-services for a limited list of curative and preventive services (see Box 1); the scheme is established by a contract that sets clear obligations upon the health centre; an independent agency checks the reality of reported figures. Equipment Accessed mainly through donation, free utilization by the health centre. No change. Building Owned by the government, a congregation or the parish; free utilization. No change. Other Bought on the market by the health centre with its cash income. No change. Governance and employment contracts Ownership and constrains on the owners A health centre is a combination of multiple owners. The land and the building are owned by the main owner (the government, a congregation or the parish). Equipment, drugs and financial assets are owned by the "health committee" (a community body). All health centres are run as non-profit organisations. The Rwandan Ministry of Health oversees all of them. There has been no formal change of this set-up. Yet, a new "management committee" has been established. It empowers the staff and put them in a position to take and enforce decisions to boost health centre performance. Management (i) The health centre is headed by a head nurse. (ii) He is expected to implement policies made by the Rwandan Ministry of Health. (i) The same, but higher involvement of staff (see above). (ii) The health district authorities leave more discretion to the health centre team for initiatives. Labour (i) Salaries of some qualified staff are paid by the government. (ii) Salaries of some qualified and all non-qualified staff are paid by the health centre with its cash income. (iii) Fixed bonuses are paid to most of the staff by the NGO. (i) and (ii) no change. (iii) The NGO a does not pay a fixed bonus. The (variable) monthly revenue collected from the performance initiative scheme is shared among the staff. An individual share is fixed by a grid that takes into account qualification, responsibility and presence at work. Bonus cuts can be used as a disciplinary measure. NGO, non-governmental organization. In general terms, one could then say that yearly income for the health centre team j is: where nj is the number of staff members, w is the average individual wage paid by the government or the health facility, b is the average individual fixed bonus paid by the NGO, p is the vector [1 × k] of prices for the vector [k × 1] of services Q, and a is the share of the output-based income distributed among the staff. As there have been no major changes in the policy of the government with respect to wages, we can assume that this element of the equation is constant and not relevant in our comparison. Then we can define Y ′ as the income paid to the health centre team by the NGO. The situation before the performance initiative can then be expressed as: Y ′ F,j = nj . b (with F as "fixed bonus") and the one after the performance initiative as Y ′PI,j = a.p.Q (with PI as "performance initiative"). This formalization allows us to identify the two behavioural assumptions behind the performance initiative: (1) that health staff would value higher average individual incomes, and (2) Q is partly determined by the behaviour of health staff. Our analyses are based on the data used by the NGO to monitor the performance initiative. We will make the simplifying assumption that all the changes observed in the production of the health centres stem from change to the contracts. Although a strong causality has already been shown, we acknowledge that this assumption is somewhat excessive. 19 For the exchange rates, we have used the average over the period 2001-03 (US$ 1 = RWF 483). Results During preparations for the new scheme in early 2002, different scenarios were considered and financial simulations were performed accordingly. The main goal was to determine the prices that would be used for buying the health centres' outputs (eventual prices are shown in Box 1). The rules were as follows: This arrangement is illustrated in The Y ′PI (2003) column in The goal of measuring output gains is to assess whether the NGO received value for money. Ouput gain (Y ′PI (2003) -Y ′PI (2001)) gives a monetary value to the increase in outputs (along the fee-based index). Our data show that incentives do make a difference: all health centre teams have increased their outputs, even those that experienced a drop in income. The relative increases in output shown in A comparison of simulated average individual bonuses due with 2001 productio

Output-based payment to boost staff productivity in public health centres: contracting in Kabutare district, Rwanda

OBJECTIVE: In many low-income countries, public health systems do not meet the needs and demands of the population. We aimed to assess the extent to which output-based payment could boost staff productivity at health care facilities. METHODS: We assessed the performance of 15 health care centres in Kabutare, Rwanda, comparing productivity in 2001, when fixed annual bonuses were paid to staff, with that in 2003, when an output-based payment incentive scheme was implemented. FINDINGS: Changes to the structure of contracts were associated with improvements in health centre performance: specifically, output-based performance contracts induced sharp increases in the productivity of health staff. CONCLUSION: Institutional configurations of health care organizations deserve more attention. Those currently in place in the public sector may not the most suitable to meet current challenges in health care. More experiments are needed to confirm these early results from Rwanda and elsewhere, since risks associated with output-based incentive schemes should not be ignored