Strategic purchasing:

An emerging agenda in Africa for

Universal Health Coverage

30 September 2016

Rabat Inke Mathauer, MSc., PhD

Health 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 providers

o Provider payment methods and rates

• Contracting with public and private providers

Purchasing Procurement

Purchaser(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 maker

Slide 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 purchasers

Coherent decision making structure (and division of labour

in decision-making) on purchasing aspects

Oversight and accountability of purchasers, citizen

participation

(Institutional) leadership to shift to more strategic

purchasing

Ensuring 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