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 Table of Contents  
Year : 2014  |  Volume : 2  |  Issue : 1  |  Page : 6-14

Performance-based financing inlow-and middle-income countries

School of Public Health, Dow University of Health Sciences, Karachi, Pakistan

Date of Web Publication25-Jun-2014

Correspondence Address:
Mubashir Zafar
Department of Community Medicine, Dow University of Health Sciences Karachi
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Source of Support: None, Conflict of Interest: None

DOI: 10.4103/2347-9019.135341

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The "pay-for-performance" (P4P) tool has been used in low and middle-income countries in order to improve the performance of health-care providers. It helps to improve the quality of care and efficiency but has a drawback that it has a focus on a single condition and do not reflect the complexity of caring for patients with multiple conditions. To assess the impact of P4P on utilization of health service and quality of care in low- and middle- income countries. Different documents, papers, reports and literature were searched to assess the impact P4P on utilization and quality of health services and used Google search engine for this purpose. Analysis of the papers and project documents from 2002 to 2012 was conducted. The P4P schemes range from very large national programs to localized pilots and has been successfully implemented in post-conflict/fragile areas. Pay for performance model implemented in Dera ghazi Kahn district in Pakistan through free of cost vouchers given to pregnant women for antenatal checkup and transport facilities. The facility based deliveries increased from 20 to 90%. In Morocco, P4P model implemented through paid to the physicians for quality of care, screening of cervical cancer increased from 1.7 to 5.3% and hemoglobin A1c increases from 0.2 to 2.1%. Pay for performance increase the utilization of health services and quality of health services but it is constrained by certain challenges such as immature non-governmental international organizations (NGO) service sector with weak managerial and technical capacity, conditional cash transfers to households in countries with a large proportion of the population considered poor.

Keywords: Healthcare provider, healthcare, pay for performance, quality, reimbursement

How to cite this article:
Zafar M. Performance-based financing inlow-and middle-income countries. Int J Health Syst Disaster Manage 2014;2:6-14

How to cite this URL:
Zafar M. Performance-based financing inlow-and middle-income countries. Int J Health Syst Disaster Manage [serial online] 2014 [cited 2021 Oct 22];2:6-14. Available from: https://www.ijhsdm.org/text.asp?2014/2/1/6/135341

  Introduction Top

Health is a fundamental human right as well as a central input to poverty reduction and socioeconomic development. A greater investment in health is envisaged to save millions of lives in most developing countries and has the potential to produce enormous economic gains. Cost-effective interventions for controlling major diseases exist, but it is perceived that the existing financial and human resource gaps and limited district level managerial capacity are hampering the efforts to extend essential health services to the poor. [1]

Healthcare financing is an important issue that developing countries are faced. Scarce resources, burden of diseases, population growth, unregulated private sector, budget constraints, inefficient use of available health budget, weak tax base and administration, are important factors making financing of health care more complex. [1] These factors may well characterize health systems of many developing countries. Healthcare financing is the most vital part of policy planning and implementation. [2],[3],[4]

Poor people do not utilize essential preventive, curative and life extending primary care services, even when those services are available. [4] Understanding the reasons for this and the policy and programmatic approaches that can increase effective utilization is central to the success of many current efforts to improve health in the developing world. [2] Deficiencies in the quality of care, caused by lack of knowledge, insufficient resources, organizational rigidities, and inappropriate incentives for providers, impede the ability of health systems to improve health outcomes for the poor. This paper, basically looks at performance-based incentive type of financing intervention that has been applied in several different ways in developing countries including Pakistan to address the problems of under utilization and low quality of health services. The focus of "pay for performance" (P4P) intervention is on demand and supply side financial and material (examples: food, travel vouchers) incentives that can be used to improve utilization and quality of mobile healthcare services, especially for the poor. Researcher's attention focused on interventions that compare payment or use of material goods to indicators of performance or defined actions (example: TB patient given presents to take medicine) that are closely correlated with improved health outcomes.

The Government of Pakistan has been spending 0.6 to 1.19% of its gross domestic product GDP and 5.1 to 11.6% of its development expenditure on health over the last 10 years. [2],[3] Pakistan principally uses two modes of health financing-taxation and out-of-pocket payments. The average monthly household out-of-pocket expenditure on health has been reported to be Rs. 358 for 2001/2002 in Pakistan. This is equal to 5.2% of the total monthly household expenditure and total per-capita health expenditure in Pakistan is reported to be between Rs. 750 to 800 (~ US $12 to 13). [4],[5] Foreign aid as a percentage of total health sector allocation has ranged from 4-16% over the last several years and these global funding initiatives are helping to minimize the financial and material constraints that prevent health systems from performing well. Important to note is that even when providers have the knowledge, skills and necessary inputs (human resources, drugs, equipment, supplies) to produce a sufficient quantity of quality services to meet population needs, [6],[7] there are low utilization, substandard quality, and poor health outcomes throughout the developing world including Pakistan. [8] Still when consumers are aware of health benefits and know that healthcare services are physically and financially accessible, they do not necessarily obtain services. [8] Without system building efforts that focus on the currently inadequate (and often perverse) incentives faced by the key health system actors (providers and consumers) it is unlikely that ambitious improvements in health outcomes can be attained. This paper argues that P4P schemes that are appropriately designed to address the underlying barriers and constraints to strong health system performance have the potential to contribute significantly to improving health outcomes in developing countries including Pakistan.

  Materials and Methods Top

Study design and search strategy

A review of the literature was performed for insight into P4P schemes aiming at stimulation of delivery of chronic care through disease management. We conducted our search in PubMed focusing on English language papers published between January 2010 and June 2012. A comprehensive search strategy was developed by a librarian of our institute to identify studies matching the following search terms (Medical Subject Headings): Health system, financing, health policy, human resource management, case management, comprehensive health care, delivery of integrated health care, disease management, managed care programs, patient care management, patient-centered care, shared care, transmural care and variations of the keywords. These search terms were combined with variations of the following search terms: bundled payment, fee for services, healthcare reform, incentives, local partnerships, P4P, payment methods, practice based commissioning, physician incentive plans, prospective payment system, quality assurance, and reimbursement (mechanisms) [Figure 1].
Figure 1: Flow chart of literature-screening process

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In addition to the electronic database search, relevant papers were identified through reference tracking and through a manual literature search on the internet. To obtain up-to-date information about the included P4P schemes, also websites of the P4P schemes and other relevant websites such as those of health insurers and Ministries of Health were consulted.

Study selection

Two reviewers independently reviewed the papers extracted by the search for their relevance by screening their title and abstract. Papers describing P4P schemes focusing on the implementation of disease management programs were included.

Four components refer to the actual delivery of care by healthcare providers of a healthcare. In our study, the term disease management was used for programs that included interventions that could be related to two or more components of the health system.

Data extraction

P4P schemes identified by the literature search were described on the basis of the nine dimensions of P4P schemes defined by Conrad and Perry. This classification was used to systematically disentangle the P4P schemes. Of the papers reporting studies that evaluated the effects of P4P on quality of healthcare and healthcare costs we described the characteristics of the evaluation study (e.g., design, sample size, years of data collection), outcome measures, and study outcomes

  Results Top

Paper retrieval

Our literature search yielded 147 potentially relevant papers. On the basis of their title and abstract, 52 papers were selected to be retrieved full-text for in-depth screening. This screening process resulted into 12 papers eligible for our review. Additionally, six papers were identified through reference tracking and through a manual literature search on the internet. Hence, 18 papers were included in our review. The 18 papers described different P4P schemes that intend to improve healthcare delivery. Some papers described the same P4P scheme, which helped us to retrieve the fullest possible information about the different characteristics of the P4P schemes.

"Transfer of money or material goods in exchange for measurable action or achieving a predetermined performance target" [4]

Demand side P4P interventions include conditional cash transfer programs, pay monthly subsidies to households conditional on defined actions such as taking children for well-care visits or keeping them in school. Supply side P4P includes the full range of financial and material incentives that are aimed at inspiring changes in behavior among public and non-state sector institutions, managers, and health workers that ultimately result in improved performance. [9]

Differences in health status between poor and rich can be explained by differences in the utilization of essential health services. For example, for the 56 countries included in the analysis presented in [Figure 2] and [Table 1] an average of 34% of children born to the poorest families are fully immunized in contrast to 62% of rich children. This indicates that the poor are not being reached as effectively as, the rich with the range of strategies countries use to motivate families to immunize their children [Figure 3], shows this inequality in utilization of services to medically treat acute respiratory infections among richest and poorest quintile. [10]
Figure 2: Inequalities in Full Immunization Coverage among poor and rich -2005

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Figure 3: Medical Treatment of ARI - Rates among poor and rich - 2005

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Table 1: Difference in health status between the richest and poorest of the world highest and lowest income quintile[26]

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Healthcare facilities largely underutilized in developing countries including Pakistan

In developing countries, health status of the poor is inferior to the rich, utilization of services is lower for the poor than the rich, and government subsidies are not effectively targeted to for the poor. Even when services can be accessed by the poor, they are often of inadequate quality. [11] Globally, 80 out of 1000 infants born to the poorest socio-economic quintile die, in contrast to an average infant mortality rate of 5 per 1,000 live births among the richest. [12] Wide disparities in health status and utilization of essential public health services indicate that delivery system priorities should not be the same for population groups with different socio-economic characteristics. [7]

The qualities of care in healthcare facilities in developing countries are generally poor. That is why people in these countries low avail utilization of services from these healthcare facilities. There are several reasons for contribution to low utilization of healthcare facilities, most important are operating only a few hours a day, absence of quality inputs like basic services are not available, not having electricity and no female staff, gaps in the availability of drugs, shortage of contraceptives, not having vaccines and lack of de-worming medicines, geographical access, inattentive attitude of the staff and out-of-pocket payments for supposedly free services. As result of low utilization of healthcare services, physical infrastructure of healthcare centers are sometimes used for other purposes like Union Council offices and other government offices in Pakistan. [8]

Public spending in Pakistan is not effectively targeted to benefit the poorest. Benefit- incidence analyses of surveys on health that have been conducted in Pakistan indicate that on average, the richest socio-economic quintile receives over twice as much financial benefit as the poorest quintile from government health service expenditures. [9],[10]

Studies on inequalities in utilization and expenditures on health services indicate that richer groups are more likely than poor groups to see a medical practitioner and obtain medicines when sick. However, household expenditures as a percentage of household income are not higher for richer households than for poor ones. [11]

Differences in utilization of healthcare faculties between the poor and rich that suggest policy recommendations, considered five determinants of demand: income, service quality, access, direct user charges and gender. [9]

Quality of care in public healthcare facilities available to the poor is lower than that available to the rich as measured by availability of drugs, staff skills and the quality of health facilities. [13],[14] Physical access to health care and the opportunity costs posed by having to travel to obtain care are obstacles that prevent utilization of care by the poor more than the rich. User fees for medical consultations are also more of a burden for the poor and constrain utilization unless quality improvements compensate. [15],[16]

P4P can contribute to improving the performance of health systems

The causes of poor quality of essential services and where P4P interventions may be effective are best examined within the broader context of the health system. All health systems have to carry out the same basic functions regardless of how they are organized or which health interventions they are trying to deliver. These functions are the development of human and other key resources; service provision; financing and stewardship. [14]

The [Table 2] below shows that one of distinguish feathers of P4P solutions is "contract and incentive" approach that sets into motion a dynamic that encourages the many actors in the health system to respond with innovative solutions. [17] Conditional cash transfer (CCT) is a scheme which provides cash on certain condition.
Table 2: Distinguish features of P4P

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Evidence and illustrative cases

Evidence from several schemes that cover a large portion of country population shows how elements of these schemes address underlying constraints or performance problems that inhibit the poor from utilizing essential services and for services to be of appropriate quality. [18],[19]

Case 1: Pakistan

Population covered: 2.2 million living in Dera Ghazi khan districts.

Description of performance problem (s)

Pregnant women visits clinic for antenatal checkup are significantly lower in rural areas, only 20 percent of women make four or more antenatal checkup in rural areas as compared with 62 percent of women in major urban areas. In Pakistan demographic health survey (PDHS) 2006-2007 found that main barriers to antenatal checkup in clinic are were lack of awareness about the benefits of care (70 percent of women), high cost of access to healthcare facilities (20 percent) and transport/distance concerns (10 percent cases).

Brief description of the model

In October 2008, Greenstar, which is non-government organization (NGO) selected Dera Ghazi (DG) Khan district in Punjab province, a low-income district with the highest unmet need of family planning. Incentive given to pregnant women is voucher, which gives benefit to the pregnant women to free-of-cost antenatal checkup in clinic. They recruited 2,000 pregnant women living in DG Khan to utilize the voucher scheme within a 12-month period. Greenstar had to convince clients to access the services, which meant doing outreach working with home-based decision makers.

  Result Top

[Figure 4] Result shows that delivery of baby in facility increased to 98% compared to 20% before intervention, 68% in Greenstar provide facility.
Figure 4: Result of recipients in DG Khan Pilot project of delivery at institution level

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Case 2: Cambodia

Population covered: 1 million living in 9 districts in 3 provinces.

Services provided: maternal and child health services

Description of performance problem (s) the program is trying to solve

In the 1993 post-conflict period, Cambodia had limited health human resources, little rural health infrastructure, and poor quality of care. This program was intended to increase access and utilization by expanding availability of services to underserved populations with the ultimate result of improving maternal and child health outcomes.

[Table 3] Result shows that performance of healthcare facilities improved after intervention. [Table 3] shows that every indicator improved as compared to control.
Table 3: Average percentage change in health service coverage indicators in Cambodia

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Case 3: Nicaragua conditional cash transfer program

Population covered: 6,000 households in 21 census comarcas in six municipalities in the northern part of the central region of Nicaragua

Services supported: Basic health and nutrition services and education

Description of performance problem (s) the program is trying to solve

Phase 1 (2000-2002):

  • Improve household overall diet by increasing overall expenditures on food through income transfers
  • Improve nutritional status of children under 5
  • Increase enrollment, reduce desertion and enhance school progression during the first 4 years of primary school

Phase 2 (2002-2005):

  • Additional improvements in all of phase 1 target
  • Improve maternal health including family planning.

Demand side incentives

Eligible households, determined by a combination of geographical and household level targeting, are provided with a cash transfer equal to US $224 per year, paid every 2 months. Receipt of this payment in Phase 1 was conditional on attending health education workshops and taking children under 5 for mandated healthcare appointments (monthly visits for children under 2, bimonthly for ages 2-5). In Phase 2, this payment was significantly reduced while the required service package was expanded to include maternal health and family planning services.

Supply side incentives

Supply of health services is by contracted private providers, chosen through a competitive process, private provider are trained and paid a per capita payment of US $130 per year per household to deliver the services covered by the program free-of-charge. In Phase 1, services included: growth monitoring and development monitoring, vaccinations, provision of anti-parasites, vitamins and iron supplements for children. In Phase 2, maternal health and family planning services were added. Providers receive 3% of the annual maximum payment in advance. The other 97% is conditional on achieving performance targets.


There is a Red de Protection Social (RPS) project management unit housed in the Ministry of Family (MIFAMILIA). This unit contracts private agencies to manage payment to households. This unit also pays private healthcare providers directly.

Performance measured

A census of socio-demographic characteristics of households residing in RPS municipalities is carried out by MIFAMILIA to establish baseline data and to determine household eligibility to receive subsidies. When households visit health providers they have to sign (finger print) a form testifying that they have received a specific service. Providers have to hand MIFAMILIA these lists in order to receive payments for the services delivered. All this information is downloaded in the management information system (MIS) managed by MIFAMILIA. Each household keeps a form that records healthcare services received by all members of the household. MIFAMILIA carry out random controls to verify the services that are being delivered as reported by providers. In addition, every two months, the Inter Audit department of board (IADB) (audit agency) carries out random audits of a sample of providers and households selected from the roaster contained in the MIS to verify that reported services were actually delivered to households. During these checks, both providers and households are interviewed and records analyzed. [20]

Case 4 Janani Suraksha Yojna by indian ministry of health and family welfare

Implementation of JSY in 2007-08 was highly variable by state-from less than 5% to 44% of women giving birth receiving cash payments from JSY. The poorest and least educated women did not always have the highest odds of receiving JSY payments. JSY had a significant effect on increasing antenatal care and in-facility births. In the matching analysis, JSY payment was associated with a reduction of 37 (95% CI 22-52) perinatal deaths per 1000 pregnancies and 23 (09-37) neonatal deaths per 1000 live births. In the with-versus-without comparison, the reductions were 41 (25-57) perinatal deaths per 1000 pregnancies and 24 (07-41) neonatal deaths per 1000 live births.

  Discussion Top

P4P in health care is based on set of assumption of uncertain validity. Financial incentive will motivate behavioral change such as improvement in quality and performance in health outcome. P4P based scheme should be viewed as dynamic system that need to be tailored to different professional groups, service and patient. Initial studies suggest that P4P programs can change performance on quality measures that are used for the basis of bonus payments, but contentions that P4P programs are cost-saving in the long run that are largely unsubstantiated. [21],[22],[23],[24]

Regarding effectiveness, most studies have focused on prevention and chronic care provision in primary care. Results of the few studies with strong designs are mixed, justifying the conclusion that there is insufficient evidence to support or not support the use of P4P. Non-randomized studies have typically found improvements in at least one measure, although results from studies with relatively strong designs (level II) were generally less positive than results from studies with weaker designs (levels III and IV). Overall, the impact of physician P4P has been estimated at 5% improvement in incentivized performance measures. The reviews further highlight P4P's potential to be cost-effective. [17],[25],[26],[27] Yet most studies use narrow cost and effect ranges. In addition, the evidence largely pertains to relatively small programs. Two recent articles not included in the reviews (level III and II) provide additional evidence that P4P can potentially be cost-effective. Walker et al. found that quality of frame (QOF) payments were potentially a cost-effective use of resources for most GPs for most of the nine evaluated measures, but QOF administration costs, which are substantial, were not taken into account. [28]

Regarding unintended consequences, the reviews identified one study finding evidence of risk selection. Several other studies provide additional evidence. A qualitative study from California found that the inability to exception report led some physicians to deter noncompliant patients. [29] In addition, Wang et al., (level II) found that physicians referred more severely ill patients to higher-cost facilities under a performance-based incentive system in rural China, [30] and Chen et al., (level III) showed that older patients and patients with greater disease severity/comorbidity were more likely to not be included in the diabetes P4P-program in Taiwan than younger and healthier patients. [31] Chang et al., (level II) had a similar finding. [32] There is some evidence of (negative) spillover effects, with some studies finding reductions in continuity of care and less improvement for excluded conditions than for included conditions. Two recent studies (level II and III) back this finding: Campbell et al., found a reduction in continuity of care after QOF implementation [33] and Doran et al., found that although incentivized and un-incentivized aspects improved, improvements associated with financial incentives seem to have been achieved at the expense of small detrimental effects on un-incentivized measures [34] . Evidence on gaming behavior and negative effects on providers' intrinsic motivation is virtually absent, although a recent study (level III) revealed that GPs in the UK probably gamed the system of exception reporting to some extent. [35]

There are some limitations associated with our review. First, although evidence is available on a wide variety of effects, most domains are only partially covered due to a limited number of studies with strong designs (e.g., cost-effectiveness) or a concentration of studies on a single program (e.g., effectiveness of hospital P4P and the impact on inequalities). Second, the included reviews lack important information on the context in which studies were conducted, such as the base payment system (e.g., P4P payments may be smaller under capitation than under FFS because of lower opportunity costs of improving performance), essential infrastructure (e.g., data collection systems), and health system features. Third, research on the effects of P4P continues to be concentrated in the US and the UK. Although an increasing number of studies from other countries have been published in the last 5-10 years, it is difficult to generalize our findings to other high-income countries or any low- or middle-income countries. Finally, we did not systematically verify the information reported in the reviews by consulting individual studies, which may have introduced bias (e.g., resulting from inaccurate reporting of findings from individual studies within reviews). We encountered virtually no conflicting reports and interpretations, so the reviews' representation of the evidence is likely to be sufficiently adequate and the bias arising from our approach limited.

Implications for research and policy

First, although many studies have found improvements in selected quality measures and suggested that P4P can potentially be effective, at this point the evidence seems insufficient to recommend widespread implementation of P4P. Second, thus far P4P evaluations have mainly focused on testing the short-term impact on clinical processes (e.g., screening for cancer, periodically performing eye exams for diabetes patients) and, to a lesser extent, on intermediate outcomes (e.g., HbA1c levels of diabetes patients). However, the ultimate goal of P4P will typically be to improve patient health outcomes in the long-run. Third, although evidence is limited, P4P may have several unintended effects, underscoring the importance of ongoing monitoring and more insight in how specific design features may help in mitigating incentives for undesired behavior. Fourth, although it is reassuring that P4P does not seem to have widened inequalities, most studies relied on cross-sectional data from the UK, and many inequalities have persisted. Finally, an important lesson is that improving performance via P4P is not straightforward. Important preconditions need to be fulfilled, including active provider engagement and support, adequate risk adjustment, a transparent information system for collecting performance data and for monitoring for undesired behavior, and a design that is tailored to the specific-setting of implementation.

  Conclusion Top

We have sufficient evidence to understand what works, under what situation estimated and the inadvertent consequences. Emerging evidence suggests that P4P may help shape high performance delivery systems; there are also big pitfalls, which must be addressed to maximize its benefit. Challenges that remain are not merely the technical aspects of design but go to the heart of the ideological debate over performance motivation.

  Acknowledgments Top

We would like to thank Dr Nelofar Sami, Peter hatcher at Aga Khan University reviewers for their helpful comments on earlier drafts of this paper.

  References Top

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  [Figure 1], [Figure 2], [Figure 3], [Figure 4]

  [Table 1], [Table 2], [Table 3]


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