Stewardship of contracting for LMICs: pragmatic lessons on skills, systems and regulations

Policy brief I October 2018

Stewardship of contracting for LMICs: pragmatic lessons on skills, systems and regulations Summary Contracting health services through private providers in low and middle-income countries (LMIC) has fallen off down the agenda in recent years, despite the role the private sector has in moving towards universal health coverage (UHC). Good contracting does not happen by accident – it needs resources, accountability and clarity of motivations behind the intent to contract.

The problem Governments can use contracting strategically to engage private health providers in LMICs. Contracting is a formal agreement between a government and private providers to deliver agreed services and outputs, over a stipulated time frame, using public provided funds. As much of the healthcare in LMICs is delivered formally and informally by the private sector, aligning private health providers towards public policy goals is an essential step for moving towards UHC. Effective contracting governance can increase health coverage in hard to reach areas, help to deliver services that are under-provided, improve the functionality and quality of services, and ultimately lower costs.

LMICs have long included contracting with private providers in their policies, although the jury is still out on its effectiveness. Contracting has delivered better in some countries than in others and this raises the need to look critically at how contracting with private providers is designed, managed and regulated in developing countries. Contracting requires capacity, resources and learning and reflection from real life lessons.

It is important that when low-resourced settings are pressed for policy innovations, they are given space to invest in stewardship building before transitioning away from traditional health service delivery.

This policy brief draws on experiences in South Asia, specifically Afghanistan, Pakistan and India, and considers how contracting can be better governed and supported.

Radical contracting in a conflict-based setting: Afghanistan Afghanistan is the only LMIC that uses contracting throughout its entire health system with NGOs contracted in 31 of its 34 provinces. Since its inception, contracting has been managed by the Ministry of Public Health (MoPH) and supported by international donor agencies.

This has resulted in visible progress of primary care indicators and the extension of coverage to remote, underserved areas. Well-designed Essential Health Service and Basic Health Service packages provide a standardised service direction costed at approximately US$5 per capita per year. NGOs are selected through competitive bidding and are independently monitored, with their performance reviewed before renewal.

Monitoring is funded by external assistance and conducted by international resource institutions alongside MoPH’s Health Management Information System (HMIS) and Grants and Service Contracts Management Unit. It includes household surveys, health facility assessments, national monitoring checklists and HMIS functionality assessments.

What have we learnt about resources, systems and client relationships for monitoring NGO contracts?

• Monitoring and evaluation is comprehensive, using internal and external (independent) entities for monitoring and multiple methods for validation.

• A large volume of data is collected but there are numerous overlaps and evidence is not used effectively.

• Security and ongoing conflict interrupt activities.

• A reliance on external technical assistance for monitoring but weak capacity to use the results to get value for money.

• Contract renewal is based on performance, but termination of contracts rarely happens.

Policy brief I October 2018

• Monitoring helps the accountability of contract delivery, but performance is not the only measure of government/NGO relationships.

Post devolution contracting in Pakistan: motives and championing Since 2005, Pakistan has been using contracting as a policy initiative for improving primary health services.

Originally scaled up and implemented across all districts as a federal initiative, the management of basic health units was outsourced through a hybrid contractingin arrangement, whereby budget and administrative control was provided to a state supported entity, administratively located outside the health department.

Some provinces downscaled contracting following devolution in 2010, but others opted to redesign or even expand it. In those provinces that continued to use contracting, some brought basic health units back under direct administrative control. Another province which continued contracting-in, not only extended this but also started contracting out the remaining primary facilities and under-performing secondary care hospitals to private providers. The results of a detailed assessment of contracting in 2011 had little influence on whether provinces chose to upscale, redesign or downscale.

How do political drivers and stewardship capacities influence the roll out of contracting?

• Contracting, where scaled up, had traction as a powerful policy option to circumvent slow moving government health service delivery. Provinces which discontinued contracting were confident of directly improving government primary care services.

• Contracting both pre and post-devolution was mainly used to improve public sector services by purchasing management expertise from the private sector. It has rarely been used to purchase privately provided clinical or preventive health services.

• More recently, contracting has been used to purchase support services including ambulance services, technology maintenance services, and medicine and supplies delivery services. This presents an important inroute into harnessing the potential of the private sector market.

• Stewardship capacity for contracting remains weak, lacking specialised staff and support systems for writing, pricing tendering and monitoring contracts.

• Insufficient capacity makes the tendering system vulnerable to corruption by suppliers who have powerful networks of influence. Contractors can largely function independently of the government.

• ‘Street level bureaucrats’ such as district health staff exercise resistance in the transfer of administrative control to private suppliers – even with strong political championing government, staff compliance remains an unsettled issue.

Configuring public finance management skills in purchasing private health services: India India has diverse public private partnerships including the transfer of unviable health facilities to the private sector, private management of public hospitals and clinics, the provision of diagnostics and maintenance of biomedical equipment, and the purchase of private health services for state insurance schemes. Most arrangements have proliferated over time led by individual states based on local need.

Public finance management is central to all public private contractual arrangements and we present findings from two initiatives.

Revival of poorly or non-functional hospitals through private sector support has been one of the popular public private partnership measures. In the absence of an explicit policy, operational arrangements are usually left to local government and the private parties.

Typically, the government provides the building, staffing and available infrastructure and the private sector takes responsibility for operational expenses, usually raised through fee charging. The amount of protection for poor patients varies across different initiatives.

An extensive community health insurance scheme is underway in Andhra Pradesh in India with the state government paying a fixed insurance premium for each household to avail services related to certain critical diseases such as heart and cancer treatment, neurosurgery, and renal diseases. This includes a fixed ceiling coverage that covers procedures and inpatient medical expenses, covering 932 therapies across 29 medical specialties. The state scheme is managed by a private insurance company with state funding and contracts with empanelled private and public sector hospitals.

Policy brief I October 2018

Why does public finance management matter for public private partnerships?

• The transfer of a non-functional government hospital to the private sector for operating and financing does not immediately translate into fully operational services. Unrealistic assumptions of revenue resulted in the private sector experiencing losses in initial years when operating the hospital, which had to be reimbursed by the government.

• In the absence of strong government financial monitoring systems, compliance for financial reporting and auditing remains largely with private suppliers.

• Lack of clear measurable outputs constrains tracking of reimbursements against performance.

• The state supported health insurance scheme in Andhra Pradesh has overwhelmingly high utilisation of private hospitals compared to public sector hospitals. While there is good tracking of covered households through an IT system, the tracking of financial balances is slow and leads to delays in claim settlement.

• Payment reimbursement to service providers is on actual consumption of services and procedures but is sufficiently developed to track by diagnostic groupings making it difficult to monitor rational and judicious use of procedures and technologies by private providers when utilising insurance funds.

• The selection of managing insurance companies is based on the lowest price which makes it difficult for the insurer to adequately invest in cost monitoring.

• Communication to patients on what is not covered by the scheme needs further attention to manage high expectations and avoid early self discharge.

Window for action and emerging lessons Contracting with private providers has gained major traction in South Asia through both formal initiatives and ad hoc spiralling. Modalities are varied, depending on context, and contracting often provides a dynamic area for harnessing the private sector to meet public sector goals.

• Contracting requires investment in stewardship and monitoring. If implemented as business-as-usual, it can give rise to half measures.

• Time and attention is required for the adequate pricing of service packages and estimation of revenues.

• Protection for the poor needs to be well-defined in both the contracting and monitoring of concessional arrangements for hospitals.

• Experimentation is needed with different payment mechanisms for reimbursing providers to guard against both over and under-utilisation of services.

• While investment in monitoring is a cornerstone of good contracting, its role in contract negotiation and renewal needs greater attention and support.

• Resistance from staff and district managements can be encountered in implementation of contracting, requiring strong upfront alignment of political champions.

• For progress towards UHC, contracting needs to extend beyond improvement of public sector facilities, to the purchase of private sector services in areas where private sector has low penetration, as done in Afghanistan, or in services where the private sector delivers at a greater efficiency.

Policy brief I October 2018

Credits This policy brief was written by Shehla Zaidi and Ken Grant, Mott MacDonald international health.

Contributions provided by Najibullah Safi (Afghanistan), Bharati Das (India) and Farooq Azam (Pakistan).

Readers are encouraged to quote and reproduce material from policy brief in their own publication.

Mott MacDonald cannot be held responsible for errors or any consequences arising from the use of information contained in this report.

Any views and opinions expressed are those of the authors.