Financial strategies

Financial strategies for quality improvement include both provider and patient interventions. Interventions within the former may include: fee-for-service (provider has been paid for number and type of service delivered), capitation (provider was paid a set amount per patient for providing specific care), provider salaried service (provider received basic salary for providing specific care) along with institutional penalties or incentives. Patient interventions may include health insurance systems, co-payment, user fees and patient incentives or penalties.

In this learning package we will briefly touch on user fees and performance based pay approaches as these are topical.

How do financial interventions relate to quality improvement?

Some financial interventions may be put into place specifically to improve quality. For example, women may only be allowed to access free care if they register with their local midwife first. The aim of such an intervention would be to establish a degree of continuity of care so that local health providers will be able to track the health needs of people in their coverage areas.

Others, for example user fees and performance-based financing (PBF), are more complex and often relate to systems reform financing. Fees to access essential services such as maternity care were abolished in several low and middle income countries over the last decade. This patient intervention was meant to improve quality of Maternal and Newborn Health (MNH) services by removing a financial barrier within the health system (and therefore improve the quality of services by increasing access).

Approaches such as PBF (provider interventions) are generally aimed at increasing the quality of care provided through incentivizing health workers or health facilities to meet agreed standards; these generally include quality of care indicators and possibly wider systems indicators such as addressing barriers to care.

User fees

The argument for the removal of user fees received high level support as recorded in speeches made at the United Nations General Assembly on 23 September 2009.

“We will support countries to implement ways to remove barriers to access. Of all the barriers, let me highlight one and that is the removal of user fees. User fees punish the poor. User fees stop mothers and children to access health services that are very much needed. So I would like to appeal to leaders in this room: prime ministers, presidents, development partners, please let’s work together to support countries to implement ways to get rid of all these barriers and most important of all user fees.”Director General of WHO, Margaret Chan
“Especially for the poor we have to be ready to try to help countries make some of those services free at the point of delivery where governments chose that’s the best way to do so”President of the World Bank Robert Zoellick

“….According to our own British Medical Journal, user fees in 20 African countries have by themselves been responsible for nearly a quarter of a million child deaths every year, so in total, millions of children could have died as a result of our failure to abolish user fees. The evidence is stark, the reality is shameful, the death toll can be counted, the pain is incalculable, so today we must act together to end that pain.”Former Prime Minister of UK, Gordon Brown

In many instances the assumption has been that removing the financial barrier will increase access. There is evidence to support this (see Hatt et al 2013, Meesen et al (Eds) 2011) and to demonstrate increased uptake of services even amongst the least wealthy (for example see Litvack 1993). However there is limited evidence on what impact this is having on health outcomes and maternal and newborn survival and whether or not this is the most effective financing mechanism to achieve this. Some studies have also indicated that the removal of user fees requires a considered approach to ensuring an effective enabling environment and to reducing some unintended side effects. These can include inequality of access, no positive impact on the user experience and can have perverse effects such as reducing quality because of loss of income to health facilities and constraints on resources to acquire essential supplies such as gloves or medicines.

Similar effects could be postulated when user fees are actually introduced. Assuming that revenue is channelled towards quality improvement, the intervention may generate income to purchase supplies or increase the workforce. Conversely, the fee may well limit the access of poorer people to the service.

Emergent learning from user fee interventions suggest:
  • A broad package of care should be provided free of charge in order to have impact on MNH. A focus on caesareans alone will address the main causes of death and disability.
  • Approaches need to be well designed and well implemented in order to provide financial protection and to remove the risk of better off households gaining the most benefit.
  • Effective implementation requires ownership across all levels of health workers which requires an enabling and supportive environment.
  • There must be effective regulation of facilities and staff to guarantee that additional costs are not levied by health workers (

Performance-based financing

PBF refers to approaches where health workers receive payments on the basis of their performance. There is a range of different implementing approaches with varying levels of payment in proportion to salaries and with different approaches as to whether payments are made on an individual or team basis.

There is very limited evidence on the effectiveness of such payments in improving performance. The majority of the evidence comes from OECD and high income countries with varying interpretations of their effectiveness (see for example Serumaga et al 2011 and Cashin (ed) 2014). There are also differing expectations of performance which compromises comparison between different studies. For example the focus may be on improving access to services as an element of improved quality, on the numbers of services provided or the focus may be on directly increasing the dimensions of quality such as user experience, clinical skills, safety and/or accessibility.

Within the LMIC context there has been a significant increase in the adoption of performance-based financing; and there are mixed reviews about its effectiveness. Supporters of the approach refer to the ability to contribute to rapid progress and to the benefits of promoting greater accountability, improved efficiency and quality and the spill-over effect to other public sectors. Critiques express concern about issues such as the speed of adoption with limited evidence, creation of dependencies and the potential lost opportunity to maximise whole sector reform and wider financing packages (see Meessen et al 2011 for an overview).

Known limitations include that some dimensions of performance are difficult to define and to measure; which has implications on setting levels of remuneration. Performance-based financing presents many challenges both at the design and implementation stages. The need to ensure effective monitoring and oversight is important for effective implementation and also for ensuring that the focus remains relevant.

Rwanda was the first country to adopt this approach as a national policy and the pilots and subsequent scale up of the approach has been accompanied by studies into its effectiveness. Findings included a 23% increase in the number of institutional deliveries and increases in the number of preventive care visits by children aged 23 months or younger (56%) in facilities in the intervention group (Basinga et al 2011). The study also estimated an increase in prenatal quality as measured by compliance with Rwandan prenatal care clinical practice guidelines. Another study looked at the impact of the payment of incentives on productivity within facilities. The incentives were linked to a 20% increase in productivity, and improvements in child health (Gertler and Vermeersch 2013).

Consider your own context: what are the benefits of each approach to PBF and what are the challenges in using PBF to improve the quality of services and reducing MNM?

Provider incentives

Let us look at the experience of another type of financial, quality improvement intervention in India. The majority of incentive programmes use pay-for-performance strategies where providers are rewarded for achieving published guidelines or benchmarks. Critics of this approach suggest that the system rewards ‘patterns of behaviour’, rather than effective clinical decision making and quality services (see Diamond and Kaul 2009).

Additionally while many countries have adopted this approach, under the assumption that they would regulate costs and inappropriate utilization of services, there has been little research into the effectiveness of provider incentives in improving the quality of care provided. (see Dudley 2005 for example). Alternative, and often more complex, approaches have been developed such as evidence-based reimbursement which aligns payment to the anticipated health related benefits which are assessed using clinical trial evidence (see Diamond et al 1993).

A 2009 healthcare literature review sought to assess the effectiveness of providers incentives in improving the quality of care and whether incentives have had secondary effects on quality of care (Christianson et al 2009).

The key findings of the review (of 36 studies) included:

  • The findings from studies on the effect pay-for-performance schemes are mixed. Relatively few significant impacts were reported, and they often run alongside other quality improvement components in addition to incentive payments, making it difficult to assess the specific impact of the financial incentives.
  • That there was insufficient information to allow any conclusion on the impact of direct payments on quality of care in hospitals.
  • There is limited evidence that the use of financial incentives to improve the delivery of preventive services is effective. The number of technically robust studies in this area was low but found the effect of incentive payments intended to improve quality were small or non-existent.
  • That financial incentives can influence utilisation and costs, although more research is needed in this area.


Case study: The Chiranjeevi scheme, Gujarat, India

The Chiranjeevi scheme is an example of a scaled up provider based financial intervention to improve the quality of maternity services by improving access to emergency care during childbirth.

What happened?

In Gujarat, the intervention comprised a partnership between the health department of the state government and private obstetricians. Contracts were offered to accredited private obstetricians to provide care to poor pregnant women, free of charge. In return the government paid the private health facilities a stipend according to numbers of cases managed (Mavalankar et al 2009). The scheme was implemented in 2007 and by 2010 more than 600,000 deliveries had been conducted (De Costa et al 2014).

What difference did it make?

Findings on the effects of the Chiranjeevi scheme have been contradictory and limited by reliance on routine health information system data. Increases in uptake of care and reductions in maternal and neonatal deaths were initially reported but these did not take into account the context of rising institutional delivery in Gujarat independently of the programme.

Other studies have suggested no influence of the scheme on deliveries in health facilities, even in private institutions.

Other financial strategies

In low and middle income countries, the burden of costs to access MNH services fall on women and their families. A wide range of demand side and supply side mechanisms have been tried out in recent years to ease this problem.

We have provided some illustrations of how financial considerations affect quality in MNH services and highlighted some of the challenges and potential benefits of using financial strategies to improve quality. Given the complexities of the concept and dimensions of quality, the improvement strategies are also often complex. They may be an amalgam of interventions across the health system; often as part of a broader reform which may also be informed by policies and practices spanning the whole public sector.

This is a large and growing area of work, which is constantly changing as new evidence emerges. The findings of individual studies are not always available in synthesised form, although mixed effects have been reported. We will return to this example later in this section (improvements in provider practice).

Financial strategies was last modified: June 15th, 2015 by Adrian Bannister

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