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Strategic purchasing Purchasing refers to the transfer of pooled funds on behalf of the population to health service providers to deliver health services. Strategic purchasing means actively linking the allocation of funds to providers with information on their performance and on the health needs of the population that they serve. It includes decisions on what to buy (including designing benefits policies) from whom to buy, and how to pay (including selecting provider payment methods); as well as establishing the governance and institutional arrangements as well as information management systems necessary for monitoring and managing purchasing arrangements. and payment systems strengthen the PHC orientation of health systems by:

Promoting PHC as the first point of contact

Increasing the accessibility of priority interventions to the entire population

Supporting the integration of individual services and public health

Strategic purchasing Purchasing refers to the transfer of pooled funds on behalf of the population to health service providers to deliver health services. Strategic purchasing means actively linking the allocation of funds to providers with information on their performance and on the health needs of the population that they serve. It includes decisions on what to buy (including designing benefits policies) from whom to buy, and how to pay (including selecting provider payment methods); as well as establishing the governance and institutional arrangements as well as information management systems necessary for monitoring and managing purchasing arrangements. and provider payment systems refer to the transfer of pooled funds on behalf of the population to primary health care (PHC) providers to deliver health services. Strategic purchasing Purchasing refers to the transfer of pooled funds on behalf of the population to health service providers to deliver health services. Strategic purchasing means actively linking the allocation of funds to providers with information on their performance and on the health needs of the population that they serve. It includes decisions on what to buy (including designing benefits policies) from whom to buy, and how to pay (including selecting provider payment methods); as well as establishing the governance and institutional arrangements as well as information management systems necessary for monitoring and managing purchasing arrangements. means actively linking the allocation of funds to providers with information on their performance and the health needs of the population that they serve.

Payment systems that include a diverse mix of aligned methods encourage providers to promote access to necessary health services for patients, incentivize quality of care, and improve equity while promoting the efficient use of resources, and when appropriate, cost-containment.

PHCPI is a partnership dedicated to transforming the global state of primary health care, beginning with better measurement. While the content in this report represents the position of the partnership as a whole, it does not necessarily reflect the official policy or position of any individual partner organization.

Before taking action, countries should first determine whether purchasing & payment systems are an appropriate area of focus and where to target improvement efforts. Read on to learn how to use country data to:

  • Make informed decisions about where to spend time and resources 
  • Track progress and communicate these updates to constituents or funders 
  • Gain new insights into long-standing trends or surprising gaps
  • Countries can measure their performance using the Vital Signs Profile (VSP). The VSP is a first-of-its-kind tool that helps stakeholders quickly diagnose the main strengths and weaknesses of primary health care in their country in a rigorous, standardized way. The second-generation VSP measures the essential elements of PHC across three main pillars: Capacity, Performance, and Impact. Purchasing & payment systems are measured in the Financing domain of the VSP (Capacity Pillar).

If a country does not have a VSP, it can begin to focus improvement efforts using the subsections below, which address:

Key indications

If your country does not have a VSP, the indications below may help you to start to identify whether purchasing & payment systems are a relevant area for improvement: 

  • Out-of-pocket expenditure: if effective purchasing and payment systems are not in place, it is likely there is a high out-of-pocket expenditure for primary care services that patients will experience, often creating financial hardship or preventing patients from accessing care altogether
  • Misalignment of incentives for provider payment methods: if incentives for providers are not taken into consideration and/or discussed, this can lead to misalignment of the types of incentives in place leading to more ineffective purchasing and payment systems and diminishing the effect that provider incentives can have on the quality, efficiency and equity of care.
Key outcomes and impact

Countries that improve purchasing & payment systems may achieve the following benefits or outcomes:

  • First contact accessibility: strategic purchasing and payment systems help to put primary care services at the centre of the health system by increasing the accessibility of priority interventions and reinforcing a PHC-centric approach 
  • Protecting patients from financial risk: when it comes to PHC, and UHC in general, protecting people from financial risk and hardship, and preventing the act of paying for services from being something that adversely affects their quality of life are both key goals that can be achieved through strategic purchasing and payment systems
  • Improve quality, equity, and efficiency of PHC: efficient and effective health financing, which includes strategic purchasing and payment systems, provides access to quality PHC even for marginalized populations who initially do not have the capacity to access services

PHCPI is a partnership dedicated to transforming the global state of primary health care, beginning with better measurement. While the content in this report represents the position of the partnership as a whole, it does not necessarily reflect the official policy or position of any individual partner organization.

Explore this section for a curated list of actions that countries can take to improve purchasing & payment systems in their context, which embark on: 

  • Explaining why the action is important for purchasing & payment systems
  • Describing activities/ interventions countries can implement to improve
  • Describing the key drivers in the health system that should be improved to maximize the success/impact of actions
  • Curating relevant case studies, tools, &/or resources that showcase what other countries around the world are doing to improve as well as select tools and resources.  

Key actions:

PHCPI is a partnership dedicated to transforming the global state of primary health care, beginning with better measurement. While the content in this report represents the position of the partnership as a whole, it does not necessarily reflect the official policy or position of any individual partner organization.

Understanding and identifying the drivers of health systems performance--referred to here as “related elements”--is an integral part of improvement efforts. We define related elements as the factors in a health system that have the potential to impact, whether positive or negative, the management of services. Explore this section to learn about the different elements in a health system that should be improved or prioritized to maximize the success of actions described in the “take action” section. 

While there are many complex factors in a health system that can impact the management of services, some of the major drivers are listed below. To aid in the prioritization process, we group the ‘related elements’ into:

Upstream elements

We define “upstream elements” as the factors in a health system that have the potential to make the biggest impact, whether positive or negative, on purchasing & payment systems.

Policy & leadership

PHC policies and leadership establish financing and expenditure plans and processes. PHC policies should include costed service packages and holistic strategies, including accounting for social determinants of health.

Learn more.

Adjustment to population health needs

Priority setting can help determine how to prioritize purchasing and payment systems to support PHC.

Learn more.

Complementary elements

We define “complementary elements” as the factors in a health system that have the potential to make an impact, whether positive or negative, on the health workforce. However, we consider these drivers as complementary to, but not essential to performance.

Multi-sectoral approach

Social accountability mechanisms can support the monitoring of PHC spending and hold stakeholders accountable for commitments made.

Learn more.

Population health management

Participatory and evidenced-based local priority setting should help to inform how to structure purchasing and payment systems to appropriately allocate limited resources to PHC at the sub-national level.

Learn more.

Funding & allocation of resources

The funding and allocation of resources for PHC can be related to the structures for Purchasing & Payment Systems, however, the direction of influence is circumstantial and often complementary.

Learn more.

PHCPI is a partnership dedicated to transforming the global state of primary health care, beginning with better measurement. While the content in this report represents the position of the partnership as a whole, it does not necessarily reflect the official policy or position of any individual partner organization.

Countries seeking to improve purchasing & payment systems can pursue a wide array of potential improvement pathways. The short case studies below highlight promising and innovative approaches that countries around the world have taken to improve. 

PHCPI-authored cases were developed via an examination of the existing literature. Some also feature key learnings from in-country experts. 

East Asia & the Pacific   
Europe & Central Asia
Latin America & the Caribbean
Middle East & North Africa
North America
South Asia
Sub-Saharan Africa
Multiple regions

PHCPI is a partnership dedicated to transforming the global state of primary health care, beginning with better measurement. While the content in this report represents the position of the partnership as a whole, it does not necessarily reflect the official policy or position of any individual partner organization.

Building consensus on what strong purchasing & payments systems look like and key strategies to fix gaps is an important step in the improvement process.

Below, we define some of the characteristics of strong purchasing & payment systems in greater detail:

  • Paying for health services can often be a massive burden to patients and their families. works to protect patients and their families from financial hardship and risk. Strategic payment systems can promote the financial protection of patients by:

    • Avoiding out-of-pocket payments as a financing source
    • Moving towards compulsory pre-payment for health care (including PHC), based on patients' ability to pay
    • Using targeted subsidies to ensure access and financial protection for disadvantaged populations

    For specifics on how exactly one can promote financial protection, continue on to the “What Actions Can I Take?” section. Below is a deeper dive into the rationale behind why these three methods can work to promote financial protection:

    Out-of-pocket payments as a source of financing for health and PHC 

    To ensure that people can afford PHC, policymakers should avoid relying on out-of-pocket payments. Out-of-pocket payments reduce people’s use of needed services, especially among the poor.  When PHC is financed this way, a household’s ability to pay determines whether or not they use health services, and payment is often incurred exactly when the household is most vulnerable – at the time of sickness.  Health systems funded on the basis of a large share of out-of-pocket payments tend to be regressive in who makes financial contributions, requiring a larger percentage of income from low-income earners than from high-income earners, as well as inequitable in who uses care and who experiences better health outcomes. 1 There is a large body of evidence concluding that user fees can negatively impact demand for health care contribute to household impoverishment and promote general inequities in health access. 234

    While an individual primary care consultation may not be high-cost in absolute terms, out-of-pocket expenditure for primary care services can be prohibitively expensive for many people when the need for care becomes chronic or when medicines are needed (for instance, treatment for TB or routine care for chronic diseases).  Spending on basic services can also sometimes be catastrophic (exceeding a substantial share of a household’s income or consumption, like 10% or 25%) or impoverishing (pushing a family below the poverty line or further into poverty). 567

    Compulsory prepayment and pooling for health care (including PHC)

    means people are asked to make their financial contributions to the health system before they need health care, not when they fall ill. 8 To protect people from financial hardship associated with health care costs, health care contributions should be collected in advance in a predictable manner, unrelated to when health care is needed. Evidence indicates that no country has achieved UHC based on a system organized around voluntary contributions. 9 Voluntary health insurance can provide some financial protection for those (often few) who are covered, but insurers have an incentive to exclude sicker, higher-risk individuals from coverage, and/or charge them higher premiums.  As a result, those most in need of health services and financial protection may be unable to afford voluntary health insurance premiums and remain without adequate health coverage. 1 Moreover, voluntary health insurance creates many risks and potential spill-over effects for the rest of the health system, such as shortages of skilled health workers in government facilities and rising prices and costs across the health system. Therefore, “VHI needs to be managed and regulated in such a way that it contributes to equitable progress towards UHC, or at least does not harm such progress”. 10

    There are various ways to pool funds and address fragmentation. 911  serves to spread the financial risk associated with the need to use and pay for health services so that this risk is not fully borne by the individual who falls ill.

    Targeting to ensure access and financial protection for disadvantaged populations

    Various geographic, sociocultural, and economic factors limit access to PHC among poor and vulnerable groups, even if they are eligible “on paper” to have coverage. Targeting (actively identifying) those vulnerable groups and funding their coverage can expand access for those groups.

    Significant investments in infrastructure may also be needed to expand coverage to underserved groups. To ensure that targeted free care policies are successful, facilities will likely need increased funding to compensate for the loss of user fees and increased demand for care. New incentives for providing “free” services and efforts to strengthen providers’ capacity to deliver those services are important. 12 In addition, the targeting process has administrative costs; targeting mechanisms require an adequate administrative capacity to be effective and to minimize errors of inclusion or exclusion.

  • Purchasing refers to the transfer of pooled funds on behalf of the covered population to health service providers to deliver health services. means linking the allocation of funds to providers with information on their performance and the health needs of the population that they serve. 8 How countries purchase health care is a critical policy lever that can have a large impact on health system performance, including access to and quality of PHC services PHC services refer to any intervention, procedure, regimen, or process that providers use to respond to the needs and demands of their patient population at the primary care level. Because of PHC’s community-facing orientation, services can be provided virtually or face-to-face in homes, communities, or PHC centres. Depending on the context, services may be provided by public or private providers. . A well-aligned mix of s can encourage providers to promote access to necessary health services for patients, incentivize quality of care, and improve equity while promoting the efficient use of resources, and when appropriate, cost-containment. 1314 Ways to utilize strategic purchasing include:

    • Consider and align the incentives of different provider payment methods for PHC 
    • Establish contracts with providers, monitor how different payment methods affect PHC delivery & apply complementary administrative mechanisms 

    Carefully considering and aligning incentives of different provider payment methods for PHC

    Given the diverse set of services required for strong PHC, there is no single best that will work for all services in all settings. All payment methods have trade-offs, but a carefully designed blend of provider payment methods can incentivize health workers to deliver the right care in the right setting at the right time. Understanding and managing the incentives associated with different provider payment methods is important. Patient cost-sharing arrangements are also important influences on patient care-seeking behaviour and also need to be aligned with payment methods and adequately designed. 15 Patients might be unaware of the full cost of the services they are using (and thus possibly use more than they really need), while providers may dispense unnecessary care. Alternatively, providers may not provide enough high-quality care if they are trying to limit their financial outlays. 

    Establish contracts with providers, continuously monitor how payment methods affect PHC delivery and apply complementary administrative mechanisms

    All payment methods can have unintended consequences. 16 Careful monitoring, as well as complementary administrative mechanisms measures, are thus needed to counter undesirable incentives of a given payment method and also to ensure that payments over time continue setting the right incentives to providers. 14 

    Below is a table of common provider payment methods for PHC that can be mixed and leveraged in order to create a system. For example, capitation payments for PHC. A number of countries have adopted a capitated payment method for PHC services PHC services refer to any intervention, procedure, regimen, or process that providers use to respond to the needs and demands of their patient population at the primary care level. Because of PHC’s community-facing orientation, services can be provided virtually or face-to-face in homes, communities, or PHC centres. Depending on the context, services may be provided by public or private providers. . 17 Capitation minimizes expenditure risk for the purchasing agency because the payment per person for a defined period is set in advance.  When paired with patient registration (based on patient choice of their primary care provider or assigning patients to individual primary care providers), 18 and strong quality monitoring systems, capitation can promote efficiency and population health. However, in the absence of patient registration and strong monitoring, capitation can also lead to under-provision and poor quality of essential care, as well as excessive referrals of sick patients to higher-level settings of care.  To offset some of the perverse incentives associated with capitation, some countries have had success with blended payment models, such as adding fee-for-service payments for priority services like immunizations or PHC-sensitive communicable diseases. 19

    Table 1. Common provider payment methods for PHC 8162021

     

  • The use of primary care services can often be incentivized through a high remunerations rate. 2223 Remuneration Remuneration is traditionally seen as the total income of an individual that may take different forms, such as salary, stipend, honorarium, and/or monetary incentives. A remuneration strategy determines this particular configuration or bundling of payments that make up an individual’s total income. The World Health Organization recommends that all occupations of the health workforce be remunerated with a financial package in accordance with the employment status and applicable laws and regulations in the jurisdiction. is the payment(s) made to primary care workers for their work or services. It includes the payment of wages and salaries (including benefits and allowances) and consultancy fees, where applicable. Delayed or irregular payments will often have a negative impact on health workers and can lead to demotivation, mistrust, and absenteeism. If health workers do not receive their salaries, they may charge informal payments to patients or refer patients in public facilities to their own private clinics in an effort to make up for lost wages. 24 Over the long term, staff remuneration challenges can make health workers less interested in taking a government-funded health care position in the first place, contributing to staffing shortages in the public sector. 

    Thus, it is important that funds in a health system are managed in such a way that remuneration of primary care staff happens reliably--regardless of subnational area or facility type. This means that a facility/country’s remuneration method is: 242526

    • Stable: the amount paid to staff is consistent in quantity with the amount specified in the working agreement or contract 
    • Predictable: the timing and delivery mechanism can be anticipated
    • Timely: the payment occurs promptly and when specified in the working contract

    More information on health workforce incentives and remuneration strategies can be found here

    • Strategic purchasing Purchasing refers to the transfer of pooled funds on behalf of the population to health service providers to deliver health services. Strategic purchasing means actively linking the allocation of funds to providers with information on their performance and on the health needs of the population that they serve. It includes decisions on what to buy (including designing benefits policies) from whom to buy, and how to pay (including selecting provider payment methods); as well as establishing the governance and institutional arrangements as well as information management systems necessary for monitoring and managing purchasing arrangements. : Purchasing refers to the transfer of pooled funds on behalf of the population to health service providers to deliver health services.   Strategic purchasing Purchasing refers to the transfer of pooled funds on behalf of the population to health service providers to deliver health services. Strategic purchasing means actively linking the allocation of funds to providers with information on their performance and on the health needs of the population that they serve. It includes decisions on what to buy (including designing benefits policies) from whom to buy, and how to pay (including selecting provider payment methods); as well as establishing the governance and institutional arrangements as well as information management systems necessary for monitoring and managing purchasing arrangements. means actively linking the allocation of funds to providers with information on their performance and the health needs of the population that they serve. It includes decisions on what to buy (including designing benefits policies) from whom to buy, and how to pay (including selecting provider payment methods); as well as establishing the governance and institutional arrangements as well as information management systems necessary for monitoring and managing purchasing arrangements. 114
    • Provider payment method Provider payment methods refer to the mechanisms used to transfer funds from a purchaser of health care services to providers. : Provider payment methods refer to the mechanisms used to transfer funds from a purchaser of health care services to providers. 13
    • Financial protection Financial protection means that individuals and households do not experience catastrophic or impoverishing expenditure as a consequence of paying for health care. : Financial protection Financial protection means that individuals and households do not experience catastrophic or impoverishing expenditure as a consequence of paying for health care. means that individuals and households do not experience catastrophic or impoverishing expenditure as a consequence of paying for health care. 8
    • Earmarking Earmarking means ring-fencing, or protecting, all or a portion of a tax or other revenue source for a particular purpose, such as a specific health program or service. : Earmarking Earmarking means ring-fencing, or protecting, all or a portion of a tax or other revenue source for a particular purpose, such as a specific health program or service. means ring-fencing, or protecting, all or a portion of a tax or other revenue source for a particular purpose, such as a specific health program or service. 27
    • Prepayment Prepayment refers to persons or households making payments to the health system before they need health care, not when they fall ill. : Prepayment Prepayment refers to persons or households making payments to the health system before they need health care, not when they fall ill. refers to persons or households making payments to the health system before they need health care, not when they fall ill. 8
    • Pooling Pooling is the accumulation and management of financial resources to ensure that the financial risk of having to pay for health care is borne by all members of the pool and not by the individuals who fall ill. The main purpose of pooling is to spread the financial risk associated with the need to use health services. : Pooling Pooling is the accumulation and management of financial resources to ensure that the financial risk of having to pay for health care is borne by all members of the pool and not by the individuals who fall ill. The main purpose of pooling is to spread the financial risk associated with the need to use health services. is the accumulation and management of financial resources to ensure that the financial risk of having to pay for health care is borne by all members of the pool and not by the individuals who fall ill. The main purpose of pooling is to spread the financial risk associated with the need to use health services. 8

PHCPI is a partnership dedicated to transforming the global state of primary health care, beginning with better measurement. While the content in this report represents the position of the partnership as a whole, it does not necessarily reflect the official policy or position of any individual partner organization.

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