PBF as a health system reform

Chapters 5 and 6 in this report discuss how PBF pilot interventions affected the coverage and quality of care patients received. However, these studies may not capture the full effects of carrying out such pilots on the health system as a whole. Even temporary PBF interventions can have a considerable impact on the development of health systems. They provide examples of what can work, how, and why. Input-based financing of health systems has historically performed poorly (Leslie et al. 2018; Kutzin 2012), and it has not been designed to incentivize efficiency, access, or quality of service provision. In this historical context, introducing PBF, even if through a vertical financing modality—where a central purchaser channels payment through the public financial management system all the way down to individual facilities and workers—can offer policy makers a glimpse as to what can be achieved through system building.

For example, PBF reforms in many countries have shown that in most contexts, it is possible to provide access to financial services and build capacity for facility managers to use these resources prudently. Good accounting and reporting, although not health outputs per se, are important steps on the road toward a health system that delivers quality services efficiently. The PBF experience may also provide evidence that the increased fiduciary risk of delegating responsibility to facility managers may pay off as they can respond to changing needs. In addition, PBF can show that flexibility of resource use does not necessarily expose the public financial management system to greater fiduciary risk and at the same time allows for efficiency gains because spending is not locked into input-based categories. All these lessons can be integrated into the design of health systems. This does not mean that there needs to be a radical shift toward full fee for service, but the experience can inform what a transition away from a purely input-based system to a mixed payment system could look like.

Another benefit of PBF pilots is the introduction of data collection and data-sharing systems. Knowing what services were delivered where and to which patient is unequivocally an essential building block of health systems and thus should be tracked systematically, for instance, through a unified health management information system. Often, PBF systems provide such tracking data through dashboards or portals that facilities use to report performance. Of course, such portals can be adopted without the strategic purchasing component and simply be linked to the health management information system instead. Budget provisions to facilities should at least

in part reflect that such spending can be reoriented for greater efficiency, equity, and quality of services. Building such capacity takes time, but it can be part of the PBF verification process, through which a facility’s performance reports are audited or verified by a third party (neither the government purchasing agency nor the facility itself).

To reiterate, the PBF initiatives reviewed elsewhere in this report have meticulously documented their performance. Thanks to rigorous impact evaluations, it is clear where and to what degree the approach has worked. However, most of the impact evaluations of the PBF schemes reviewed in this report evaluate a handful of indicators of success—all measured at the health facility, worker, or population catchment level—whereas PBF is promoted as a health system intervention (Shroff et al. 2017). Indeed, the potentially transformative sectorwide impacts are often discussed as both a benefit (Meessen, Soucat, and Sekabaraga 2011) and a criticism (Paul et al. 2018) of PBF schemes. Among the reasons PBF is hypothesized to be a systemwide intervention are the autonomy, accountability, and transparency aspects, which may indeed accrue at a higher level than the health facility. There may be important effects on the Public Expenditure Tracking System, which are not captured by impact evaluations. Finally, there may also be important political economy considerations as governments must be willing to invest scarce resources in the health sector. Tying payments to results can make PBF politically feasible and a conduit for health sector investments—the so-called flypaper effect (Devarajan and Swaroop 1998).

A related question is whether it is possible to measure the effects of different components of PBF separately. What is known from the studies discussed earlier is the effect of the set of interventions implemented as part of the PBF package, vis-à-vis the status quo or other packages, like decentralized financing or supportive supervision and autonomy. What a health system practitioner might be most interested in, however, is the marginal effect of any one of the above-mentioned changes since they might be interested in pursuing individual measures separately. For example, what is the effect of allowing greater facility autonomy, and what might it take to get there? Can facilities be introduced one by one into the government chart of accounts? Sending funds to providers might require training them in accounting and reporting. Is this realistic, and what would be the effect on accountability and service delivery? It may be most useful for practitioners to understand these individual effects, rather than the effect of the PBF package as a whole, to pursue meaningful reforms in the public financial management space. These may mimic specific PBF processes and would

affect health system reform and how the health budget is managed. At the same time, most LMIC health systems may face constraints at several points in the underlying production function for effective coverage. For instance, there may be inadequate training of health workers, insufficient capacity, or demand-side barriers. A PBF program intervenes at one point or constraint—the health facility. It may be the case, however, that alleviating some of these other constraints may also lead to improved effectiveness of the PBF intervention. Thus, understanding the time horizon and observational unit capturing all—or even most—of the PBF impacts and the complementarity with other approaches is key to documenting any systemlevel impacts of PBF interventions.

Another important question is what to measure as an end outcome. Improvements in health systems are believed to contribute to effective coverage at a lower cost down the line (Vaz et al. 2020). If this is the case, then seeing gains in intermediate steps to effective coverage could be indicative that down the line, enough system-level gains would accrue that would lead to improvements in effective coverage and health outcomes. Thus, changes in health systems—timeliness of payments, accountability, and transparency—may be worth tracking even without concomitant improvements in effective coverage or health outcomes. This challenge is essentially that of an incomplete time cycle in using impact evaluations to study an intervention that is trying to change a system—such changes take time to implement, but it is typically infeasible, possibly even unethical, to maintain a counterfactual for an extended period. Thus, if it is believed that PBF interventions have system-level impacts and that such impacts can improve effective coverage, then it is important to track health system development as an end goal in and of itself as part of evaluative research.

One way to understand a PBF pilot’s broader impact is to study what the government chooses to invest its resources in after a donor-funded PBF pilot has reached completion. Such an approach would assess concerns around the fungibility of donor aid and government resources. The concern with the fungibility of aid is identifying what the government would have spent resources on in the absence of donor aid. If donor aid is simply displacing government funding, then outcomes might have been identical even without the intervention (Devarajan and Swaroop 1998; van de Walle and Mu 2007). This of course presents a challenge for the sort of evaluative research discussed here. One way to assess the impact of a PBF pilot in the face of such fungibility concerns might be to examine what aspects of the pilot are scaled up. Sometimes, even when the PBF intervention is not scaled up, individual