Takeo Provincial Referral Hospital: Pioneering a Health Financing Scheme

Transcription

1 Takeo Provincial Referral Hospital: Pioneering a Health Financing Scheme Takeo province, Kingdom of Cambodia Ministry of Health Swiss Red Cross World Health Organization June 12, 2002

2 This monograph was written by: Dr. Sarah Barber, Research Associate, University of California, Berkeley Mr. Filip De Loof, MPH, Consultant Dr. Frédéric Bonnet, Public Health Adviser, Swiss Red Cross Dr. Henk Bekedam, Team Leader Health Sector Development, World Health Organization The authors thank the following persons and the institutions they represent for their valuable contribution. Under the Government of the Kingdom of Cambodia: Governors H.E. Mr Sou Pirin, former Governor of Takeo Province H.E. Mr Kep Chuktema, current Governor of Takeo Province Ministry of Health H.E. Dr Mam Bun Heng, Secretary of State Dr. Te Kuy Seang, Director General for Administration and Finance Prof. Dr. Eng Huot, Director General for Health Dr. Sok Kanha, Chairperson Health Economic Taskforce (HETF) Ms. Khout Thavary, Chief of Financial Planning Bureau and Vice-Chair HETF Dr. Tê Tong Sin, Director of the Provincial Health Department until 2000 Dr. Nuth Sinath, Director of the Operational District Office until 2000 Dr. No Samith and Dr Hem Sarreth, Directors of Takeo Hospital Dr. Koy Chhem, Dr Hem Sarreth and Dr Kieu Samros, as successive Presidents of the Management Committee And all the Takeo Provincial hospital staff members Under Swiss Red Cross Dr. Jean-Gerard Pelletier, Public Health Adviser Dr. Pascale Brun, Medical Anthropologist Mr. Santepheap Chukmel, Assistant Adviser Mr. Jean-Marc Thome, Health Economist Dr. Thomas Achard, Senior Adviser Ms. Margrit Schenker, Program Officer Under World Health Organization Dr. Aye Aye Thwin, Health Financing Adviser Dr. Fabrice Sergent, Health Economist Mr. Mike Curtis, Budget Adviser Mr. Yogi Thami, Provincial Health Adviser Takeo Dr Julian Lob-Levyt, WHO Team Leader Strengthening Health System ( ) 2

3 Table of Contents Abbreviations...5 Summary...6 I. Opportunities and challenges in Cambodia The social and political environment National health reforms Population health status and government commitment to health MoH expenditure for hospitals Constraints in improving health system performance...11 II. Implementing a hospital financing scheme: preparatory work Ensuring high technical and structural quality Reaching a critical mass of committed leaders Gaining commitment among hospital staff Selecting members of the Hospital Management Committee Collecting data about the demand for health services Working out a realistic financial plan toward sustainability...15 III. Designing the financing scheme The Global Contract Internal hospital reorganization Calculating Performance Related Bonuses (PRBs) Pricing and user fees Exempting the poor Developing management tools Stimulating utilization of referral hospital services...21 IV. Takeo hospital activity levels, Inpatient levels Outpatient consultations Population contact rates...24 V. Financial Sustainability The hospital balance sheet: revenues and expenditures The performance of the user fee system The performance of the exemption system Operational costs: staff bonuses and drugs...28 VI. Managerial feasibility Gaining commitment among hospital staff Securing firm resource commitments via contractual arrangements Reorganizing hospital management Setting staff incentives Promoting utilization and patient satisfaction...34 VII. Lessons learned Prerequisites for implementing a successful scheme Contracting and mobilization of resources Protecting the poor Being a pilot program Takeo provincial hospital: a rich source of information and learning...37 VIII. Conclusions

4 Appendices 1. The national health coverage plan 2. Summary of the National Health Financing Charter 3. List of operational and administrative districts for Takeo province 4. The hospital management committee s terms of reference 5. The global contract 6. Details of inpatient admissions per service, Detailed hospital revenues and expenditures, Average income from user fees by service, Summary of Takeo provincial hospital performance indicators, 2000 References 4

5 Abbreviations ADD Accelerated Districts for Development ALS Average length of stay BOR Bed Occupation Rate CMS Central Medical Store CNTS Centre National de Transfusion de Sang, National Blood Transfusion Center CPA Complementary Package of Activities DPT Diphtheria, pertussis and tetanus immunization ECG Electro-cardiogram EPI Expanded Program for Immunization ENT Ears, nose and throat GDP Gross domestic product ICU Intensive Care Unit IPD Inpatient Department MCH Mother and Child Health MoEF Ministry of Economy and Finance MoH Ministry of Health MPA Minimum Package of Activities NGO Non-governmental organization O.D. Operational District OPD Outpatient Department PAP Priority Action Program PHD Provincial Health Department PRB Performance Related Bonus SRC Swiss Red Cross TB Tuberculosis UNDP United Nations Development Program UNICEF United Nations Children Fund WHO World Health Organization $ / P. US Dollar per Patient 5

6 Summary The rapid development of the modern health system in Cambodia is striking in consideration of its devastating history. In the early 1990s, the Kingdom of Cambodia began a period of relative stability and development, although the losses in human resources, infrastructure, and education during this period underlie many of Cambodia s existing constraints. The health sector remains challenged by a high burden of communicable diseases and high infant and maternal mortality rates among its population, 36% of who live in absolute poverty. In 1996, the Government of Cambodia initiated a broad Health Sector Reform agenda that encompassed fundamental reforms in the organization and financing of health services, embodied in the National Health Coverage Plan and Charter on Health Financing. This agenda was instrumental in initiating a systematic process under which alternative finance and delivery mechanisms could be tested and evaluated and a policy environment that reinforced taking initiative, monitoring and evaluation, and disseminating results for replication. This monograph focuses on Takeo Provincial Referral Hospital, the first Cambodian hospital to initiate and maintain a systematic approach to its financing with support from the Swiss Red Cross. By 1997, the Swiss Red Cross ten-year program of technical assistance enabled this 176-bed referral hospital to provide a range of high quality referral level medical services, particularly surgery. Managerial and financial constraints nonetheless obstructed a vision for the hospital s long-term sustainability. Takeo hospital leaders and the Swiss Red Cross endeavored to rationalize the management of available resources and sustain high quality and accessible services through a hospital financing scheme. Hospital staff made a commitment to implement major organizational changes fundamental to the success of the financing scheme; their partner organization, the Swiss Red Cross, provided technical and financial support to the initiative. At its core, the scheme consisted of a transparent official fee system, designed to generate sufficient revenue that would gradually supplement staff salaries and cover a proportion of operational costs. The underlying principle was straightforward. Adequate remuneration would provide staff the incentive to focus on improving hospital management and maintaining consistently high care quality. Together with a transparent affordable fee system, utilization rates would increase to a level at which the hospital could sustain activities without external financial support. Indeed, within a short period, utilization levels increased by more than 50% for inpatient and surgical services and have since exceeded bed capacity. At the onset, the management of the hospital shifted from an autocratic directorial board to an elected management committee that developed, fostered, and maintained the financing scheme and its principles. Transparency in hospital resource management thus improved dramatically. The development of the Takeo scheme generated basic financial data key in defining sustainable cost recovery policies. Over the 3-year period, the costs of operating Takeo Provincial Referral Hospital averaged US$ 467,000 annually. Of this amount, the major operational expenses included drugs (45%) and personnel costs primarily in the form of salary supplements (38%). A full one-third of its operational budget was generated from user fees (33%). The average out-of-pocket payments ranged from US$ 1.7 for a general outpatient consultation, US$9.4 for an admission, and US$ 39.5 for surgical admission. The fees established, therefore, represented two-thirds or less of previous under-the-table inpatient payments. Despite wide variation in unofficial fees, it is likely that patient out-of-pocket expenditure for most inpatient and surgical services was greatly reduced. The costing data and other specific aspects of this experience contributed to health development nationwide. The MoH and WHO have used the financial data generated by Takeo provincial hospital for cost analyses and project planning. The health information and accounting systems some of the first to be computerized in a Cambodian referral hospital serve as models for other hospitals. Essential for 6

7 internal hospital management, sound data have also proven powerful in advocating for crucial resources. The financing scheme itself attracted attention nationwide for having consolidated the principles of health sector reform effectively supporting their further implementation. The entire approach promoted innovation and partnership between external organizations and the government. Thus, despite the limitations and challenges in Cambodia, a transparent hospital financing scheme is not only feasible but also has the potential to increase financial accessibility to high quality referral services. Key prerequisites for replicating the scheme include: A legal framework that provides guiding principles for implementation and ensures the retention of fees within the facility. Existing high service quality and volume of hospital activity. Hospital staff, and senior hospital leaders in particular, committed to the objectives of a hospital financing scheme, including greater transparency. A consensus for major change and the motivation to make it work with full knowledge of the respective commitments and potential risks. Creating management conditions, including sufficient staff wages and contracts, which enable systems of sanctions and rewards. Sufficient population demand for services and affordable fixed prices. Commitment from the government in the form of sufficient release of public funds. External technical advice and financial support in the transition phase. Notwithstanding these successes, we draw attention to three important constraints. In 2000, the Government of Cambodia spent 0.8% of GDP on health an extremely low investment in health by any standard but particularly alarming given the health and human resource needs in Cambodia. Furthermore, because of unresolved system-wide constraints in public financial management, the hospital will likely continue to receive irregular and insufficient public funding based on monthly financial cycles that are too short for rational resource management. The Ministry of Health, however, has established a precedent with decentralized financial management one that could be expanded in scope and scale to address this key impediment. A related factor is the lack of public funds to pay for exemptions. Exemptions are partially financed from user fee revenues, which imply a reduction in salary supplementation. Such a conflict of interest results in a natural tendency to grant exemptions sparingly. Starting from October 2000, hospital fees for poor patients were financed from a different budget via an Equity Fund. This fund, however, similarly requires a regular reliable source of external funding --urgently needed to ensure that the poor are exempted. Release of public health budget designed as a social fund for the poor (Chapter 31) could be a starting point in contributing to these costs. Finally, a key constraint inhibiting sustainability was the delay in the development of the referral system and the poor integration of the provincial hospital within the overall system. Transparency and accountability within Takeo hospital has been achieved; the financing scheme was a major catalyst for enhanced quality and output. Unfortunately, the hospital remains isolated from the rest of the health system one that does not yet share the same ethics, performance-driven management, and commitment to quality health care and accessibility to all. The lessons learned from the Takeo hospital experience are valuable ones that can be adapted to other hospitals and health centers to reduce such discrepancy in progress. This monograph describes the challenges in initiating a hospital financing scheme and systematic organizational change within the constraints of the Cambodian health system. The organizational changes took into account the needs and demands of hospital staff, public health and political authorities, and patients. Clearly, the challenge encompasses not only technical aspects but also economic and political ones. Consequently, the changes must be seen as part of a broad process under which pioneering and learning from experience are key elements. 7

8 I. Opportunities and challenges in Cambodia 1.1. The social and political environment The rapid development of the modern health system in Cambodia is striking in consideration of its devastating history. During the 1970 s, the political, economic, and social foundations of Cambodia were destabilized, leading to the total collapse of economic and governance systems during the Khmer Rouge regime from 1975 to After the fall of the Khmer Rouge in 1979, the government began the reconstruction of health and social services with the assistance of socialist bloc countries due to western isolation of the government in Cambodia. Continued civil war with Khmer Rouge and other resistance forces who frequently targeted public services and systems in their efforts to undermine the government until 1998 drained the country s revenue and fostered international aid dependence. The Paris Peace Accords of October 1991 signaled the end of international isolation for Cambodia. Substantial broad international investments followed a democratic election in 1993, and its transition to a market economy. The macroeconomic environment was encouraging, with greater political stability, an ongoing process of strengthening national institutions, positive economic growth, the promotion of decentralized social services, and increases in national budget allocated to health late in the decade. The losses in human resources, infrastructure, and education during from the 1970 s, however, underlie many of Cambodia s existing constraints National health reforms Within the health sector, the Cambodian Ministry of Health (MoH) began to re-examine its centralized mode of health service delivery. In line with ongoing political change in 1996, the MoH took the initiative of developing an overall policy framework under which a series of fundamental sustained reforms were established to address a poorly funded system and workforce. The overall aim of the reform agenda was to regain public confidence in the health system and increase utilization of modern health care. It was instrumental in initiating a systematic process under which alternative finance and delivery mechanisms could be tested and evaluated and a policy environment that reinforced taking initiative, monitoring and evaluation, and disseminating results for replication. Four key policies form the foundation of national health reform and provincial health initiatives: the coverage plan, financing charter, and systemic reforms in budgeting and public administration. The health coverage plan established the reconstruction and reorganization of health infrastructure and management systems on population rather than administrative needs. Implementation of the coverage plan requires a clear definition of services available at each level of the system: The top of the management structure is comprised of the MoH, its technical programs and centers, and the national tertiary hospitals. The intermediate level consists of the Provincial Health Departments (PHD) as management bodies and provincial referral hospitals. At the peripheral level, the Operational Districts implement the minimum and complementary packages of activities within a series of health centers supported by a referral hospital. The central focus is the operational district, which aims to provide the minimum and complementary packages of activities. The health coverage plan, therefore, aims to shift the concentration of external and domestic resources from national hospital-based care towards population health within the operational districts. The referral system is a major component of the reform agenda under the principle that costeffective patient care is provided by the most peripheral and capable provider within the health system (Appendix 1). The health financing charter serves as the legal framework to test financing mechanisms, such as user fee systems and contracting. The charter provides guidelines for building links with the community and 8

9 establishing exemption mechanisms to protect the poor (Appendix 2). 1 It further stipulates that 99% of revenue should be retained within the facility itself. A maximum of 49% of fee revenue can be used for direct staff supplementation while the remainder can be allocated to other recurrent costs or quality improvements. Local retention of revenue is considered essential to ensure facility quality improvements (Gertler and Hammer 1997). The accompanying budgetary reforms were expected to increase both government allocations for health overall and the effectiveness of public spending within the sector. Lastly, the objective of the national public administrative reform was to rationalize civil service staffing levels and, over the long-term, provide an increased level of support to a full-time cadre of public servants. The underlying rationale of the reform agenda the protection of the poor and their access to high quality services is extremely important in the context of hospital care. In line with ongoing reforms, the MoH supported higher levels of managerial and fiscal hospital autonomy within the decentralized system, with hospital revenues managed as a global budget consisting of government funds, revenue from user fees and possible external financial support. Budget reforms, however, have proceeded slowly, and a key aspect of successful financing is continued government financial commitment to pay for basic hospital operational costs Population health status and government commitment to health Despite concrete progress in revitalizing the foundation for good health policies and access to basic services, population health indicators in Cambodian rank among the poorest in Southeast Asia (Table 1). Table 1. Demographic and health indicators for selected Southeast Asian countries, Total population (million) Life expectancy (years) Infant Mortality Rate Annual growth rate (%) Fertility rate Laos % 5.2 Cambodia % 4.8 Thailand % 1.9 Vietnam % 2.5 Cambodia has a total population of 12.5 million growing at 2.3% annually. Estimates for the infant mortality rate are more than double the regional average of 42 per 1000 live births (Ministry of Health 2000; World Bank, 1999). Life expectancy is 56.5 years, reflecting high rates of infant and child mortality, the impact of prolonged civil war on prime age adults, and a maternal mortality ratio estimated at 437 per 100,000 births (DHS, 2000). Such indicators point to the urgency of government investment in health and social services. Indeed, total spending in the health sector amounted to 12.6% of GDP in 1997, estimated at US$35 per person. The vast majority, however, was comprised of individual out-of-pocket payments (84.2%). MoH expenditure accounted for only 4.8% of total health expenditure and thus remains wholly inadequate to support basic health service delivery. Individuals, however, expend a disproportionate amount of their resources on health and such expenditures are made at the point of use when individuals may be the most vulnerable financially MoH expenditure for hospitals No exact formula exists for allocating resources between primary, secondary, and tertiary level care. Focusing on the proportion of public budget spent in 2000, 3 hospitals absorbed 59.7% of public budget 1 The financing charter requires that the remaining 1% is paid to the National Treasury. 2 Sources: Cambodian DHS 2000; World Bank 1999; US Census Bureau

10 for operational costs (MoH 2000). Within the hospital subsector, national tertiary hospitals and centers received one-third (33.5%) and provincial and district hospitals received 26.1% of MoH operating budget. In determining whether hospital allocation is optimal in Cambodia, one must consider two important factors. Evidence exists in Cambodia and elsewhere that the costs of unpredictable catastrophic hospital care are associated with poverty and landlessness (Oxfam 2000). Furthermore, neither social insurance mechanisms nor private health insurance will exist within the near future in Cambodia. Thus, government financing and production of hospital care can effectively protect the population from the high costs of unexpected catastrophic illnesses by subsidizing hospital care. Indeed, financing hospital services also effectively serves to pool health risks. A key indicator, therefore, is the socioeconomic profile of hospital users. We examine who uses hospitals by per capita expenditure quintile (Table 2). Table 2. Number of annual hospital inpatient admissions per 1,000 persons by per capita expenditure quintile from 1 (poorest) to 5 (richest), Per capita expenditure quintile Type of hospital Total Public hospitals Private hospitals All hospitals Table 2 indicates that increasing levels of household consumption is associated with inpatient admissions. Those individuals with the highest per capita consumption, or the wealthiest, have the highest rates of inpatient admissions in both public and private hospitals, whereas individuals with the lowest per capita consumption have the lowest hospital admission rates. In theory, the poor are exempted from paying hospital fees and government hospitals receive limited budgets to cover the costs of treating the poor. Data from the 1997 Socioeconomic Survey, however, demonstrate that the hospital exemption system does not function well (Table 3). Individuals utilizing central hospitals within the first (lowest) and fifth (highest) expenditure quintiles were most likely to be exempted. At provincial level, individuals falling within the third and fourth highest expenditure quintile were more likely to be exempted compared with the other quintiles. Remarkably, such data describe the situation before health financing schemes were formally sanctioned by the central government, and public services were officially free of charge. Moreover, a survey conducted in 1996 estimated that the average cost of a visit to the public hospital was US$17.60, whereas a visit to the public health center was US$5.31 (Ministry of Health et al 1998) before the initiation of formal user fees systems. Table 3. Percent of hospital clients that do not pay for fees or drugs, by per capita expenditure quintile from 1 (poorest) to 5 (richest), Per capita expenditure quintile Hospital expenses Total Service Fees Drugs These data suggest two key findings. Unofficial fee payments in the public sector were widespread and the amount collected substantial before the introduction of official fee systems. Indeed, one 3 Source: Ministry of Health (2000) compiled by Jim Knowles for DfID and WHO. The value of drugs and medical supplies were allocated proportionate to facility operating costs including Chapters 11 & Source: Ministry of Planning (1998). 10

11 objective of the health financing charter was to formalize existing under-the-table payments, both to ensure patients of fixed prices and channel informal payments into public revenue systems. Secondly, factors in determining exemptions from informal service fees were operational but not systematic. While it appears that some central level hospitals did identify a small proportion of the poorest, the relatively high number of exemptions among the wealthiest suggests that such systems may not have been based solely on ability to pay. Yet, one of the strengths of the financing charter is that the exemption mechanisms to identify the poor are largely determined locally. This is a challenging task in practice, particularly given the lack of incentives to exempt the poor. Indeed, disincentives to exempt individuals may exist given that a proportion of user fee revenues also contribute to salary supplements for staff Constraints in improving health system performance Several major constraints internal to the MoH inhibit health system performance. A major constraint to health service development is the inadequate level of resources, whereby provincial level managers are not guaranteed regular government funding to cover basic operating expenses. Not only is the total allocation to health overall inadequate, public health budget largely comprised of operational costs is typically reduced should revenue collection fall short of expectations, in the event of an unforeseen need or overspending at central level in other sectors. Spending is not evenly distributed throughout the year but instead concentrated in the last few months. A closely related issue is the lack of control over resources at the facility level. Health spending decisions are centralized, and MoH and provincial health managers are largely dependent on administrative authorities for budget access. The central level MoH conducts large procurement transactions in the health sector, such as for drugs. Once purchased, medicines and supplies are allocated to provinces and districts by the center. Even though hospitals can request qualified personnel, the provincial health department can only post staff that were assigned to provinces by the central level. At the facility level, these factors translate into the inability to plan effectively. The majority of MoH expenditures are pre-audited and authorized only after considerable paperwork and delays. Such delays provide a number of opportunities for leakage of money and resources among numerous provincial administrative and health intermediaries. Furthermore, the system functions so poorly that MoH funds remain unspent, further jeopardizing the urgent need for greater government investment in the health sector overall. In 1996, the MoH was unable to spend 25.6% of its provincial budget allocations (World Bank 1999). The average base salary for a civil servant is approximately $15 per month, whereas the cost of living ranges from US $80 in rural areas to $260 in Phnom Penh. Staff devote much time to alternative employment whether private practice, other jobs, or coping mechanisms. Indeed, the combination of an increasingly stable economy and exceedingly low overall civil service salaries resulted in the rapid growth of the private sector. While the private sector effectively subsidizes civil servant salaries, the situation also prevents the development of a professional full-time cadre of public health professionals and, in the long run, promotes a poorly regulated private sector and overstaffing in urban areas where private practice is more lucrative. Strong arguments have been made that increasing the salary share of the budget would improve health sector performance given that less than 13% of MoH recurrent expenditures in 2001 was absorbed by salaries. Salaries, however, cannot be raised except by general civil service reform. A possibly related issue is the commonplace practice of collecting unofficial fees for medical services, drugs, and consumables. Not only do few sanctions exist but the practice is widely tolerated because of little salary support. Other key factors beyond the control of the MoH include poor infrastructure and security concerns, which limit access. Low educational levels affect the decision to seek care and compliance with treatment protocols. In summary, major socioeconomic and MoH-specific structural constraints inhibit health system performance and underlie the problems in implementing a successful hospital financing scheme. 11

12 II. Implementing a hospital financing scheme: preparatory work Takeo Provincial Referral Hospital was the first Cambodian hospital to initiate and maintain a systematic approach to its financing with support from the Swiss Red Cross. Takeo province is approximately 80 kilometers south of the capital, Phnom Penh. Its population is estimated at 711,000 among its ten administrative districts, four of which have fewer than 44,000 inhabitants (Appendix 3; Graph 1). The provincial hospital has relatively modest infrastructure with 176 official beds and its staff numbering 157, including 4 surgeons among 13 medical doctors. The overall quality of hospital services is high compared with other secondary hospitals. Graph 1. Map of Takeo province Between 1994 and 1996, government funding to the To Phnom Penh Ministry of Health ranged between 0.4 to 0.6% of GDP (World Bank 1999), and was thus Main Road unable to cover facility operational costs. Existing public funding was unpredictable and misappropriations common. Functioning facilities such as Takeo Takeo Provincial Hospital thus Takeo relied on external assistance, both in cash and in kind. Although informal user fees were collected, no official fee systems supplemented hospital revenue. These systemic flaws contributed to poor management at the facility level. The combination of exceedingly low salaries, poor resource management, and few sanctions created a situation where underthe-table payments from patients to staff were the norm at Takeo and other hospitals. The mentality of the health staff was thus individualistic whereby each staff member simply sought to profit financially from patients. The essential elements of hospital care could not be guaranteed because of high absenteeism, shortages of essential drugs, and poor equipment. The population s confidence in public services was low. Many staff did not profit from under-the-table payments and unethical practices, instead focusing their efforts on private sector employment to generate sufficient income. They were dissatisfied with the hospital situation and wanted change and a handful of senior hospital staff members were committed to lead the change. By 1996, the Swiss Red Cross ten-year program of technical assistance enabled this 176-bed Referral Hospital to provide a range of high quality referral level medical services, particularly surgery. Managerial and financial constraints nonetheless obstructed a vision for the hospital s long-term sustainability. Takeo hospital leaders and the Swiss Red Cross initiated an important endeavor to rationalize the management of available resources and sustain high quality and accessible services through a hospital financing. The National Health Financing Charter and implementing guidelines offered a new approach in increasing hospital revenues and improving the management of hospital resources, along with the legal framework and national technical support to establish a successful scheme. Swiss Red Cross decided to 12 District Boundary

13 support the health financing initiative in Takeo provincial hospital for a limited period of three years as the final step in phasing-out its external assistance. Building on key positive factors that supported management and financing changes, Takeo Provincial Hospital began the first of several steps within a sequence of events leading to the implementation of the hospital financing scheme (Box 1) Ensuring high technical and structural quality Takeo provincial hospital benefited from 20 years of international support, first by the Czechoslovakian Bilateral Cooperation in 1980, followed by the Swiss Red Cross from 1986 to In 1996, the Swiss Red Cross was considering a phase-out of its support. A decade of thorough training had resulted in improved managerial capacity and technical skills, particularly for surgery. Given the overall low technical and structural quality in many Cambodian hospitals, the improvement of technical and structural quality over a substantial period is an essential initial step that should not be overlooked before developing financing schemes Reaching a critical mass of committed leaders Even though the technical quality of services was relatively high, senior staff expressed concerns about access and equity, in addition to the misappropriation of resources and under-the-table payments from patients. Although such activities were widespread in many hospitals in Cambodia, a small group of senior hospital staff was willing to challenge the status quo conditional on receiving a living wage. These leaders remained optimistic about finding alternative ways to support staff, thereby preventing under-the-table payments and other activities that decreased the overall quality of hospital care. They recognized that the hospital staff were strongly dedicated to patient care as demonstrated by their readiness to handle a higher workload. Box 1: Preparatory activities in implementing a financing scheme in Takeo provincial hospital 1. Ensuring high technical and structural quality services. 2. Reaching a critical mass among senior hospital staff willing to make changes. 3. Gaining commitment and consensus among hospital staff. 4. Selecting members of the Hospital Management Committee to lead the change. 5. Collecting data about the demand for health services among users and the population. 6. Working out a realistic financial plan toward sustainability Gaining commitment among hospital staff As an integral part of developing a successful hospital financing scheme, the hospital managers and Swiss Red Cross spent months in preparatory discussions among staff and hospital users to identify problems in the hospital. In addition, the Swiss Red Cross conducted a socio-economic survey in Takeo in August 1996 and a feasibility study in December This process allowed the hospital management to identify key factors both within the hospital and among the population that could either support or hinder the development of a successful financing scheme. During this process, the hospital personnel identified important activities that would need to take place for a financing scheme to be successful: Building commitment and consensus among hospital staff, some of whom perceived a formal financing scheme as a personal loss 5 More than 30 expatriates participated development projects supported by the Swiss Red Cross, some staying for a few months and eight giving assistance for more than two years. Among 34 expatriates, there were three surgeons, 17 medical doctors, and 10 nurses or midwifes. In a period of ten years, these expatriates contributed approximately 402 months of technical assistance, including 160 months by medical doctors, 100 months by surgeons and 97 months by nurses, mainly anesthesia nurses. 13

14 Accessing financial management skills to design the financing scheme Implementing a re-organization of the hospital, including a rationalization of staffing levels Engaging the participation of national and provincial health authorities, and Securing funding for the budgetary shortfall during the transitional period The project was built upon financial and managerial provisions and arrangements as a strategy to allow rational and cost-effective management systems within the hospital. It was expected, however, that the synergistic effect of multiple factors would generate sufficient hospital revenue: high motivation of the hospital staff, a transparent fee system fixed at a level below average informal payments, high service quality, and the volume of activity. It was foreseen that a genuine commitment among members of the hospital team as a whole was required to motivate staff behavior in line with the changes proposed, particularly given that disciplinary action was part of the system Selecting members of the Hospital Management Committee The creation of a management committee was crucial in providing guidance and in securing the involvement and adhesion of the stakeholders during the development of the pilot scheme. To ensure staff confidence in the committee, members representing the hospital were elected among each category of personnel (Appendix 4). The committee and its activities created a forum for the identification and analysis of problems, discussions, group decision-making about strategies, and monitoring and evaluation of the pilot scheme. The committee was also responsible for day-to-day oversight of hospital budget and other resources, and played a key role in advocating for an increase in government resources. Representatives from the Provincial Health and Governor s Offices were also represented in the management committee. Annually, all stakeholders from WHO to population representatives were invited to contribute to an annual review of hospital work Collecting data about the demand for health services Importantly, the hospital management committee recognized the importance of stimulating population demand for services. An important part of developing a scheme, therefore, was conducting a socio-economic private provider 27% survey the findings of which brought to public provider light key factors affecting utilization: 3% accessibility, affordability and equity in health care; appropriateness of services, and price for quality ratio. It also underscored no treatment or larger socio-economic barriers that affected no expenses self-medication access, including extreme poverty, low educational levels, poor communication infrastructure, socio-cultural gap between rural and urban populations, family and 2% 49% farming constraints, and the absence of informal community support to hospital referrals. Graph 1. Choice of health care provider in Takeo province (Brun and Chukmel, 1996) Graph 2. Choice of health care provider in Takeo province (Brun and Chukmel, 1996) The survey in Takeo focused on the level of poverty, education, and attitudes towards health services, in addition to key factors determining user fee levels and exemption procedures (Brun & Chukmel, 1996). The survey found that self-medication and traditional healing are frequently practiced in Takeo not surprising given its overwhelmingly rural population. In addition, utilization of public facilities was extremely low, with only 3% of respondents giving the public health system as their care-seeking choice (Graph 2). The survey also revealed that the average expenditure for one episode of illness is US$ 16.5, with self-medication and traditional remedies the least expensive alternatives at the average expenditure levels 14 traditional healer, offerings 19%

15 of US$ 2.7 and US$ 2.1, respectively. In contrast, the average cost for an episode of illness treated in a public facility was US$ 34.3, suggesting that the low utilization of public sector services may be associated with high costs relative to the alternatives Working out a realistic financial plan toward sustainability Some doubt remained, however, about the feasibility of generating sufficient funds to cover operational costs from a user fee system and an increased level of government funding. A feasibility study was conducted in 1996, therefore, to determine how much money would be needed to run the hospital on a monthly basis. Unofficial fee payments were widespread, and the amount collected thought to be substantial. Thus, the study compiled data not only from available government records but also from in-depth interviews with staff to estimate the amount of money generated from under-the-table payments. These data proved key in determining the relative commitments of each stakeholder and translating the vision of sustainability to a concrete financial plan. In depth interviews revealed that unofficial service fees varied widely given that patients paid staff individually for each service rendered but accounted for up to 80% of total staff income. Unofficial fees for general outpatient consultations averaged US$ 1.5, although this price did not include the cost of medicine. Diagnostics and imaging was US$ 1 to US$ 5. Inpatient admissions ranged from US$ 15 to US$ 30, not including drugs, while the price of a given surgical service ranged from US$ 40 to US$ It was estimated that surgical services produced 47% of the total amount of unofficial fee income collected. Table 4. Takeo provincial hospital estimated monthly revenues, expressed as US$ and % of total, 1996 US$ Monthly Line item Revenues Salaries (MoH) 2,500 8% Drugs, CMS government supply 3,333 11% Drugs, Swiss Red Cross supplement 9,000 29% Operational costs (MoH) 2,000 7% Under-the-table fee payments 13,750 45% TOTAL 30, % Using revised estimates of hospital activity levels and the information about the amounts generated from under-the-table payments, the estimated monthly revenues for Takeo Provincial Hospital totaled US$ 30,563, of which an astonishing 45% was generated from unofficial user fees (Table 4). Assuming that a proportion of expenditures were for non-catastrophic events, these data show some willingness to pay. They also demonstrated enormous variation --particularly for surgical services which points to the highly unpredictable nature of under-the-table payments. Clearly, the potential existed to increase utilization, quality, and hospital revenue should existing under-the-table payments be formalized into affordable fixed fees for service. 15

16 III. Designing the financing scheme Once committed to making difficult organizational changes with the clear understanding of the potential obstacles and facilitating factors, hospital leaders and staff proceeded to develop an innovative and sustainable hospital financing scheme. The approach integrated the issues of high quality care, fair financial contribution from beneficiaries, and staff salary supplementation. The objectives of the scheme reflected MoH guidelines that successful financing schemes require high quality services, accommodation for the poorest patients, community involvement, efficient and transparent management, and close monitoring and evaluation. The objectives of the financing scheme were four-fold: To establish a financial system whereby government inputs complemented by user fee revenue would cover recurrent hospital costs, including staff salary supplements. To promote high quality care, potentially enhanced by salary supplements inherent in the financing scheme. To increase accessibility via transparent fixed fees and exemptions for the poorest users. To generate practical tools and share lessons learned, thereby advocating for further implementation of sound health financing systems in Cambodia. In achieving the objectives proposed, the Hospital Management Committee implemented a series of specific tasks. They included: designing contractual arrangements both among the hospital management and supporting institutions as well as between hospital management and its staff; determining the basis for staff performance related bonuses, establishing a level of user fees and recording hospital revenue, exempting the poor, and stimulating demand for hospital services The Global Contract The financial feasibility analysis demonstrated the need for external interim funds that were not immediately available from public coffers. The Global Contract stipulated the financial and managerial commitments of the six institutions involved in providing resources to the hospital: the MoH at national and provincial levels, provincial authorities, Swiss Red Cross, the Takeo hospital directorate, and its management committee (Appendix 5). Its purpose was to establish a partnership based on detailed binding commitments among the signatories. The primary difference between the Global Contract and the usual MoH Protocol of Understanding signed by non-governmental organizations was the detailed description of the government s contribution. 6 In the Contract, the Swiss Red Cross financial contribution was designed as non-earmarked funding that filled the operational budget gap but progressively declined over three years as government funding and user fee contributions systematically increased to the point of a balanced budget. In effect, the Contract granted Takeo provincial hospital autonomy in financial management with a source of funding conditional on a commitment to manage such resources rationally and transparently. The MoH s newly established Health Economic Task Force was expected to monitor closely the implementation of the Global Contract Internal hospital reorganization A first conditional measure directly affecting the hospital personnel was a reorganization of the existing workforce to rationalize staff postings and the potential workload. The functions for each ward were reviewed to establish the appropriate mix of skills and qualifications for each. Clear job descriptions were developed for each position, and new posts were introduced that improved care quality, such as head nurse. This process of recognizing individual qualifications and responsibilities effectively stimulated the recognition of technical and medical competence among staff and promoted high levels of 6 It is important to note that the distribution of public resources was in line with regulations that apply to other provincial hospitals. For instance, a contribution from the National Budget for salary supplements could not take place. 16

17 professionalism within the hospital. Existing management practices that were maintained and strengthened included continuing medical education in the form of weekly sessions with nurses and doctors, daily de-briefings, and systematic information exchange between shifts that improved the quality of case management and brought the staff together as a team. To formalize staff commitment to the overall goal of organizational change supported via the financing scheme if successful contracts between the hospital management committee and individual staff person were also designed. The individual contracts aimed: To confirm each individual s verbal commitment to organizational change and sanctions, expressed during the initial workshops. To set out the principle that all staff are equally responsible in fulfilling their rights and duties. To establish concrete means for organizational and managerial change, such as the stipulation of working hours, job descriptions, professional standards, and staff reassignment. The contracts were based on internal hospital regulations and the individual job descriptions elaborated by the Management Committee (Box 2). The principle underlying the individual contracts was a high standard of professionalism. The Internal Hospital Regulations stress professional behavior toward the patients such as the abolition of under-the-table payments, compliance with hospital working hours, professional medical ethics, respect for patient privacy, and a prohibition of transferring patients to one s own private practices. Box 2. Specifications of internal hospital performance contracts Position title of signatory Working hours Contribution to the night duty roster when applicable Minimal monthly activities for some positions Maximal monthly bonus entitlement Principle of individual monthly evaluation used as a basis to calculate the actual bonus Types of serious misconduct that could lead to the expulsion of the signatory from the hospital These internal hospital contracts, signed between staff members and the management committee, created transparency in the disbursement of salary supplements, or performance related bonuses (PRBs). The PRB used staff performance assessments as the basis of the supplementation and aimed to generate sufficient supplementation to cover the cost of living Calculating Performance Related Bonuses (PRBs) Intended as a product of high quality services, the PRBs provided the major incentive in implementing managerial changes and accepting a large increase in workload associated with the hospital financing scheme. The underlying principle of securing a livable income based on high levels of performance was well understood by all staff. A key part of the preparation, therefore, was defining high levels of performance in terms of professional conduct and service quality, and translating performance into a method of calculating staff supplementation. The components of this calculation were based on: An individual s base salary provided by the government. A fixed scale of salary supplements based on two factors: the amounts staff were able to generate via under-the-table payments and the actual cost of living estimated as US$100 per month in Takeo. Verifiable methods of measuring staff performance, acceptable to local culture and customs. Financial feasibility among the population measured by the (a) patient s ability to pay, (b) expected number of patients, and (c) estimated amount required for salary supplements. 17

18 The concrete guidelines in operationalizing these concepts were one of the main tasks of the management committee. For each staff person, the maximum monthly bonus specified in the individual contracts was based on professional qualifications and level of responsibility in the hospital. Each person s maximum monthly bonus was clearly established in his/her contract, conditional on a minimum volume of activity in the hospital, or the Overall Hospital Activity Factor. The Overall Hospital Activity Factor is the volume of hospital services in a given month compared to a targeted level of activity. An additional Individual Factor was determined by presence at work (70%) and quality of performance (30%). Quality of performance was based on the monthly personnel evaluation. At the end of each month the PRB for each staff member was be calculated as: Bonus for the month = (Maximum Bonus * Overall Hospital Activity Factor) * Individual Factor The average monthly maximum bonus among the 154 hospital staff members was approximately US$95, and monthly bonuses ranged from US$ 50 to US$ 250. In addition to the performance supplementation, staff members are granted free hospitalization for him/herself and a 50% cost reduction for direct family members. The entire bonus itself, however, could be withheld should the staff person violate the Internal Hospital Regulations Pricing and user fees The implementation of a user fee system requires a transparent and uncomplicated process. It was estimated that a range of flat fees for the most common packages of services would reduce out-of-pocket payments but generate high levels of revenue assuming a high volume of paying users for affordable quality health care. Table 5. Takeo Hospital user fees per package of service 7 Package of Services (since1/4/99) Riel US$ Riel US$ Outpatient consultation 8 General consultation and drugs 4, , Specialist consultation and drugs 6, , Wound dressing and small surgery 15, , Dentistry, 2 categories 6,600 15, ,000 20, Physiotherapy 3, , Imaging and diagnostics X-Ray, Ultrasound, or ECG Laboratory 9,000 3, ,000 4, Inpatient services Hospitalization: 9 up to 1 week more than 1 week Surgery 10 T1: minor surgery, local anesthesia T2: medium, with general anesthesia T3: major surgery, complex, transfusion 27,900 62,190 45,000 90, , ,000 82,000 70, , , Maternity: delivery without complication 27, , Year 1997: US$1 = R 3,000; Year 2000: US$1 = R 3,800 8 The outpatient consultation fee covers one episode of disease, including five days of treatment. 9 The hospitalization fee includes accommodation, two standard meals, diagnostic technologies, services and drugs. 10 Fees for surgery include admission itself and related services. 18

19 A series of flat transparent fees for services aimed to: Assure the population of a simple, easily understood, and predictable set of fixed fees Avert individual staff subjectivity in determining any one patient s fee levels similarly creating certainty in fee levels. Assure financial accessibility for the vast majority of the population Secure a level of revenue for the hospital under which it was possible to achieve a balanced budget Enable patients to compare service quality and price with other providers The choice of flat fees was also strongly influenced by the hospital s supply of drugs from the MoH s Central Medical Store (CMS) that theoretically meets its needs fully, which effectively permits it to ignore the severity of illness and accompanying cost variations in treatment. The exact level of fees was determined by integrating a socio-economic analysis of ability to pay and a hospital cost analysis, which took into account a fair level of PRB for hospital staff (Table 5). The financial projections proposed a 5% increase in the first year of operation, although whether this increase was implemented depended on the overall effect of fees on hospital utilization. In fact, fees were slightly reduced initially to promote utilization and allow the financing scheme to run while Swiss Red Cross could fill the gap. Although wide variation was seen, under-the-table payments for inpatient admissions prior to the start of the financing scheme in Takeo ranged from US$15 to US$30. The fees established, therefore, represented two-thirds or less of previous under-the-table inpatient payments. Despite wide variation in unofficial fees, it is likely that patient out-of-pocket expenditure for most inpatient and surgical services was greatly reduced Exempting the poor Integral to the user fee system was a transparent and non-arbitrary exemption process that promotes care-seeking behavior among the poor and vulnerable groups. It was projected that 10% to 20% of the total number of patients could be exempted the poorest quintile of the population, assuming that the poorest utilize the hospital at the same rate as other income quintiles. Certain services and individuals were also automatically granted exemption, including inpatients for tuberculosis treatment, registered orphans, and the disabled. 12 The Takeo socio-economic survey conducted in 1996 established defining characteristics among the poor. From this survey, the poorest quintile of the population was found to have a total asset value of less than US$100 per household. Distinctive easily verified indicators of poverty were also identified, such as the characteristics of the dwelling and household material assets, which correlated with households among the poorest quintile (Table 6). The high proportion of the population identified as poor using these indicators suggest that accurately identifying the poor may be difficult to operationalize, with the potential to exempt those who can pay. Patients request exemptions at the reception desk where the exemption process was advertised. Management committee members took turns in screening applicants by completing a simple and verifiable grid scoring these indicators, in addition to collecting information such as the total number of children in the household. The grid provided the staff person with a score above or below a given 11 Unofficial fees for general outpatient consultations averaged US$ 1.5, and official fees were established at approximately the same level. 12 An estimated 2,500 disabled were registered in Takeo province. 19

20 threshold for full or partial fee-exemptions. The final decision, however, was made only after determining whether the patient may have faced exceptional hardship or special circumstances. All information was kept confidential at the reception, and the medical files did not show any distinctive mark that could have led to differential treatment or behavior. For the time period covered by this analysis, all applicants had been granted full or partial exemption. Table 6. Proportion of rural population with selected poverty characteristics, Takeo province 1996 Indicator Total population Poorest quintile Roof of house in grass or leaves 50% 67% No furniture in the house 67% 84% No television in the house 83% 95% No transportation 13 45% 65% Use petrol lamp as light source 92% 98% Less than 3 types of farm animals 89% 98.5% Less than 9 heads of poultry 92% 96% This method was preferred to a system in which community or administrative leaders attest to the poverty status of the patient, possibly requiring more complicated procedures to standardize and certify household resources at the village level. It would also require training and good cooperation among local leaders. The hospital staff feared, however, that it would carry a substantial risk of misallocating exemption funds. They insisted that fee exemptions should be strictly controlled and expressed a genuine concern that that the system could be abused, thereby not fulfilling the health financing scheme s overall goal of rationality and transparency Developing management tools The key factor in improving hospital management and supervision was the introduction of an elected management committee that took charge of day-to-day hospital management. This committee was responsible for restructuring the hospital organization, rationalizing patient flow, monitoring resources and information flows, and promoting overall transparency in hospital functioning. Specific tasks were delegated to several sub-committees, i.e., for personnel evaluation, investigation of staff misconduct, elaboration and modification of the financing principles, and procurement. The quality of pharmaceutical stock management was strengthened further given that the drug supply is a major resource requiring careful management. Transparency in drug supply and consumption helps to prevent over-prescription, and reliable record keeping is necessary for effective pharmacy management. Under the financing schemes, the supplies were costed and their sources identified, whether from the Central Medical Store (CMS), NGOs, or purchased directly by the hospital. Indeed, the hospital was newly responsible for managing self-generated revenue and determining collectively the additional purchases for drugs or material that would ensure maximum hospital activity levels. Other efforts to monitor progress include a survey among patients, and regular patient interviews to evaluate their satisfaction with the services. Among the hospital staff, a personnel opinion poll has been held twice, in addition to the monthly individual staff performance assessment used as the basis of calculating the bonus. Position-specific evaluation charts establish standards that aim to stimulate a gradual improvement of individual performance. Monitoring of detailed activities per service and hospital financing has become routine. Periodic collection and tabulation of public health indicators provide managers with data for daily decision-making. Regular evaluation assesses the degree of success of the HFS, in implementing the planned strategies and attaining the activity objectives. After the 13 Bicycle, motorcycle, car, or boat 20