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Penny wise, pound wise: results-based financing in healthcare

When you invest in something, you want good results. Achieving those results requires efficiency from the beginning. Especially when it’s about trying to make the best of limited resources to achieve health for all. Results-based financing, in many cases, is the way to ensure efficiency.

How well health facilities perform can be measured by clear indicators, for example, the quality, the accessibility, and affordability the of the services. In results-based financing, health facilities get incentives based on their agreed results and can invest the funds in further improving their services.

The approach also helps reform the whole health system to become more resilient. It starts with collaboration and a joint understanding of the pursued targets, and is calcified through a strong monitoring system.

How RBF makes healthcare better

RBF is a specific form of investment in healthcare. It can be funded either by external donors, like the Dutch government does in Ethiopia, or through domestic financing, like the Zimbabwean government allocating part of its own government budget through RBF. It can also be a combination of both. In all cases, the investor can decide to apply the RBF method.

Together with the purchasing agency (an independent organisation which contracts the health facilities and pays them based on their performance), the ministry of health agrees on a number of objectives.

Based on those objectives, specific indicators are developed, which, when achieved, will be incentivised. For example, if the objective is to reduce maternal mortality rate in a health clinic, one of the indicators they can agree on is the number of safe deliveries. When the agency signs a contract with a hospital or a clinic, the contract is directly based on those indicators.

Contrary to traditional funding, in RBF, health service providers such as clinics and hospitals receive incentives entirely based on their performance. The better the performance, the more bonus they get.

This initiates a positive cycle. The staff gets motivated to perform better, because they earn more when they offer better services, the clinic can invest in their own facility, which helps increase the quality of the services , and as a result the community gets better health care for an affordable price.

The thread that binds it all: monitoring

As mentioned before, the ministry of health, the purchasing agency and the health facilities agree on a set of targets. The health facilities get incentives based on how far they have achieved those targets. The question is: how is that measured and confirmed?

Three types of monitoring – or verification, as those who work with RBF call it – together do the trick. The local health authorities monitor the quality of care, whereas the purchasing agency verifies the exact number of health services delivered.  The communities in their turn testify how they have perceived the quality of the services. Only after these verifications have confirmed satisfactory performance or results, the clinic or hospital gets its funding.

Thanks to the independence of the purchasing agency, conflicts of interest – which can exist in any government system when too many responsibilities are concentrated within one ministry – can be minimised. RBF improves the overall accountability of the health system; not only by the solid monitoring mechanisms of RBF itself, but also by the division of the tasks among different parties.

How everyone wins

Except for external and government funding, there is also a third kind of financing of health: out of pocket money from the patients. In many fragile countries where government and external funding for health is severely lacking, for a person, seeking health care may mean falling deeper into poverty.

And this is just the start. When people cannot afford quality health care when they need it, they cannot remain healthy, develop, and thrive. They sink deeper into poverty and misery. As individuals and as a country. Limited or no access to health care starts the cycle of less productivity, less taxes, and thus less government funding for health.

With RBF, the investment in health creates a positive ripple. It makes good quality health care affordable and available for everyone. If applied at a larger scale, this would result in a healthier population that can help the country progress and prosper. A flourishing government will be able to invest more in health. Therefore, the dependency on external funding will decrease.

RBF works! We just need to make it happen

Some African countries are implementing RBF with success. Cordaid  has been part of some of these success stories, for instance in Rwanda, Zimbabwe and Ethiopia. Therefore, we can show the evidence…it works!

>> Read about how RBF or PBF is catalysing change in health in Ethiopia

RBF means being wise about every penny invested in health in fragile countries. And the reward we harvest is a healthcare system that is strong and can go a long way in providing essential health services. Now, more investment through RBF is needed in health. For greater results, and to start the positive cycle of health and prosperity.