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Acknowledgements
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Stock Number: 37159

Abstract
In 1999, the World Bank Institute (WBI) launched a major learning program for Bank
client countries and Bank staff on "Population, Reproductive Health and Health Sector
Reform". It aims to complement the Bank's extensive lending activities for population
and reproductivehealth (about $500 million annually) by providing information about
options, interventions and best practices to advance the reproductive health agenda in
countries undergoing reform.
An important part of the learning program is to identify sector-wide changes in health

systems that are required to combat deeply entrenched, systemic performance problems
that currently undermine desired reproductive health outcomes. This is a daunting
challenge especially for those who have been associated with more narrowly managed
family planning and reproductive health projects, and must now champion the integration
of population and reproductive health concerns in overall health sector development. To
do so, new skills will be required including knowledge about how different forms of
financing, provider payments, organizationalarrangements, regulation, and ways of
promoting healthy behaviors can be brought to bear to improve reproductive health.
Acknowledgingthe immense challenge ahead, this paper does not pretend to offer an
exhaustive review of all problems involved or ways of dealing with them. Its purpose
rather is to:
* explain why health sector reform prevails in many countries and why reproductive
health advocates cannot ignore it;
n
propose a diagnostic approach for 'thinking about' reproductive health that links
undesirable outcomes to their causes, as well as five categories of health reform
interventionsor "levers" than can be employed to remedy them;
* illustrate the application of the reforrn categories or "levers" in countries where a

concerted effort is underway to improve reproductive health outcomes; and
* contribute to a common language and understandingof reform options that can help
empower advocates of reproductivehealth in their dialogue and negotiations with
Ministries of Health, Ministries of Finance, and the international donor community.
iii
Contents
Part I: Linking Reproductive Health and Health Reform I

Introduction I
Why is Health Sector Reform Important for Reproductive Health? 3
Motivations for Health Sector Reform 5
A Diagnostic Approach to Using Health Sector Reform to Improve
Reproductive Health 12
The Five Reform Levers 14
Scope of the Reform Levers 15
Financing and Resource Allocation 16
Provider Payments, Incentives and Motivation 19
Organizational Change 24
Regulation 30
Promoting Healthy Behaviors 35
Combining the Five Reform Levers 38
Part II: Country Level Examples 39
Reforms in Different Types of Health Systems 39
Trends in Public Sector Reform 41
New Public Management 41
Ghana 45
Background to Reform 45
The Reform Levers 47
Lessons Learned 50
Trends in Public/Private Service Delivery Models 51
Egypt 52
Lessons Learned 57
Trends in Private Service Delivery Model 58
Bolivia 59
Lessons Learned 64
Philippines 64
Lessons Learned 70
Conclusion 70
Part I: Linking Reproductive Health and Health Reform
"Reproductive health is a state of complete physical, mental and

social well-being and not merely the absence of disease or
infirmity, in all matters relating to the reproductive system and to
its functions and processes. Reproductive health therefore
implies that people are able to have a satisfying and safe sex life
and that they have the capability to reproduce and the freedom to
decide if, when and how often to do so. Implicit in this last
condition are the right of men and women to be informed and to
have access to safe, effective, affordable and acceptable methods
of family planning of their choice, as well as other methods of
their choice for the regulation of fertility which are not against
the law, and the right of access to appropriate health care
services that will enable women to go safely through pregnancy
and childbirth and provide couples with the best chance of
having a healthy infant. In line with the above definition of
reproductive health, reproductive health care is defined as the
constellation of methods, techniques and services that contribute
to reproductive health and well-being by preventing and solving
reproductive health problems. It also includes sexual health, the
purpose of which is the enhancement of life and personal
relations, and not merely counseling and care related to
reproduction and sexually transmitted diseases."
(ICPD Programme of Action, Paragraph 7.2 )i
Introduction
The ICPD agenda poses a formidable challenge to those concerned with population and
reproductive health because it reaches far beyond the scope of traditional projects to
embrace entire national health systems, as well as other sectors that have significant
impacts on health. It calls for a more comprehensive and integrated approach to
reproductive health and principles of equity, with the implication that all
stakeholders-government, NGOs, other private sector actors, and households-need to
be engaged to achieve the vision.
There is growing recognition that implementation of ICPD recommendations and the

reproductive health approach already is (in some cases) and needs to be (in other cases)
grounded in a broader context of health sector reform efforts that are simultaneously
taking place in many developing countries. Health sector reform can be described as
sustained purposeful change to improve the performance of the health sector. It is an
inherently political process, initiated by public or political action, motivated by
dissatisfaction caused by the failure to deliver outcomes deemed important by society and
implemented on a sector wide level.
The ICPDwasheld in Cairo,Egyptin 1994.178countrieshaveadoptedthe Programmeof Actionof the

ICPD, orwhatis commonlyreferredto as the "CairoAgenda".
I
The process of health reform significantly alters the ways in which health services are
financed and delivered; this in turn largely determinesthe extent and way in which
reproductive health care is financed and delivered. In some countries, reproductive health
and health sector reform efforts are complementaryand compatible. In other countries,
there are conflicts between the goals and means of health sector reform and those of
reproductive health.
Compared to concerns about equity, quality or accountability,many on-going health

reform efforts are primarily implemented in response to resource constraints as well as
widespread perceptions that available resources are being used inefficiently. Addressing
all of the many reproductive health conditions and providing better and more
reproductive health services to all men and women is a difficult - if not impossible - task
for an already financially strapped health system. The reproductivehealth approach
explicitly puts rights, equity, and empowerment as key goals; health reform efforts in
some countries may not. In these instances, health reforms may be both incompatible
with reproductive health goals/values and inconsistent with a particular society's views
and values.
In other cases, health reforms may be consistent with societal values that reproductive
health advocates would argue need to be changed.2 Badly designed, poorly implemented
and rigid health reform efforts that are not evaluated and adjusted in light of whether they
are achieving positive intended effects or resulting in unintended negative consequences
are not successful from any perspective -- whether one is primarily interested in health
sector reform or reproductive health. Deciding upon the goals and strategies of health
sector reformnand reproductivehealth which balance goals of quality, equity, and
accountability with efficiency concerns and effectively implementingthese interventions
are major challenges for both reproductive health advocates and health sector reformers.
Clearly, to effectively advance the reproductive health agenda, one needs at least a basic
understanding of the motivations behind and the building blocks of health sector reform.
This paper is designed to assist in building that knowledge base. It is not intended to be
an exhaustive review of health reform, rather it is an attempt to demystify some of the
main concepts and techniques of health reform for those with a background in
reproductive health. Our objective is not simply to argue that health reforn is important
for reproductivehealth. It is also to illustrate how health reform can be used to tackle
obstacles that undermine the capacity of health systems to deliver good quality
reproductive health services in an efficient, equitable and sustainable manner.
In Section I of this paper, we present a rationale for why health reform is important for
those involved in reproductivehealth efforts, a review and discussion of the motivations
for health sector reform, and a diagnostic approach for using health reform to improve
reproductive health. In Section II, we examine how health reform is being implemented
in three countries-Ghana, Egypt and the Philippines-to make improvements in health
in general, and in reproductive health in particular.
2Many individuals involved in health sector reform would be in agreement with reproductive health
advocates and make the same arguments that certain societal values need to be change, but either they were
not involved in the reform decisions or they were overruled.
2
Why is Health Sector Reform Important for Reproductive Health?
Why should reproductive health advocates care about health sector reform? Can and do
health sector reform efforts help reproductive health efforts? If so, how? What do
reproductivehealth advocates lose by ignoring or fighting against health reform efforts?
What do they gain by a better understanding of reform efforts taking place on the ground
or active participation in health reform? These are critical questions which set the stage
for a closer look at the motivations for health sector reform, areas of compatibility with
reproductive health goals, and means of harnessing reform options to advance the
reproductive health agenda.
Perhaps the main reason that health reform is important for reproductive health is that
deficiencies that characterize the financing and provision of reproductive health
services are closely linked to those that characterize health services in general and
tend to be system wide. Recognition of this problem in the past often resulted in the
establishmentof vertical programs that by-passed inefficienciesin national health
systems by creating more efficient, donor-funded parallel systems. A foundation stone of
the Cairo Conference and ICPD + 5 is that commitments to revitalizing national systems
of health care must include a more integrated approach to the delivery of population and
reproductive health services in well functioning national health systems. This implies the
need to resolve deficiencies that characterize system-wide financing and provision of
health services in general, and reproductive health care more specifically.
Another fundamental reason that health reform is critical to reproductive health is that
the Cairo agenda cannot be effectively implementedwithout the existence of well-
functioning services at several levels of the health system and beyond. Consider, for
example, one of the conditions that appears on nearly every country's list of major
reproductivehealth problems-high levels of maternal mortality. It is clear that broader
health sector capacities need to be engaged to effectively deal with maternal deaths and to
deliver appropriate services. In order to remedy the most direct causes of maternal deaths
in developing countries-hemorrhage, sepsis, obstructed labor, eclampsia, and the
consequences of unsafe abortions-a country must have an effective system for handling
obstetric emergencies. It is impossible to effectively manage obstetrical emergencies
without: 1) improving the quality of care provided in secondaryand tertiary care
(hospital) facilities as well as primary care facilities; and 2) insuring a functioning
referral and transport (emergency evacuation) system. This latter requirement in itself
requires an effective communicationbetween different levels of the health system as well
as effective communication and understanding of needs and capacities between the
community and the health system.
The centrality of improving the quality of care as well as communications and referrals in
efforts to reduce maternal mortality ratios is illustrated in Grenada. Training and
delegation of additional obstetric responsibilities to nurse-midwives,complementedwith
improvementsin interactions and telephone communicationbetween levels of the health
care system were essential to bring the maternal mortality ratio by half, to levels of 120
3
deaths per 100,000 live births by the early 1990s. 3 In Matlab, Bangladesh a program that
trained midwives, posted them in remote health centers near the population to assist in
home births and supported referrals to a higher level maternity center from the trained
midwives in cases of obstetrical complications reduced the maternal mortality ratio by
68% in only 3 years. An evaluation of EOC pilot programs in Mali, Burkina Faso,
Senegal and Benin found that the most successful approaches to reducing maternal
mortality: 1) improved the technical quality of care at both the health center and reference
levels, 2) established and maintained an effective referral and transport system, 3)
improved physical access to services, 4) lowered the costs to the population due to
deliberate cost sharing mechanisms, 5) improved collaboration between clients and health
center personnel, 6) involved strong community participation and community inclusion in
decision making and problem solving at the health facility,5'
These causal factors that together influence the magnitude of maternal deaths cannot be
remedied by making small changes 'at the margin' of the health system. Instead, they
require major changes in the way health services are financed and delivered, often in
creative, new ways.
A third reason that health reform is critical to reproductive health and vice versa is that
health reform and reproductive health advocates share common concerns. The most
obvious of these is Cairo's concern for equity and client empowerment. The language of
ICPD and country implementation since 1994 refers to reproductive health as conditions
and interventions, but also as an approach:
"Reproductivehealth is also an approach. When we use the language of ICPD,

we talk about health needs, but we also talk about rights, equity, dignity,
empowerment, self-determination and responsibility in relationships.
Reproductive health is an approach to analyzing and then responding
comprehensively to the needs of women and men in their sexual relationships
and reproduction." (ICPD +5, WHO, 1999)
The reproductive health approach represents a major paradigm shift from previous
thinking on population and development. While the commitment to slowing population
growth as a goal remains, there has been a significant shift in the strategies to achieve this
goal - an emphasis on meeting the needs of individual women and men rather than on
achieving demographic targets. This emphasis is clearly consistent with the ultimate
goals and strategies of health systems and health reform; in fact, it fits much better than a
more narrowly focused "demographic targets approach". The results of a health system
and health sector reform are ideally measured in terms of health and reproductive health
outcomes such as morbidity, mortality and malnutrition, client measures of quality, and a
balance of equity and efficiency concerns.
3Laukeran V and Bahattacharya A Maternity Care in Grenada, West Indies: A Comprehensive Study.
Paper presented at the 1 8 th Annual NCIH Conference, Arlington, VA, 1991 in Timyan J et al, 1993.
4Faveau V, Stewart K, khan SA, Chakraborty J Effect on mortality of community-based maternity care
programme in rural Bangladesh. Lancet 338: 1183-1186, 1991.
Sall,F and Krasovec K Cost and Financing of Projects to Improve Essential Obstetrical Care in 4 West
African Countries, in press.
4
Since the reproductive health approach is a move away from demographic targets to
meeting the reproductive health needs of individual women and men, it would seem
preferable to defend certain reproductive health priorities in equity terms, such as
decreasing unmet need for contraceptives or other reproductive health services in poorer
or under-served households or for adolescents, than in termnsof declines in fertility rates -
AND this equity argument is likely to carry more weight with those designing and
implementing health reform. Furthermnore,by insisting that the range of reproductive
health services is provided through the primary health care system, reproductive health
efforts are deliberately linked with efforts to improve the health system in general, which
is also consistent with health sector reform goals.
A final reason that health sector reform is important for reproductive health advocates is a
practical one. Simply put,,health sector reform is happening and the most powerful
stakeholders in health systems are involved. Policy makers and implementers
concerned with reproductive health need to take part in diagnosing system-wide
problems and selecting among competing strategic options if they want to
preserve/achieve reproductive health goals. Moreover, those implementing health
sector reform may not have a good understanding of reproductive health needs or how
health sector reform efforts might unintentionally hinder reproductive health goals. This
might happen, for example, where health sector reform is inappropriately tipping the
balance too far away from quality and equity of reproductive health services in efforts to
increase overall efficiencies. Health sector reform can have both positive or negative
impacts on reproductive health, whether deliberately or not. Provisions will, therefore, be
needed in health sector reform to protect reproductive health goals and reproductive
health proponents will need to become effective advocates for these goals. In order to do
so, reproductive health people need to understand and learn the language of health sector
reform and how to use these tools to effectively to achieve reproductive health goals.6
Motivations for Health Sector Reform
Health sector reform is motivated by the need to address fundamental deficiencies in

health care systems that affect all health care services, including reproductive health
services. The most common reasons for developing countries to undertake significant
health sector reform efforts are to address the problems of:
* poor quality of care,

* inequities and limited access to health services,
* insufficient funding for health,
* inefficiencies in delivery of services,
* lack of accountability, and/or
* insufficient responsiveness to client needs.
6 An important distinction needs to be made between 1) protecting reproductive health GOALS or

SERVICES and 2) protecting vertical reproductive health PROGRAMS. Health reform efforts can and
should be helpful in the former, but not the latter.
5
Reform tends to be contentious and difficult because (i) systemic deficiencies are often
deeply entrenched, with historical and political underpinnings, (ii) some groups in society
will invariably resist change, and (iii) to be successful, health reform efforts usually need
seek to tackle some combination of these deficiencies simultaneously.
A fundamental motivating factor for health reform in most developing countries is to

improve the quality of health care outcomes provided by the health system. Most health
sector managers, providers and patients would agree that providing good quality care is
an essential, if not THE essential, role of the health system. However, not all would agree
on just what constitutes good quality care. In addition, not all would agree on whose
point of view -- patients or providers (technicians) -- is most important in assessing
quality when market failures such as asymmetries of information between provider and
client are involved.
The determination of what constitutes good quality health care is difficult and has been
the subject of much research and programmatic effort. Research and evaluations of
quality of health care in the US, other industrialized countries and, increasingly,
developing countries is inspired by and based on the extensive work of Arvedis
Donabedian,who created the structure - process - outcome framework for describing and
evaluating quality of care in the health field. Donabedian defines quality of care as "that
kind of care which is expected to maximize an inclusive measure of patient welfare, after
one has taken account of the balance of expected gains and losses that attend the process
of care in all its parts."'
In the Donabedian framework, quality improvements are contingent on 'structure',

'process' and 'outcome':
* structure refers to all aspects of the health system that support the patient-health
system interaction (among others, this includes things like facilities, personnel,
training, commodities, equipment,management and supervision);
* process refers to all that happens during the patient-health system interaction
(including technical and interpersonal aspects of the patient-provider interaction and
other aspects of the service delivery setting that directly impact the patient, such as
check-in, patient flow, handling confidentiality or privacy concerns, referrals, IEC,
etc.); and
* outcome refers to changes in health status (morbidity, mortality, malnutrition, case

fatality) as well as patient variables (perceptions of and satisfaction with health care,
health-related knowledge acquired and behavior change) that can be attributed to the
health care that the patient received. Outcomes of the health system are influenced by
processes, which themselves are the results of structure - two key points are that the
process of care is critical in determining outcomes, and that structure can only
influence outcomes by changing process, not directly.
7Donabedian, 1980.
6
Determining and improving essential or minimal elements of structure has been the
traditional focus of most quality of care work in health in developing countnres.Yet, as
important and necessary as structural elements of quality are, they do not automatically
lead to betterprocess quality or, in turn, higher quality outcomes. Thus, quality of care
efforts that have focused exclusively on structure can only be expected to "go so far" in
improving health care processes and subsequently, health outcomes.8Determining and
improving essential elements of process aspects of quality are much more difficult,
particularly since both medicine and management of medical care are both as much art as
science.
On the other hand, most health professionals and patients can come to some sort of
agreement on what good quality outcomes of a health system are - less morbidity, less
mortality, less malnutrition, lower case fatality; more satisfied, more knowledgeable and
better behaved patients (who follow prescnrptionand medical advice to the letter, and
practice better life-style habits, more exercise (or reduced workloads in the case of under-
nourished pregnant women), better nutritional practices, use of preventive care services
like antenatal care, family planning, immunizations, STI prevention, less abuse of alcohol
and other drugs, less smoking or exposure to household smoke).
Limitations of focusing on structure or process aspects of quality as a way of improving

performance have prompted greater use of outcome aspects of quality to monitor and
evaluate quality of health care .9The challenge for health reform efforts is to determine
and manipulate the mix of major levers of health reform (financing, organization,
provider motivation, regulation and promotion of healthy behaviors) that most effectively
and efficiently influence improvements in the process of health care and, in turn, health
outcomes. These levers are examined in more detail in the next Section.
A second important reason for health reform in many countries is to make the health care
system more equitable in the form of access to care as well as financing and funding of
care. In health care, under-served population groups are often defined by income (e.g.
poor), socio-economic status (e.g. less educated), age (e.g. adolescents), ethnicity (e.g.
minority groups) or gender (e.g. females, young girls). Although equity in health may be
defined as equity of health status (self or professionally assessed) or equity of access,
most health sector reforns are concerned with equity in terms of equity of access to
health care.
Access itself has physical, economic and cultural dimensions.10 Physical access refers to
the availabilityof or distance away from health facilities, specific services or providers.
Some common indicators used to measure physical access include: percentage of the
8A caveat to this argument is that certain minimal elements of quality are necessary to providing health
care and do not universally exist in many developing country settings. These include: availability of drugs,
essential obstetric care, etc. For example, providing drugs to primary care facilities has been shown to be a
necessary, if not sufficient, element of quality improvement, as well important as a patient perception of a
good quality outcomes. (Health Policy and Planning, Vol. 10 No.3, Special Issue: Improving quality, equity
and access to health services through health financing reform in Africa, September 1995).
9 Grundmann, C, The Association between Structure, Process and Outcome in the Rwandan Public Health
Care System. PhD Thesis, Johns Hopkins University School of Hygiene and Public Health, May 1997.
10Knowles, J, Leighton C and Stinson, W Measuring Results of HSR for Systems Performance: A
Handbook of Indicators, PHR: Special Initiatives Report No. 1, September 1997.
7
population residing within 3-5 kilometers of a primary care health facility (or 10-15
kilometers from a hospital), percent of the population residing within 30 minutes of a
hospital that provides 24 hour EOC care, or population per doctor.
Economic or financial access refers to factors related to the cost of seeking care,
obtaining care and following through with treatment. Economic access includes
transportation costs, direct fees paid for care at health facilities, and medications and
other consumables. It is important to note that for poor populations in many developing
countries, the cost of medicines and transportation often account for the majority of the
total cost for health care, compared to direct fees for services. Common indicators of
economic access include: average cost of an outpatient illness episode, average cost of a
hospital stay, average fee paid per outpatient visit, or average cost per day of
hospitalization.
Economic costs of health care that people face can lead to inappropriate and sometimes
dangerous health practices, particularly for the poor. There are many examples of
countries where it is common practice for the poor, when they are ill, to bypass treatment
or prescription from a medical provider/facility to avoid paying direct fees and transport
costs and go directly to pharmacies for medications. In other cases, poor, sick individuals
will seek medical care but then only partially fill prescriptions for medicines. In both
cases, the poor cannot afford both medical care and medicines, so they choose one or part
of one over the other. In worse case scenarios, the poor or certain subgroups, like women
who may have less access to household financial resources, forgo care completely.
Because of equity concerns, indicators of economic access are often measured and
reported in relation to individual or household income. Common discussions about
"willingness and ability" of patients to pay for a particular health service are good
examples of this approach. Some economists, most notably the Nobel laureate Sen, insist
that the economic impact of health care or health reforms be evaluated not only in
relation to client or household income, but also in relation to individual or household
spending patterns (how and what people spend their money on, social choice).' l
Cultural dimensions of access are most easily thought of as social or cultural barriers that
inhibit utilization of health services. Cultural barriers may include such things as:
inappropriate gender, age, ethnicity, social class or language competencies of health
providers in general or providers of specific services; health care service hours that are
not convenient for the population or subgroups of the population; not allowing relatives
or culturally appropriate "helpers" to accompany inpatients or women in labor to health
services; or special treatment (hours, entrances, etc.) for sensitive services or subgroups
of the population.
In some cases, offering all services at all hours is more culturally appropriate than
separate service hours for sensitive services, such as family planning or STD services,
and leads to increased access for sensitive groups. PROSALUD (a not-for profit private
service provider) services in Bolivia, for example, are specifically organized so that
patients can receive a variety of adult and pediatric curative and preventive services
Sen,A. NIH Lecture,June 1999.

8
during clinic hours, so that it is impossible for any waiting patients to know what services
other patients are waiting for.'2
Ensuring equity by reducing physical barriers to access might mean, for example, that
more providers who can insert IUDs need to be assigned to rural health clinics, but not to
urban areas where households already live within close proximity to providers who can
provide this service.
Ensuring equity by reducing economic access barriers may mean that fees for specific
hospital services are lower for women than for men (even in households which do not
meet income cutoffs), since women may not have access to enough household resources
to cover the total cost of fees, transportation and medicines.
Ensuring equity by reducing cultural barriers may also mean that female health providers
must be available to clients so as not to discourage use of certain reproductive health
services or components of services (i.e. pelvic exams). It may also mean that partners and
family members are encouraged to be with women during labor and birth and that babies
are kept with their mothers, in the same bed. after delivery.
A third reason for health sector reform is insufficient funding. Insufficient funding for
health services is a nearly universal problem in developing (and developed) countries.
Historically, the public health sector in most countries has not been particularly
successful in competing with other sectors for scarce government resources. In many
lower income countries, the percentage of government revenue that has gone into
financing health care has declined since the early 1980's.'3
In some countries, like Indonesia, Mexico and Tanzania, economic upheavals have
resulted in significant reductions in government tax revenues, and subsequently for
Ministry of Finance allocations to the Ministry of Health.'4 Moreover, new demands are
being placed on the limited resources of the health sector:
* the population continues to increase, which means that the health system has to meet
the needs of additional clients with fewer resources;
* with increased communications and educational levels, expectations and demand for
health care on the part of developing country populations are also increasing;
* competing challenges posed by the changing epidemiological profile of developing
countries - rising levels of (expensive to treat) chronic diseases in primarily urban
populations on the one hand, and continued high levels of infectious disease related
morbidity and mortality in the primarily rural populations on the other hand.
Together, this results in even greater demands on old and still necessary types of care
by less politically powerful and more vulnerable groups (who governments are
supposed to protect) and very vocal demands for new kinds of health care to meet the
changing health needs of more politically powerful groups.
12 Putney, Pamela and Carlos Cuellar, Expanding Women's Access to Health Services in Bolivia, A Case
Study of PROSALUD, Draft report to the World Bank, 1999.
1 Hsiao, 1995.
14 Forman, Shepard and Romita Ghosh. The Reproductive Health Approach to Population and
Development, 1999.
9
Funds for health care can be mobilized through four main sources: direct government
financing, donor financing, private user charges and third party payments (health
insurance, community financing or mutuelle schemes). Some analysts reduce these
sources into 3 categories, by combining donor and government financing as a single
source since, in most instances, donor financing either flows through government coffers
or is included in government budget and expenditure reports.'5
In the last decade, faced with decreases in both direct government financing and reduced
donor assistance, many developing countries have attempted to raise additional funds for
health by instituting private user charges, cost-sharing or user fees for services that had
previously been provided free of charge by public sector health facilities. User fee
strategies have been employed fairly extensively throughout the developing world. Fees
for hospital inpatient services have been on the books for a long time in most developing
countries; "newer" user fee initiatives have applied fees to primary health care services.
Experience shows, however, that user fees (for primary care) cannot be counted on as the
primary solution to make up for funding shortfalls for the health sector. A review of user
fees in Africa revealed that, on average, user fees in poor countries only covered 10 to
15% of total recurrent costs of publicly operated facilities16
However, even if user fees cannot be expected to be a major source of revenue for the
overall health system in developing countries, this does not mean that user fees are
without merit. Fees often provide 60% or more of non-personnel recurrent costs in
primary health care facilities. Fees have been shown to be useful in improving some
structural aspects of quality (drug availability, financial book-keeping) at primary care
facilities. They can also be useful in improving patient perceptions of care (an outcome
aspect of quality) or providing financial incentives to health workers when fees were
reserved for use at the facility where the fees were collected. These improvements are
important in financially strapped systems, particularly since very small levels of
unrestricted revenue can go a long way in primary care facilities, where direct
government resources are scarce. Moreover, without user fees, many NGO providers, as
well as private providers, would not be able to sustain themselves, thus forcing
government to satisfy all health needs and demands.
The important point to stress is that since the simple user fee structures used in most
developing countries are inherently regressive, efforts to ensure that the poor or other
vulnerable groups are protected should be implemented in conjunction with user fee
systems. This is an illustration of how efforts to remedy the problem of insufficient
funding in many countries need to be closely linked to efforts to ensure equity. This
tension in user fee systems has also led many countries to begin to experiment with
prepayment or insurance reforms (which require their own different mechanisms to
subsidize or protect the poor.)
A fourth motivating factor for health sector reform is to decrease current inefficiencies in
the current health financing or delivery system. Improving efficiency is an important way
15 Dunlop and Martins, World Bank, EDI, 1995.

16 Shaw and Ainsworth, 1995.
10
to maximize scarce resources and one that is more directly under the control of health
managers. Efficiency is the concept of getting "the most bang for your buck", getting a
good rate of return on your investment and expenditures, or making the most out of your
inputs or resources; be they human, financial or material (equipment and supplies), while
at the same time ensuring quality.'7
Efficiency is often discussed in terms of the use of funds or inputs, but also in terms of
the use of services by clients. A compelling example of this is provided in a World Bank
study, Better Health in Africa, where it is claimed that for every $100 spent by the public
sector on drugs, 80% is lost due to inefficiency and waste-through inadequate buying
practices (10%), procurement and quantification problems (41%), inefficient distribution
(10%), irrational prescription (15%), and non-compliance by patients in taking the drugs
properly (3%).18
In quality of care termns,efficiency refers to the patient-health system interaction

(process) using the available structure in such as way as to maximize quality outcomes. It
is important to recognize that efficiency and quality should not be treated separately since
efficient, poor quality health care is never a desirable outcome of a health system.
Some common complaints of inefficiencies in health systems are: "too much money is
being spent on hospitals, rather than primary care;" "public funds are being spent on
inappropriate or cost-ineffective services;" "too much of the health care budget is spent
on salaries, compared to operating costs;" "too much of the health budget is spent at the
central or regional level, not at the periphery and not on service delivery;" "maternity
wards in large referral hospitals are overcrowded, women are delivering in the hallways;"
and/or "maternity wards in district hospitals or health centers are underutilized; midwives
or doctors only deliver 1 baby per week." Some common solutions employed with the
goal of making health services more efficient are: designing and deliveringof essential
packages of services which are based primarily on cost-effectivenessconsiderations or
integration of various health services (MCH and FP, FP and STI services) at a specific
service delivery point (health center or hospital).
Finally, an increasingly explicit motivating factor for many health reform efforts is to
increase accountability of the health sector (providers) to the client and other
stakeholders. Accountability takes many forms; in some countries the concern is
primarily for greater accountability in terms of providing good quality care as judged by
health professionals, in others it is accountability for responding to client needs, in still
others it is primarily accountability for use of funds or to reduce levels of corruption.
Integration of services is also often cited as a way for health services to better respond to
client needs, by instituting "one stop shopping," making it easier for clients to access
multiple health services for themselves or for multiple family members (usually a mother
and her young child or children) at a single health facility visit. Decentralization is
another form of organizational change that is often instigated on the assumption that
decentralized services are inherently more accountable to local populations, although this
17 Fora more detailed discussion of the concepts of technical, economic and allocative efficiency, see
Behrman, Jere and James Knowles, Population and Reproductive Health: An EconomnicFramework for
Policy Evaluation, Pop and Dev Review 24 (4), December 1998.
, World Bank, 1994, Better Health in Africa, (Washington DC: World Bank)
* S~~~II
is not automatic and there is little empirical evidence to suggest that decentralization, in
itself, leads to increased accountability.
Lack of responsiveness to client needs (in terms of what services are provided, how they
are provided and at what cost) is sometimes referred to as lack of client empowerment.
People are willing to and do spend their own money for privately provided health care,
whether through direct fees for service, under-the-table payments, for medicines and
supplies, or through traditional or modern/formal system. Out of pocket expenditures by
individuals and families account for greater than 50% of health care funding in most
countries, even poor countries.19 Enhancing people's ability to "vote with their feet" by
introducing different forms of provider payments, such as capitation (discussed later), is
an important method of client empowermentthat is emerging in many reforns.
A Diagnostic Approach to Using Health Sector Reform to Improve Reproductive

Health
At this juncture, it is useful to introduce a diagnostic framework to clarify relationships

between desired reproductive health outcomes, motivations for health sector reform, and
policy levers that are available to bring about change. This is presented in Figure 1.2°
For reasons explained in the balance of this paper, we believe that the components of
Figure 1 provide a useful way of thinking about (i) linkages between reproductive health
and health sector reform, as well as (ii) broad, operationally-orientedpolicy levers that
are available to improve reproductive health outcomes.
The starting point, or initial emphasis in Figure 1, is on OUTCOMES desired by society.

This mirrors a shift in emphasis by policy makers and implementers over the last ten
years, from an input-oriented approach to one that stresses improving performnancein
terms of achieving measurable OUTCOMES. It is no longer sufficient, for example, to
claim that a country's health sector is performing better simply because it has built more
hospitals, deployed more personnel (i.e., inputs), increased hospital bed occupancy rates
(outputs), or increased dissemination of FP commodities or IEC. Rather, the
performance of health systems is increasingly beingjudged nationally and internationally
by how well resources are being used to achieve outcomes that impact more directly on
the well-being of households.
In the case of reproductive health, the desirable outcomes might include: low or reduced
levels of maternal mortality (MM), low or reduced levels of infant mortality (IMR), low
or decreasing prevalence of HIV/AIDS in men of reproductive ages, or reduced unmet
need for family planning services. From a reform perspective, it is only when failure to
achieve desired outcomes is placed on the 'societal radar map' and stakeholders reach
consensus on their importance that motivation for real reforrn begins to build. In turn, it is
only when improved outcomes are demonstrated that reform efforts are said to enjoy a
measure of success. What is new or different in the sequence of thinking in Figure 1 is
19NHA documents,Berman, Peter.

20 Figure I has been adapted from the diagnostic framework of the World Bank Institute's Flagship
Program on Health Sector Reform and Sustainable Financing. It has also benefited from contributions by
Charlotte Leighton, PHR Project, Abt Associates.
12
that it essentiallyworks backwards by first identifying what matters most to clients -
outcomes that impact on individual and collective well-being.
Figure1
Frameworkfor DiagnosingPerformranceof HealthSystems
Healh
sectorn Reform Levers Healdgsystem & System1wide Desired
Reform
a e Prograo Chancqe performance Outco.ies
Policy and be AFinancing,t CritLr n h
Strategy arsoutre sInputs (emgi, wcilites,
S allocation personnel,supp lies, AAccess A Maternal heafth
rProed ider fund ng) Equity and surival
S payments sProcess (e.D Cualfty .Irant/nChild
T A Organizguron, su peNision, h Eelici ency heasthand
cu_rently
configustructre mai training,
waement, aSustancabil,ty survival
e Regulat &
ions gistics, research, eAccointabilia y to bDesired fertility
Laws financig clients Reduced
mechanisms) HIV/AIDS
cltyputs (egr, transmission
in services,
thedesireddirection.Theypreventive h br
dnrg sales, social
marketing)
The second step in the diagnostic process in Figure is concened with system-wide
causes -- as reviewed in the prior section -- that appear to be responsible for the poor
perforwiance outcomes - inefficiency, poor quality, inequity, etc. Remedying these
causes can be referred to as improving generic or insteumental health system goals in the
sense that their attai,nent - system-wide -- will raise the chances of delivering on the
desired reproductive health outcomes.2
The third step in Figure m looks at how health system inputs, processes, and outputs are
currently configured to determine what human, financial, material and political resources
exist, in what configurations, where strengths exist and can be exploited and where
weaknesses lie.
The fourth step considers how one or more of the five REFORM LEVERS in Figure I
can be manipulated by policy makers and implementers to stimulate system-wide change
in the desired direction. They are proposed here because (i) they are commonly used in
the reform literature by the WHO, the World Banlk, and OECD countries, (ii) they are
sufficiently parsimonious to facilitate broad classification and discussion, and (iii) the
large majority of reform interventions, strategies or policies appear to be can be grouped
within these categories. It is through these five reform levers that desired outcomes can
be linked to action.
21 Ouruse of 'instrumentalgoals' agreeswith thinkingin WHO'snew frameworkforhealthsystem

perforrnanceassessment, as described by Christopher J.L. Murray and Julio Frenk, 1999, "A WHO
Framework for Health System Performance Assessmenf'(Geneva: WHO, mimeographed).
13
This diagnostic framework has been developed and discussed widely in the context of the
World Bank Institute Flagship Program on Health Sector Reform and Sustainable
Financing.22 We have found that its appeal to policy makers lies in its action-oriented
focus on change agents or reform levers -- within which policies, strategies, and
interventions can be organized in mutually reinforcing ways. Clearly, this way of
thinking about health sector refonn stands in sharp contrast to discussions of reform in
many developing countries that tend to be more narrowly focused on of 'structural
adjustment', decentralizationpolicies, application of user fees, privatization, etc.
The Five Reform Levers
Once a reproductivehealth problem/outcome and its causes have been established as a

goal of reform, the most formidable challenge of all begins. It concerns the 'art' of
harnessing the major reform levers to change problems that are often deeply entrenched
in existing health systems. We propose that the five generic reforrn levers in Figure 1
embody action-orientedquestions that should be asked of all reforms, as illustrated in
Table 1.
Table 1: Reform Levers and Action Oriented Implementation Questions
Reform Lever Action Oriented, or 'How to Implement' Questions?
Financing & Resource Allocation Who pays for and who benefit from the reforns? How can revenues be
raised in an efficient way, while honoring equity goals?
Provider Payments, Incentives & What mechanisms currently exist to motivate providers to deliver high
Motivation quality care that leads to desirable outcomes? What current mechanisms
demotivate providers? How will providers be encouraged to improve
performance through both monetary and non-monetary incentives?
Organizational Change Is the way providers are organized and managed hindering optimal service
delivery? What organizational or institutional changes are needed to make
health care providers more perforrance oriented and more accountable to
the clients they serve?
Laws and Regulations Do current laws and regulations encourage or discourage desired health
system performance outcomes (ie. quality, equity, efficiency, etc.)? How
will quality standards, monitoring & evaluation, market failures, and
government's increasing use of contracting out of services be assured and
by whom?
Promoting Healthy Behaviors How will individual behaviors that are conducive to better health and better
health care utilization be fostered? How will health systems and service
delivery need to change to reinforce positive changes in client behaviors?
22The Flagship program began in 1996 and has provided training for more than 2000 policy makers and
implementers through its core course in Washington DC and its seven regional Flagship partner institutes.
14
From one perspective, health system perfornance has always been determinedby how
things are financed, how providers are motivated, how services are organized, how health
care is regulated, and how clients or potential clients behave. Yet, the diverse ways in
which the five reform levers might be predicted to impact on the efficiency, equity,
quality, financing, and accountabilityof health systems as instrumental goals that impact
on measurable outcomes is only beginning to be documentedempirically. The diagnostic
process as well as strategy formulation is further enhanced by the recognition that each
reform lever can work in multiple ways to affect the instrumental goals of health systems,
as suggested in Table 2.
Table 2: Links between Reform Levers and Health System Instrumental Goals
InstrumentalGoalsof HealthSystems
ReformLevers Client
Efficiency Quality Equity Responsiveness Sustainabilty
* Financing X X X
* ProviderPayments,
hicentives& Motivation X X X
* OrganizationalChange X X X X X
* Regulation X X
* PromotingHealthy
Behaviors X X x
Our experience suggests that while professionals with a more vertical program
orientation may be familiar with one or several of the reform levers, they tend to be
poorly informed of the full range of levers or of the interaction between levers. This
undermines their effectiveness in representing specific outcomes of interest, such as
reproductivehealth, when major reforms are being designed, implemented and evaluated.
Scope of the Reform Levers
How might each of the five reform levers be implementedindividually or together to

improve reproductivehealth outcomes? A necessary step in this segment of the
diagnostic process is to ask how each reform lever is currently operating and whether it is
having positive or negative implications for resolving the systemic causes undermining
performance and achieving desired outcomes. This serves as a baseline assessment,
against which the effects of reforms can be subsequentlyassessed. The second step is to
ask how the reform lever might be better utilized to produce the desired result. The third
step is to implement the reforms and assess both the quality and effectiveness of
implementation of the reforms as well as the reforms' effects on reproductive health
outcomes of interest. This is by far the most difficult step and most forgotten in practice.
Lastly, reforms should be altered in light of how well they are being implemented and
how they are affecting reproductivehealth outcomes, and in light of changing
circumstances in the local context.
15
These steps sound logical and simple in theory, but are rarely simple and straightforward
in practice. Clearly, in the space of this short paper, we cannot possibly conduct an
exhaustive treatment of each of these steps. Our aim, rather, is to characterize and
illustrate aspects of each of the reform levers, leaving applied analysis and the experience
of real country applications to later sections.
Financing and Resource Allocation
Financing and resource allocation refers to the mechanisms for raising money to support
health sector activities or pay for health care. Financing usually tops the list of reform
levers because money is widely perceived to 'make the wheels go round'. Broadly,
sources of financing for health and reproductive health come from taxes, social health
insurance, private insurance, or direct payments to providers - as well as some financing
modalities such as community health financing. Most country's health systems contain a
mixture of these financing sources, so it is impossible to put a country purely in any one
box.
Commonly cited weaknesses in financing of developing country health systems that may
hinder achievement of reproductive health goals include:2 3
o Financial resources are simply inadequate to enable the public sector to provide
reproductive health servicesfor everyone in low- and middle-income countries. All
governments face tough financing decisions related to the provision of health
services-what services to finance or provide, to whom, and at what level. The
economic crisis affecting many developing countries, economic restructuring
affecting others and severe debt burdens in yet others place substantial constraints on
the public sector's ability to provide current health services, let alone "new"
reproductive health services. A review of post ICPD implementation in Bangladesh,
Egypt, Indonesia, Mexico, South Africa and Thailand, found that sources and levels
of overall health sector financing were a major concern in all countries.2 4
* Scarcepublic resourcesfor reproductive health are often allocated in ways that

benefit relatively rich households more than relatively poor ones: In El Salvador,
benefit-incidence analysis reveals that 65% of women using subsidized hospital
birthing care are from high and middle-income households.25In Vietnam, the poorest
20% of the population receives only 15% of public subsidies for family planning
whereas the richest 20% receives almost 30%.26 In Tanzania, the poorest 20% of the
population accounts for only 9% of hospital outpatients and 16% of inpatients,
23 Itis important to note that these health system weaknesses are not exclusive to reproductive health
services, but affect other health interventions as well Thus, tackling these weaknesses should improve the
quality of health services in general and improve client satisfaction with health services overall. Irnproving
general health service quality and client satisfaction are ultimately responsive to the ICPD goals and should
have the additional benefit of increasing utilization of all services, including reproductive health services.
This connmentholds for the examples provided here and in the next 3 sections on reform levers.
24
Forman, Shepard and Ghosh, Romita, The Reproductive Health Approach to Population and
Development, 1999.
25 Farrell et al: 1994
26
Behrman and Knowles: 1998.
16
compared with 37% and 35%, respectively, for the highest expenditure quintile.27 In
Indonesia, 54% of high-income households obtain family planning services from
subsidized sources, along with 80% of low-income households who are intentionally
targeted.
* Cost sharing arrangements are poorly designed or poorly implemented, thus

discouraging use of reproductive health services or increasing inequities (poor,
adolescents, rural areas, etc.). User fees for preventive and primary care often deter
use of services by those needing them most, whereas more desirable prepayment and
other community risk pooling schemes remain underdeveloped, especially in low
income countries in Africa and South Asia.
* Risk sharing arrangements are inadequately developed to the extent that poor
households risk huge financial loss at times of serious reproductive health
complications. In China, for example, approximately one-third of all households go
into debt due to the need to pay for expensive curative care at times of serious illness
or injury. In some cases, it takes decades to pay off the debt.
According to two World Bank studies - the 1993 World Development Report and Better
Health in Africa-about $12 per person per year is required to provide an essential
package of health services to the poor in less developed countries, of which about $6.75
is directly or indirectly related to reproductive health.28 The good news is that these
amounts need not be prohibitive for most countries, assuming that governments target
scarce public revenues effectively towards the poor, and service needs can be jointly
financed from both public and private sources. That is, total revenues for health in low
income countries that represented 3.5 billion people were about $20, on average--$7 per
capita from public sources and $13 per capita from private sources.29
What are the prevailing patterns of resource allocation in developing countries? In most
countries, scarce public funds are seldom targeted effectively to help those suffering most
from poor reproductive health, and/or those least able to afford care. In addition, large
shares of resources have traditionally gone to 'bricks and mortar' projects, resulting in
concentrations of spending at secondary and tertiary level hospitals in and around large
urban areas, rather than on preventive and primary health services in and around rural
areas where the majority of the population lives. Crude estimates of these concentrations
suggest that 70-85% of all health spending in low and middle-income countries goes to
curative level care, 10-20% to preventive level care, and 5-10% to community level care.
Weak government revenues can be expected to prevail in many poor countries because
their tax base is comprised of a large share of relatively low income, rural and/or
agricultural households where systems of collecting taxes tend to be inefficient and
underdeveloped. This underscores the importance of stimulating new forms of
collaborative financing involving both public and private collaboration and cost-sharing.
Such forms will include a mixture of government revenues from general revenue taxes
(income, import/export, sales taxes), social insurance revenues from earmarked
27Shaw and Griffin: 1995.

28World Bank, World Development Report 'Investing in Health' 1993. World Bank, Better Health in
Africa, 1994.
29
ICPD +5, WHO, 1999.
17
employer/employee taxes, out-of-pocket payments or user fees, community health funds,
and donor contributions. Without such collaboration, or without massive infusions of
donor aid (which is unlikely), it is difficult to imagine how 2.4 billion of the world's
population in relatively poor countries will ever enjoy equitable access to reproductive
health services.
How might the financing reform lever work better to advance the reproductive health
agenda in developing countries? Examples include:
* Public health expenditures by governments and multiple donors might be better

coordinated, combined and allocated to finance an affordable, basic set of services,
and sustain the delivery of the set of services to low income households in both rural
and urban areas?30 The 'sector wide approaches' underway in Bangladesh, Pakistan,
Ghana and Zambia provide examples. Sector wide approaches aim to reduce technical
inefficiencies and costs associated with multiple, parallel projects and activities, and
to better target scarce public funds to subsidize provision of a basic package of
reproductive health and other services.
* Government can play a more active role in stimulating public-private collaboration to

increase both financing and provision of reproductivehealth services. In many
countries, representatives of NGO church or 'mission' health facilities are excluded
from or marginalized in MOH policy formulation, planning, and donor meetings,
even though these NGOs may play an important role in providing specific
reproductivehealth services, general health services to specific geographical areas or
health and reproductivehealth services to the poor. An exception to this rule is found
in Malawi, where the government works closely with the Christian Health Medical
Association (CHAM), subsidizingabout 15% of the recurrent costs of the mission
facilities (NGOs) in return for collaborating in providing a range of FP services and
IEC. Indonesia provides another example where the government provides support for
private health insurance that includes coverage for FP.
a Governmentrevenues can be complementedby other earmarked sources of funds for

health, such as social health insurance, to finance a benefit package of services that
feature reproductivehealth services. Egypt provides an example as it aims to pool
contributions from social health insurance funds with government revenues to provide
a benefit package to households in Alexandria. This is described in more detail in Part
II of this paper.
* Government can allocate revenues in ways that correct gender imbalances in access to
services, such as in Bolivia, where local governments are required to use 6% of the
federal tax dollars they receive to support a maternal and child health 'insurance
fund' that provides basic entitlementsto primary and curative care.
* Governments under tight resource constraints and deficit financing can encourage
forms of cost sharing that are more sensitive to the needs and capacities of the poor to
pay. Tanzania provides an example in its Community Health Fund in Igunga District
30 Note: In many contexts the "set of services" we are referring to may be called a "package" of services.
18
where cost-sharing by households combines with government subsidies to sustain a
health card that entitles households to basic reproductive health and other health care
services at rural health centers. Piloting of the scheme in a poor rural district, Igunga,
has fired enthusiasm country-wide to the extent that expansion is now taking place in
an adjacent six districts. In Kolokani, Mali, an emergency referral and evacuation
system for obstetric care has been set up with 1/3 financing from the district level, 1/3
from the community, and 1/3 from evacuees who pay user fees.3 1 In Uganda, several
districts are creating insurance schemes to finance ambulances in a public sector
emergency obstetric care system. In Rwanda, a prepayment scheme that covers
preventive and basic curative care provided by nurses in health centers, essential
drugs, and coverage for hospitalization and ambulance transfer to the district hospital
in the case of obstetric emergencies is being pilot tested in 3 districts. One of the main
reasons for offering a prepayment plan, as opposed to a fee for service system, was
that rural Rwandan farmers often forgo medical care in times of need because they
lack the resources to pay, except at specific times of the year (primarily followingthe
2 post-harvest periods). As one satisfied patient who was successfullyreferred and
received a caesarian-section at the district hospital said, "if I were not a member, I
would not have had enough money to pay for my treatment".3 2
Providers Payments, Incentives and Motivation
An efficient, motivated work force -- doctors, nurses, midwives and others-are

obviously central to providing good quality reproductivehealth services. Professionalism,
occupational standards and protocols, altruism, as well as complianceto the Hippocratic
oath are traditionally invoked by governments and the medical establishmentas
motivating factors for health providers.
Commonly cited weaknesses that underscore the importance of provider incentives in

quality and access to reproductive health services include:
* Lack of incentivesfor providers to deliver good quality care: Theway in which

providers are paid and/or offered opportunities for advancement in their careers can
provide strong incentives for them to deliver good services. Public providers in most
developing countries are paid a salary, which provides no incentive to deliver more
care or higher quality carc-especially when salaries are low and payment is
unpredictable. A frequently observed pattern in many poor countries, such as Egypt,
is that doctors employed by the public sector maintain private sector clinics, where
they allocate considerable time in response to more lucrative user fees. Fee for service
payments to private providers can also result in perverse outcomes. In Brazil, for
example, a study of 7000 births in one region in 1982 found that C-section rates were
54% for private patients, who tended to be covered by private health insurance which
would reimburse doctors for C-sections,as opposed to only 13% for indigent women,
31 Sall, Farba. La prise en charge des urgences obstetricales au Mali: L'experience de Kolokani.
Partnerships for Health Reform, Abt Associates Inc. November 1998.
32 George Phara, 1999, "Prepayment Programs in Rwanda: More than 12,000 Members in Two Months",
Quarterly Highlights (Bethesda: Maryland, Partnerships for Health Reform, Abt Assocates).
19
who might not be able to pay for more complicated procedures.3 3 In this case, both
the private and the indigent patients suffered in terns of receiving poorer quality
care-the private patients being more likely to receive unnecessary C-sections and
the indigent less likely to receive necessary C-sections.
* Lack of disincentives or sanctions for providers who deliver poor quality care: This is
the converse of the first point. Not only are providers not rewarded for giving good
care, there also tend to be little or no disincentives or sanctions for health providers in
most countries who deliver poor quality care, are rude to clients or are inattentive to
client needs and circumstances.
* Lack of accountability ofproviders to clients/users: Clients currently are not

empoweredin relation to public health providers. In many countries, the absence of
linkages with the community power structure and lack of understanding of
communityneeds and desires hinders access to and use of services. Salaried providers
are paid regardless of the number of clients they serve or client satisfaction.Altemate
payment methods such as 'capitation' have been designed to change this overly
supply-side orientation to a demand-side focus with 'money followingpatients'. This
will be elaborated in the Egypt case later.
Provider payments can be particularly important for motivating providers to behave in a

certain manner, especially when they are contained in contractual arrangements, linked to
performance of duties and outcomes. Contractual arrangementsand obligations take on
an increasing role in contexts where 'purchasers' of health care services-such as a
District Health Authority, a Social Health Insurance Fund, a Community Health
Fund-pay or reimburse public, NGO and private providers for serving serve clients.
Other incentive schemes utilize non-pecuniary awards such as staff holidays for good
performance, employee of the month awards, and so on. On the other hand, innovative
approachesto empower clients are contained in national or even private 'client charters',
such as in the UK and Malaysia, where promises to the public are announced regarding
services available, quality of care, and waiting times. In view of space limitations, the
remainder of this section will discuss provider payments as a means to motivate health
providers to improve performance and reproductive health outcomes.3 4
Provider payments refer to the means by which the money raised for financing is
transferred to individuals and organizationswithin the health sector. Institutions (e.g.
hospitals or health clinics) can be paid in many different ways: per admission, per day,
per service, or on an overall budget. Practitioners can also be paid per capita fees for
those under their care, or per case or per service, or by salary. Each of these forns of
payment has its own incentive effects.
Empirical evidence shows that different provider payment mechanisms can incentivize
health personnel in both positive and negative ways. Depending on the forrn of payment,
33 Barros FC, Baughan JP and Vicotra C Why so many Caesarean sections? The need for a future policy
change in Brazil. Health Policy and Planning, 1 (1): 19-29, 1986.
34 R. Paul Shaw, 1999, "New Trends in Public Sector Management in Heal6th: Applications in Developed
and Developing Countries" World Bank Institute Working Paper, (Washington DC).
20
health care workers may focus more on quality (than volume), take more time to better
understand client needs and prescribe effective action, and treat poor clients with more
respect. Negative effects of inappropriateprovider payments on reproductive health in
developing countries have been seen where, for example,providers are given bonuses for
attracting new contraceptive clients or methods, without controls on quality. For example,
in Indonesia,previous incentive payments to village midwives that stressed quantity-in
the form of greater supplies of contraceptive methods- resulted in oversupply, non-use
and waste by households. In Indonesia, these incentive payments have been recently
replaced by performance-basedcontracts to compensate midwives for providing a clearly
defined package of services to the poor (a targeted intervention), as well as a more
limited set of public health services to the entire village.35
An important underlying rationale for enlisting NEW formnsof provider payments to

improve outcomes is to 'transfer the financial risk' of poor performance from the PAYER
of services (e.g., government, insurance funds) to the PROVIDER of services.As we will
see below, some forms of provider payments specifically aim to make providers more
responsive and accountable for the work they do, with reimbursement tied more directly
to desired performance.
What are the prevailing patterns regarding provider payments in developing countries
concerned with improving reproductivehealth? To a large extent, payment of salaries to
doctors, nurses or midwives in public hospitals and clinics has been the dominant form of
provider payment, with line-item budgeting for other health workers at district level? In
such cases, payment of salaries takes place on a regular, pre-deterrminedbasis and is
largely divorced from what the recipient has or has not accomplished in his or her work.
There are no monetary incentives if a salaried provider sees more clients than usual, and
no monetary disincentives if the provider fails to be polite, considerate, thorough, and
client-oriented.This scenario applies particularly to the provision of reproductive health
servicesby MOH employees in many countries.
In other contexts, for example, where significant numbers of doctors, nurses or midwives
work in private clinics or hospitals, remuneration is in the form of fee-for-service.In this
case, the payers of services may be the individuals who receive the service (i.e., out-of-
pocket payments), by governments who are contractingwith the private sector, or by
health insurance funds. Empirical studies show that fee-for-service payments provide
incentives to providers to deliver more expensive services (and technology) and to see
more clients. This is because their total income derives from the VOLUME of services
they provide TIMES the FEE per service, with more volume leading to rapid increases in
provider incomes. This not only leads to cost-escalation in the health sector but can result
in oversupply of services which carry high reimbursement rates. It also motivates
providers to see those who are able and willing to pay fees-the relatively rich.
The negative effects of fee-for-service can be illustrated with respect to the oversupply of
costly C-section deliveries in several Latin America countries. In Brazil, for example,
higher rates of fecs paid by the social security system to physicians for C-sections as
35Patricia Daly and Fadia Saadah, 1999, "Indonesia: Facing the Challenge to Reduce Maternal Mortality",
East Asia and the Pacific Region 'Watching Brief (Washington DC: World Bank).
21
compared to fees for vaginal deliveries resulted in a doubling of the C-section rate from
15% to 30% between 1970 and 1980. Even after social security payments were changed
and made equivalent for the two procedures in 1980 in response to this problem, financial
incentives continued to favor C-sections and high rates remained. Physicians continued to
gain higher remuneration for C-sections due to their ability to collect fees for extra
charges like longer hospital stays and higher use of medications.36
Even when PAYERS seek to control costs by modifying payments, providers tend to be
crafty in finding ways of protecting or insuring their earnings growth. In Australia, for
example, the government repeatedly placed controls on the level of fees paid to private
doctors in efforts to keep national health costs down. Physicians responded to each
control measure however by increasing utilization levels to the point that their earnings
continued to grow each year ahead of inflation.
How might provider payments work better to advance reproductive health services? A
relatively simple approach relies on continuation of salary payments for public or private
providers, with the addition of a bonus for the provision of a set of selected or targeted
services. In the case of reproductive health, bonuses might be paid for targeted services
that include pre- and post-natal care, family planning consultations, nutritional
supplements for mothers, and HIV/AIDS or STI testing and counseling. Bonuses can also
be applied to redress gender imbalances in utilization of services, such as screening of
males for STDs. An important rationale behind the bonus is that increased provision of
preventive services will improve health, reduce the need for more costly curative
services, and therefore be self-financing over the long run. This approach is being
implemented by Health Maintenance Organizations in the US, Chile and the Philippines
where physicians, on salary, are given incentives to provide preventive services such as
family planning consultations, pre- and post-natal screening, and immunizations, in
return for service-relatedbonus payments.
A more complicatedforrn of payment that is growing in popularity to motivate providers

to be attentive of preventive care and reproductivehealth needs is called 'capitation'.
Under a capitation scheme, a provider is prepaid a pre-determined amount of money for
each person s/he agrees to care for over a specified period of time. This requires
agreement on the prepayment amount, the number of clients enrolled in the provider's
practice, and the range of service entitlements to be provided. For example, a doctor,
nurse or midwife paid by capitation with a practice serving 1,000 people (all enrolled at
the practice) might receive $20 per capita per year for each of the 1,000 people s/he is
responsible for. The provider could therefore count on receiving $20,000 per year, in
return for which s/he agrees to provide care to enrolled members seeking it. Under
'capitation'payment schemes, the provider is motivated to emphasize preventive care so
as to keep their enrolled population as healthy as possible, with reduced need for
expensive curativecare. This is because providers under capitation are allowed to keep
savings resulting from reduced health expenditures on their enrollees.
36Barros FC, Baughan JP and Vicotra C Why so many Caesarean sections? The need for a future policy
change in Brazil. Health Policy and Planning, I (1): 19-29, 1986.
22
Capitation can also be used as a form of payment to a group of providers working out of a
single facility, such as a hospital and a network of clinics serving an enrolled population,
or a district responsible for, say, 100,000people.
Capitation is now the major form of payment to providers who are reimbursed by the
U.S. government (for Medicare and Medicaid enrollees), and is growing rapidly in many
developing countries such as Chile, the Philippines, Brazil and Nicaragua. Purchasers of
health services-governments, health insurance funds, HMOs-are increasingly favoring
capitation as a method of payment because:
* It is relatively simple to administer (enrolled population times per capita amount)
* It involves negotiations between the purchaser (e.g., government or insurance fund)

and the provider (e.g., public or private doctor, nurse or midwife; clinic or hospital)
on what services are to be provided at what cost; and it records agreements in the
form of a contract.
* Contracts usually stipulate that patients can switch providers-and take their
capitated payment "with them"-should they be dissatisfied with the quality of
service they receive. This gives and incentive to providers to be more accountable to
their clients.
* Since providers are allowed to keep money from the capitated payments they don't
use in providing services, they are strongly motivated to feature timely preventive
care which will keep down the need and demand for more expensive curative care for
their clients.
* Capitation is compatible with an integrated approach to reproductive health because

capitated payments are almost always linked to client entitlements to a clearly
specified menu of integrated services.
On the negative side, capitation requires precautions because it tends to provide

incentives to providers to limit treatment, especially more expensive treatments, so as to
protect their overall budget envelope and earnings levels. Also, the notion that clients can
switch providers-thus taking their capitated payment with them-assumes a relatively
broad provider base to choose from. If clients have little or no choice in switching
providers if service is not to their standards, then the incentive for providers to be
responsive to their clients is effectively removed.
As noted previously, the single most important feature of enlisting new forms of provider
payments - from a health reform perspective -- is to transfer the 'financial risk' for
performnancefrom the PURCHASER or PAYER of services to the provider. This is not
possible under more traditional forms of salary payments in the public sector, where the
purchaser of services (government making use of tax money on behalf of taxpayers) pays
a regular salary to workers in government owned health facilities. If these workers fail to
produce the outputs needed to improve reproductive health outcomes, it is the
government-the PURCHASER-rather than the provider - who must absorb the
negative consequences of poor value for money. Alternatively, under capitation, if the
23
provider or facility fails to deliver the goods, the goods are of poor quality, or the
provider or facility is inefficient and overspends the total capitation payment it receives,
it is the PROVIDER-NOT the purchaser-who must bear the financial risk of loss. The
provider's losses will be exacerbated as disgruntled patients switch to higher quality
providers, because the poorly performing provider's enrolled population will be depleted
and his/her capitation payments will decline. Moreover, if the provider fails to deliver
high quality preventive services, s/he will be forced to absorb the costs of serving an
enrolled population that is less healthy, and more in need of expensive curative services.
Organizational Change
Our use of organizationalchange refers to how providers-Ministries, hospitals, health

centers, clinics -- are organized in termnsof arrangements affecting inputs, processes and
outputs of health care provision. If government and the Ministry of Health in a particular
country are responsible for the financing and provision of all reproductive health care,
then our analysis of organizational change could be content on focusing solely on
perfonnance of the public sector. Were we to satisfactorily re-organize the public sector
in such a context, we might reasonably assume relatively direct impacts on desired
reproductive health outcomes. In reality, however, public sector providers share the stage
with NGO and private-for-profitproviders. To the extent that reforms do not
acknowledge the importance of "public-private collaboration", they are sure to fall short
in achieving national reproductive health outcomes.
The significance of the private sector in overall financing and provision of health care can
be illustrated from National Health Accounts in several low income Asian countries. In
Viet Nam, 68% of total financing for health derived from private sources in 1993, while
the private sector's share in provision amounted to about 50% of all health expenditures.
In Bangladesh, about 47% of total financing for health derived from private sources
(households) in 1994/95, while the private sector's share in provision accounted for 46%
of all health expenditures. In Sri Lanka, non-governnental sources of finance accounted
for just over 50% of total financing for health in 1990, while the private sector's share in
provision accounted for 53% of health expenditures. Finally, in Nepal, the private
sector's share in financing accounted for 71% of total health expenditures in 1984/85.
More specific to reproductive health, the proportion of women using for-profit sources of
family planning is about 46%, on average, in countries of Latin American and the
Caribbean, 44% in the Middle East and North Africa, 27% in sub-Saharan Africa, and
26% in Asia (excluding China and India).37 Other examples of private provision
include:3 8
* In Morocco and Tunisia, 48% and 25% of women 15-49 years, respectively use the
private sector for prenatal care.39
* In the Philippines, 23% of women 15-49 years, use private facilities for their first
prenatal Visit.4 0
37 JamesE. RosenandShantiR. Conly,1999,Ibid.

38 SeeRosenandConly, 1999,Ibid.
39
Berman and Rose, 1996
40 East-West
Center,1996
24
* In South Africa, 35% of nearly 5,000 STD patients in a rural health district sought
treatment from private doctors.41
* In Nigeria, 60% of 120 women receiving treatment for abortion complications in a
large public hospital had the initial procedure performed at a private hospital or
42
clinic.
Organizations have both macro and micro components. Macrostructure refers to the legal
and market conditions that impact on the organization's production function from
"outside". If an organization is a monopoly, with no competitors, then it is likely to have
a big say in what it produces, how it ascertains quality, and the cost to produce its
product. But if the organization has competitors and is exposed to market forces, then the
way it does business will be very much influenced by how others are doing business and
how successful they are at it.
Microstructure refers to what happens inside an organization that affects its perfornance.
How are staff and other resources managed, what kinds of incentive structures can be
used to mobilize staff to be more efficient, stress quality and be responsive to clients;
who sets performance targets; and to whom are managers accountable? The importance
of microstructure can be illustrated by comparing the management of two hypothetical
hospitals. In hospital #1, the directors/managers do not have authority to hire or fire staff,
build new structures, change the profile of services, or decide on user charge policies.
Rather, an outside body, in this case the Ministry of Health, sets organizational protocols
that determine what can and cannot be done. Hospital #1 is typical of public, non-
autonomous hospitals in many developing countries. In the case of Hospital #2, however,
directors or managers can hire and fire staff, determine who will provide drugs and non-
clinical supplies to the hospital, spend resources on construction and determine fee
charging policies (to cover costs). This degree of management autonomy is often seen in
NGO or mission facilities, private for profit hospitals and in some autonomous public
hospitals. It is also often credited as a major reason for superior performance of NGO
facilities over government facilities in providing reproductive health and other services.43
Commonly cited weaknesses related to organizational and institutional capacity that

underscore the importance of organizational change in health sector reform include:
Reproductive health services are poorly managed: Effective planning and

implementation of reproductive health programs and activities in many countries are
hindered by weak technical and administrative capacities at the national, regional and
service delivery levels. Often, responsibility within Ministries of Health for
population and reproductive health services is located in relatively unempowered
offices-in terms of budget, authority, and staff skills. Decentralization policies
increase concerns among reproductive health proponents, because greater numbers of
actors with more variable technical and administrativeexpertise need to be engaged
to ensure effective implementation.
41 Wilkinson et al, 1998

42 Konjeand Obiseasan,1991
43 See
R. Paul Shaw, 1999, 'New Trends in Public Sector Management in Health: Applications in
Developed and Developing Countries', (Washington DC: World Bank Institute, WBI Working Papers).
25
* Monitoring and evaluation is weak: Monitoring and evaluation is seldom linked to
health outcome improvements or responsiveness to client needs or desires. In many
countries, disparate and parallel MIS systems exist and new programs insert new
requirements on an already overburdened and redundant system.
* Referral systems are non-existent orfunction poorly; there is a lack of linkage

between levels of care: This is a particularly important problem for services to
prevent maternal mortality. 'Women experiencing an obstetric emergency will
always need a functioning health system, one that recognizes the gravity of their
situation, and refers and then provides them with the appropriate care. " ICPD +5,
WHO, 1999.
* Administration and delivery of services is inefficient: Services that are delivered or

administeredvertically, for example, are often inefficient from both the client and
provider perspectives. Clients find the hours for preventive services limited and are
not willing to make special visits for each of the different services they or their family
members may need. Integrating services or offering all services at all hours that a
facility is open may encourage clients to seek a wider variety of preventive and
curative services than they otherwise might. In Bangladesh and Egypt, integration
resulted in cost savings both in the administration of programs and delivery of
services. Mexico reported a fifty percent savings in staff time when three services
were provided at a single consultation rather than one.44
* Services are organized to meet the needs or convenience ofproviders, not necessarily
to respond to client need or desires: Services offered may be too expensive, offered
in inappropriate manners and at inconvenient times, with no provisions for privacy.
Antenatal care or family planning may be offered only at specific times of the week,
rather than whenever clients show up. Facilities often do not have personnel on call or
on guard 24 hours a day to respond to emergencies-this is particularly essential for
obstetrical emergencies.
* The range of services or options offered to clients are limited: In most countries,
women lack access to the total range of reproductive health services. This is not just a
matter of lack of resources, it is also a due to a lack of understanding and respect for
client choice. In some countries, the majority of reproductivehealth services are not
available or are only available to better off women in urban areas.
* Drug supply (essential drug) systems are weak and accountability is inadequate: In
response to weak drug systems many countries have adopted a vertical drug supply
system for contraceptives which, in many cases, function well. However, these
vertical systems often rely on donor financing and technical assistance and may be
unable to function as separate systems without donor support.
The push for change in the organization of the health sector has been motivated by
widespread impressions that overly centralized Ministries of Health lack
entrepreneurship, are not accountable to the clients they serve, and provide poor quality
44 RHA to Population and Development, Forman and Ghosh, 1999.

26
service. For example, a survey conducted for the World Bank's 1997 World
Development Report on the role of the state in the financing and provision of social and
other services found that only 6% of domestic private managers in 58 developing
countries rated public service delivery as efficient. Health services scored lowest. Sixty
percent of the business managers rated the efficiency of health services as low, 33% as
moderate, and only 7% as high.
In response to these complaints, decentralization is perhaps the most common, visible,

reform option being implemented in developing countries-the explicit goal being to
improve performance by increasing the involvement and entrepreneurial talents of local
actors and establishing greater accountability to the communities served. The framework
by Rondinelli has become widely accepted in public health.4 5 Rondinelli describes four
"pure" types of decentralization: deconcentration, devolution, delegation and
privatization.4 6 Broadly,
* with deconcentration, authority is transferred from a central ministry to lower levels

within the same ministry. An example of this is the introduction of MOH district
based planning and resource allocation by District Health Management Teams in
contexts where planning and resource allocation were previously centralized.
* Devolution involves transferring authority away from a line ministry (e.g. the MOH)
to local government units who are not part of the line ministry. These local
government units are usually elected officials representing regions, districts,
municipalities or rural communities.
* Delegation involves transferring authority from the government to parastatal or some

similar organization created by the government but lying outside of government
control. While common in the electrical and telephone sectors in developing
countries, delegation has not been widely used to date in the health sector.
* Under privatization, functions held by the government are "handed over" to the
private sector.
Decentralization reforms in developing countries tend to be deconcentration or

devolution, or a combination of the two. In some countries, decentralization (in the form
of deconcentration) is confined to the health sector and pursued as a deliberate health
reform strategy. A common form of deconcentration in the health sector is the WHO
district model, in which a district hospital (and its staff) are handed over responsibility for
a group of geographically clustered satellite health clinics. In other instances, countries
that are considering or undergoing health reform are simultaneously undergoing
decentralization (devolution or deconcentration) as a national development strategy,
which extends beyond the health sector. The different forms of decentralization change
the incentives for organization and provider behavior in different ways. For example,
decentralized decision-making without devolved control over finances often results in
little new implementation.
41WHO, 1997.
46
Rondinelli, 1981 and 1983.
27
A second major type of organizational reform taking place in developing countries-one
that focuses on improving the way public institutions are managed - is the "New Public
Sector Management" approach. New Public Sector Management has grown out of
consensus that public sector organizations can benefit by identifying, mimicking, and
importing business-like practices from the private sector that appear responsible for better
performance. It stresses accountability for performance among government employees by
adding considerable clout in the form of (i) annual personnel performance agreements
between employer and employee, (ii) performance-related budgeting that links
expenditures to achieved outcomes, and (iii) performance monitoring and evaluation to
assure outcomes are achieved. Often, this involves giving greater autonomy and
management of publicly owned agencies such as central procurement agencies, public
works, and hospitals.
A third organizational change strategy being introduced in some developing countries

aims to reshape EXTERNAL forces impacting on performance through a 'separation of
public finance from public provision'. The rationale for separating public finance from
public provision is to get government out of the business of providing services, so as to
concentrate more on policy development, public health goods and services, and subsidies
for the poor. This approach envisions (i) making greater use of the efficiencies of private
sector provision, financed through government contracting, and (ii) more value for
money by requiring competition for government contracts. Trinidad and Tobago,
Nicaragua, and Mongolia, to name just a few country examples, are progressively
introducing these kinds of changes.
A key organizational feature associated with the separation of public finance and
provision is the emergence of PURCHASING agencies in systems of 'managed
competition'. The underlying rationale is to establish organizational intermediaries that
have an arms length relationship to the policy roles of government (leaving that to
MOH), and concentrate on the function of getting best value for money for the clients it
represents. This is precisely what social health insurance organizations try to do when
they contract a health maintenance organization (HMO) to provide high quality
reproductive health services for members of the social insurance plan. This organization
change has also been referred to as a 'purchaser-provider split' and is defined, along with
typical functions of the purchaser vs. provider in Box 1.
For example, in the UK, the new purchasers are District Health Authorities who purchase
services from public and private hospitals as well as clinics. Zambia has adopted a similar
approach and Ghana plans to do so. In Nicaragua, the purchasers are social health
insurance funds that purchase services from public or private providers. In the United
States, the purchasers are large employer groups (called sponsors) that purchase services
from health maintenance organizations, like Kaiser Permanente, that owns its own
hospitals and clinics, as well as contracts from others. In Lebanon, the purchasers are
private sector entities (e.g., MEDNET), that act on behalf of several private insurance
funds to get the best deal they can from public and private hospitals and other providers.
The organizational significance of the new purchasers is that they can have considerable
clout in (i) getting providers to comply with the services they want their members to get,
28
(ii) pressuring providers to accept lower payments. They also have a strong hand in
perforning monitoring and evaluation, and usually insist that providers self-regulate as
well to assure quality standards. With respect to reproductive health services, the new
Box 1: Functions and Conditions Associated with a Purchaser-Provider Split
A purchaser-provider framework is established when:
* government initiates a split between public purchasing (who pays for the services) and public
provider roles (who supplies the services):
* the purchasers act as the consumer's/patient's agents, with emphasis on contracting, and
* public and private providers of services are required to compete for contracts.
The Purchaser - often a public agency - generally has thefollowing responsibilities:
* carrying out population/epidemiological needs assessments of the population it serves

* developing and publishing plans to improve health (strategies, priorities, targets)
* determining a purchasing strategy to assure quality health care is delivered
* determining service specifications (price, volume, quality)
* selecting providers that are qualified to provide services (intemally or externally)
* contracting for services
* monitoring services
The Provider - a public or private supplier - has the following responsibilities:
* delivering good quality services

* considering issues of access, location, and standards
* establishing realistic and competitive prices (if cost recovery is in place)
* understanding the cost structure of their own business
* ensuring that adequate information and monitoring system are in place to review contractual
arrangements with the Purchaser -- e.g., achievement of agreed upon outcomes and targets.4 7
purchasers tend to concentrate on identifying cost-effective services that impact most on

the reproductive health outcomes of the poor, and negotiating contracts with reliable
providers-public or private-that can deliver best value for money. This is the
prevailing approach in Mali, where government contracts are directed to NGO and
private sector providers who, in turn, provide reproductive health and other services to
the population.
47 Oceana Health Consulting, 1997, Purchaser Provider Separation and Public Health, Australia.
29
Needless to say, organizational changes of this scope have been strongly resisted by the
status quo. A legitimate complaint concerns the skills required to prepare, negotiate,
monitor and evaluate contracts. Trial and error suggests that considerable training of
public sector officials, as well as 'learning-by-doing', is required to establish effective
contracting. It is also clear that contracting of some kinds of services, such as non-clinical
services (e.g., laundry, food, maintenance) is easier than clinical services (e.g.,
operations).48Nevertheless, the momentum to separate finance and provision, and to use
contracting as a means of fostering public-private collaboration to increase efficiency and
greater access is picking up and is sure to prevail in low and middle income countries
alike over the next decade.
Regulation
Regulation embodies various mechanisms that have been designed to constrain the
behavior of organizations in the health sector as well as direct them in societally desired
directions. It is perhaps the most important lever government has at its disposal to assure
quality, protect client needs, and promote access, if not equity. Regulation becomes
particularly important in contexts where NGOs and private-for-profit providers are active
in health systems, as a means of insuring quality, responsiveness to clients, and standards
and protocols related to individual safety. As summarized in Box 2, regulatory measures
have wide scope and can affect conditions affecting entry, price, quality, and buyer-seller
relationships.
Commonly cited weaknesses related to regulatory issues in developing country health

systems that hinder achievement of reproductive health goals include:
• Lack of experience and capacitiesfor a government regulatory role in assuring

quality ofpublic health goals: In most developing countries, government workers
have little experience or expertise in regulation, and it has not in the past been an
important part of their jobs. Service standards and norTnsfor various health
professionals or for different services and procedures may be non-existent, not up to
date or poorly disseminated. Procedures for enforcement of standards may need to be
established and maintained. In some countries, the problem may be confined to
jointly establishing, disseminating or enforcing standards with private sector
providers, so that the public and private sectors follow similar standards and norms.
* Lack of a legal or regulatoryframework to helpfacilitate and guide NGO action in

reproductive health: Legal frameworks which provide NGOs with freedom of action
in reproductive health, still do not exist or require revision in many countries. Yet,
NGOs tend to be key actors in developing and delivering reproductive health
approaches and services in many countries. They have been instrumental in
establishing policies, setting priorities, developing and testing innovative programs,
translating client needs and demands, and holding governments accountable for their
actions.
48 Anne Mills, 1998, "To Contract or Not to Contract? Issues for Low and Middle Income Countries",
Health Policy and Planning, Vol. 13, no. 1, pp. 32-40.
30
* Lack of a legalframeworkforfor-profit serviceproviders or alternatively,over-
regulation ofprivate sector providers or ofprovider arrangements:Without a
regulatory framework for private practice, most for-profit providers are unwilling to
invest their own resources in setting up shop. On the other hand, regulations which
overly restrict entry of private providers of contraceptive products or services,
autonomous practice by midwives or nurses, or groups medical practices or managed
care arrangements, to name a few, can severely limit access to reproductive health
services in many developing countries.
Box 2: Tools of Regulation
Regulation of Providers
* Licensing and laws concerning setting up practice -- who, where, when, how
* Standards affecting quality of care
* Rules pertaining to pre-service training, residency and internship,nursing, CBDs
* Controls on marketing
* Controls on price
* Controls on reimbursementpractices
* Malpractice law and grievanceprocedures
Regulation of Facilities
* Accreditation
* Financial audits
* Reporting requirements
* Liability rules pertaining to malpractice
* Controls on price (price fixing)
Regulation of Commodities
* Testing commodities (drugs), equipment,
* Tax and customs laws-important in contexts of donor funding and imports
* Prescription and pharmacy practices
* Pricing of drugs and medical supplies
* Rules concerninguse of publicly purchased and housed equipment
Regulation of Health Insurance/Third Party Payers

* Entry of firms into markets
* Financial audits
* Creme skimmingand exclusionary practices (attempts to exclude the sick and poor)
* Grievance procedures
Self-regulation
* Quality control
* Monitoring and evaluation of client satisfaction
31
* Taxpolicies that are unfavorable to reproductive health goals: Imposing heavy
import or value added taxes and customs charges on certain public health
commodities, such as contraceptives,can substantiallyincrease their prices to
consumers. This can, in turn have negative implications for the use of these
commodities by economicallydisadvantaged individuals. In almost all developing
countries, when donors purchase and import these commodities, the products are
granted a tax free status. However, taxes are imposed on these same products when
the government, private providers, pharmaceutical distributors or NGOs purchase
them. A recent survey on the tax treatment of 3 pubic health commodities (vaccines,
ORS and contraceptives) in 22 responding countries found that specific tax
arrangements for the three products varied greatly between countries, but were
seldom implemented with public health goals in mind. Vaccines tended receive the
most favorable tax treatment (i.e. exoneration of most types of taxes for the greatest
number of purchasers), while contraceptives receive the least favorable treatment.49
* Lack of a supportive legalframework beyond the health sector to support

reproductive health goals: For reproductive health, this includes: laws on the legal
age of sexual consent and marriage which allow men to marry young girls or
adolescents;poor legal protection of women in areas such as marriage (including
violence against women by their husbands), divorce and polygamy; restrictions on
abortion in some countries and stigmatization of abortion in others; laws or policies
that prohibit sexuality education for young people; laws that restrict free and
informed choices of people related to sexual and reproductive health.
Regulation takes on priority as a health sector 'reform lever' because it can be used to
'operationalize' a vision of what selected inputs, structures, and outputs should be in
place to achieve desired reproductivehealth outcomes. It seeks compliance from
financiers and providers that they will honor the standards and protocols mandated by
government. And it aims to protect the public in cases where informnationis imperfect
(e.g., comnmoditiesand procedures that may involve risks to one's health) and where
providers may not act in the best interest of clients (e.g., when insurers reject people with
health conditions from membership in health insurance plans).
Two issues concerning regulation are: to what extent will compliance with existing
standards/normsimprove outcomes, and to what extent might changes in existing laws
and regulations or new regulations improve reproductive health outcomes?
Compliance with existing reproductive health standards and norms is a major issue
because governments tend to be weak in carrying out their regulatory functions-weak in
limited numbers of regulators, weak in enforcement, weak in levying penalties for non-
compliance. If government is the only financier and provider of reproductive health then,
in a sense, there is no formal regulation because government itself sets and complies with
its own standards and protocols. Regulation is almost always important however because
NGOs, not-for-profit and for profit organizations tend to be heavily involved in the
financing and provision of reproductive health as well. Moreover, many governments are
Katherine Krasovec and CatherineConnor, "Survey on tax treatment of public health commodities,"
49
PHR Technical Report #17. Bethesda, MD January, 1998.
32
trying to expand the size of the private health care sector, as well as its role in assuring
delivery of quality reproductivehealth services.
Many countries' existing laws or regulations limit the population's access to reproductive
health services. For example, access to family planning products and services are
restricted in some countries because pharmacies are not allowed to distribute
contraceptiveproducts without a prescription from a health provider (usually a
physician). In many cases, clients, particularly poorer clients, would prefer to get a
prescription directly from a pharmacy or pharmacist, so that they do not have to make
two separate trips to separate facilities and incur additional financial costs. Limiting IUD
insertion to physicians or certain specialist physicians, when midwives or nurses can and
do provide these same services safely and effectively in other countries, hinders the
population's access-geographically, financially and often socially-to this method of
contraception. Constraints on autonomousparamedical practice limits access to
important, good quality services that these providers can and are willing to deliver in
rural or poorer areas where physicians are unwilling and unable (for financial, social and
cultural reasons) to practice. Limiting group medical practices, managed care
arrangements,or other arrangementsin which the financial burden and risk for a medical
practice can be shared between providers, also constrains possibilities for expanding
service availability.
Some ways that regulation has been used in developing countries to improve health
sector performance and reproductive health include:
* requiring medical graduatesto serve time in remote areas where health and
reproductivehealth are substandard. In Thailand, for example,the government started
a program in 1995to produce 300 doctors annually, specifically for rural areas,
whereby students must spend at least one year providing rural services and three
years of their training at a regional hospital, networking with district hospitals.5 0
* requiring that medical, nursing, midwifery and other paramedical schools provide
training in selected reproductivehealth topics of concern to society.
* providing a legal framework for midwives to deliver reproductivehealth services

previously restricted to physicians. In some countries, midwives now have the legal
framework to insert UJDsor provide other contraceptiveproducts. In others,
midwives or nurses can be registered as private autonomousproviders of midwifery
services. In others midwives can now perform certain obstetrical functions previously
limited to physicians. Tunisia, Turkey, Morocco and Chile, to name a few, all have or
are investigating reforms of this nature.
* requiring that NGOs contribute to public health goals. For example, the government
of Malawi subsidizes about 15% of the recurrent costs of facilities managed by the
Christian Health Medical Association-a group of mission clinics and hospitals-in
50Suwit Wibulpolpersert, "Strategies to Solve Inequitable Distribution of Doctors: A Review of Experience

from Thailand", (case study prepared for World Bank Institute Flagship Program on 'Health Sector Reform
and Sustainable Financing'), 1997.
33
return for their compliance to population, FP and reproductivehealth norms and
provision of specified services to poor households.
* requiring that insurance programs do not creme skim clients (reject the sick and
needy in favor of the healthy and wealthy); requiring regular auditing of health
insurance funds.
* requiring that gender issues are featured as an explicit part of policy formulation, and
that gender neutrality takes place in the quantity, quality and access to services
delivered.
In what new ways might regulation be employed to advance reproductive health

outcomes? As governments increasingly advocate the provision of basic packages of
health services (which include reproductivehealth), and increasingly contract with public
and private providers to offer the basic package, there will be a major role for the
regulator to play in assuring the reproductive health services are indeed available. In this
context, the regulationcan be built into contracts in the formnof services that must be
provided, as well as agreed procedures to monitor and evaluate compliance. The same
applies to benefit packages offered to paying clients of social health insurance and private
insurance funds. In this context, regulatory functions can be jointly undertaken by the
public and private sector, possibly under the umbrella of an NGO that takes the lead in
performing 'rating' and 'watchdog' functions.
Another important way of harnessing regulation as a reform lever to advance

reproductivehealth outcomes is to encourage self-regulation among competing entities.
In markets where large NGO and private providers are competing for clients (for example
under capitation payments) they are inclined to self-regulate for quality, motivated by the
desire to satisfy and retain their client base. Governments can tap this propensity for self-
regulation by influencingthe standards and norms that must be met and possibly
subsidizing the technical training and data systems involved. In Germany, for example,
where financing and funding of health services is performed by German Sickness Funds,
the funds self-regulate for quality. Government itself is only responsible for about 10% of
regulatory tasks in the country.
The 'flip side' of regulation is that governmentregulations might be overly stringent to

the extent they crowd out private sector entrepreneurs. We have already cited examples
of regulations that may restrict direct provision of reproductive health services. Other
regulations-on prices, patents, and commercialmarkets for products, can have negative
repercussions as well. For example, in Egypt, Jordan and elsewhere, government controls
on the price of oral contraceptives that were intended to make products more affordable
have discouraged commercial sector interest. Furthermore, government policymakers
typically know little about the commercial sector and may unintentionallyinhibit the
growth of commercial markets, thus hampering the achievement of public health goals. In
South Africa, for example, a major U.S.-based pharmaceutical company suspended plans
34
to set up production facilities over concerns that govenment neglect of weak patent
protections would make it unprofitable to manufacture products in the country.5
Promoting Healthy Behaviors52
Promoting healthy behaviors refers to interventions that can be taken to influence care
seeking behaviors-that is, the demand side of health care. This is an important reform
lever because individual behaviors -- rooted in habits, values, perceptions and ideas -- can
work both for and against optimal reproductive health. The role of healthy behavior
promotion is to mobilize individuals to adopt healthy behaviors by (i) identifying,
clarifying and communicating the benefits he or she will gain by adopting these
behaviors and, (ii) providing information on how and where to access assistance when
problems or concerns arise. For example, a healthy behavior objective among consenting
individuals show decide to engage in sexual activity is to get them to practice 'safe sex'.
A healthy behavior objective for individuals who drive cars with seat belts is to get them
to use the seat belts. A healthy behavior objective regarding pregnant women in rural
village households is to motivate them to use skilled providers as birth attendants.
Some commonly cited weakness in developing country health systems related to

promoting healthy behaviors for better reproductive health are:
* Low levels of contraceptive use in high risk situations. UNFPA estimates that at least
350 million couples worldwide lack access to infonnation about contraceptives and a
range of modern contraceptive methods.53 This is particularly problematic in poor
countries where the incidence and prevalence of HIV is high, such as in countries of
sub-saharan Africa and South Asia. Moreover, between 120 and 150 million married
women who desire to limit or space future pregnancies are not using contraceptives
and have an unmet need for family planning infonnation and services. This is as
much a matter of educating men and women about their reproductive health rights,
needs and choices, and confronting biases regarding contraceptive use, as it is about
making more services and commodities available and affordable.
* Lack of effective use of available health professionals: Lack of appropriate demand

for maternity care services: only 65% of women in developing countries make use of
antenatal care, compared to 97% of their counterparts in developed countries. Even
fewer women -- less than 30% -- receive postpartum care, compared to 90% of
women in developed countries. Only slightly more than half (53%) of all developing
country deliveries take place with the assistance of a skilled doctor or midwife. This
translates into 60 million unskilled deliveries per year in developing countries in
which a woman either delivers alone, with a family member or with an unskilled
attendant.54 Service use is low for a variety of reasons, including physical and
51 JamesE. Rosenand ShantiR. Conly,"GettingDownto Business:Expandingthe PrivateCommercial

Sector'sRolein MeetingReproductiveHealthNeeds"(WashingtonDC: PopulationActionInternational),
1999.
52 This section borrows from presentations by Michael Reich, Harvard School of Public Health, to the
World Bank Institute Flagship Program on Health Sector Reform and Sustainable Financing.
3 UNFPA, The State of the World's Population, New York, 1997.
54 WHO, Coverage of Maternal Care: a Listing of Available Information, Fourth Edition, Geneva, 1997.
35
financial accessibility, intra-household control of resources which do not give priority
to women, poor quality of services and treatment at health facilities and by personnel,
and multiple demands on women's time.55 In addition, clients may have little
knowledge of their own reproductive health needs and may lack information on
services available to solve reproductive health problems. Efforts to promote healthy
behaviors can help deal with constraints to more effective use of services, particularly
if they are combined with interventions to improve service quality and accessibility.
* Lack of involvement of important subgroups of thepopulation in health

programming: Few strategies to involve men in reproductive health prograrns have
been developed or effectively implemented,even though it is nearly universally
recognized that men are important decision makers in their own and their partner's
reproductivehealth behaviors. The same holds true for adolescent girls.
* Inappropriate use of health services by clients: Clients may bypass less expensive
health serviceswhere appropriate care is available, for more expensive higher level
care. For clients, unnecessary costs may be incurred, such as travel costs, whereas for
health systems more generally, clients may demand services at expensive higher-level
facilities that should be provided at less costly lower level facilities. Helping clients to
make more informed choices -- about entitlements at different places, as well as cost
sharing if it is involved-can contribute to the efficacy of their demand-side decisions
about where to obtain the right services at the most desirable cost.
Successful promotion of healthy behaviors tends to be contingent on whether or not (i)

the benefits communicatedaddress a "felt need" or core value held by the individual, (ii)
whether enough and the right kind of specific information has been provided on how to
adopt optimal behaviors, (iii) whether services that can help change behavior can be
accessed, and (iv) whether services provided are judged to be useful by clients.
Linking benefits-that can be achievedby adopting the healthy behaviors-with core

values held by individuals has been explored in various marketing strategies that aim to
promote social change. This is illustrated in Box 3. For example, public endeavors to
promote safe sex would not only tout the health benefits to the individual of doing so but
would stress 'core values' of freedom and independence from the ravages of a controlling
disease.
Promoting healthy behaviors is clearly a complex area however because it (i) delves into
reasons why individuals do seemingly irrational things, (ii) involves psychological
techniques to motivate more desirable behaviors, and (iii) requires effective
communicationskills and technologies to reach large numbers of individuals.
Appreciating this complexity helps explain why efforts to promote healthy behaviors are
used unevenly in the process of health sector reform. Thus far, they have tended to focus
on:
55AbouZahr, Carla, "Improve Access to Quality Maternal Health Services" (Sri Lanka: Presentation at the
Safe Motherhood Technical Consultation, October 18-23,Mimeographed)
36
-- the importance of taking preventive measures in household behavior;
-- the importance of regular pre- and post-natal care at health centers
-- regular preventive exams and check ups for cervical cancer;
-- changes in perceptions of stigmas regarding treatments for TB and HIV/AIDS;
-- acceptance of generic drugs by patients, and prescribing doctors and pharmacists;
-- greater understanding and acceptance of fee-for-service and pre-payment schemes in
contexts where health services have traditionally been provided "free of charge".
Box 3: Desired Action, Benefits and Core Values among a Target Audience
Desired Action Benefits Core Values
FreedomfromAIDS Freedom
Practice safe sex Independencefrom virusthat is affectingyour Independence
friends and communities
Control over yourdestiny Control/rebellion
Freedomfromnicotineaddiction Freedom
Prevent smoking Independencefrom tobaccoindustrymanipulation Independence
Rebellionagainstan industrythat is tryingto trick Control/rebellion
you, seduceyou, addictyou,and kill you
Identityas a physicallystrongand attractiveperson Freedom
Exercise more often in control of your appearance Independence
Rebellionagainstfeelingsof unattractivenessand Control/rebellion
lack of control over your appearance
Source:M. Siegeland L. Doner,1998,MarketingPublicHealth:Strategiesto PromoteSocialChange(Gaithersburg,
MD:AspenPublishers)
However, measures to influence behaviors have a relatively strong and consistent track
record in the field of population and family planning, where cumulative evidence
suggests they can serve as an important catalyst to motivate health seeking behavior. This
is particularly apparent in the area of population and family planning programs, where
'Information, Education & Communication' (IEC) strategies recognize that information-
seeking is a necessary first step in the complex process of adopting a new behavior.
Examples suggesting that such strategies have produced positive gains include:
- In the Sudan, village midwives made house-to-house visits to explain the benefits of
child spacing as a means of combating negative attitudes towards contraception. One
year later, respondents who had been visited by the midwives were 1.7 times more
likely to be currently using contraceptives for spacing than those who had not, and the
proportion of village women not using contraceptivesbecause they believed it was
against their religion or that it was harmful had fallen from 21% prior to the
intervention to 10% after it.56
* In countries of Latin America, Turkey and Zimbabwe, IEC programs targeted males
as well as husband-wife communication in efforts to help make family planning a
household word and a community norm, rather than a taboo subject. In Zimbabwe,
60% of men who listed to a radio drama series with family planning themes talked to
make friends and relatives about the issues involved. In Turkey, a national multi-
media campaign in Turkey prompted 63% of women to discuss family planning with
56 ElTom,A.R.,D. Lauro,A.A.Farah,R. McNamara,E.F.Ali Ahmed,"FamilyPlanningin the Sudan:A

PilotProjectSuccessStory"WorldHealthForum,Volume10, 1989.
37
their husbands. Studies in Latin America, Niger and India, reveal that interventions
that improved communicationbetween both men and women contributed to joint
decision makers in family planning and had a significant,positive impact on both
acceptance and continuation of family planning.5 7
* In Indonesia, the government launched a "Blue Circle Campaign" that aimed to

improve the image and status of private doctors and trained midwives as high-quality
providers of family planning services. After a five month campaign, the average
weekly family planning caseload increased by 28% for doctors and 36% for nurses.5 8
* In Kenya, a project aimed to change behavior of male truck drivers through a

workplace intervention that combined IEC about unsafe/unprotected sex, STI
treatment, and access to condoms. After one year, there was a 13% decrease in
extramarital sex (49% to 36%), and a 6% decrease in visits to commercial sex
workers (12% to 6%). There was also a decline in STIs.59
Combining the Reform Levers
Each of the five reform levers can be invoked to inject change into the health system.
What makes health sector reformnso complex and demanding, however, is that major
improvements in system-wideperformance and outcomes are unlikely to take place if
only one reform lever is manipulated at a time. In fact, changes in one of the reform
levers almost always leads to changes in one of the others, making it impossible to work
on one lever without affecting changes in the others. Lack of understanding of how the
four reformnlevers interact can be expected to result in situations where well-intentioned
changes in one reform lever may be undermined or sabotaged by neglect of others.
Moreover, simultaneous action on all five levers will probably need to be orchestrated to
remedy deeply entrenched performance problems in health systems.
In some contexts, the changes brought about by manipulating the reformnlevers have been
intentionally rapid, and so sweeping that the resulting policies have been called 'Big
Bang' reforms. This applies to developed countries like the UK and New Zealand where
a separation of finance and provision, and the creation of internal markets was introduced
by political fiat, then bulldozed through the health system by the govemment in power.
Such reforms encountered considerable political risk because inadequate efforts were
devoted to building consensus among different stakeholders. In the UK, for example, the
medical establishment fought endlessly against the separation of financing and provision,
the establishment of internal markets, and contracting. Even though the arguments in
favor of the reformnsgradually won increasing favor and support across the country, the
conflicts along the way resulted in a certain amount of backtracking.
57 PhyllisT. Potrow, K.A. Treiman, J.G. Rimon II, S.Hee Yun, B.V. Lzare, and R-C. Meyer, 1990,
"Strategies for Family Planning Information, Education, and Communication" (Baltimore, MD: School of
Hygiene and Public Health, The Johns Hopkins University).
58 Ibid., 1990
Rakwar, el al, 1997, "Decreased Incidence of Sexually Transmitted Diseases among
59 Jackson, D., J.
Trucking Company Workers in Kenya: Results of a Behavior Risk-Reduction Programme", AIDS, Vol. 11,
pp. 903-909.
38
In other cases, the adoption of a 'system wide perspective' has made use of the four
reform levers, but in a more incremental way. In Ghana, Zambia, Bangladesh and
Pakistan, the introduction of the 'new public sector management' techniques has been
complementedwith 'sector wide approaches' in donor co-financing, both of which have
involved considerable discussion and consensus building in political forums. As we shall
see in Section II, important modifications are taking place in these sector wide
approaches with respect to financing, provider payments, organization, and regulation,
but without turning the existing system on its head.
In yet other cases, more radical use is being made of the reform levers, but on a pilot or
experimental basis. These involve far-reaching changes in the way the health sector is
organized, financing is mobilized, and providers are paid, leading to extensive
collaboration between the public and private sector. As we will see in Section II, this is
taking place in countries like Egypt and the Philippines, where 'learning-by-doing' and
best practice are setting the stage for more solid advocacy of such refonns nationwide.
Part II: Country Level Examples
Reforms in Different Health Systems
We are now ready to illustrate the practice of reform in different countries where
improved reproductive health outcomes are sought as part of the reform process.
To assist our presentation, we cluster selected countries into three stereotyped health
systems in Table 3 As imperfect as this clustering and stereotyping may be, it helps us
illustrate how the reform levers might be employed to effect change (and outcomes) in
health systems with different characteristics.
Table 3: Three Stereotyped Health Systems
I II III
Generic Health Public Sector plays Mixed Public-Private roles in Strong private sector presence
System predominant role in financing & provision and reliance on market
financing & provision mechanisms
Country
Examples Ghana, Bangladesh Brazil, Egypt, So. Africa Bolivia, Chile, Philippines,
Main Reform Government led sector- Separation of public finance & Market-based competition, use
Intervention wide approach with provision and transfer of of managed care principles
newpublicsector financialrisk to different
management changes providers under contractual
agreements
RefornmLevers
Finance General revenue taxes, General revenue taxes, Out-of-pocket private payments,
donor funds, user fees earmarked social insurance private insurance & social health
funds insurance funds
Provider Salary Capitation, DRGs, Block grants Fee-for-service, capitation,
Payments to hospitals DRGs
Organization Large public provider Major governmentand Social Health maintenance
sector, small NGO & Insurance purchaser entities and organizations
private sector use of contracting
Regulation Gov't or none Gov't & some self-regulation Gov't & heavy self-regulation
PromotingHealthy Various Various Various
Behaviors
39
The first stereotyped system represents a country where government plays a dominant
role in financing and provision of health services and sees itself as largely responsible for
improving reproductive health outcomes in the country.6 0 Historically, this kind of
system is referred to as a 'Beveridge-type' system after Lord Beveridge of England, and
prevails in the historical development of Commonwealth countries. It applies to most
countries of Anglophone and Francophone Africa, as well as countries of South Asia. In
such contexts, a strong role of government and donors in financing and providing health
services tends to be advocated. This tends to be justified by the absence of a well
organized private sector, weak resource mobilization capacities, and highly politicized
public commitments to subsidize the poor. We will focus almost exclusively on GHANA
as an example to illustrate how government is using the reform levers to revitalize its
public service delivery model to achieve improved reproductive health and other health
outcomes.
The second stereotyped system represents a country where government continues to play
an important role in both health financing and provision of services, but is increasingly
recasting itself as a purchaser of health care services -- on behalf of citizens -- from
private voluntary and private-for profit providers. In these contexts, markets and private
sector capacities tend to be considerably more developed, more choice of public versus
private providers exists, and higher household incomes are more conducive to client's
ability and willingness to pay. Moreover, many countries in this category have
established social insurance funds (SHI), thus earmarking funds to cover health care of
employees in the formal sector. Such changes introduce greater autonomy in the
management of health resources by autonomous funds, and often creates powerful new
'purchasers' of services that may or may not adequately feature reproductive health
services. Private insurance companies may also be mobilizing resources for health in
such contexts, and may compete to serve clients or may offer complementary insurance
to 'top up' services provided by government or social insurance. This kind of system
prevails in many middle income countries, particularly in Latin America. We will focus
on EGYPT to illustrate how government is using the reform levers to create a new public
and private service delivery model.
The third stereotyped system is characterized by a relatively large private sector in the
sense that large shares of the population pay out-of-pocket for the health services they
receive, and a significant share of providers are Egos or not-for-profit as well as for-
profit. In many of these contexts, the philosophy that market forces and competition
should play a strong role in financing and providing health care prevails as well. On the
one hand, we will examine an NGO in Bolivia that aims to compete with MOH and
60 The strong link between government finance and government-owned health facilities can be traced back
to British influence and the formation of a 'national health service'. This kind of system-historically
called a called a 'Beveridge' system (after Lord Beveridge)-is sharply differentiated from the German
model which mobilizes funds for health through mandated social health insurance contributions (from
employers and employees) that is historically called a 'Bismark' system. An important difference between
the two systems is that public funds for health in a Beveridge-type system can be usurped and used for
other purposes (e.g., fight a war), whereas funds for health in a Bismark-type system are earmarked for
health and cannot be reallocated to other ends by political whim.
40
private-for-profit providers by providing an integrated approach to reproductive health
and other services while, at the same time, sustaining itself through cost recovery. On the
other hand, we will focus on the Philippines to illustrate how government has encouraged
private entities to pilot a new private service delivery model, making use of the principles
of managed.
At this juncture, we caution that the countries examined below should not be viewed as
controlled experiments where the reforms are solely concerned with improving
reproductivehealth. Indeed, we know of NO such countries. Rather, the health sector
reforms we will examine typically involve changes and tradeoffs in a broad constellation
of health sector inputs, processes and structures that aim to improve a broad constellation
of health sector outputs. This is quite different from a more traditional project approach
where reproductive health per se might be the target of intervention. Accordingly,
expectations need to be tempered that reproductive health alone matters in a world of
serious budget constraints, limited national capacities, and competing priorities.
Trends in Public Sector Reform
In developing countries where the public sector plays a prominent role in both the
financing and delivery of health services, governments are increasingly experimenting
with new modes of organization to improve performance. Many such countries suffer
from widespread poverty and have relatively limited private sector capacities, thus
elevating the importance of government roles in health as well as the stakes associated
with reformns.
Table 4 identifies four important trends in developing countries that have been
implementedin varying degrees during the 1980's and 90's. These include (i) new public
management changes, (ii) sector-wide perspectives, (iii) private sector development, and
(iv) cost recovery. Each trend is further described in terms of reform levers involved,
expected impacts and lessons learned regarding implementation.
In view of space limitations and our desire to illustrate reforms that benefit reproductive
health outcomes, we focus here on changes involving new public management (NPM),
combined with a sector-wide perspective in Ghana. Both practices or strategies are
largely illustrative of the organizationalreforrn lever, though we will also comment on
use of the remaining reform levers in this context as well.
New Public Management
The new public management (NPM) grew out of efforts in several OECD countries, such
as the UK and New Zealand, to 'revitalize' if not 'reinvent' practices that shape public
sector perfornance. Acknowledgingwidespread dissatisfactionwith public sector
performance, it advocates serious study of private sector practices that have proven
efficient and identification of those that might benefit the public sector as well. In a
nutshell, it aims to (i) identify business-like practices in the private sector that have
reduced costs and improved quality in the private sector and (ii) mimic or import these
practices into the public sector towards enhancing performance.
41
Thus far, general practices in the private sector that have been identified as valuable
include greater emphasis on (I) achieving measurable outcomes desired by society (i.e.,
clients, taxpayers, voters, NGOs, etc.), (ii) monitoring and evaluating progress relative to
baseline estimates, (iii) linking performance-based incentives for public sector workers
and contractors to job performance, and (iv) performance related budgeting that links
expenditures to the attainment of measurable products. Contracting is used as a key
mechanism to formalize such performance agreements, both within and between
institutions. Underlying the new public management philosophy is an explicit
acknowledgement that clients are the ultimate target and beneficiary of investments.6'
61See R. Paul Shaw, 1999, 'New Trends in Public Sector Management in Health: Applications in
Developed and Developing Countries', (Washington DC: World Bank Institute, WBI Working Papers).
42
Table 4: Selected Trends in Public Sector Reforms
Expected Impacts Experience to date

Trends Rationale Reform Levers on System suggests best results if:
Performance
New public Inadequate Organization, Efficiency, Emphasize:

management management skills Provider payments, Improved quality * Health worker
& incentives Greater motivation &
behind poor public * Decentralization responsiveness & rewards for
sector performance * hospital autonomy accountability to performance
* contracting clients * Monitoring &
* financial incentives evaluation of
outcomes
Sector wide Single strategies Financing Overall, government Emphasize:
approach and fragmented Provider payments led blueprint to * Consensus building
projects don't Organization improve health . Build capacities for
work well Regulation system performance Gov't to build the
* Multiple with sustainable process
combinations of financing * Measurable
changes indicators
Cost recovery Budget constraints Financing Financial Emphasize:
require user fees to Provider payments, sustainabilityplus * Improved quality
raise resources to * User fees better quality of * Guidelinesto
improve quality of * Prepayment services communicate user
services schemes fee policy
* Health insurance * Retention of fees at
point of collection
* Adequate audits
* Exemptions for the
______________.________ poor
Private sector Public sector can't Organization Greater value for Emphasize:
development do everything Provider payments money, quality, client * Regulation for
Regulation responsiveness, and quality
Tap efficiency of * Collaboration expanded access * Capacity of gov't
private sector * new organizational to write &
arrangements negotiate contracts
* remove legal & tax * Equity issues
barriers
* public subsidies for
private sector
development
* selective contracting
Source:Adaptedfrom presentation by Charlotte Leighton to World Bank Institute core course on 'Population,Reproductive Health
and Health Sector Reform', Oct. 5,. 1999
In developing countries like Ghana and Zambia, the motivations behind the NPM policies
are to revitalizepublic sector institutions to make them more accountable and
performance oriented in the delivery of better health and reproductive health outcomes.
In Bangladesh, motivations for reform are similar and emphasize that the delivery of
reproductivehealth services must be carried out in a cost effective, consumer-focused
and gender-sensitivemanner.
43
The primary health system performance goals that NPM reforrmsaim to improve are:
* Accountability: Making the public sector more accountable for improved health
outcomes. Making public sector employees (health managers and their employees)
more accountable by introducing personnel performance management.
* Transparency in budgeting andfinancing: Linking performance related budget
allocation to expected outcomes and assuring that performance monitoring and
evaluation is in place.
* Efficiency: Increasing emphasis on autonomy and management practices to promote
technical efficiency and value for money through competitive forces.
When applying NPM principles in developing countries, it is important to recognize that

efforts to improve the institutional capacity of government can be seriously undermined
by parallel 'systems' of planning, financing and delivering health services. This tends to
happen when donors play a major role in national health care financing and delivery, and
establish separate projects and management units to accomplish the job. One particular
mechanism that has been used to complement and support health reform goals and the
NPM approach is referred to as a Sector Wide Approach (SWAP). A SWAP is basically a
new funding arrangement involving pooled donor financing, and an explicit, agreed upon,
government-led blueprint for change. 62
In Ghana, a SWAP was initiated in 1997 and is fully complementary to the thrust of the
NPM reforms. The relationship between the new public sector management approach and
sector wide approaches in Ghana is illustrated in Figure 2.
Figure 2
Problem
Motivation for Reform
Solution: Application of Sector-wide Perspective
/ \ / ~~~SWA
PX
New Public Sector or
Management Sector-wide
Approach
62Sectorwideapproaches,or SWAPs,havearisenin responseto concernsthat verticalapproachesand

programsdo not makeefficientuse of scarcehuman,materialand financialresources.Morover,several
criticspoint out that whileverticalprogramsmayhavebeenquitesuccessfulin achievingtheir own
programmaticgoalsor outcomes,effectivenesstends to limitedin scope(for exampleto contraceptive
prevalenceor fertilitydeclines)or is overlydependenton externalassistance.
44
Ghana 6 3
Background to Reform
Ghana has experienced considerableimprovements in both overall and reproductive

health status during the past decade, and has outperformed several countries in sub-
Saharan Africa (Table 5). Nonetheless, levels of matemal and child mortality, fertility
and unmet need for contraception remain high, HIV/AIDS is a growing problem, and
overall nutritional status has not significantly improved since the early '90s.
Table 5: Comparison of Health Indicators for Ghana, Africa, and Low Income Countries
Sub-
Indicator Year Ghana Saharan
Africa
Life expectancy (years) 1993 56 51
Infant mortality rate (per 1000) 1993 66 104 (1992)
Under 5 mortality rate (per 1000) 1993 119 175 (1990)
Total fertility rate 1993 5.5 6.5
Annual rate of population growth (%) 1990-94 2.8 3.0(1990)
Maternal mortality (per 100,000 live births) 1993 742 700
(WHO estimates) 224*
Prenatal health care coverage (%) 1985-90 65 60
1993 83
Births attended by trained personnel (%) 1985-90 42 34
Children stunted (%) 1980-90 30 39
Low Birthright(°) 1985-90 11 14
1990-94 7
Access to health services(%) 1988-90 76 54
(MOH estimate) 60
DPT3 immunization coverage of 1 year olds 1991 55 61
(%) 1992-95 55
Health expernditure pe capita (US$)
- Government 1990 4.9 4.7
1995 4.1
-AID 1990 1.8 2.7
1995 1.7
- Private 1990 7.2(?) 6.5
Total
- 1990 14 14
Goverrnent health expenditure as % of 1990 1.2 1.5
GDP 1995 1.0
Sources: World Development Report 1995, 1996; Better Health in Africa; UNICEF State of the World's
Children; Ghana Ministry of Health
* National survey estimate
63Informationon reforms in Ghana have been sumiarized from the Ghana Case Study Materials, prepared
by Edna Jonas for this course.
45
The main issues faced by the health system, as identified in the Ministry of Health's
medium term strategy, are poor access and poor quality of health and reproductive
health services. Approximately, 30 percent to 40 percent of the Ghanaian population,
mostly in rural areas, do not have access to health services and utilization of publicly
provided outpatient services is quite low, at 0.35 visits per capita. Limited economic
access on the part of the poor is assumed to have particularly negative implications for
reproductive health since (1) maternity care and treatment for sexually transmitted
diseases are not exempted from fees at health facilities and (2) women have relatively
less access to financial resources than men. Numerous studies having identified the cost
of care as a major reason that the poor delay or avoid seeking appropriate care.
Ghana's health system faces major financing constraints, which have increased over
time. The government's recurrent health expenditures decreased from 14 percent to 9
percent of total government spending between 1990-95'. Government spending is less
than $5 per capita (about average for sub-Saharan Africa). Complicating the problem
limited public resources is the equity of public financing. The poorest quintile of the
population received onlyl2 percent of public expenditures on health in 1992-93, whereas
the richest quintile "captured" 33 percent of public expenditures.
In addition to government expenditures for health care, out-of-pocket health expenditures

are estimated to be about equal to government expenditures. Combined, these two
sources of financing are still less than the estimated $12 needed to finance a basic
package of health services.64
User fees at public health facilities have been introduced to help shore up revenues, but
have not been administered equitably or efficiently in the past, and cost-recovery through
patient fees continues to be a politically sensitive issue. After the introduction of user fees
in public health facilities in 1985, utilization of public facilities fell, although utilization
has since recovered. Currently, user fees finance about 10 percent of recurrent costs and
have been the major source of funds for non-wage recurrent costs at the district level. To
protect the poor, user fees have been accompanied by an exemptionpolicy and a
government-financed fund for facilities to use to compensate them for loss of revenue.
Although the public sector is the dominant provider of health services, the private sector
(both NGO and for-profit) plays a significant role in service delivery, providing
approximately 35 percent of outpatient services. Mission hospitals fill gaps for inpatient
care in rural areas and urban slums. For-profit providers, particularly clinics that target
wealthier segments of the population, are prevalent in cities in the southern part of the
country.
We have selected Ghana for closer study because it faces immense budget constraints in
its endeavor to reform deeply entrenched health system problems, government has
decided to take the lead in launching ambitious reforms, and improved reproductive
health outcomes are targeted by the reforms. How might such a country proceed, what
expectations is it reasonable to aim for?
64World Bank, 1995, Better Health in Africa, (Washington, DC)

46
The Reform Levers
Strengthening the health sector is a central focus of Ghana's development vision and is
reflected in the government's 1993 Medium Term Health Strategy. By the year 2001,
government aims to achievethe following outcomes:
* Increase life expectancy from 58 to 60 years

* Decrease infant mortality from 66/1000 live births to 50/1000
* Decrease under 5 mortality from 132/1000 live births to 100/1000
* Decrease maternal mortality from 214/100,000 live births to 100/100,000
* Decrease the annual rate of population growth from 2.8 percent to 2.75
* Decrease total fertility from 5.5 children per woman to 5.0
To achieve these outcomes, govermmenthas identified a number of health system

performance goals (i.e., instrumental goals), including:
* Improve efficiency of the public sector in delivering services,providing a basic

package of services and integration of services.
* Improve equity by increasing physical and economic access to health and
reproductive health services and providing higher quality services.
* Increase the availability offunds for service delivery, particularly at the district level
and below, and increase efficiency of collection and reimbursement through pooled
funds.
* Increase accountability, through increased transparency of funding sources and uses
and periodic review of sector budgets, plans, and government performance, user
charges and external assistance.
• Increase efficiency through pooled funding,
* Foster linkages with other sectors in order to decrease population growth and
malnutrition, increase female education, increase access to water and sanitation, and
decrease poverty.
To achieve these results, the Ghana reforrns employ several of the reform levers as
follows:
Financing
The Ghana reforms include major changes in the financing of health services. Financing
of the sector has been reorganizedand streamlined at a national level in order to increase
technical efficiencies and costs associated with multiple, parallel projects and activities,
and to better concentrate public subsidies on the funding and provision of a basic package
of reproductive health and other services. Pooled donor funding through a SWAP
mechanism is complementingand strengthening governmentresources. In this sense, the
financing lever serves improved efficiency goals -- efficiency in terms of minimizing
duplication, reducing costs, and achieving greater value for money.
47
Efforts are also in place to improve the equity of financing and resource allocation by
channeling increased resources to the primary and secondary level within districts. These
efforts include:
* deconcentration of resources from the central MOH to local Budget and Management
Centers (BMCs): Since 1995, both planning and the authority to handle budgets for
recurrent expenses have been transferred from the central MOH to certified Budget
and Management Centers (BMC). BMCs can be District Health Management Teams,
hospitals or other institutions that meet certain criteria. Currently, approximately 350
of the more than 1,000 BMCs in the country have been certified and have
responsibility to handle funds for recurrent expenses. Over time, responsibility for
global budgets will be deconcentrated to BMCs.
* improvements in the user fee and exemption system to (i) make fees more transparent
to the public, (ii) exempt vulnerable groups, (iii) build systems to regularly review
and change payment rates, and (iv) incorporate incentives for patients to use primary
care services, rather than more expensive services.
Performance related budgeting is another important feature of the Ghanaian reforms.

Funding allocations from the central MOH to the districts are now determined annually
after annual performance reviews, which assess progress at the district level toward
reaching 20 sector-wide process and output indicators. Among these, for example, are
imnmunizationand couple years of protection targets, increased access to providers of
reproductive health services, and indicators of client satisfaction.
Decentralization is a key organizational feature of Ghana's reform process. In Ghana,

decentralizationtakes the form of deconcentration of responsibility for planning and
budgeting. Reorganization of the Ministry of Health and decentralization of responsibility
to District Health Management Teams (DHMTs) began in the late 1980s.As described
above, BMCs (which include, but are not limited to DHMTs) are now responsible for
recurrent budgets and will evolve over time to have global budget responsibility. Reform
plans also call for regional plans that will no longer be separate from the national plan;
each regional office will be expected to prepare a strategy to guide the district's planning
process. Under these reforms, the role of central MOH will change. Its functions will
include policy oversight, resource allocation and financing, regulation, and advocacy,
rather than the direct provision of inputs and services.
The reform process also involves new relationships between the governrmentand non-
profit and for-profit private providers. Historically, the government provided salary
support and other operating expenses to mission hospitals that filled the gap in public
service provision in under-served areas. An important reform just getting underway in
Ghana is the introduction of performance based contracting between the government and
private not-for-profit mission hospitals. Eventually, the responsibility for these contracts
will to shift from the national level to the districts, thus resulting in a clearer separation of
public finance and provision. For example, contracts with NGOs will specify the type and
frequency of reproductive services to be provided, along with monitoring guidelines.
48
Ghana also plans to pilot new arrangementsbetween the government and private for-
profit providers. These initiatives will link payment to performance and use financing to
leverage and influence the distribution of services. Groups of private providers,
physicians and ancillary providers will be encouraged to bid on contracts for providing
reproductivehealth and other services in remote rural areas. The contracts will specify
the range of services to be provided and standards of care.
Regulation
Performnance-basedmonitoring and evaluation is not only being stressed in the

management of public agencies and institutions (like hospitals) but is being incorporated,
formally, in performance based contracts as noted above. Contracting is therefore
emerging as a more visible and powerfal tool for government-as purchaser of services
from private or NGO providers-to assure quality, timeliness, compliance with treatment
protocols, and provision of key reproductive health services.
Promoting Healthy Behaviors
The sector wide perspective in Ghana is guided by overarching development plans as

well as the government's Vision 2020, both of which identify selected social and cultural
behaviors that may be at odds with best practices in family planning, STD's/AIDS
prevention, safe motherhood, and a more wholistic, gender sensitive approach to
reproductivehealth.
Governmenthas noted widespread pro-natallist values, conservative attitudes towards

contraception, lack of information and education on responsible sexual behavior and
parenthood, and harmnfultraditional practices that can affect the reproductivehealth of
men and women, such as female genitalmutilation.
To combat these influences, national health policy and health sector reform
strategies-relevant to reproductive health-have underscored the importance of
activities to;
* promote birth spacing, breast feeding, immunization and other child survival
strategies;
* educate and motivate men to accept and practice family planning;
* create awareness of, and educate the public on the causes, consequences and
prevention of HIV/AIDS and other STDs;
* discouragementof harmful traditional practices such as female genital mutilation;
* information and counseling on responsible sexual behavior.
49
In addition, the 1994 ICPD conference, followed by the 1995 Fourth International
Women's Conference have resulted in greater advocacy for women's rights and gender
equity.65
Beyond advocacy, however, on-the-ground interventions to combat social and cultural

behaviors that are 'hostile' to better reproductive health have been limited and largely ad
hoc, with most socio-cultural interventions undertaken by NGOs and researchers. For
example, the University of Ghana-Legon has done some interesting work on sexual
behaviors, but has had difficulties in influencing and inforning government policy.66
Research has also been undertaken on cultural perceptions of family planning and
reproductivehealth interventions by the Navrongo Health Research Centre, resulting in
some small scale interventions to encourage community engagement with health workers
and targeting of male and elder opinion leaders.67Some small scale initiatives have also
been conducted by a small private practitioner, aimed at village elders about the
importance of contraception and the need to cater to pregnant women.6 8
Lessons Learned
Slowly, but incrementally, the reforns being implemented in Ghana are demonstrating
some positive, measurable results. For example, Table 6 shows progress indicators
related to reproductive health outcomes over the period 1996-98, showing gains in child
immunizations, couple years of protection, and attended deliveries.
Contraryto common expectations, little direct evidence was found of a donor-driven

policy agenda for reproductive health or for its integration but, rather, a government led
process located within the wider context of ongoing health reforms.69 Though many
bottlenecks and challenges remain as the reforn process proceeds, it is also reassuring to
note positive process indicators including:
3 Increased Transparency:Independent financial and management audits of the MOH

were conducted in 1997 and 1998, and will continue to be conducted annually.
v Pooled Funding: Pooling of donor and govemrnment resources is progressing well.
* Reproductive Health: Knowledge and support for reproductive health are high, and
Ghana introduced National Reproductive Health Service Policy and Standards in
1996. However, national service standards remain largely unimplemented.
* QualityAssurance: Quality assurance teams are functional in five of the nine regional
hospitals and partially functional in one other. Quarterly monitoring of quality
assurance indicators was carried out in several regions.
Joe Annan and Helen Dzikunu, 1998, "A Study of Barriers and Opportunities for Integration of
65 65
Reproductive Health Services in Ghana", (London: London School of Hygiene and Tropical Medicine,
Mimeographed).
66 This refers to research by J. Anarfi and K. Awusabo-Asare in the Faculty of Social Science.
67 This refers to work headed by Dr. Fred Binka and Dr. Alex Nazzar, with funding by the Population
Council, Rockefeller and Ford Foundations.
68 This refers to work by Dr. Odoi-Agyarko in the rural Upper East Region, with funding by UNFPA.
69 Ibid.
50
The path ahead will continue to be a difficult one. As Awudu Tinorgah, acting Principal
Secretary of Health in 1999 points out, the major challenges and outstanding issues are;70
* Developing capacity and motivation of staff to step up the reformnagenda.

* Need for more consensus building on desired outcomes.
* More attention needed to resolve equity issues.
* Need to increase and sustain financing.
* Importanceof building more on linkages and intersectoral collaboration.
* More concentrated efforts and progress on reproductive health indicators.
Table 6: Ghana's Achievements in Improving Reproductive Health, 1996-98
1996 1997 1998

Anti-natal care (%) 84.4 85.2 87.5
Attended deliveries (%) 37.7 40.6 40.8
Anti-natalvisits 2.5 2.5 2.0
Couple Years of Protection (000) 251.7 264.4 346.5
Couple Years of Protection (%) 6.0 7.7 9.2
DPT3 (%) 51.4 59.6 67.5
Source: Figures presented by A. Tinograh,MOH, Ghana to 1999 WorldBank Institute Core Course on
Population, Reproductive Health and Health Sector Reform, Washington
Trends in Public/Private Service Delivery Models
In developing countries where the financing and provision of health has traditionally been
dominated by the public sector, but where a significantNGO and/or private sector exists
as well, there is growing interest in tapping into the efficiencies demonstratedby private
providers of clinical and non-clinical services. This interest has been motivated by
perceptions there are some things the private sector just does better than a traditional
MOH, such as a variety of 'hoteling' functions at hospitals, including laundry services,
preparationof meals, security functions,maintaining equipment, and so on. Moreover,
the idea of collaborating with the private sector, and pursuing a strong public-private mix,
is seen as a way of freeing up MOH to pay more attention to policy formulation,using
public financing to subsidize public health goods and services, targeting subsidies to the
poor, and regulation.
The key reforrn levers in this new model involve organizational change, new provider
payments, and regulation. Most notably, it involves a 'separation' of public finance and
provision, with govermmentcontinuing responsibility for raising revenues for health, but
serving more as apurchaser of services via contracting with the private sector. This
organizationalchange has also been referred to as a 'purchaser/provider' split, as
describedpreviously in Box 1.
70 Adaptedfrom a presentation by Awudu Tinorgah, "Reproductive Health and Health Sector Reforms: The
Ghana Experience",to World Bank Institute Flagship Course on Health Sector Reform and Sustainable
Financing", Washington DC, Oct. 5, 1999.
51
The conditions alluded to above, as well as the sentiments regarding the private sector,
characterize several developing countries, such as Egypt, Brazil, South Africa, Tanzania,
Indonesia, that are currently experimenting with a purchaser/provider split. In Egypt, with
a total population of 58 million, the new model was implemented in Alexandria in 1998,
a city of 600,000, and in Menoufia, a city of 400,000. The Egyptian pilots are precursors
to nation-wide expansion assuming the pilots prove successful.
Egypt is also implementing major changes in the way they pay providers-switching
from salaries to capitation. Regulation is being tightened through licensing arrangements,
negotiated contracts, and the monitoring and evaluation of client satisfaction. The Egypt
pilot also pools tax revenues and social insurance contributions to enhance finical
sustainability of the new package of health services offered.
The motivation of the reformnsis to:
* increase utilization of services (and access)

* be more cost effective in the balance between preventive and curative services
* get more value for money
* increase client accountability
* pool resources for health in a way that better cross-subsidizes the wealthy and poor,
the healthy and sick.
Improving reproductivehealth is a major preoccupation of the Egyptian pilot insofar as

basic packages of reproductive health and other services are provided in Family Health
Units, with referrals for obstetric complications to nearby hospitals.
Egypt 71
Egypt's health system has long suffered from four major structural weaknesses. First,
while health care in Egypt is "free" to all citizens -- financed by general tax revenues and
social insurance contributions -- resources have traditionally been lamented as inadequate
to provide quality care, with glaring gaps in rural and poor areas. Total expenditures on
health per capita were in the vicinity of $20 per capita in 1995, with public expenditures
amounting to about $7 per capita and private expenditures of $13 per capita. Without
tapping private expenditures in an organized way, government has consistently fallen
behind its promises of providing wide access to a basic package of services.
Second, the delivery system is highly fragmented into many specialized programs,
leading to inefficient coordination of care, relatively weak emphasis on primary and
preventive care, and lack of unifornity in records keeping. For example, there are 29
uncoordinated government and public entities such as the Ministry of Health and
Population, the Curative Care Organization,and the Health Insurance Organization,
71Information on reforms in Egypt and Brazil has been summarized from the Egypt and Brazil Case
Studies, prepared by Susan Harmeling for this course.
52
along with numerous private, vertical programs in such areas as family planning,
immunization, and control of parasitic diseases.
Third, the fragmentedsystem of provision has given rise to relatively strong

constituencies for certain health issues, whereas other diseases and issues receive little or
no attention to funding. This has created a maldistribution of resources and a very uneven
health care system. For example, population and family planning have long been
relatively large recipients of donor funding in Egypt, but with few links to other
reproductive health services.
Fourth, as most of the private verticalized programs are donor-financed, they are
somewhat unstable, subject to collapse if donors withdraw their funding.
In addition to the above, reviews of the health system in Egypt have traditionally
lamented poor quality of governimentprovided health services, inefficiencies in the form
of low hospital occupancy rates (government owns most hospitals), and an oversupply of
poorly paid physicians, with doctors usually having positions as an MOPH physician, as
well as maintaining a private practice. In 1995, 89% of physicians held multiple jobs.
Reproductive health indicators further suggest the country has major inequalities between
different geographicaland socio-economic groups.Infant and neonatal mortality were 51
per 1,000 and 29 per 1,000 in rural areas, versus 87 per 1,000 and 42 per 1,000 in rural
areas. The infant and neonatal mortality rates were approximately three times higher
among women with no education and women who had completed secondary/higher
education. Overall, medical assistance at delivery was received by about 46 percent of
women in the mid-1990s, and about 39% had medical prenatal care. The CPR was about
48%, signifying a positive effect of vertical FP programs. Overall, the maternal mortality
rate was about 174 per 100,000 live births.
We have selectedEgypt for closer study because (i) the impetus to more away from a
narrowly construed population and family planning programs to a reproductive health
approach took place at the ICPD Conference in Cairo in 1994, and (ii) the government of
Egypt is highly motivated to translate the resolutions and rhetoric of the Cairo conference
into action. What approach has Egypt, with a per capita income of about $700 in 1995
taken; what expectations have been realized?
The Reform Levers
The overall mission of health reform in Egypt is to improve health and reproductive
health outcomes of the population by (i) making primary and preventive health care the
foundation of reform, (ii) integrating the provision of services in a system of community-
focused providers (iii) assuring universal access to a basic benefits package to all
members of the community, (iv) combining public and private health expenditures to
finance delivery of the package, and (v) create a more effective public-private partnership
in health care service provision.
53
With respect to reproductive health, the basic package of benefits includes three sets of
cost-effective services:
1. Maternal health care services, including selected safe motherhood interventions and
family planning and
2. Child health services, including integrated management of childhood illnesses (acute
respiratory illness, diarrhea, malnutrition) and immunizations
3. Adult and all age group services, including treatment of TB, and management of
sexually transmitted diseases.
In view of the government's far reaching reform goals, it has commenced with pilots in
the urban and peri-urban areas of Alexandria, with a population of 600,000, followed by
Menoufia, a medium sized urban area of about 400,000. Thesepilots are to set the stage
for nation-wide expansion over the next decade. The major reform levers in the Egyptian
reforms are organizational change, financial and provider payments.72
Financing
The most important change in the financing of care involves (i) the separation public
finance and provision of care, (ii) the creation of a Family Health Fund to purchase health
services, and (iii) the adoption of a family practice model to provide a basic benefits
package of integrated primary care services to patient rosters of 500-600 families (2,500-
3,000 individuals).
With government endorsement and support of the new Family Health Fund, financing for
services derives from:
* government tax revenues

* contributions for social health insurance (for those who pay into Egypt's Health
Insurance Organization)
* a fee to join the roster of a family practice
* co-payments for services obtained.
Out-of-pocket payments that were previously made in a haphazard way will now be
channeled into a more formal structure, namely a standard copayment and an annual
enrollment fee. While subsidies will be provided for the poor, and fee levels will be kept
low, a major concern of the Egyptians is how to sustain provision of the basic package
financially.
During the pilot, the Family Health Fund has been designed to be a purchaser of health
services on behalf of the citizens of Alexandria (or Menoufia). Its principal challenge is
to attain much higher efficiency, value for money, and quality than had been attained
under prior MOHP financed and provided health care. To this end, it enjoys a measure of
autonomy in its management, has control over earmarked revenues for health, and will be
judged on performance results.
72Design and progress of the pilot is based on reviews and presentations during the fall of 1999 by Mary
Patterson, Abt Associates, PHR project, Egypt, and Susan Harmeling, case study on Egypt, niimeo.
54
The Family Health Fund contracts with various levels of care in the "family practice
model" to provide health services to individuals and households on the roster. All public,
not-for-profit or for-profit providers of services may compete for contracts, provided they
satisfy certain accreditation criteria.
Organizational reforms stress greater integration of primary, preventive and curative care
through the family practice model's three levels of care, called the Family Health Unit
(FHU) . The first level, the "Family Health Unit" provides the first level of preventive
and curative outpatient services. Families that join the roster are initially assigned to a
unit, but they may change once a year to any unit of their choice. This responds to design
elements in the pilot that aim to be client responsive. The second level, the "Family
Health Center" is the first level of referral for basic inpatient care including safe
uncomplicated deliveries, essential obstetric care, uncomplicated neonatal services, and
severely ill children. The third level, the "District Hospital" is the second level of referral
for complicated deliveries and or/neonatal care, limited care for stabilization of diabetes
and hypertension, severely ill children, etc. Additional organizational features of the
Family Health Unite are summarized in Box 4.
Box 4: What is a FamilyHealthUnit(FHU)?
The centralorganizationalfeaturesof a FHUare:

* autonomousgrouppracticeswith a 'managementboard' comprisingan administrative
manager,as wellas physician/nurserepresentation
* 5 to 11full-timequalifieddoctors(dependingon sizeof the catchmentarea),that maybe
MOHPor privatesectorphysiciansworkingin a new healthfacility,an existingfacility,a
hospital,or in rentedor ownedbuildings
* an equalnumberof nurses(as doctors),staff for socialwork,reception,accountingand
patienteducation.
* viableeconomicentitiesto contractto providehealth servicesand businessfunctions
Provisionof Servicesby an FHUincludes:

* entitlementsby all enrolleesto a basicpackageof healthservices,includingRH
* 24 hour referralserviceby FHU doctors-who serve as gatekeepers-to FamilyHealth
Center(hospitals)
The philosophybehindthe FHU:

* a broadercompositionof healthprofessionalsin one placewill promotebetter qualityof care
thanan individualpractice
* memberdoctorsin eachpracticewill have a vestedinterestand 'joint fate' in performanceof
the overallgroupin the FHU
* patientswillbe assuredaccessto healthservices,evenif one physicianis away, sick, or on
vacation
* poolingof resources,and applicationof businesspractices,will reduceadministrativecosts
and increaseefficiency.
Note: Based on case material prepared by Susan Harmeling, World Bank Institute, 1999, and a presentation by Ahsan
Sadiq, Partnerships for Health Reform Project (USAID) to the World Bank, Washington DC, 1998
55
Provider Payments
Payment reforms combine a base salary for both doctors and nurses, with a capitation
payment to the FHU for each person on the FHU enrollment roster. To prevent the FHU
from enrolling more patients than it can accommodate, there is a cap on enrollees of
2,500 per doctor/nurse combination. The capitation payment to the FHU is then used to
give doctors and nurses incentive payments for quality. Penalties can also be levied on
doctors for over-referrals and over-prescribing. These arrangements, reviewed regularly
by the FHU 'management board' give leverage to the notion of 'joint fate' of all
professionals in an FHU, as noted in Box 4.
Reimbursement of contracts is also performance based, meaning that if agreements and

targets explicitly built into the contract are not fulfilled, payment can be reduced or
withheld. This reflects new public management practices noted earlier, with contracting
serving as a major vehicle for purchasers to specify, then monitor efficiency, quality, and
value for money. Efficiency in contracts signed by the Family Health Fund is assessed in
terms of roster size (are enough or too many people on the roster), volume of visits per
individual, timeliness of encounters with providers, referral rates, and prescription costs
per visit. Quality is assessed in terms of patient satisfaction, provider conformance with
protocols and guidelines, and overall outcome indicators.
Regulation
Regulation of this new approach is to being jointly shared by the MOHP and the Family
Health Fund, Family Health Units, and Family Health Centers (hospitals). Oversight is
also provided by the Ministry of Finance regarding past (or new) fixed investments in
government owned health infrastructure-such as approval of a new hospital.
Regulations are expected to be more enforceable in the new the new system because;
* physician groups seeking to qualify as a Family Health Unit must demonstrate to the
Family Health Fund they have meet licensing standards
* FHUs that contract with the Family Health Fund to provide services must agree to
providing a pre-determined benefit package to all enrollees, and must submit to
monitoring and evaluation of performance
* FHUs are expected to self-regulate physician and nurse performance, providing
monetary incentives for quality and penalties for over-prescribing and over-referrals.
* Client feedback, in the form of satisfaction surveys, will be used to reassess
performance of FHUs and modify behaviors as appropriate.
Promoting healthy behaviors
Promotion of healthy behaviors in the Egyptian context relies on two interventions: 1)

proactive management of rosters by the family care team, and 2) cooperation between the
health district and the family health unit to identify and manage health behaviors in the
population.
s6
The proactive management of the client registration rosters by the team includes
surveying the roster to identify clients who are eligible for preventive services such as
immunization, well-baby care, and annual physical examination. Proactive roster
management also identifies targets for secondary prevention such as individuals with
chronic disease or families with communicable diseases such as tuberculosis.
Cooperation between the family health unit and the health district means that health
promotion can be affected either by the farnily health providers or by the public health
authorities. Close cooperation between the family health unit and the district can result in
rapid dissemination of information to the client since all families are rostered and known
to a primary health care team.
The pilot sites are using both interventions to promote healthy behaviors. For example,
family health providers have identified all hypertensives and diabetics on their roster and
are proactively managing their conditions according to agreed practice guidelines to
prevent serious complications. The health district and the pilot sites have cooperated to
control several outbreaks of communicable disease among the school-age population
represented in the roster.
Lessons Learned
According to people involved in the Egyptian pilot, it was a wise decision to begin on a
pilot basis because a great deal of planning, learning-by-doing, and overcoming
resistance is involved. While there is widespread agreement that major changes in the
Egyptian health system are needed, and while policy makers and planners are rising to
the challenge, it is the deeply entrenched 'culture' of health care delivery in the country
that is most difficult to change. That culture is characterized by:
* prevailing power structures in the organization financing and provision that resist the
new purchasing agents and focus on primary health care units
* a top-down management style -- where the top spots have traditionally been
'rewarded' to physicians-that resists the new role of professionally trained
administrators and business managers.
* modes of organizing and delivering services that corresponds more to the
convenience of providers than clients
* an economic class system that resists integration of both providers and clients of
health care
* a patient orientation that favors seeing specialists and receiving drugs
* g prescriptions, rather than seeing more cost-effective providers of services at first-
referral centers.
As the Alexandria pilot only commenced in the spring of 1999, it is too early to ascertain
impacts on measurable outputs and health outcomes. However, process indicators reveal
that:
* All pilot sites are rapidly filling their client registration rosters. The first facility to
open in the Montazah district completed their roster in three months for all family
practice teams and now has a waiting list of families. Preliminary results from
57
recently completed focus groups indicate that the care model is popular with most
families, and the increased quality and responsiveness of care are recognized and
valued by all clients.
* The providers like the new care model, but they feel the current level of
reimbursement is not sufficient to support the increased productivity expectations.
Additionally, all providers are requesting additional training to enable them to handle
the new integrated delivery of health and reproductive health services more
effectively.
* More effective referral tracking is needed to assure continuity of care. The referral
system does not always capture all information on the episode of care, and there are
plans to improve both the organizational and cost information available on referrals.
* Preliminary accreditation visits have shown that the family practice model is not yet
well understood by clients. Many clients still do not understand the family practice
approach with its emphasis on primary care and 'gatekeeper roles' to assure referrals
are necessary, and want to see a specialist. More patient and community education is
needed to enhance understanding of the integrated care model.
• Further development of the concept depends on additional training, enhanced family

and community education, and careful analysis of provider payment strategies to
assure a reasonable income for providers given the increased expectations for
efficiency and effectiveness.
Trends in new Private Service Delivery Models
Reforms to improve reproductivehealth outcomes must extend beyond government

capacities to finance and provide services.NGOs and private-for-profit providers are
major players in the provision of reproductive health services as well. A large portion of
households in many developing countries-up to 70 percent in India-make out-of-
pocket payments for services that go directly to NGO or private providers. Are these
relationships and the kinds of services provided conducive to advancing the reproductive
health agenda? In addition to satisfying immediate demands of clients, are NGO and
private-for-profit providers also interested in promoting healthy behaviors, in tackling
gender-specific issues?
The prevailing motivation behind the provision of services in the private sector is to
cover all production costs, make a faire rate of return, and be responsive to client
demands. An appealing feature of private sector involvement in financing and providing
reproductive health is that efficiency and quality of services are stressed. According to
various sources, this is manifest in:
* Strong motivation to produce maximum output at minimum cost (technical

efficiency) and to allocate of resources in ways that respond to societal preferences,
as expressed by individual's willingness to pay for different services (allocative
efficiency);
58
* Strong client orientation because inadequate attention to client preferences and poor
quality will motivate clients to seek services elsewhere; and
* Motivation to spend money on research and development, as well as to communicate
availability goods and services to clients.
However, negative aspects of private sector involvement also tend to be widely

discussed, particularly those that relate to equity concerns, as well as failure of private
markets to provide public health goods and services (positive externalities);
* lack of interest in providing preventive health goods and services to those unable to
pay;
* lack of interest in private financing or provision of "public" health goods and
services, meaning those goods and services with societal benefits that extend beyond
what individuals are willing to pay for;
* motivation not to provide catastrophic insurance coverage to those who are poor, sick,
or injured and are unable or unwilling to pay relatively high risk-rated insurance
premiums;
* supply-side 'moral hazard', whereby private providers may supply more costly
services due to asymmetries of informationbetween provider and client (the
'principal-agent' problem), and therefore reap unfair profits;
* private insurance reimbursementpatterns-especially fee-for-service -- that tends to
foster cost escalation and purchase of high tech equipment
* high administrativecosts involved in competition among private insurers for
members, as well as high transaction cost (and investment of resources) in risk
selection.
The challenge facing governments where private markets are thriving is to stimulate the
capacities of private health providers to get better value for money (efficiency and quality
gains), while requiring them to adopt practices that are in the best interests of clients and
society. In the developing countries we review here-Bolivia and the Philippines-the
government or donors have played precisely this kind of nurturing role with the result
that private sector entities have become allies in increasing financing and provision of
reproductivehealth services.
In Bolivia, we examine a self-sufficient NGO provider called PROSALUD (the

Asociaci6nProtecci6n a la Salud), whereas in the Philippines we examine a Managed
Care HMO model to provide health and reproductive services to relatively low income
households. Both of these 'models' combine (i) efforts by government to guide private
entities to cater more for the needs of low income people, and (ii) innovationsin private
sectorhealth care delivery to provide highest quality care at lowest cost.
Bolivia
Bolivia has a population of about 7 million people and a GNP per capita of
approximately$500. The country has a long history of political instability, mediocre
economicperformance, and remains one of the poorest in Latin America (except for
59
Haiti). About half its population resides in urban and peri-urban areas. In recent years,
hyperinflation has been brought under control (estimates ranging up to 30,000% in 1985)
to less than 10% in 1995, and the country has experienced improved economic conditions
since market-oriented policies were introduced.
In 1993,the MOH provided services to about 43% of the population, while the private
sector-including traditional providers and private pharmacies - provided about 46% of
health services. Yet, overall, it has been estimated that only one-third of the Bolivian
population is receiving adequate medical attention, with even smaller proportions of
women receiving pre- or post-natal care.
Limited overall coverage, especially in peri-urban and rural areas, has prompted growth
of NGOs as well as the practice of nontraditional medicine. In the past, the orientation of
private for profit providers has been largely curative, providing rather limited coverage to
those willing and able to pay. The private, not-for-profit sector on the other hand was not
well organized, has relied heavily on outside (donor) funding, and has involved little
collaboration with the public sector in evolving standards, norms, priorities and practices.
The Reform Levers7 4
Reform of the Bolivian health system started in 1990 with emphasis on local govermnent,
modernization of the social sector, opportunities for private sector development, new
criteria for external aid, and new health financing mechanisms. In addition, the
government had already paved the way for an integrated approach to delivering family
planning in 1989, by deciding to incorporate family planning services into the national
mother and child health program.
It is in this context that efforts to develop PROSALUD-beginning in 1987with the help

of USAID-began to thrive. Legally, PROSALUD is a private, nonprofit Bolivian health
care organization that serves low-income and lower-middle class populations in urban
and periurban areas. Between 1990 and 1998, growth of health services offered by
PROSALUD grew fivefold from about 200,000 services in 1991 to more than a million
by 1998. By the end of 1999, it operated health facilities in nine cities throughout the
country and offered services to about 500,000 people.
Initially, PROSALUD stressed primary and preventive services, while referring clients to
external clinics and hospitals for more complicated curative care or hospital services.
Finding the referral practice unsatisfactory to many clients, PROSALUD eventually
added referral facilities to its own network. It now provides a full package of preventive
and curative health and reproductive health services at its basic clinics, its polyclinics,
and referrals to its hospital. Population and reproductive health services include:
Basic clinics:
7 USAID, 1999, "Bolivia in Country Health Profile" (United States Agency for International Development,
Latin American and the Caribbean Resources, ht:,/!www.info. usaid.gov/counitrieslbo.fbolipro.txt,
Oct.
19,1999.
74 This section borrows from Carlos J. Cuellar, William Newbrander, and Gail Price, 2000, Extending
Access to Health Care Through Public-Private Partnerships: The Prosalud Experience, (Boston, MA:
Management Sciences for Health).
60
* family planning-all reversible methods
* reproductivehealth counseling
* initial prenatal visit
* follow-up prenatal care
* deliveries
* well-baby clinical services
* immunizations
* health education
Polyclinics:
* Pediatrician and gynecologist consulting time

* Voluntary surgical contraception (in some)
* immunizations
* reproductive health counseling
* postpartum care
* health education
Hospital:
* Cesarean section and other simple surgical procedures

* Specialized laboratory services, including tests for HIV
* Voluntary surgical contracept8ion
* immunizations
* reproductivehealth counseling
* postpartum care
* health education
Financing
The management of PROSALUD aims to achieve self-sufficiency in financing, without

having to rely on external sources of donor funding clientele possible. PROSALUD
currently finances its services by a fee-for-service structure that is designed to be
competitivelypriced with private health clinics by charging fees for consultations,
laboratory tests, and drugs. The goal has been to provide high-quality services at
reasonable prices, resulting in a high volume of services. This form of payment
represents 95% of all revenues.
For those patients who are truly unable to pay for the services needed, staff of
PROSALUD collaborate to determine a patient's ability to pay. Usually this results in an
arrangementwhereby the patient pays something at the time of service and some later.
At the same time, PROSALUD cross-subsidizesthe poor with revenues received by those
61
more able and willing to pay-especially for curative services -- so as to serve the widest
possible clientele. Through this approach, roughly 10% of all the curative services
delivered by PROSALUD are provided free to indigent clients. In addition, following the
initial consultation fees, PROSALUD tries to contain costs by pricing a complete
package of services for an episode of illness rather than set prices for individual services.
PROSALUD's health network recuperates over 70% of its costs from user fees. This
represents one of the highest levels of self-sufficiency in the developing world, and a
noteworthy achievement in a country considered the second poorest in Latin Amenrca.
As a means of strengthening its financial sustainability,PROSALUD is also offering

companies a deferred payment plan that consists of enrolling company employees in their
system and billing the companies at the end of each month for the services provided. This
approach, yet to be evaluated, replaces PROSALUD's attempt to initiate a prepayment
system, which resulted in overutilization (moral hazard in insurance terminology) and
tremendously high drug costs.
Provider Payments, Incentives and Motivation
PROSALUD's doctors and specialists are paid by salary, as are medical workers
employed by the MOH. A problem with this means of payment is it contains no
incentives to work beyond regular "office hours", or at times that might be more
convenient for clients, such as evenings or weekends. Convinced that clients wanted
access to PROSALUD facilities on weekends, PROSALUD's management took the risk
of offering its doctors a considerably higher proportion of the patient revenues generated
on Saturdays than they could earn on weekdays. For PROSALUD specialists, a fee per
visit was established, with 50% of the fee going to the specialist.
These innovative payments had the effect of (i) increasing overall demand for patient
services, and (ii) motivating the physicians themselves to "bring in" additional patients to
PROSALUD. This happened because wives (and children) who might ordinarily go to
another health center were more willing to come to centers that could also provide their
husbands with care (men preferred to the facilities on weekend), and vice versa.
PROSALUD functions under autonomous management, which oversees hiring, training

and firing of personnel, purchasing and distribution of drugs and supplies, managing
community relations, overseeing the delivery of services and controlling quality, and
maintaining fiscal and financial structures. Reflecting commitments to decentralization in
the country, PROSALUD's central office is complemented by several decentralized
regional offices that manage health centers.
A fundamentalunderstanding and application of basic market principles, such as supply

and demand and the promotion of services, has been key to PROSALUD's activities.
During the planning, establishment, and management of the organization's cost-recovery
strategy, the analysis of market dynamics has consistently been utilized as a managerial
tool. The centrality of these functions to sustaining the organization of PROSALUD's
62
activities-human resources, services rendered, configuration of facilities, monitoring
and evaluation-can be appreciated in view of the reality that failure to attract clients and
provide high quality services would result in bankruptcy.
Use of basic market principles as well as rigorous application of performance-based

management-including personnel recruitment and training-has resulted in;
* PROSALUD staff have been more productive than MOH staff in terms of services
rendered;
* PROSALUD's unit costs have been lower than those of MOH clinics;
* PROSALUD facilities were more efficient in their operation than MOH facilities;
* PROSALUD's catchment population made greater use of services-nearly I visit per
person per year per PROSALUD member compared to .25 visits per year at MOH
facilities;
* Patient's perception of quality of care, as well as patient satisfaction are better than in
MOH facilities;
* Cost-recovery percentages were higher in PROSALUD facilities than in MOH
facilities.
Regulation
PROSALUD's central management office has established working relationships with

other service providers in the area, including the MOH. For example, PROSALUD's
standard package of essential, curative, and specialty services was defined using the
government's guidelines and considering local community needs. All clinics provide
preventive care and other priority public health interventions free of charge.
More important, PROSALUD self-regulates for quality, driven by its need to be

competitive, to attract clients with other choices. As part of its vision, it includes among
rights of its users, dignity, information, confidentiality, and quality.75 PROSALUD not
only attempts to abide by standards set by MOH, but has actually played a key role in
demonstrating how to achieve those standards in its facilities, and therefore setting an
example for MOH clinics.
Promoting Healthy Behaviors
Each PROSALUJDclinic is staffed with community health workers who promote

services, supply family planning, arrange for health education, and follow up with clients
to ensure that appropriate treatment has been provided. While motivated by 'good will',
the real driving force behind such promotion is it serves as a key component of
PROSALUD's marketing strategy to reach more people and win more clients.
PROSALUD staff members also collaborate with other local organizations to develop
and conduct large-scale IEC campaigns, using effective social marketing techniques to
raise the public's awareness of the importance of preventive care and thus to generate
demand for these priority services. To bolster the accessibility of services and ties with
75 El libro azul de PROSALUD" (The 'Blue Book' for PROSALUD, an employees handbook.)
63
the local community, each PROSALUD clinic also includes a conference room for public
use, as well as a community advisory committee.
Lessons Learned
Interest in replicating the PROSALUD model is growing in Bolivia and other developing
countries, based in part on successful replication in several Bolivian cities. It's experience
over more than a decade, lessons learned through trial and error, and extensive
monitoring and evaluation of performance provide a rich source of insights on what to do
and not to do-far more than can be reviewed here. Briefly, some of the more important
lessons that emerge from this experience are:
* PROSALUD devoted considerable time and energy to refining multiple dimensions

of its organization-financing, incentivizing providers, management performance,
self-regulation and monitoring, marketing strategies-in its attempt to build self-
sufficiency and sustainability.
* Assuring financial sustainability was a key, if not the key building block, to assuring
expanded access to services (through cross-subsidization), quality of services, paying
and incentivizing providers, and accommodating demands of clients. Costing and
realistic pricing of services was an essential ingredient to containing costs and living
within PROSALUD's budget envelope.
* The philosophy and practice of good marketing strategies-involving managerial

oversight of products, identification of client target groups, dissemination of
IEC-involved a great deal of learning-by-doing, but emerged as a foundation stone
of PROSALUD's organizational efficiency.
* Decentralized management to regional and clinic level, as well as close collaboration

and networking with community groups helped assure that PROSALUD's vision,
facilities and services were relevant to client needs.
Philippines
The Philippines has a population of about 74 million people and a GNP per capita of
about $2,400 (1997). The country has a strong private sector, strong societal endorsement
of market competition, and a public sector that has traditionally been plagued by
shortages of revenues for health, poorly targeted subsidies for hospital care, and weak
and ineffective local health spending on primary and reproductive health care.
Approximately 54% of personal health care in the Philippines was paid from private
sources in 1997 (including social insurance), with the remaining 39% paid by
government revenues and 7% by social insurance. Providers consist of Health
Maintenance Organizations in the larger cities, private polyclinics in the major cities,
private practitioners and their clinics mostly in urban areas, and rural health units and
clinics run by the government for out-patient primary care services.
64
The first HMO in the Philippines was established in 1978. Since then the industry has
grown to 32 large, operating HMOs, most operating on a for-profit basis, and the
remaining few run by NGOs and cooperatives. The HMO industry is entirely private
sector driven. It started without any specific govenmmentregulatory mechanism and to
date only an administrativeorder by the Department of Health regulates the operation of
HMOs.
In 1987, an Association of HMOs of the Philippines was formnedby the private sector
agents involved to unite the industry, develop standards, and benchmark norms of
business conduct. It consists of 18 HMOs that represent 95% of HMO clients. By 1997,
their number had risen to 32, they provided coverage nationwide in major population
centers, and they enrolled about 2 million or 10% of the population.
If and when the government launches a national health insurance program (as it hopes to
do), it is expected that HMOs will be contracted by government to serve as major
providers of households nationwide. However, concerns have been raised over the issue
of affordability,especially in view of current HMO practices that cater to formal sector
employers and their relatively well paid labor force.
With the above in mind, a USAID funded pilot project called Healthsaver has
collaborated with a major HMO PhilamCare to test the idea that low cost packages of
care can be successfullyprovided to lower income workers. Success in this context
means that costs to the HMO can be recovered through premiums, and that a fair rate of
return on investments can be realized. Government's primary interest in expanding this
model is not solely to reduce costs and improve efficiency-as in the US-but to increase
financial access to quality service.
PhilamCare was first established in 1982, now serves about 300,000 members, including
over 650 corporate clients, owns clinics staffed by salaried physicians, and contracts in-
patient services with mostly private tertiary hospitals. In 1996, it began to pilot three low
cost plans, aimed principally at employed males in factories and rural cooperatives.
The Reform Levers
Financing and Benefit Package7 6
Based on an assessment of unit costs, as well as market analysis of what clients were
willing and able to pay, Philamcare offered three different benefit packages to different
categories of clients. An important guiding principal in the design of each package is that
provision must be financially sustainable, otherwise bankruptcy would occur.
76 Source: Information derived from a presentationby Benito R. Reverente to the World Bank Institute Core Course on
Population, Reproductive Health and Health Sector Reform, Washington DC, Oct. 7, 1999.
65
Pearl Plan
* Targeted members: blue-collar workers, rank and file employees
* Comprehensive HMO plan-full range of reproductive health & other services
* Hospital ward room accommodation
* Maximum cap per illness- ($1,500)
* Membership fees per person per year ($50)
Healthsaver Plan
* Targeted members: low income & informal sector in Manila & Cebu
* Low cost HMO plan includes
-- primary care consultations
--MCH/F
--basic diagnostic costs
--prevention/immunizationservices
* In-patient ward bed accommodation- ($374 per individualper year)
* Membership fee per person per year ($30)
SIFI Plan (Sugar Industry Foundation)

* Targeted members: sugar plantation workers
* Limited benefit plan includes:
--consultations
-- MCH/FP
- basic diagnostic tests
- prevention & immunization services
* in-patient coverage-ward bed- (up to $375 per family per year)
* Membership fee per person per year ($11), per family per year ($27)
To be financially viable, it was initially estimated that about 5,000 individuals would
have to join each plan. As conveyed in the Pearl Plan, membership between initiation in
1995 to 1999, has now grown beyond this level and the plan remains financially viable
(Table 7). The SIFI Plan (Sugar Industry Foundation) is also showing growth in
membership, is considerably above the 5,000 level, and is nearly covering costs.
Table 7: Membership and Profiltsof Three Low Cost Plans in the Philippines
1995 1999
Members
Pearl Plan 12,400 26,100
Healthsaver Plan 875 1,220
SIFI Plan 11,900 13,900
Profit Margin
Pearl Plan (%) 4.05 1.67
Healthsaver Plan (%) 2.0 (loss) 18.8 (loss) up to 1996 only
SIFI Plan (%) na 2.4 (loss)
Source:Informationderivedfroma presentationby BenitoR. Reverenteto the WorldBank InstituteCore
Courseon Population,ReproductiveHealthand HealthSectorReforn, WashingtonDC, Oct. 7, 1999.
66
Greatest difficulty has been experienced in recruiting members and covering expenses in
the Healthsaver Plan-targeted to low income and informal sector workers in
Manila/Cebu. Philmeare has estimated the breakeven point to be 5,000 members, but
only if marketing costs are not included. With marketing costs, breakeven membership is
estimated at 17,5000
The low cost plans offered by Philamcare make use of five principles of managed care, as
summarized in Table 8. These five principles derive from 'best practice' in the evolution
of HMOs in countries like the United States, Chile, and the Philippines, and are all rather
recent. For the most part, each principle has appeal from a management and performance
viewpoint. The challenge is to get all five working together, and well, in one
organization.
* The first principle of managed care-selective provider contracting-aims to get

'best value for money' from providers and often pays providers through capitation.
* The second principle utilizes clinical protocols, case management, and cost effective
procedures to increase technical and allocative efficiency. Implementing this principle
requires a very effective health information system to track patients and procedures,
as well as access to results of evidence-based medicine.
* The third principle employs utilization management so as to reduce demands on

costly in-patient services-by stressing preventive care, relying on primary care
doctors as 'gatekeepers' and shortening the length of stay in hospitals to acceptable
medical standards.
* The fourth principle stresses integrated care of the patient and his/her family, places a
lot of emphasis on educating the patient on how best to care for their own health
status, and monitors the performance of physicians.
* Finally, quality management is a key component of managed care which relies

principally on self-regulation and quality control the by HMO itself, as well as
collaboration with independent monitoring bodies, such as NGOs, or national
accreditation systems.
Provider Payments
Philmacare, as purchaser, pays providers of services contained in the three plans by

capitation. This method of payment was found to be financially viable as the hospitals
attained a modest surplus due to greater efficiencies and cost-savings in provision, and
utilization was no higher than regular comprehensive HMO plans. Non-renewals and
drop-outs were relatively high however -up to 50% among individual enrollees, the most
common reason given being financial-with the implication that providers might not be
so inclined to accept capitated payments, in view of high drop out rates and the
possibility of smaller populations to be served. .
67
Regulation
Regulation for quality was built into provider contracts and self-regulation played a major
role through the principles and mechanisms of managed care. Only four percent of clients
expressed dissatisfaction with the quality of services.
Promotion of Healthy Behaviors
Philamcaretook a strong interest in promoting healthy behaviors among it's clients in the
interests of reducing their need for health services. Though Philamcare incurred costs to
promote healthy behaviors among it's clients, the benefits outweighed the costs in the
fonn of a healthier clientele that made fewer (expensive) demands on Philamcare
providers. In this case, the push to achieve cost-containmentwas complementarywith the
push to promote healthy preventive behaviors, resulting in a win-win situation for both
Philamcare and it's clients.
Philamcare initiatives to promote healthy behaviors include:
* Pre and post-natal care and well-baby care information, education, communication(as
part of all standard benefit packages,
* Family planning consultation and advice offered at out-patient clinics as part of the
standard benefit packages,
* Wellness seminars held at corporate client premises which focused on cessation of
smoking, nutrition, and healthy lifestyles
* One-on-one health advisories given during primary care consultations rendered by
clinic physicians,
* Cancer prevention and early detection programs, carried out from time to time,
* A quarterly health newsletter with articles dealing mainly preventive health
68
Table 8: Principles of Managed Care in an HMO
PLAYERS MAJOR GOALS PRINCIPLES OF MANAGED CARE

1 Selective Provider Contracting
* negotiated payments (more volume for better prices)

* share financial risks (capitation)
DECREASE COSTS * clarify services provided
PURCHASERS
2. Technical +Allocative Efficiency
+ * clinical protocols
* case management
* cost-effective procedures
ALIGN INCENTIVES 3. UtilizationManagement
* in-patient care (shorten length of stay)

* increased preventive care + outpatient care
PROVIDERS * primary care doctor as 'gatekeeper'
4. Integrated Care
* systems thinking
INCREASE OUTPUTS * health education, information, + communication
* management information systems on patients + performance of physicians
5. Quality Management
* National Committee on Quality Assurance (NCQA)

* client surveys
* self-regulation by HMO administrators
69
Lessons Learned
On the basis of these pilot plans, the past President of Philamcare, Dr. Benito Reverente,
concludes that low cost HMO plans are financially feasible, and that managed care is a
viable alternative for health care delivery in developing countries. The challenge facing
such endeavors lies in building up membership in the risk pool to the extent that cross-
subsidization of membership fees can cover costs of those experiencing illness or injury
as well as more expensive obstetric care, as well as generate a fair rate of return. Dr.
Reverente is now serving as an adviser to government as it looks to tap the potential of
HMOs to serve a broader clientele.
A caveat in this positive scenario is that fee-charging benefit plans that include
population and reproductive health services are likely to exclude (i) some services that
are considered too expensive or unsustainable, as well as (ii) employers/employees that
cannot afford the fees. Such exclusions tend to be singled out as incompatible with broad
public health advocacy goals to provide a complete, universally accessible package of
reproductive health services to all households. The answer to this dilemma is purported to
lie in new forms of public-private collaboration whereby the excluded services, and the
excluded households are more effectively targeted by public subsidies. This response
presumes, on the one hand, that more private sector involvement in the financing and
provision of reproductive health and other services -- as with Philamcare-will help free
up public resources for targeting to the poor, and that government will indeed reallocate
the freed up resources thus. This is precisely the spirit in which USAID collaborated with
Philamcare to launch low cost benefit packages for those willing and able to pay. The
extent to which such arrangements will jointly serve efficiency, equity, and sustainability
goals in the future remains, to date, and empirical question.
Conclusion
The Cairo Agenda poses a formidable challenge to those concerned with population and
reproductive health because it reaches far beyond the scope of narrowly managed vertical
projects to embrace entire national health systems, as well as other sectors known to have
significant impacts on health. It calls for a more comprehensive and integrated approach
to reproductive health, with the implication that all stakeholders in health-government,
NGOs, the private sector, and households - should be committed to achieving the vision.
It advocates increases in overall funding for reproductive health, with potentially major
implications for public and private financing and Ministries of Finance to re-allocate
public resources. It implies significant changes in the way in which providers are
incentivized to improve the quality of reproductive health services offered at both
primary and secondary level facilities. It advocates significant changes in the way public
and private organizations should be monitored and evaluated for their work on
reproductive health. And, it envisions the need for societal-level changes in awareness
and demand for reproductive and other health services at the household level.
How can all these priorities be effectively incorporated into the health systems of low
income countries where (i) problems of inefficiency, inequity, and poor quality, tend to
be deeply entrenched, (ii) total expenditures on health from all sources may be less than
70
$10 per capita, and (iii) government failure to provide good services often co-exists
alongside market failures in the private financing and provision of population and
reproductive health services.
To what extent, how, and how fast can such deeply entrenchedproblems be transformed
under conditions of severe budget and human resource constraints? Our answer is
'incrementally'. Big problems, such as high rates of maternal mortality, require big,
system-wide changes to resolve them.
We have argued that the first step to advancing the reproductive health agenda in contexts
of health sector reform is to identify OUTCOMES that are unsatisfactory to society, then
focus on system-widecauses that underpin them. The second step is to determine the mix
of inputs, processes and structure that would need to be in place to produce change in the
desired direction. The third step is to understand key reform levers and their scope of
influence, then put them to work to mobilize and reconfigure resources to move in the
health system in the right direction.
The good news is that the focus on outcomes and reforn levers paves the way for a much
more precise appreciation of cause and effect, where interventions in one or more areas
can be classified, monitored and evaluated more precisely. Our experience suggests that
when armed with a broader understanding of major reform options and levers, advocates
for better reproductivehealth will be far better prepared to make their case. The bad news
is that orchestratingthe reform levers requires a much broader understanding of health
systems and their determinants than are typically associated with well-managed family
planning or other reproductive health projects. Indeed, our experience suggests that NO
developing country can yet claim to have reformed their health system in a way that
exemplifies the vision of better reproductive health advocatedby Cairo. Rather, many
uneven and partial initiatives are underway, thus elevating the importance of diagnosing
the adequacy of various approaches, assessing impact, and communicating lessons
learned.
The case studies reviewed in this paper are therefore only indicative and illustrative of
new ventures into vastly complicated territory. At the very least, they provide a baseline
against which the nature of the challenges, differences of approach, and the need for more
concentrated action can be better appreciated.
7]
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An important part of the learning program is to identify sector-wide changes in health

* illustrate the application of the reforrn categories or "levers" in countries where a

Part I: Linking Reproductive Health and Health Reform I

"Reproductive health is a state of complete physical, mental and

(ICPD Programme of Action, Paragraph 7.2 )i

There is growing recognition that implementation of ICPD recommendations and the

The ICPDwasheld in Cairo,Egyptin 1994.178countrieshaveadoptedthe Programmeof Actionof the

Compared to concerns about equity, quality or accountability,many on-going health

"Reproductivehealth is also an approach. When we use the language of ICPD,

Motivations for Health Sector Reform

Health sector reform is motivated by the need to address fundamental deficiencies in

* poor quality of care,

6 An important distinction needs to be made between 1) protecting reproductive health GOALS or

A fundamental motivating factor for health reform in most developing countries is to

In the Donabedian framework, quality improvements are contingent on 'structure',

* outcome refers to changes in health status (morbidity, mortality, malnutrition, case

Limitations of focusing on structure or process aspects of quality as a way of improving

Sen,A. NIH Lecture,June 1999.

15 Dunlop and Martins, World Bank, EDI, 1995.

In quality of care termns,efficiency refers to the patient-health system interaction

A Diagnostic Approach to Using Health Sector Reform to Improve Reproductive

At this juncture, it is useful to introduce a diagnostic framework to clarify relationships

The starting point, or initial emphasis in Figure 1, is on OUTCOMES desired by society.

19NHA documents,Berman, Peter.

21 Ouruse of 'instrumentalgoals' agreeswith thinkingin WHO'snew frameworkforhealthsystem

The Five Reform Levers

Once a reproductivehealth problem/outcome and its causes have been established as a

Table 1: Reform Levers and Action Oriented Implementation Questions

Reform Lever Action Oriented, or 'How to Implement' Questions?

Scope of the Reform Levers

How might each of the five reform levers be implementedindividually or together to

Financing and Resource Allocation

* Scarcepublic resourcesfor reproductive health are often allocated in ways that

* Cost sharing arrangements are poorly designed or poorly implemented, thus

27Shaw and Griffin: 1995.

* Public health expenditures by governments and multiple donors might be better

* Government can play a more active role in stimulating public-private collaboration to

a Governmentrevenues can be complementedby other earmarked sources of funds for

Providers Payments, Incentives and Motivation

An efficient, motivated work force -- doctors, nurses, midwives and others-are

Commonly cited weaknesses that underscore the importance of provider incentives in

* Lack of incentivesfor providers to deliver good quality care: Theway in which

* Lack of accountability ofproviders to clients/users: Clients currently are not

Provider payments can be particularly important for motivating providers to behave in a

An important underlying rationale for enlisting NEW formnsof provider payments to

A more complicatedforrn of payment that is growing in popularity to motivate providers

* It is relatively simple to administer (enrolled population times per capita amount)

* It involves negotiations between the purchaser (e.g., government or insurance fund)

* Capitation is compatible with an integrated approach to reproductive health because

On the negative side, capitation requires precautions because it tends to provide

Our use of organizationalchange refers to how providers-Ministries, hospitals, health

37 JamesE. RosenandShantiR. Conly,1999,Ibid.

Commonly cited weaknesses related to organizational and institutional capacity that

Reproductive health services are poorly managed: Effective planning and

41 Wilkinson et al, 1998

* Referral systems are non-existent orfunction poorly; there is a lack of linkage

* Administration and delivery of services is inefficient: Services that are delivered or