Performance-based financing: a magic bullet for health systems change?

By Josephine Borghi

For many low- and middle-income country governments it is no longer a question of whether to introduce performance-based funding but how to. This is a result of the large scale promotion and funding of performance-based schemes by a number of donors who see this as a mechanism to ensure that aid money achieves results. There is also some support for performance-based funding as a lever for systems change. However, the evidence base from low- and middle-income countries remains weak.  Personally, I need more convincing.

Performance-based funding in Cambodia

A study recently published by Matsuoka et al. provides new insights into the effect of a GAVI-funded performance-based financing system to improve maternal and child health services in one operational district of Cambodia. Based on facility service statistics, Matsuoka et al. found that the introduction of GAVI funding led to an increase in antenatal care visits (up to 4 visits) and vaccination coverage. However, as the performance payment relies on facility reports, and in the absence of independent verification of these reports, the change in service use could be driven by the simple incentive to over-report, or ‘gaming’.

What about the effects on service quality? 

Although quality of care was not explicitly measured, Matsuoka et al. indicated that system constraints had not been overcome by the scheme. Notably, midwifery capacities and knowledge remained limited, and equipment, medical supplies and drugs shortages prevailed.

Why did utilisation increase, if indeed it did?

The authors suggest that longer opening hours may be partly responsible. Greater financial autonomy and revenue resulted in health workers investing in drugs and supplies in some instances to improve facility resource availability.  The scheme was felt to strengthen relations between district and facility and improve motivation of providers, reducing the likelihood of private practice – both valuable achievements. This all sounds plausible; however, I still have a nagging doubt over whether the increase was driven by changes in reporting practices, or whether it mirrors increases that would have happened anyway.

Lessons learnt 

The paper highlights a number of important lessons for performance-based financing in low-income settings. The authors suggest that to improve quality of care, quality indicators need to be built into the performance contract. A critical question for me here is how do we measure and verify quality? The authors underline the importance of independent verification to ensure facility reporting is accurate, yet achieving this may not be so straight forward in low-income settings or without cost.

I agree with the authors that performance-based funding cannot be expected to transform the health system, and that it should, if at all, be integrated with broader health system strengthening strategies. Matsouka et al.’s findings of improved relations among facility and district staff and some increased responsiveness to population needs are encouraging. It will be interesting to see to what extent these effects are sustained. I am also curious as to whether greater financial autonomy and increased supervision would not achieve the same results, in the absence of performance contracts, at considerably lower cost.

On a final note, I would urge future evaluations to triangulate data; we really need household survey data to validate changes in service use for performance-based funding schemes that rely on facility service statistics. I also have to ask my favourite question: are these schemes cost-effective and if so, how can they be sustained by governments when donor funds run out?

Dr Josephine Borghi is Health Economics Editor of Health Policy and Planning and Senior Lecturer in Health Economics and Policy at the London School of Hygiene and Tropical Medicine.


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1 comment

  1. Robert Soeters

    I would like to congratulate the authors of the blog with the statement that in most low- and middle-income countries the question is not anymore whether to introduce PBF but how. This is true.

    Yet, I would also like to make a few suggestions for removing some of the misunderstandings presented in the HPP blog:

    1. It is incorrect to label PBF as a magic bullet. To the contrary, PBF is a health reform approach containing a definition, some 11 best practices, PBF instruments such as a standard list of output, quality and equity indicators, a business plan format, the indices management tool, a costing format and a change strategy. Therefore the statement in the blog that “I agree with the authors that performance-based funding cannot be expected to transform the health system” does not make sense in this context. Please better study the most recent propositions in PBF for example at where also the PBF course manual can be downloaded. This course was already followed by close to 800 participants mainly from Africa during one of the previous 29 courses since 2007.

    2. It is erroneous to suggest that PBF is mainly donor driven. To the contrary, today the PBF initiatives often come from low- and middle-income country stakeholders. The Rwanda and Burundi governments promoted PBF while in both countries several donors between 2002 and 2009 were skeptical. Currently, Burkina Faso and Zimbabwe governments steam ahead with PBF while several of their donors are watching at the sideline.

    3. Besides a bulk of papers and grey literature showing encouraging results of PBF there are indeed also studies that show that contracting projects has produced doubtful results. Examples are from Uganda (Ssengooba, McPake B, Palmer N), from DRC (a recent Katanga study 2011-2013) and several performance initiatives from Tanzania. Yet PBF experts will argue that these studies refer to projects that in fact were not PBF at all. PBF experts only consider a contracting initiative to be PBF when it at least scores 80% based on some 12 PBF criteria such as: the level of autonomous health facility management; the existence of competition; the separation of functions; the active involvement of the private sector; the right for health facilities to buy their essential drugs and equipment from distributors operating in competition and; the non existence of input financing by a national essential drugs monopolists.

    PBF experts therefore argue that it is incorrect to study a contracting initiative, which is not PBF, and then to assume that it was PBF. It would also be interesting to apply the standard PBF feasibility scan on the Cambodia GAVI PBF initiative mentioned in the blog.

    For those who read this blog and who are interested the feasibility scan can be downloaded from the PBF course book module 9: PBF Project Feasibility, Killing Assumptions & Advocacy (from the website mentioned above).

    4. The HPP blog seems to suggest that results might also be achieved without a contract. With all due respect but this seems weird. How would one wish to hold health facilities and health workers accountable for achieving results and pay for their performance without formalizing the desired results identified by governments in terms of outputs, quality and equity? Contract development, verification, quality assurance and coaching have indeed a cost but they can be maintained at a ceiling of approximately $0.50 per year per beneficiary. The efficiency gains of PBF more than offset those costs.

    5. A further misunderstanding in the blog is that only donors finance PBF. This is not true. In Rwanda and Burundi and also in other countries government are either financing or planning to finance PBF from their national budget lines. In fact there is no need for more money but merely a better use of existing inefficient government input budget lines such as for centrally buying essential drugs, equipment, infrastructure improvement, etc.

    Again thanks for this blog and for those interested, the PBF community will be more than happy to provide more information.


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