The concept of performance-based payments for funding health services is a relatively new strategy that offers financial incentives and holds great promise for improving performance of health services. This approach can be applied in both the public and private sectors and at different levels of a national health system. The use of performance-based payments for funding health services is a collaborative partnership between payers and service-providing organizations, where the payers and service providers jointly determine the key performance areas, define performance targets, and assess performance.
In many parts of the world, organizations that fund health services have not required the institutions that provide the services to guarantee their performance, in terms of impact on the health status of their clients. As a result, providers tend to focus on securing the funding to sustain their programs, rather than improving efficiency or quality of care. Public-sector payers usually fund public institutions to maintain their capacity to provide services without establishing a means to ensure that clients receive high-quality services.
Payers are responding to this problem by experimenting with financial incentives as a condition of their agreements to disburse funds. The aim is to stimulate providers to reform inefficient practices and improve performance, yielding measurable gains in public health. The concept is to provide project funding on an incentives basis, where an agreement between the payer and the service provider spells out the goals and objectives that the provider is expected to meet. The performance of the provider in meeting the agreed goals and objectives becomes the basis for releasing the next portion of funds in the project cycle.
The new performance-based approach of payers, in utilizing incentives for funding institutions that provide health care services, has been borrowed from the principal-agent theory of economics. According to this adaptation of the theory, the payer is the principal that, in the health care setting, may be a government, a donor, or an insurance company. The principal purchases services from an agent, an entity that provides health services. The principal and the agent together design a contract that rewards the agent for achieving agreed-on targets.
This approach focuses on organizations and institutions that provide health services, not on individual health service providers. The partnership or contractual relationship between payers and provider institutions is designed to fund health services in accordance with a system of financial incentives for achieving defined measures of performance. The use of performance-based payments has been shown to be effective in improving health services, particularly in areas where providers are not held accountable for their performance.
In the case of Matangol Province, a performance-based payment plan was initiated to improve health services. The plan was designed to provide financial incentives to providers for achieving specific targets, such as improving health outcomes and increasing access to health services. The results of the plan showed significant improvements in health outcomes, including a reduction in mortality rates and an increase in the number of people accessing health services.
The use of performance-based payments for funding health services offers several benefits, including improved performance, increased accountability, and better health outcomes. It also provides a framework for collaboration between payers and service providers, which can lead to more effective and efficient use of resources. However, the implementation of performance-based payments requires careful planning and design, as well as ongoing monitoring and evaluation to ensure that the desired outcomes are achieved.