Are Incentives Everything? Payment Mechanisms for Health Care Providers in Developing Countries

Abstract:     
Can provider payment mechanisms solve some of the key problems in developing countries' health care systems by "getting the incentives right?" Perhaps.

Reforms in developing countries' health care systems often focus on "getting the incentives right." They aim to use provider payments to optimize the use of scarce resources, transform clinical practice, and improve the quality of care. Gauri examines the extent to which provider payment mechanisms can achieve those objectives in developing countries.

Because of data limitations, selection effects, and numerous confounding variables, a body of convincing empirical research on the effects of different payment mechanisms on provider behavior in developing countries is at least several years away. For that reason Gauri has written this paper in the spirit of an essay - an effort to glean practical knowledge from the partial theoretical and empirical findings that are available.

He identifies four key problems in the health care systems of developing countries. First, public facilities, which provide most secondary and tertiary health care in most countries, offer poor-quality services. Second, providers cannot be enticed to rural and urban marginal areas, leaving large segments of the population without adequate access to health care. Third, the composition of health services offered and consumed is suboptimal. And fourth, coordination in the delivery of care -including referrals, second opinions, and teamwork - is inadequate. Gauri assesses the extent to which changes in provider payments might address each of these problems.

He concludes that identifying the best policy instruments for addressing these problems requires further research. But on the basis of existing research, he recommends the following:

• Experiments and pilot projects for improving public hospitals should focus on mission clarity and organizational simplification.

• Programs for improving the composition of utilization should experiment with payments to consumers and with medical and nursing training.

• Initiatives for attracting providers to rural areas should use explicit deferred compensation contracts to improve monitoring.

• More research should be done on developing mechanisms for increasing medically indicated professional referrals.

This paper - a product of Public Service Delivery, Development Research Group - is part of a larger effort in the group to examine incentives for service delivery. The author may be contacted at [e-mail].

Number of Pages in PDF File: 21

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