Contracting: Why, How, and How Much

1
Contracting Why, How, and How Much?

• Benjamin Loevinsohn and
• Emanuele Capobianco

2
Overview

• Why is it worth considering contracting?
• Cambodia
• Bangladesh
• Pakistan
• How should contracting be done?
• How much does contracting cost? Is 5 per capita
  per year for PHC myth or reality?

3
Definition of Contracting

• A financing agency (government, insurance entity
  or development partner) or purchaser
• Non-state provider (NSP, such as an NGO or
  private sector firm) or contractor,
• On basis of a contract, purchaser provides
  resources to NSP to deliver services
• in a specified location,
• with specified objectives indicators
• over a defined period.

4
Potential Advantages Why Contracting Ought to
Work

• Greater focus on measurable results
• Private sectors flexibility and better morale
• Increases managerial autonomy decentralizes
  decision making
• Allows governments to focus greater efforts on
  their unique roles
• Uses competition to increase effectiveness and
  efficiency

5
Potential Difficulties Expressed Concern

• Can not be done on a scale that matters
• More expensive, higher transaction costs
• Increases inequities, NSPs only interested in
  easy areas
• Governments cannot manage contracts well
• Creates opportunities for fraud and corruption
• Governments and NSPs cant work together
• Contracting is not sustainable

6
Results of Global Review

• 13 studies were found from a variety of countries
  and settings, all found positive results
• The most rigorously evaluated cases tended to
  display the largest effects
• In 9 studies where it was possible to compare,
  NSPs performed better than governments
• In 5 studies with controlled, before and after
  design, the median double difference ranged from
  8 to 26 percentage points

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Double Difference Example Prenatal Care
Coverage in Cambodia
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Median Double Differences (in percentage
points)
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1. The case of Cambodia

• 12 districts (100,000-180,000 popn each)
  randomly assigned to CO, CI, or GS.
• 3 districts were not contracted ? G
• Baseline household surveys carried out by 3rd
  party in 1997
• Follow-on survey carried out in mid-2001, 2.5
  years after start of the contracts and in 2003, 4
  years into the contracts

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Cambodia Coverage of Services () under 4
Contracts
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of Pregnant Women Receiving Antenatal Care
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of Deliveries Taking Place in Health Facility
13
Contracting was Pro-Poor Change in Concentration
Index
14
Change in QOC Index Endline (2003) Baseline
(1997)
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Total Per Capita Health Expenditures - 2003
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2. The case of Bangladesh Urban PHC Project

• Contract with NGOs to deliver PHC services to
  geographically defined areas
• Parts of 4 large cities divided into PAAs
• 5-7 health centers constructed per PAA
• Two PAAs given to CCC (i.e. local government) to
  run itself, while another PAA in Chittagong
  managed by an NGO
• Baseline and follow-on household health
  facility surveys carried out in 2000 2003

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Changes in Coverage of RH Services Percentage
Points
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Changes in Coverage of Child Health Services -
Points
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Quality of Care and Access Indices in Chittagong
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Comments on Urban PHC Project

• Improvements in coverage, quality of care, and
  access for the poor observed.
• NGO did better than the CCC
• NGO performed better in spite of receiving
  slightly less resources than CCC
• Already expanded to all of 6 city corporation and
  5 municipal corporations

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3. The case of PakistanManagement Contract for
BHUs

• R.Y. Khan district of Punjab 3.3 million
  population with 104 BHUs
• With support from highly placed champion a
  quasi NGO given MC to manage all the BHUs
• NGO provided same budget as the previous year
• Introduced a series of innovations, doctor covers
  3 BHUs, salary increased 150, brought in
  professional managers, small operating budget
  given to doctors.

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Outpatient visits per month in RYK and Bawalpur

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of people sick in the last month who used a BHU
household survey results
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of visits per BHU compared with the same month
of the year before 10 PRSP Managed Districts vs.
24 non-PRSP
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OPDs Per Year in 3 BHUs in Pilot Area Run by NGO
then by Government Again
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Comments on R.Y. Khan Example

• Controlled, retrospective before and after with
  data from HMIS, households and facility surveys.
• Now replicated in 40 other districts in the
  country covering more than 40 million population
• Achieved better results with the same resources
• Increased efficiency, i.e., Rs.40 per OPD visit
  compared to Rs. 60 in control district

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Posited Difficulties of Contracting

• Contracting can only be done on small scale
• many examples with tens of millions of
  beneficiaries, one now covers 40 million people!
• Contracting more expensive than government
  provision of services
• Studies in Bangladesh, Pakistan, India show
  NGOs do better job at same or lower cost

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Posited Difficulties of Contracting

• Contracting worsens inequities
• NGOs willing to work anywhere if provided
  resources direction
• If designed properly contracting can reduce
  inequities, e.g. Cambodia, Bangladesh UPHCP
• Governments cant manage contracts
• Even if they cant experience in Bangladesh,
  Guatemala shows it doesnt matter much
• Examples from Cambodia Africa show that
  governments can manage contracts with help

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Posited Difficulties of Contracting

• NGOs and Governments weary of each other
• Contracting makes for more mature relationship,
  can work together
• Contracting will be a source of corruption
• Needs constant vigilance, difficult to know how
  serious
• Involvement of neutral parties important
• May actually prevent corruption

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Posited Difficulties of Contracting

• Contracting will not be sustainable
• In all 10 examples where enough time (gt3 years)
  elapsed and where information available,
  contracting sustained expanded.
• People likely mean different things around
  sustainability
• financial sustainability
• reliance on international NGOs
• long-term role of government in health sector

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Sustainability

• Financial Contracting often lower cost. Even
  when not, reduces OOP by the poor
• 3 to 6 per capita per year
• sustainability a matter of political will!
• Reliance on International NGOs
• If you build it they will come local NGOs will
  develop
• Bid process based at least partly on cost will
  lead to replacement by local NGOs staff

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Long-Term Role of Government

• Private sector already is providing most care in
  developing countries 80 in South Asia
• In OECD countries implicit or explicit contracts
  are the norm
• Experience in other sectors like public works
  indicates governments dont have to deliver
• Less time spent on service delivery will allow
  MOHs to do a better job on their other roles

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Overview

• Why is it worth considering contracting?
• How should contracting be done?
• How much does contracting cost? Is 5 per capita
  per year for PHC myth or reality?

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The Process of Contract Design

• Dont Panic!! there are better and worse ways
  but it doesnt have to be perfect
• Perfection is enemy of the pretty good
• Theres an opportunity for real creativity and
  adaptation to local conditions

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The Contracting Cycle
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Overview

• Why is it worth considering contracting?
• How should contracting be done? What have we
  learned?
• How much does contracting cost? Is 5 per capita
  per year for PHC myth or reality?

37
Public health expenditure in Low Income
Countries (n42)

• In 15 countries total public expenditure is less
  than 5 per capita per year
• Including Pakistan, Bangladesh, DRC, Ethiopia,
  Nepal
• Assuming that 50 of public expenditure goes to
  PHC, 30 countries spend less than 5 per capita
  per year on PHC
• Assuming that 30 of public expenditure goes to
  PHC, 38 countries spend less than 5 per capita
  per year on PHC
• Including India, Nigeria, Ghana, Tanzania

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Can Reasonable PHC be Delivered for 5 per capita?

• Experience from a number of situations shows that
  this has been done already.
• In Cambodia, contracting out (4.5) and
  contracting in (3.6) achieved large improvements
  in 4 years
• Urban PHC provided in Bangladesh for 0.63
• Pakistan has improved its PHC at no cost.

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Private health expenditure in Low Income
Countries (n42)

• 70 of total health expenditure
• Mean private health expenditure is 11 per
  capita per year.
• Assuming that 50 of private health expenditure
  goes to PHC, this adds 5.5 private expenditure
  to the public health expenditure for PHC
• Assuming that 30 of private health expenditure
  goes to PHC, this adds 3.3

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Are 5 enough for PHC?

• Probably not!
• However, money alone is probably not enough to
  achieve the MDGs
• More money should be linked to approaches (like
  contracting) that guarantee efficiency gains and
  results focus