An Assessment of Provider Payment Mechanisms (PPMs) in Ethiopia: Implications for Redesign of PPMs and Progress Toward Universal Health Coverage

Figures & data

Figure 1. Provider payment diagnostic and assessment framework.²⁹

Table 1. Sampling Frame.

Purchasers	Providers
Ministry of Health	Black Lion Hospital
Regional Health Bureau, Addis Ababa Region	Jinka Hospital
Regional Health Bureau, Oromiya Region	Olanciti Hospital
Jinka Zonal Health Office, Southern Nations, Nationalities, and Peoples Region	Commercial Bank of Ethiopia Clinic
Ethiopia Health Insurance Service (community-based health insurance schemes)	Police Hospital
Commercial Bank of Ethiopia (parastatal)	Ethio-Tebib Hospital
Federal Police (parastatal)	Halleluja Hospital
Midroc (parastatal)	Seka Chokorsa Hospital
Ethiopia Life and General Private insurance	Serbo Health Center
CORDAID (nongovernmental organization)	Bishoftu Private Pharmacy
Ethiopian Insurance Corporation	Bishoftu Hospital
	Beletshachew Health Center
	Koyibe Hospital
	Arada Health Center
	St. Paul Hospital
	Tarre Health Center
	Dimeka Health Center

Table 2. Questions posed to purchasers on the positive and negative consequences of PPMs.

Equity and Access	Population	Does the payment system contribute to fair and equitable distribution of resources across the population?
	Geographic	Does the payment system contribute to fair and equitable distribution of resources across geographic areas?
	Provider	Does the payment system contribute to fair and equitable distribution of resources across providers?
	Case Mix	Does the payment system contribute to fair and equitable distribution of resources across different types of cases?
Efficiency	Efficiency	Does the payment system help health facilities manage resources more efficiently?
	Over-use	Does the payment system make it beneficial or more profitable for health facilities to deliver too many services? deliver services in a costly way? Increase unnecessary referrals?
	Payment delays	Does the payment system contribute to payment delays to providers?
	Admin burden	Is the payment system administratively burdensome?
Quality	Quality	Does the payment system make it beneficial or more profitable for health facilities to provider higher quality of care?
	Primary care	Does the payment system make it beneficial or more profitable for basic care to be delivered at the primary level?
	Prevention	Does the payment system make it beneficial or more profitable for health facilities to focus on health promotion, prevention and chronic disease management?
	Responsive	Does the payment system make it beneficial to be responsive to patients?
Financial sustainability	Provider Viability	Does the payment system help health facilities stay financially viable and avoid deficits?
	Autonomy	Does the payment system help increase the autonomy of health facilities?
	Cost Containment	Does the payment system help total expenditures stay within available resources?

Figure 2. Flow of funds to public health facilities.

Table 3. Design Features and Implementation Arrangements of the Provider Payment Mechanisms in Ethiopia.

Payment System	Design Features			Implementation Arrangements
	Basis for Payment	Services	Cost Items	How payments are disbursed, used and accounted for	Caps	Surpluses and deficits
Line-item budget National implementation used by all levels of government—federal, regional, woreda levels	Historical expenditure data, input norms, input cost estimates Final budgets approved by 49-line items	Preventive services Basic primary care Outpatient consultations Diagnostic services Inpatient Medicines and supplies	Salaries and other personnel costs Medicines Supplies Administrative costs Capital investments, repairs and equipment Training	Fundsare disbursed, used and accounted for according to 49 input-based line items Recurrent budget is paid monthly in equal installments and capital budget is paid according to cash flow requests submitted to finance offices existing at respective level	Budget cap	Supplementary budget or transfer is requested for deficits Surplusesare returned to the treasury at the end of the fiscal year
Feefor Service Used nationally by the Community Based Health Insurance (CBHI). Woredas pay health facilities for services rendered within the CBHI benefit package to CBHI members.	Feeschedule is prepared by Ministry of health for Federal hospitals and University hospitals, regional health bureaus for hospitals and health centers under their administration, (council approves) there are also health facilities that prepare their own fee schedule in Southern Nations, Nationalities, and Peoples’ Region (SSNPR) For medicines health facilities can add mark up of 15%–25% on the original price No uniformity on how fees are calculated	Outpatient services, diagnostic (Laboratory, pathology and imaging, Inpatient service, Medicines	Medicines Supplies Equipment and HR (for Federal and University hospitals)	Fees are received as internal revenue from provision of health service or sale of drugs/supplies Revenue can be allocated flexibly to the line items in the provider’s budget Expenditures are accounted for by budget line items	There is no cap	Surplus internal revenue can be retained and utilized in the following fiscal year except for Federal/University hospitals
Capitation Ongoing pilots in the SNNPR, Oromiya, Amhara, and Addis Ababa regions.	Capitation is only implemented at the health center level where households were mapped/assigned to the HC’s in the woreda and payment is made to the HC based on calculated rate per household, The rate considered an analysis of utilization patterns, drug availability, audit findings, and historical data adjusted for inflation and the performance ranking of health centers operating under contract.	Preventive services Basic primary care	Medicines supplies, lab/imaging and consultation Minor surgery	Only health centers are paid with capitation and revenue can be allocated flexibly across their budget line items Payment is made to providers based on the estimated catchment/assigned population Payment is made as a calculated lump sum to health facility	It is a soft cap as over-runs due to unassigned household is allowed and deducted from assigned health facility	Health centers are able to retain surpluses by line items When deficits faced payment rate is revised by the woreda
Performance based Financing Ongoing pilot in the Oromiya region	Payment is based on the contract between the purchaser and the health service provider. Rates determined by indicators for quantity and quality of services The contract mainly contains unit cost to be paid for the services provided/indicator and also the targets to be achieved by the fiscal year The contract also indicates the payment for quality scores Payment is made based on the performance of identified and agreed indicators	Community-based health services Outpatient services, Inpatient services, Pharmaceuticals, Public health or Vertical programs, (e.g., immunization, TB services, HIV/AIDS services).	Additional payment based on achievement of a set of 25 indicators focusing on both the quantity and quality of services rendered	Payment is made based on claims submitted by providers to purchaser for services provided and verified results by the verifier entity. Payment for quality achievement is also made upon quality verification. Use of funds is based on a business plan detailing the intended use of incentive payments across specific activities	There is no cap	Health facilities can retain surplus and utilize in the next financial year upon approval of health facility board.

Table 4. Perspectives of Purchasers and Providers on Provider Payment Mechanisms used in Ethiopia.

Mechanism	Positive	Negative
Line-item budget	– Predictable budget for purchaser Usually no payment delays	– Rigid rules for using funds Insufficient resources Unused funds not retained after the fiscal year
Fee-for-service	– Providers incentivized to provide high-quality care to attract beneficiaries and increase volume of services Source of flexible funding for providers	– Cost escalation through increased volume of services and increased markup on medicines threatens financial sustainability of schemes and purchaser’s budget Payment delays Supplier-induced demand to increase their revenue Administrative burden of processing claims Unfair distribution of resources due to different fee schedules Focus on curative rather than preventive care
Capitation	– Providers paid on time (advance payment) Predictable budget for purchaser and provider Motivates provision of cost-effective services Provider autonomy to manage resources Low administrative burden	– Lack of clarity on base rate calculation Administrative burden transferred to providers Quality of care may suffer or providers may underprovide services to those who need them, to contain costs Promotes more referrals to higher levels of providers
Performance-based financing	– Financial incentive to providers Prioritizes priority and high-impact interventions Focus on quality of services Well-defined performance monitoring and verification system	– Administrative burden on providers and purchasers Expensive to implement and therefore not sustainable in the long run

Joint Learning Network (JLN). Provider payment mechanisms diagnostic and assessment guide. Washington (DC): JLN for Universal Health Coverage; 2012.

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Data availability statement

All the data are included in the manuscript and supplemental materials submitted to the journal.