Four Performance-based Financing Lessons Public Health Supply Chain Managers Can Learn from the Commercial Sector

 Public health specialists in developing nations are urgently seeking innovative ways to stretch resources to provide more results. Performance-based financing (PBF) has gained prominence as a possible solution because of its emphasis on paying for results rather than inputs. The basis of PBF is that cash or non-monetary benefits are offered in return for measurable actions or the achievement of a defined target.

You may know about PBF in the health service delivery context. For instance, doctors and nurses may be rewarded, if fewer patients acquire infections during a hospital stay. However, PBF interventions can also be used to improve public health supply chains in developing countries. For instance, staff at a central medical store can be rewarded for using a computerized logistics system correctly and for increasing their productivity. By linking a supply chain worker’s performance with rewards, PBF may be able to reduce bottlenecks along the supply chain, reduce stockouts, and improve commodity availability.

Over the last two years, the USAID | DELIVER PROJECT has explored the possibility of using PBF interventions in this context. We began by surveying examples of PBF applications in commercial sector supply chains. We asked ourselves: What are the commercial supply chain PBF programs doing successfully? What are the commercial sector programs’ motives, and how has PBF been used to help this sector meet its goals? We then organized a brainstorming meeting of relevant experts: supply chain specialists from the commercial sector, public health supply chain professionals, and academics with a special interest in public health supply chains. We learned a lot. Four of our lessons from this process are described below and are delineated further in this technical brief.

  1. Strong health information and reporting systems are prerequisites for success.
    A PBF plan should be based on valid and reliable supply chain data. Before you implement a public health supply chain PBF program, make sure that your health information and reporting systems are yielding quality data. Also, include logistics information reporting indicators in the PBF plan.
  2. All parties involved in the supply chain must understand the PBF plans and incentives.
    Performance metrics should be clearly defined and made available to all parties, through published reports, for instance.
  3. PBF Programs must be flexible.
    All actors along a public health supply chain must have the ability to make changes to respond to their specific incentives.  Actors must be empowered to make decisions and adjustments necessary to achieve the targets set for them in the PBF plan.
  4. Review performance goals periodically and make adjustments.
    Rolling out the PBF plan is not the end. PBF scheme managers should continually monitor progress to ensure that goals are being met in a timely manner.

Our review of commercial-sector interventions suggests that PBF schemes can accelerate improvement in public health supply chain performance. Here is a call to action: Public health managers in developing countries should examine their supply chains for opportunities to improve performance through PBF interventions.

The traditional model of payment in supply chain systems is to pay for inputs such as medicines, human resources, infrastructure, and IT. New models could include payment for the performance of the central medical stores, subnational depots, and service delivery points. National and regional stores could be paid for their performance on such key logistics indicators as warehouse management, timely distribution of commodities, and effective planning. At the service delivery point level, supply chain performance could be rewarded in addition to quality of health services. Seven country examples of applying PBF in the public sector can be found in this technical update.

Now, you may be wondering how such PBF programs should be designed.
A good place to start is in this Supply Chain Options Guide

Also see this Technical Brief Commercial Sector Performance-based Financing Offers Lessons for Public Health Supply Chains in Developing Countries

And this Technical Update

Performance-based Financing: Examples from Public Health Supply Chains in Developing Countries

Have further questions about using commercial sector PBF schemes for public health supply chains? Ask me!


**This post was originally published by The World Bank’s blog, Results Based Financing for Health, on February 20, 2013

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