Strengthening Performance? Piloting Results-Based Financing in a Central Medical Store

The grand debate on the central medical store (CMS) role in developing countries’ public health supply chains is ongoing. There are generally two sides to this debate:

Pro-CMS Model

Supporters argue for the CMS as the organizer and responsible entity for national-level essential supply chain functions. These functions include but are not limited to —

  • procurement and temporary storage
  • distribution of public-sector health commodities and supplies to the second level of the supply chain
  • in some countries, delivery of health commodities directly to health facilities.

CMS-model proponents argue that these important functions are often unattractive to other parties—e.g., the private sector—because they do not offer enough incentive; delivery of a carton or two of medical supplies to a remote health post a few times a year doesn’t provide sufficient financial reward. CMS, advocates say, offers real value to the health system by subsidizing distribution and other services for the most vulnerable populations, i.e., clients who would not otherwise be served. Moreover, proponents argue that because of economies of scale and more stringent controls, a CMS can procure good-quality medicines and medical supplies at a lower cost than private distributors.

Con-CMS Model

Opponents point to the historical failures of the CMS model, examples of which are all too common. Despite substantial investment in technical assistance to CMS’ across the globe, they note, many CMSs have failed to execute their basic supply chain functions effectively.

Whether or not the fault actually resided within the CMS, country governments, development partners, and technical assistance providers have often labeled the CMS as the primary supply chain improvement bottleneck. CMS leadership change, a frequently suggested solution, has had little effect on the organization’s overall performance. Opponents argue therefore, that in-country public health supply chain operations must be restructured to exclude the CMS or at least reduce its overall footprint and level of responsibilities. Some opponents, hoping to stimulate change within the CMS, have positioned independent, private, or nongovernmental entities to offer direct competition to the CMS in the hope that this will stimulate changes within the CMS.

Results of these alternative models, which have generally been tried on a temporary basis, have been mixed. In some instances, sidelining the CMS has led to a lack of local technical expertise to take over these supply chain roles once the donor-funded alternative ends.

So what might be done next? Starting with the proponent “camp,” let’s look at a variation-on-the-theme to add more fuel to the debate.

Piloting Results-Based Financing in a CMS

In 2012, the USAID Mission in Mozambique decided to carry out an innovative experiment with the CMS (Central de Medicamentos e Artigos Médicos, or CMAM) in Mozambique. CMAM is responsible for procuring, warehousing, and distributing medicines and health supplies for the public-sector supply chain, and they receive significant U.S. Government support for both health commodities and technical assistance. In January 2013, USAID entered into a one-year government-to-government agreement that conditioned disbursement of USAID funds on achievement of specific results by CMAM. In particular, CMAM could receive up to $125,000 per quarter for achieving performance targets that improve five indicators related to planning, distribution, and warehouse management.

The program’s goals were to—

  • encourage innovation, collaboration, and hard work
  • reduce cycle times
  • improve stock storage and management.

The design of this results-based financing (RBF) scheme required a series of meetings between CMAM, USAID/Mozambique, and technical experts on RBF and supply chain management. The USAID | DELIVER PROJECT and Health Systems 2020—predecessor to the Health Finance and Governance Project—jointly provided technical assistance in the early design stages. USAID’s agreement with CMAM, a fixed-amount reimbursement agreement (FARA), enabled CMAM to decide how best to use FARA funds to achieve the required targets. At the end of each quarter, CMAM produced reports on these indicators, which a team from USAID then verified. USAID/Mozambique selected indicators in areas where change had previously been difficult to achieve and for which baseline data could be collected. Indicators had to be in areas under CMAM’s control and where measurable targets could be set and potentially achieved during the time period of the agreement (one year).

So what was learned from this program? The results indicate a gradual improvement in all performance indicators included in the RBF scheme. For instance, the number of days from receipt of orders to delivery to provincial clients dropped from 40 days at baseline to about 30 days or fewer by the third quarter. Also, the time for developing a distribution plan was cut in half, from about 27 days at baseline to 15 days or fewer. There were also significant improvements to inventory record accuracy and in “picking and packing” of orders.

In March 2014, USAID/Mozambique, through the USAID | DELIVER PROJECT and the Health Financing and Governance project, conducted a qualitative review to learn the reasons for the CMAM performance improvements. The results of Year 1 of this RBF scheme are detailed in a report that you can read here.

In summary, the review found that the strong performance by CMAM was a result of a number of improvements in the implementation of routine tasks. The performance incentives offered by USAID /Mozambique led to process changes including—

  • double-checking of packing lists
  • implementation of previously overlooked standard operating procedures (SOPs)
  • creation of a new unit for monitoring and evaluation
  • voluntary increases in working hours
  • enhanced team work.

Also, CMAM elected to use some of the reimbursement payments from the FARA to invest in new equipment (such as the purchase of new computers to improve collaboration with program staff), and to common-area furniture to boost staff morale.

A number of important points need to be made about this trial program. First, it is important to acknowledge the high level of innovation of USAID/Mozambique. To the best of our knowledge, this is the first and so far only RBF scheme specifically targeting performance improvement at a public health central medical store in any developing country. Although RBF schemes are increasingly being implemented to improve the quality and access to health services in developing countries, there is scant evidence on their application in the public health supply chain setting. Mozambique provides the earliest evidence of the potential effectiveness of this approach and positions the Mission as a trailblazer in this area.

Secondly, we should not miss the strong response of CMAM to the RBF incentive scheme, which reinforced a culture of performance improvement at CMAM. The availability of financial incentives prompted top and middle management to devise and implement ways to manage several longstanding challenges that the institution was having with both internal and external stakeholders. Key informants spoke of changes in teamwork dynamics, adherence to processes, and use of tools. Staff repeatedly mentioned staying late and coming in on weekends to make sure tasks and reports were completed. Staff also recounted increased collaboration and coordination within and among teams and described more proactivity in seeking data that was not forthcoming; e.g., reminding provinces to send requisitions on time and encouraging the programs to complete reports before deadline.

Where do we fall in the CMS debate?

Finally, here are our “two cents” for this debate. It is important to constantly question the usefulness and long-term effectiveness of technical support provided to build the capacity of a CMS. Public health supply chains exist in constantly evolving political and sociocultural environments that often affect CMS events. Therefore, any targeted supply chain improvements must be firmly anchored in broader efforts to strengthen the entire health system. The promising results of this RBF scheme at CMAM should lead us to investigate whether the capacity-building approach of technical assistance for CMS is flawed:

  • Are we addressing the right questions at the CMS?
  • Are we expecting transformational change overnight or incremental improvement over time?

In some instances, it may make sense to abandon the CMS model. However, it is time for a business case for innovations that have been successful, and USAID/Mozambique’s RBF example is an excellent starting point.

We suggest that—

  • development partners and technical experts revisit current CMS improvement approaches and consider whether they fit into the dynamic supply chain environment
  • stakeholders use approaches, such as RBF, that place the CMS at the forefront in choosing which interventions offer the best value for the achievement of their strategic objectives and execution of mandates
  • technical assistance interventions be packaged and delivered with direct links to individual and institutional performance-improvement objectives.

After all, warehouses and SOPs don’t run a supply chain. People do.

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