Report on the Status of Provider Payment Mechanisms in Vietnam

EU HEALTH FACILITY IN VIETNAM

Report on the status of provider payment mechanisms in Vietnam

Ms Nguyen Thuy Huong, Health Financing Expert

Mr DejanOstojić, Senior Health Financing Expert

Hanoi, April 2017

Contents

List of abbreviations

Executive Summary

Introduction

Background

Analysis of provider payment mechanisms

Budgetary transfers - global budget and line item budget

Fee-For-Service

Overview of provider payment mechanisms that are not currently in use in Vietnam

Capitation

Case Based Payment

Recommendations

Budgetary transfers

Fee-for-service

Capitation

Case Based Payment

Conclusions

List of abbreviations

ALOS - Average Length of Stay

AusAID - Australian aid

CHS – Commune Health Station

DH – District Hospital

DHC – District Health Centre

DoF – Department of Finance

DoH - Department of Health

DRG – Diagnosis Related Group

EUD - European Union Delegation

EU-HF - European Union Health Facility

FFS - Fee For Service

GDP – Gross Domestic Product

GNI – Gross National Income

GP - General Practitioner

HSCSP - Health Sector Capacity Support Project

HI – Health Insurance

ICT - Information and Communication Technology

MoH - Ministry of Health

NGO – Non-Governmental Organisation

OECD – Organisationfor Economic Co-operation and Development

OOP - Out-Of-Pocket

PHC - Primary Health Care

PPC - Provincial Peoples Committee/Council

PPM - Provider Payment Mechanism

PSS – Provincial Social Security

SHA – System of Health Accounts

SHI – Social Health Insurance

THE - Total Health Expenditure

UHC - Universal Health Coverage

WHO – World Health Organisation

VND – Vietnamese Dong

VSS – Vietnam Social Security

Executive Summary

The objective of the analysis is to examine current provider payment mechanisms in place, as well as to elaborate on those that were piloted, but are not in use at the moment. Based on the results of the analysis and findings, the report will providerecommendations for provider payment system reform aiming to support the health policy objectives of the Vietnamese Government and the achievement of universal health coverage.

The application of different provider payment mechanisms (PPMs) can affect the behaviourof health care providers and significantly impact the health care outcomes. The provider payment mechanisms that will be elaborated in this report are:budgetary transfers (global budget and line item budget), fee-for-service(FFS), capitationand case-based payment.

Global budget, line item budget and fee-for-service are currently applied for reimbursement of health care providers in Vietnam, while capitation and case-based payment have been piloted, but these PPMs are not in application at the moment.

All aforementioned provider payment mechanisms could generate both, adverse and beneficial incentives for health care providers. Therefore, well designed provider payment systemas a mix of provider payment mechanisms can enable trade-offs to offset the disadvantages of any individual PPM.

The report is mainly a qualitative study supplemented by analysis of reference literature, relevant reports (national and international), legal and policy documents, including limited amount of quantitative data and indicators. The analysis is based on:

• a desk review of legal and policy documents currently in force in Vietnam, official statistics and relevant reports of the development partners;
• the meetings and workshops with key counterparts and development partners;
• the field visits to provinces; and
• the information and data collected from the officials at the Ministry of Health (MoH), Vietnam Social Security (VSS) and visited health care facilities.

Application of global budget, line item budget, FFS and capitation would be analysedin details and compared with international experiences and practices. Even though, capitation is not in use at the moment, it was piloted for more than 10 years and there is a lot of evidence and lessons learned that deserve to be elaborated in this report.

Case-based payment has been piloted for a very short period of time and in very limited number of health care facilities, thus, the results of its application that are summarized in this report could not be considered representative for the purpose of the analysis, but a brief description of the pilot results is provided as well.

For effective implementation of provider payment mechanisms the following recommendations should be considered:

• Strengthening the capacity of relevant MoH and Department of Health (DoH) departments in health financing, health economics and provider payment mechanisms.
• Provide training to Provincial Peoples Committees (PPCs) members in health financing, health economics and provider payment mechanisms, since PPCs are key decision makers with regard to financing and management of the health care at the level of province.
• Strengthening the capacity of health facilities’ managers in financing and administration, especially at grassroots level health care facilities with regard to the application of provider payment mechanisms.
• Improvement and integration of management information systems across all levels of health care.
• Strengthening the monitoring and evaluation mechanisms across all levels of health care aiming to enable evidence based decision making.

Health authorities in Vietnam need to make a shift from continuous analysis and policy dialogue with development partners to implementation of health financing reforms in order to assure financial sustainability of the health care systems and to respond to ever increasing health care needs of the population. Drafting an Action plan for implementation of Health Financing Strategy 2017-2025 would be one of the first steps needed in this regard. Defining a proper mix of provider payment mechanisms should be the second one, but some preconditions should be met, especially with regard to necessary revision of legal framework that would enable implementation of health financing reforms.

Introduction

Over the past few decades improvement in the health system of Vietnam is evident. Social health insurance (SHI) was introduced in 1993 and SHI enrolment has increased significantly since then. Overall health status of the population is improved, as well as the scope of available health services. The law on health insurance of 2008 has been amended in 2014, with the goal of achieving universal health coverage (UHC), marking an important milestone in the development of health insurance (HI). The introduction of information and communication technology (ICT) and its intensive utilization further contributes to the development of the health sector.

Nevertheless, challenges still remain. The most significant are: low quality of care, low access to health services in rural and disadvantaged areas, fragmented health care provision, limited risk pooling mechanisms, poor efficiency, high out-of-pocket (OOP) health expenditure, high proportion of expenditure on drugs in total health expenditure (THE). Due to unfavourable legal provisions related to free access to services, currently up to the provincial level of health care, brings additional uncertainty to long-term financial sustainability of the health system mainly, as well as for implementation of cost containment measuresand mechanisms.

Provider payment system is an important financial tool that can be used to influence providers’ behaviour and to incentivise the providers to improve service delivery. Every provider payment system is composed of provider payment mechanisms that determine the payment amount and structure of payment, and supporting systems (accountability mechanisms, accounting, management information system, etc.) that are needed to apply the provider payment mechanisms.

Defining and appropriate mix of provider payment mechanisms and incentives is one of the major concerns for Vietnamese health authorities at the moment. In order to deal with shortage of financial resources for maintaining basic operations of public providers, user fees were introduced in public health facilities for the first time in 1989. This marked the most significant change in the health care financing system in Vietnam. Since then, budgetary transfers (global and line item budget),and especially fee-for-service is one of the main payment mechanisms for reimbursement of health care providers, including the health services provided under social health insurance scheme.

Currently, the aforementioned three provider payment mechanisms are in place and providers receive a combination of budget transfers (global or line item budget) and fee-for service payments. Other provider payment mechanisms are piloted (capitation, case-based payment), but without any significant results that would trigger a decision for nationwide implementation.

Public healthcare providers receive government budget transfers directly from central and local level. Global budgeting is applied for health care providers exercisingthe autonomy mechanism, which grants autonomy and self-responsibility for task performance, organizational apparatus and finance to public service institutions in general, and to state health facilities in particular. Line-item budgeting is applied through budgetary transfers from central or local level for financing of non-autonomous public health facilities including preventive care providers.

Fee-for-service is the dominant payment mechanism in Vietnam. The providers are reimbursed by the social health insurance fund or through direct payment by users of health care services. FFS payments are associated with risk of service overprovision,leading to cost escalation and budget deficit, fragmentation of service delivery, and negative impact on equity in terms of accessibility to health services and financial burden for users.

There were several attempts of capitation piloting over the last decade. However, most of the pilots were reported not successful with common problem of overspending. Capitation payments are allocated to district hospitals to cover outpatient and inpatient services for registered insured patients, and costs related to referrals and self-referrals to higher levels of health care. Capitation payments are defined differently for HI groups and across provinces. This kind of capitation design had a number of challenges and difficulties, including inequities across HI groups and high financial risk for district hospitals. Since the results of piloting were not satisfactory, the European Union Delegation (EUD) in Vietnam tasked the European Union Health Facility (EU-HF) to perform the assessment of the revised capitation model approved by the Decision 5380 and to prepare an assessment report with recommendations and a capitation road map for the years 2016 and 2017. Based on the assessment’s results, the EU-HF experts advised the Ministry of Health to develop a weighted capitation model based on the age groups and to introduce new simple methodology for calculation of a total capitation fund, a capitation base rate and a capitation budget (allocation capitation fund). After intensive and long consultation the MoH decided to develop capitation model and draft the Circular that is not fully in line with the EU-HF proposal. The draft circular considers some points proposed by the EU-HF: To cover only outpatient services, to apply weighted capitation model, and to impose application of capitation as compulsory. The MoH Circular on capitation is still under development.

The case-based payment method applying clinical pathways was piloted within the framework of the AusAID funded project from 1/12/2009 to 31/12/2011 and the Health Human Resources Sector Development Program from 2010-2013. The experiences, lessons learned and the results of the piloting will be briefly elaborated in the report.

Well-designed provider payment system is critical to Vietnam’s movement towards UHC and must be designed in such a way to enable the most value for the limited resources available, good quality of care, timely provision of services, and appropriate referrals across the continuum of care.Having this in mind, moving from predominantly used FFS payment mechanism is urgently needed in order to achieve cost containment and improve the performance of health service delivery. In order to address these challenges, the Vietnamese Health Financing Strategy 2017-2025 recommends various policy options, including introduction of proper provider payment system in the health sector and application of provider payment mechanisms that have a potential to contribute to cost containment, efficiency and quality improvements.

Background

Competing priorities make decision making very hard, and political dynamics often have a bigger role in determining the answers than evidence-based evaluations of value for money. Policymakers and political leaders face tough choices and trade-offs when considering where to allocate the limited resources at their disposal to achieve the health policy goals. The design of a provider payment system can significantly influence the achievement of health policy goals. In various policy and strategy documents the Vietnamese government defined the following health policy goals:[1][2]

• Universal health coverage - ensure that everyone (the poor, the minorities, people in disadvantaged or remote areas, bordering areas or islands and highly susceptible people) can access high-quality basic health care services;
• Strengthening the grassroots health care delivery;
• Development of the health care system;
• Equity/fairness;
• Innovate the operational and financial mechanism of health agencies in order to adapt to the socialist-oriented market economy institutions in the health sector’s activities;
• Efficiency and effectives;
• Continuity of health care;
• Improvement of health management information systems.

Achievement of universal health coverage is one of the top priorities and according to the Roadmap towards HI Universal Coverage for the period of 2012-2015 and by 2020, the key general objectives are:

• expanding the health insurance coverage in terms of the percentage of the population participating in health insurance and the scope of health services the insured can benefit from;

• reduction of the ratio of out-of-pocket payments for health services;

• guaranteeing the benefits of the insured;

• proceeding to universal health insurance, contributing to creation of stable financial sources for the people’s health care toward fairness, efficiency, quality and sustainable development.

Provider payment mechanisms can be powerful tools to set incentives that can promote the development of health systems and achieve health policy objectives. Therefore, provider payment mechanisms should accomplish far more than simply the transfer of funds to cover the costs of services. Application of different provider payment mechanisms can generate different incentives for efficiency, quality, and utilization of health care services, and changes in provider payment mechanisms can cause rearrangements in health care provision. These changes are particularly important where public and private providers coexist and interact.

The network of health care facilitiesin Vietnam is dominated by public health care providers with an evident increase in number of private health care providers in recent years. The health care facilities are established at four administrative levels: central, provincial, district and commune. In total, there are 13.725 health care facilities, out of which 48 at central level, 458 at provincial level, 1.191 at district level and 11.101 at commune level, including 169 private hospitals across different administrative levels.[3]

Key health indicators have been improved. Life expectancy at birth has increased from 71.3 years in 2006 to 73.2 years in 2014; the infant mortality rate was reduced from 36.7‰ in 2000 to 14.9 ‰ in 2014; under 5 mortality decreased from 42‰ in 2000 to 22.4‰ in 2014.[4]

The system of health accounts is a useful tool to systematically describe the flow of financial resources relating to use and consumption of health goods and services across the country. Basic national health accounts indicators provided in the National Health Accounts Report 2013 will be presented in full in order to give complete information for reference and use, while only some of the most relevant indicators for the reporting purposes would be analysed and elaborated in detail.

According to National Health Accounts Report(SHA 2011 framework) in 2013 total health expenditure from all sources was 211.966 billion VND ($10.314 million), out of which 197.104 billion VND for recurrent expenditure and 14.860 billion VND for capital expenditure. Recurrent health expenditure approximate to 93% and capital expenditure was around 7%(Table 1). Public health care facilities accounted for the largest share of THE (64,8%) with private health care facilities accounting for the reminder (35,2%).[5]

THE as a percentage of GDP is relatively stable since 2008 (6%) - Vietnam spent the same percentage of its GDP on health in 2013 (6%). In comparison to other countries in the region Vietnam has the second highest spending on health as a percentage of GDP. Despite constant growth of THE in recent years, the level of spending per capita is still relatively low. It has increased from 1.962 VND ($94) in 2011 to 2.363 VND ($113) in 2013.[6]

For the current 2017 fiscal year, low-income economies are defined as those with a GNI per capita, calculated using the World Bank Atlas method, of $1.025 or less in 2015; lower middle-income economies are those with a GNI per capita between $1.026 and $4.035; upper middle-income economies are those with a GNI per capita between $4.036 and $12.475; high-income economies are those with a GNI per capita of $12.476 or more.[7]

Table 1.Key National Health Accounts indicators

Health Account Indicators / 2010 / 2011 / Estimate 2012 / 2013
Total expenditures and by expenditures by category
1 / Total health expenditure / 137.256 / 172.398 / 201.954 / 211.966
2 / Recurrent expenditure (bilion VND) / 125.403 / 158.988 / 189.612 / 197.105
3 / Capital health expenditure (billion VND) / 11.853 / 13.410 / 12.341 / 14.860
4 / General government expenditure (billion VND) / 63.893 / 77.976 / 87.569 / 74.233
5 / Household expenditure / 61.541 / 78.571 / 83.091 / 93.799
6 / Social security funds (Public health insurance fund) (billion VND) / 34.973 / 48.616 / 44.895 / 40.223
7 / Non-profit institutions serving households (e.g: NGOs) (billion VND) / 11.822 / 15.851 / 2.972 / 3.440
Expenditures per capita
8 / Total expenditure on health/capital (million VND) / 1,58 / 1,96 / 2,15 / 2,36
9 / Total expenditure on health/capital at exchange rate (US dollars) / 83 / 93 / 109,23 / 113
Percentages
10 / Total health expenditure (THE) % Gross domestic product (GDP) / 6,36 / 6,20 / 6,22 / 6,00
11 / General government expenditure on health (GGHE) as % of THE / 43,70 / 42,95 / 53,88 / 42,00
12 / Social security funds as % of THE / 55 / 66 / 45 / 45
13 / Private expenditure on health (PvtHE) as % of THE / 53,44 / 54,77 / 44,47 / 56,20
14 / Household expenditure as % of THE / 44,84 / 45,57 / 41,14 / 44,30
15 / Household expenditure as % of PvtHE / 83,90 / 83,20 / 85,96 / 78,75
16 / External resources health expenditure as % of THE / 2,85 / 2,28 / 1,65 / 1,80
17 / Capital expenditure % total health expenditure / 8,64 / 7,78 / 6,11 / 7,01
18 / Total expenditure on curative health % total health expenditure / 53,23 / 55,00 / 49,70 / 68,35
19 / Total expenditure on drugs and medical supplies % total health expenditure / 14,59 / 19,92 / 20,69 / 17,82
Source: Vietnam 2013 health accounts reports, MoH

Due to stable and constant economic growth in recent years, Vietnam has been shifted from World Bank Operational Lending category I[8] to category II[9] in 2011, and from category II to category III[10] in 2013.[11] This has trigged the decrease of donor funding and currently health care is predominantly funded from domestic sources. As shown in Figure 1, with regard to THE (recurrent and capital), health sector in Vietnam is funded by two main sources: households (44,3%) and government (42%).[12] However this information does not show how much of households’ contribution to health is managed through out-of-pocket payments or through pooling mechanisms such as social health insurance or private health insurance. Households expenditure on health through OOP accounted for 38,73%[13] of THE in 2013, which is still relatively high and negatively affectsequity.