Let managers manage: a health service provider’s perspective on public financial management

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Today more than ever, there is wide consensus that public, compulsory funds are key to achieving universal health coverage (UHC). The recent reforms by countries to finance UHC have renewed an interest in public financial management (PFM). While the path to UHC will be determined by decisions about how to allocate and use these funds in the health sector, the content and focus of the required PFM reforms, particularly from a health service provider perspective, remain unclear.

In low and middle-income countries (LMICs), PFM reforms often consist of a standard set of interventions  to strengthen the overall strategic allocation and accountability of public funds. They are often not sufficiently customised or responsive enough to specific country contexts, sector needs or inadvertently inhibit the reform process.

If PFM systems are meant to support financial accountability through transparency and an overall good and efficient use of resources, they can – or should – simultaneously enable adequate delivery of services and create an enabling environment for effective funding. Yet, these links are not always thought through enough in advance during the design and implementation of PFM reforms.

To address this gap, we - a group of professionals working for various international agencies at the nexus between PFM and health policy and management – want  to bring a health service provider lens to the PFM discussion[1]Recognising that the quality and effectiveness of health service provision is closely related to how providers receive and are able to use financial resources, our goal is to  promote a design and implementation of  PFM reforms that  reflect the role and needs of front-line service providers.

The following PFM-related challenges need to be addressed:

  1. Adequate planning of and access to funds: providers are often not involved in the planning and budgeting of expenditures, which are historically determined and managed by higher levels – such as district, provincial or central levels, and often transferred in-kind to front-line facilities. This lack of spending authority and access to funds severely impede the ability of facility managers to take responsibility for providing responsive service delivery to users.
     
  2. Timely release and use of fundseven when countries have moved toward output-oriented frameworks and mechanisms, funds often continue to be released by inputs to providers. As a result, the autonomy of providers in determining the best mix of inputs to deliver priority service outputs is limited.  Similarly, rigid PFM rules, such as the inability to have carryovers from one fiscal year to the next, constrain their capacity to effectively manage funds in a more rational manner.
     
  3. Misaligned reporting systems: new financial management procedures and information systems are only introduced once they have been centrally adopted. Poorly developed and fragmented reporting systems hinder the consolidation with national finances and limits the impact that PFM reforms would otherwise have on transparency and accountability.

To increase the capacity and flexibility of health service providers to plan, use and report funds, enhanced dialogue and action involving ministries of health, finance and sub-national authorities is needed.This dialogue can be based on the following three guiding principles:

  1. Revising the status and functioning of health service providers: this implies recognising health service providers as “spending entities” with greater financial and managerial autonomy. Typically, this entails have a bank account and some degree of spending authority over the revenues received, as well as having an accountability system that ensures funds are adequately spent. 
     
  2. Introducing greater flexibility in expenditure management for providers: this implies softening rigidities attached to input-based appropriations, especially when funds are released to health service providers. National level reforms should also include a re-thinking of the way providers are managed and paid; more flexibility at sub-national levels or with purchasing entities would facilitate a comprehensive and more efficient management of all costs related to health service delivery.
     
  3. Strengthening service providers’ financial management capacities: This is directly linked to the first two principles and will allow health service provider’s capacities to better plan and budget; receive; spend; account for; and report funds. While capacity building is critical, building confidence in facility managers would contribute to their empowerment. We believe that service providers entrusted with greater capacity and autonomy would likely perform better.

Approaching PFM from the perspective of health providers that deliver services to their citizens and communities allows stronger and more coordinated dialogue between the health sector and public finance reform specialists. Additionally, improving communications  between health and PFM specialists could lead to re-thinking the reform agenda, while finding a  balance between control and autonomy for providers to “buy the right thing” could result in  improved sector performance without a loss in financial performance.

 

[1] The Group is composed of: Hélène Barroy (lead), Elina Dale & Grace Kabaniha from the World Health Organization, Moritz Piatti from the World Bank Group, Fabrice Sergent from the African Development Bank, Sheila O’Dougherty& Gemini Mtei from Abt Associates and Jason Lakin from International Budget Partnership. Valuable comments and inputs were provided by Mark Blecher (National Treasury, South Africa), Paolo de Renzio (International Budget Partnership), Joseph Kutzin (World Health Organization) and Magnus Lindelow (World Bank Group).

Authors

Helene Barroy

Senior Health Finance Specialist, World Health Organization

Fabrice Sergent

Chief Health Analyst, African Development Bank

Elina Dale

Technical Officer, World Health Organization

Sheila O’Dougherty

Abt Associates Vice President/USAID Tanzania PS3 Project Deputy Chief of Party

Gemini Mtei

Finance Team Lead, Tanzania USAID/Abt Associates

Dr. Grace Kabaniha

Regional Advisor, World Health Organization AFR

Jason Lakin

Head of Research, International Budget Partnership

Join the Conversation

Dr. Ali Salim Ali
September 18, 2019

Even at health facility levels Health Care Providers more often are not involved in budget development and management. There is convulsions between Reccurent and Development budget. Usually recurrent budget used for development such as buying equipment etc.

Moritz Piatti
October 07, 2019

Thanks Dr Ali Salim, a very thoughtful point.
Hopefully PFM mechanisms can be found that allow providers to focus on their work: the provision of quality care. PFM should be a support function and empower them to do their work and make funds available in a timely manner without loss of accountability.

Toomas Palu
October 09, 2019

We need to acknowledge that increasingly, front line providers receive their financing from multiple sources, including the budget, user fees, health insurance or other demand side financing source based on performance, and development assistance. How the use, account and report on funds needs PFM guidelines. Too often PFM discussion only concerns the government budget resources.

Andrew Keith
February 10, 2020

I think this kind of discussion is really important. The perspective of health facility managers is of course critical in these discussions and in planning financial management systems. It is also very interesting that such a broad group of donor and international advocacy and contractor organisations have joined forces to make this plea. I think kudos to you all for putting your own and your organisations' reputations on the line around a common message.

Unfortunately, while I am pleased that the topic of public financial management in the health sector, is being discussed, the issues and solutions are considerably more complex than are presented here. Let me also say that It is a pity that the voice of health 'providers' (which I take to mean managers and staff of health facilities) is not present in this call for the voice of providers to be heard. The article also displays a familiar misapprehension held by advocates and contractors in the health sector that PFM is really just budgeting and accounting. This is unhelpfully simplistic, and raises unfulfillable expectations among managers.

let me just state at the outset. I don't wish to denigrate health or finance professionals in developing countries. I have spent the better part of 30 years working with those people in various capacities and have found them to be some of the most dedicated, insightful and inspiring people I know. Similarly, I have worked with and for many of the organisations represented by the signatories to this article, and have the greatest respect and admiration for much of what many of them do. We are definitely on the same team, and I hope the comments that follow can spark a reasoned and fruitful discussion about the future of health care in developing countries and the role of PFM in that future.

I do agree that spending units should have a stronger voice in the strategic and operational financial planning of health services, and that greater autonomy and accountability for those running front-line services is a good thing. It is indeed a mark of all high functioning delivery systems. That is true for all countries from the most advanced and richest western countries to the poorest, least sophisticated, in Africa.

I am sure you all would agree that weak technical and managerial capacity, poor compliance, and a lack of management discipline are some of the defining characteristics of developing economies. In fact those factors require constant vigilance in all countries and are the reason that PFM exists as a professional discipline. A recent study on the implementation of strategic purchasing projects in several European countries found that in many cases, diligent planning and administrative efficiency gave way to pragmatism and an ad hoc approach that resulted in, at best, mixed results (https://www.ncbi.nlm.nih.gov/pubmed/29502893). The most important lesson for developing countries is that if systems that can rely on the the most sophisticated staff, systems and procedures, are unable to successfully implement complex adaptations of what might be called standard practice, what chance do they have?

Tight fiscal control and flexible or 'adaptive' financial management are much desired in every organisational setting. As a trained auditor, I can confirm that even with European or US levels of accountability, transparency and sophisticated management, the general rule is that systems and procedures break down with alarming frequency. Managers, make decisions well beyond their authority level, and bored, poorly trained and unmotivated staff make regular basic errors. Without highly skilled oversight in the shape of internal and external audits, and multiple in-built safety nets (layers of very expensive technical and quantitative review) many western based organisations and governments would barely be able to function.

The institutional frailties of developing countries cannot simply be wished away. Nor too can the national fiscal constraints which are often conveniently ignored in articles like this. Ministries of finance control expenditures as tightly as they can not because they are control freaks, but because without it, the country would slide almost immediately into failed state status. This also accounts for why budget procedures and financial management rules are set in law rather than, more easily changeable, guidelines and policy notes.

The IMF often has a stronger influence over growth and flexibility in health budgets than a countries citizens, health professionals, politicians and donors. Even if these days the IMF generally sees the benefit of social programmes, conditions applied to financial support that demand tighter control and accountability ensure that Ministries of finance are not generally free to significantly increase funding for health or allow facility managers greater flexibility over funds without the clearest justification of how the new money will be spent and explicit proof that the the managers who might receive the authority to (re)allocate funds have the essential skills, attitude and integrity to do so in a manner that won't reduce, already tenuous, levels of accountability and transparency.

The real PFM challenge in health is about building up the credibility of the sector and the decision makers working in it. Every Ministry of Finance I have been in has complained that the health sector and especially external health advocates continually make demands for more funding and flexibility while offering nothing apart from vague promises of improvements in accounting skills and better health outcomes in return, while Finance ministry staff are looking for hard evidence of accountability, transparency, capability and managerial discipline.

Building that credibility is not easy and not quick. We can all make a start by working together with Finance Ministries rather than against or blind to them. PFM experts need to get themselves out of Ministries of Finance and learn more about the health sector. Health experts need to better understand finance and fiscal control. Communication between health and finance ministries should be more active rather than instructive. And perhaps for me at least, most importantly of all, health advocates must resist introducing ever more complex systems and terminology to try and make the institutions work better.

Line item budgeting is a perfectly acceptable way to budget for health services. It is simple to understand and familiar to anyone who has ever worked for a government anywhere in the world. Purchasers of health services are overwhelmingly just tax payers via their government. Providers are health facilities. There is a place for health insurance, but as in the most successful countries it is often just another form of tax. Private health insurance and provision is almost always only for the rich. the vast majority of citizens in developing countries should not be told they can only get better care if they pay for it.

There is much more to add here, but there is a danger that this comment will be longer than the original article. I would be delighted to take these issues up with one or all of you. Helene, we might be able to do that in person in Mongolia some time.

Kassimu Tani
May 05, 2020

This is a great motion to assist the current health financing management at facility level!