Re-alignment of Health System Incentives to Improve Affordable and Effective Healthcare Project, in Ningxia

The primary objective of this policy intervention is to retain primary care providers (township health centers and village health posts) in rural areas, to improve their efficiency and quality of care and to incentivize township health centers to improve services of village health posts under their management.

Primary health care providers in Ningxia, like in other parts of China, were paid by FFS, according to a government-set fee schedule where diagnostic tests incurred profits and drugs a mark-up of 15 percent, incentivizing the over-prescription of both. When the government of Ningxia removed the drug mark-up for primary care providers in 2006, which made up over 90 percent of village doctors’ income, many village doctors left to work in cities as migrant workers. Those who remained in practice had little incentive to improve quality and efficiency, or to fulfill their role as primary health providers for the population in their catchment area.

Our policy intervention consists of changing provider payment methods to town and village providers from FFS to capitation plus pay-for-performance (p4p). The capitation rate covers basic primary health care for both the township health center (each town has only one health center) and all the village health posts within the town. At the beginning of each year, NCMS pays the township health center 70 percent of the capitated budget, with 30 percent with-held pending mid- and end-of-year performance assessments. Township health centers are assessed for the quality of their own services as well as that of village health posts under its supervision. Township health centers and village health posts can also share any savings, conditional on meeting minimum volume thresholds.

This policy was introduced during 2010, using a pair-wise randomization design at the town level, within Haiyuan and Yanchi counties in the province.

The primary objectives of this intervention are to incentivize county hospitals to play the role of gatekeeping for the county population’s hospital care and to improve the efficiency and quality of their own service delivery.

A common phenomenon in rural China is that a significant share of hospital admissions (and therefore expenditures) occurred at costlier tertiary facilities than at county hospitals, even for health conditions that county hospitals are capable of treating.

In 2012, the project changed provider payment for county hospitals from FFS to a global budget with pay-for-quality. The design of the global budget is innovative in that it is not a facility-based budget, as in the usual case. Instead, it is a population-based global budget, calculated to cover all hospital admissions from the county’s residents, but limited to conditions that it is deemed capable of treating.  The county hospital becomes the gatekeeper of all services and populations included in its budget. It is incentivized to keep patients it is able to treat as it otherwise has to bear the financial cost of those patients if referred to higher-level hospitals from its own global budget. At the beginning of each year, NCMS prepays county hospital 70% of the budget, the rest withheld and disbursed based on biannual quality assessments.

This supply-side intervention is accompanied with demand side incentives.  Reimbursement rates for out-of-county secondary and tertiary hospitals are more generous for patients with a referral from county hospitals.

NCMS Insurance Benefit Package

The primary objectives of this policy intervention are to reduce financial barriers to access outpatient health care, to provide incentives for patients to use primary health care providers as opposed to county hospitals for primary care services and county hospitals rather than above-county hospitals for hospital care for health conditions that county hospitals are capable of diagnosing and treating.

In 2009, the New Rural Cooperative Medical Scheme (NCMS) in Ningxia – the government subsidized voluntary health insurance scheme for rural populations – included  a risk pooled fund which covered inpatient services and individual savings accounts that covered outpatient visits.  Generally, the amount in an individual’s savings account could barely cover a single outpatient visit.

In 2010, with increased funding from the government, the project re-designed NCMS’s benefit package, covering both inpatient and outpatient services from a single risk pool fund (abolishing the individual savings accounts). Reimbursement rates were set higher at primary care facilities than at county hospitals to incentivize patients to use primary care.  Then, in 2012, to accompany the county hospital provider payment intervention, differential reimbursement rates for above-county hospital admissions were introduced for referred and non-referred cases.

In line with China’s national policy to integrate its vertically organized TB treatment and control program with the broader health care reform, the project pilot-tested a model of diagonal system for TB treatment and control. The goals are to reduce patient delay in seeking treatment, improve referral of TB suspects for diagnoses, reduce financial burden faced by patients and improve efficiency of TB treatment. On the demand side, NCMS benefit package is revised to provide generous reimbursement, 80% and 95% for regular and MDR-TB patients, respectively. On the supply side, the functions of diagnosis and treatment are transitioned from TB clinics to county general hospitals to improve service integration and reduce duplications. Finally, primary care providers (township health centres and village health posts) are given financial incentives to improve case-finding through a pay-for-performance payment method, and complemented by extensive training. The attached graph summarizes the policy objectives, interventions, hypothesized outcomes, and phase-in time of each intervention.

The policy interventions are based on a quasi-experimental design in five counties in the Ningxia Hui Autonomous region (hereafter Ningxia). Ningxia is located in the northwest of China bordering Gansu, Shaanxi and Inner Mongolia. It has a population of 6.3 million, a territorial area of 51,954.40 sq.km, and is composed of 22 counties – about half of which lie in mountainous regions while the rest are in plains or valleys. With an annual per capita consumption expenditure was 16,674 and 5,908 Yuan amongst urban and rural residents respectively in 2012, it is one of the poorest provinces in China.

With the provincial government, we selected two mountainous counties with no recent pilot health sector reform projects as our treatment sites (T). We then matched three other counties to act as comparison sites (C). These counties are also located in mountainous areas and have similarly low levels of income and poor access to health care. They serve as comparison sites in the sense that they did not experience the specific interventions of our project but did experience the same province-wide policy changes as the two intervention counties. Our choice of counties means that the results are most generalizable to rural areas in China with similarly low levels of development.

Embedded in our design was a matched-pair cluster randomized experiment using the township health centre and its catchment area as the unit of randomization. In our two treatment counties, half of the 28 towns and their primary health care facilities (township health centres and village health posts) were randomly selected to receive both supply and demand side interventions (the provider payment intervention introducing capitation plus pay-for-performance at village and township health centres and the modified NCMS benefit package), while the other half received only the demand side improved NCMS package. Towns were paired before randomisation in such a way as to ensure matches were as similar as possible on the basis of a Mahalanobis distance measure derived from data on a set of baseline characteristics. In each pair, one town was randomly assigned to receive the provider payment intervention.

In both treatment and comparison counties, towns were stratified by income and a weighted sampling scheme was used to randomly select villages and households. In treatment counties, 40 percent of villages in each town were sampled, from which 33 households in each village were randomly selected. In comparison counties, 20 percent of villages were sampled, yielding 20 households per village. A household survey sample size of 7,000 was targeted to yield approximately 28,000 to 30,000 individuals. Townships health centres and village clinics for the facility surveys were selected within this sampling frame so that 66 township health centres and 267 village clinics were targeted. For the management information system, the sampling frame included the universe of all towns and villages in Haiyuan and Yanchi. Figure 1 provides a diagrammatic presentation of the survey design.