Pioneering a Health Financing Scheme

The rapid development of the modern health system in Cambodia is striking in consideration of its devastating history. In the early 1990s, the Kingdom of Cambodia began a period of relative stability and development, although the losses in human resources, infrastructure, and education during this period underlie many of Cambodia’s existing constraints. The health sector remains challenged by a high burden of communicable diseases and high infant and maternal mortality rates among its population, 36% of who live in absolute poverty.

In 1996, the Government of Cambodia initiated a broad Health Sector Reform agenda that encompassed fundamental reforms in the organization and financing of health services, embodied in the National Health Coverage Plan and Charter on Health Financing. This agenda was instrumental in initiating a systematic process under which alternative finance and delivery mechanisms could be tested and evaluated – and a policy environment that reinforced taking initiative, monitoring and evaluation, and disseminating results for replication.

Takeo Provincial Referral Hospital is the first Cambodian hospital to initiate and maintain a systematic approach to its financing with support from the Swiss Red Cross. By 1997, the Swiss Red Cross’ ten-year program of technical assistance enabled this 176-bed referral hospital to provide a range of high quality referral level medical services, particularly surgery. Managerial and financial constraints nonetheless obstructed a vision for the hospital’s long-term sustainability.

Takeo hospital leaders and the Swiss Red Cross endeavored to rationalize the management of available resources and sustain high quality and accessible services through a hospital financing scheme. Hospital staff made a commitment to implement major organizational changes fundamental to the success of the financing scheme; their partner organization, the Swiss Red Cross, provided technical and financial support to the initiative. At its core, the scheme consisted of a transparent official fee system, designed to generate sufficient revenue that would gradually supplement staff salaries and cover a proportion of operational costs. The underlying principle was straightforward. Adequate remuneration would provide staff the incentive to focus on improving hospital management and maintaining consistently high care quality. Together with a transparent affordable fee system, utilization rates would increase to a level at which the hospital could sustain activities without external financial support.

Indeed, within a short period, utilization levels increased by more than 50% for inpatient and surgical services – and have since exceeded bed capacity. At the onset, the management of the hospital shifted from an autocratic directorial board to an elected management committee that developed, fostered, and maintained the financing scheme and its principles. Transparency in hospital resource management thus improved dramatically. The development of the Takeo scheme generated basic financial data – key in defining sustainable cost recovery policies. Over the 3-year period, the costs of operating Takeo Provincial Referral Hospital averaged US$ 467,000 annually. Of this amount, the major operational expenses included drugs (45%) and personnel costs – primarily in the form of salary supplements (38%). A full one-third of its operational budget was generated from user fees (33%).

The average out-of-pocket payments ranged from US$ 1.7 for a general outpatient consultation, US$9.4 for an admission, and US$ 39.5 for surgical admission. The fees established, therefore, represented two-thirds or less of previous under-the-table inpatient payments. Despite wide variation in unofficial fees, it is likely that patient out-of-pocket expenditure for most inpatient and surgical services was greatly reduced.

The costing data and other specific aspects of this experience contributed to health development nationwide. The MoH and WHO have used the financial data generated by Takeo provincial hospital for cost analyses and project planning. The health information and accounting systems – some of the first to be computerized in a Cambodian referral hospital – serve as models for other hospitals. Essential for internal hospital management, sound data have also proven powerful in advocating for crucial resources. The financing scheme itself attracted attention nationwide for having consolidated the principles of health sector reform – effectively supporting their further implementation. The entire approach promoted innovation and partnership between external organizations and the government. Thus, despite the limitations and challenges in Cambodia, a transparent hospital financing scheme is not only feasible but also has the potential to increase financial accessibility to high quality referral services. Key prerequisites for replicating the scheme include:

• A legal framework that provides guiding principles for implementation and ensures the retention of fees within the facility.
• Existing high service quality and volume of hospital activity.
• Hospital staff, and senior hospital leaders in particular, committed to the objectives of a hospital financing scheme, including greater transparency.
• A consensus for major change and the motivation to make it work – with full knowledge of the respective commitments and potential risks.
• Creating management conditions, including sufficient staff wages and contracts, which enable systems of sanctions and rewards.
• Sufficient population demand for services and affordable fixed prices.
• Commitment from the government in the form of sufficient release of public funds.
• External technical advice and financial support in the transition phase.

Notwithstanding these successes, we draw attention to three important constraints. In 2000, the Government of Cambodia spent 0.8% of GDP on health – an extremely low investment in health by any standard but particularly alarming given the health and human resource needs in Cambodia. Furthermore, because of unresolved system-wide constraints in public financial management, the hospital will likely continue to receive irregular and insufficient public funding based on monthly financial cycles that are too short for rational resource management. The Ministry of Health, however, has established a precedent with decentralized financial management – one that could be expanded in scope and scale to address this key impediment.

A related factor is the lack of public funds to pay for exemptions. Exemptions are partially financed from user fee revenues, which imply a reduction in salary supplementation. Such a conflict of interest results in a natural tendency to grant exemptions sparingly. Starting from October 2000, hospital fees for poor patients were financed from a different budget via an Equity Fund. This fund, however, similarly requires a regular reliable source of external funding – urgently needed to ensure that the poor are exempted. Release of public health budget designed as a social fund for the poor could be a starting point in contributing to these costs.

Finally, a key constraint inhibiting sustainability was the delay in the development of the referral system and the poor integration of the provincial hospital within the overall system. Transparency and accountability within Takeo hospital has been achieved; the financing scheme was a major catalyst for enhanced quality and output. Unfortunately, the hospital remains isolated from the rest of the health system – one that does not yet share the same ethics, performance-driven management, and commitment to quality health care and accessibility to all. The lessons learned from the Takeo hospital experience are valuable ones that can be adapted to other hospitals and health centers to reduce such discrepancy in progress.

*Summary of the monograph “Takeo Provincial Referral Hospital: Pioneering a Health Financing Scheme” published, in June 2002 by the Cambodian Ministry of Health, the Swiss Red Cross, and the World Health Organization. The document can be ordered at the International Cooperation Department of the Swiss Red Cross. Contact: Margrit.Schenker@redcross.ch.
Jean-Marc Thomé’s Powerpoint-presentation on the Takeo Health Financing Scheme at the MMS-Symposium 2003 is available at the Symposium’s website.