IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-73950) ON A LOAN IN THE AMOUNT OF US$ 110 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A
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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of The World Bank Report No: ICR2236 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-73950) ON A LOAN IN THE AMOUNT OF US$ 110 MILLION TO THE REPUBLIC OF THE PHILIPPINES FOR A NATIONAL SECTOR SUPPORT FOR HEALTH REFORM PROJECT January 21, 2013 Human Development Sector Unit East Asia & Pacific Region
2 CURRENCY EQUIVALENTS (Exchange Rate Effective January 15, 2013) Currency Unit = Philippine Peso (PhP) PhP40.56 = US$1 FISCAL YEAR January 1 December 31 ABBREVIATIONS AND ACRONYMS BFAD CAS CBMS CDR CHD COA DBM DOF DOH DPL DQC DSWD EC engas EPI ETS F1 FDA FHSIS FIC GAA GOP HiB HRH HSEF HSRA IA IP IPPF ISR JAPI LGUs M&E Bureau of Food and Drugs Country Assistance Strategy Community-Based Monitoring System Case Detection Rate Center for Health Development Commission on Audit Department of Budget and Management Department of Finance Department of Health Development Policy Lending Data Quality Check Department of Social Welfare and Development European Commission Electronic National Government Accounting System Expanded Program of Immunization Expenditure Tracking System FOURmula ONE for Health Food and Drug Administration Field Health Service Information System Fully Immunized Children General Appropriations Act Government of the Philippines Hemophilus Influenza B Human Resources in Health Health Sector Expenditure Framework Health Sector Reform Agenda Internal Audit Indigent Program Indigenous People Planning Framework Implementation Status and Results Report Joint Assessment and Planning Initiative Local Government Units Monitoring and Evaluation
3 MDGs MoU MMR MNCHN MOA MTR NCB NEDA NG NHIA NHIP NHTS NHTS-PR NPS NSS NSSHRP OOP P4R PAD PDO PHIC PHOs PhP PMT PPA QAG QER QMS SDAH SEMP SEMP 2 SLA TB TBC THE TTL UHC UN WHO Millennium Development Goals Memorandum of Understanding Measles, Mumps and Rubella Maternal, Newborn, Child Health, and Nutrition Memorandum of Agreement Mid-Term Review National Competitive Bidding National Economic Development Authority National Government National Health Insurance Act National Health Insurance Program National Household Targeting System National Household Targeting System Poverty Reduction National Program Support National Sector Support National Sector Support for Health Sector Reform Out-of-Pocket Program-for-results Project Appraisal Document Project Development Objective Philippines Health Insurance Corporation Provincial Health Offices Philippine Peso Proxy Means Test Plans, Projects and Activities Quality Assurance Group Quality Enhancement Review Quality Management System Sector Development Approach for Health Social Expenditure Management Project Second Social Expenditure Management Project Service Level Agreements Tuberculosis Tuberculosis Control Total Health Expenditures Task Team Leader Universal Health Care United Nations World Health Organization Vice President: Ulrich Zachau (EAPVP) Country Director: Motoo Konishi (EACPF) Sector Manager: Toomas Palu (EASHH) Project Team Leader: Roberto Rosadia (EASHH) ICR Team Leader: Sutayut Osornprasop (EASHH)
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5 PHILIPPINES NATIONAL SECTOR SUPPORT FOR HEALTH REFORM PROJECT Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph CONTENTS 1. Project Context, Development Objectives and Design Key Factors Affecting Implementation and Outcomes Assessment of Outcomes Assessment of Risk to Development Outcome Assessment of Bank and Borrower Performance Lessons Learned Comments on Issues Raised by Borrower/Implementing Agencies/Partners Annex 1. Project Costs and Financing Annex 2. Outputs by Component Annex 3. Economic and Financial Analysis Annex 4. Bank Lending and Implementation Support/Supervision Processes Annex 5. Beneficiary Survey Results Annex 6. Stakeholder Workshop Report and Results Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders Annex 9. List of Supporting Documents MAP
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7 A. Basic Information Country: Philippines Project Name: National Sector Support for Health Reform Project ID: P L/C/TF Number(s): IBRD ICR Date: 01/19/2012 ICR Type: Core ICR Lending Instrument: SIM Borrower: Original Total Commitment: Revised Amount: Environmental Category: C REPUBLIC OF THE PHILIPPINES US$ M Disbursed Amount: US$ M Implementing Agencies: Department of Health Cofinanciers and Other External Partners: B. Key Dates Process Date Process Original Date Revised / Actual Date(s) Concept Review: 07/25/2002 Effectiveness: 03/27/ /27/2007 Appraisal: 03/06/2006 Restructuring(s): 08/16/ /26/2011 Approval: 06/29/2006 Mid-term Review: 08/30/ /08/2010 Closing: 06/30/ /31/2012 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Risk to Development Outcome: Bank Performance: Borrower Performance: Moderately Unsatisfactory Moderate Moderately Unsatisfactory Moderately Unsatisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Unsatisfactory Government: Moderately Satisfactory Quality of Supervision: Moderately Implementing Moderately Unsatisfactory Agency/Agencies: Unsatisfactory Overall Bank Performance: Moderately Unsatisfactory Overall Borrower Performance: Moderately Unsatisfactory
8 C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project at any time (Yes/No): Problem Project at any time (Yes/No): DO rating before Closing/Inactive status: No No Satisfactory D. Sector and Theme Codes Sector Code (as % of total Bank financing) Quality at Entry (QEA): Quality of Supervision (QSA): Original No rating was provided None Actual Central government administration Compulsory health finance Health Non-compulsory health finance 10 0 Theme Code (as % of total Bank financing) Administrative and civil service reform HIV/AIDS 16 0 Health system performance Social risk mitigation Tuberculosis 17 5 E. Bank Staff Positions At ICR At Approval Vice President: Ulrich Zachau Jeffrey S. Gutman Country Director: Motoo Konishi Joachim von Amsberg Sector Manager: Toomas Palu Fadia M. Saadah Project Team Leader: Roberto Antonio F. Rosadia Loraine Hawkins ICR Team Leader: ICR Primary Author: Sutayut Osornprasop Sutayut Osornprasop
9 F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The project development objectives were: a. improving priority public health outcomes and increasing the utilization of health services by the poor in areas and for conditions or diseases subject to intervention under the project. b. increasing financial protection of indigents from health care costs. Revised Project Development Objectives (as approved by original approving authority) No changes were made to PDOs. (a) PDO Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion or Target Years Indicator 1: Increase coverage rate of fully immunized children by at least 10% Value 80% 90% N/A 85% Date achieved 12/31/ /03/2010 N/A 12/31/2011 Comments The target Fully Immunized Children (FIC) rate was not achieved by the final year of the project. The latest FIC rate improved slightly from the baseline, but fell below the target. The data for the FIC were drawn from the Field Health Service Information System (FHSIS). Indicator 2: Increase TB case detection rate from 72% to at least 80% Value 72% 80% N/A 72% Date achieved 12/31/ /03/2010 N/A 12/31/2010 The target TB case detection rate was not achieved by the final year of the Comments project. The latest TB case detection rate is the same as the baseline. The data were drawn from FHSIS. Indicator 3: Increase TB cure rate from 81% to at least 85%
10 Value 81% 85% N/A 82% Date achieved 12/31/ /03/2010 N/A 12/31/2010 The target TB cure rate was not achieved by the final year of the project. Comments The latest TB cure rate improved very slightly from the baseline, but fell behind the target. The data were drawn from the FHSIS. Indicator 4: Evidence of a statistically significant improvement (wherever feasible) or validation by an alternative method of improvement, in prevention, diagnosis or treatment rates in participating LGUs for diseases or conditions subject to performance agreements and grants Value 0 LGU 15 LGUs N/A 0 LGU Date achieved 10/03/ /03/2010 N/A 03/31/2012 No method has been finalized. Department of Health (DOH) sees that it is very difficult to come up with an evidence of a statistically significant Comments improvement. DOH has not been able to get a third party to validate an alternative method, as planned. Nevertheless, DOH conducted a small scale self-assessment by using LGU scorecards. (b) Intermediate Outcome Indicator(s) Indicator Baseline Value Original Target Values (from approval documents) Formally Revised Target Values Actual Value Achieved at Completion of Target Years Indicator 1: Increase in proportion of DOH budget allocated on the basis of criteria of need and performance (from 0 to at least 5% of existing maintenance and other operating expenses and at least 5% of any increment in DOH MOOE budget) Value 0% 5% N/A 24% Date achieved Comments 10/03/ /03/2010 N/A 12/31/2010 DOH budget was allocated on the basis of need and performance. It rose gradually to 5.4% in 2007, fell to 1.8%(during the world-wide economic crisis), and reached 24% in Indicator 2: Increase in number of development projects or programs using HSEF to plan and program their health sector support (from 0 foreign assisted project to 100% of FOURmula ONE PPAs) Value 1 project 100% of projects N/A 100% Date achieved Comments 10/03/ /03/2010 N/A 12/31/2009 From 2009 onward, 100% of FOURmula ONE PPAs used HSEF to plan and program their health sector support. This target was reached well ahead of the project s closing date. Indicator 3: Increase in number of LGUs identifying the poor using acceptable, defined
11 methods of means testing and enrolling them in NHIP Indigent Program (from 0 to 993 LGUs) Value N/A 0 Date achieved Comments 10/03/ /03/2010 N/A 03/31/2012 No LGU identified the poor using an acceptable, defined method of means testing and enrolling them in the NHIP Indigent Program. With no progress on the LGU front, the project shifted to support a nationally developed means test, and was able to identify the poor using the NHTS- PR, which is an acceptable, defined method of means testing. Although this enabled enrollment of 5.2 million poor households in the NHIP Indigent Program, unfortunately this change in approach was not formally specified during the project restructuring. It should also be noted that the number of poor households on the list adopted by LGUs was around 6-7 million. Out of these, only about 900,000 households were the same as those identified by the NHTS-PR, raising the concern that many of the households on the LGU list are not poor. Indicator 4: Significant quantified reductions in date-expiry, stock-outs and losses of public health commodity stocks at defined levels in supply chain Quarterly reporting on inventory & method of forecasting quantities Target agreed in No data are Value required of public N/A year 4 met available health commodities satisfactory to the Bank in place Date achieved Comments 10/03/ /03/2010 N/A 03/31/2012 Information on stock-outs was not collected by the DOH beyond the level of the Center for Health Development (CHD). Indicator 5: LGU scorecard implemented and scores improve in convergence sites
12 Value Date achieved Comments Scorecard methodology and guidelines completed and disseminated by end of year End of term evaluation finds further progress in scores N/A There is progress on scores in 16 F1 provinces 10/03/ /03/2010 N/A 03/31/2012 LGU scorecards were generated in all 16 F1 provinces by 2008, and later expanded to all LGUs. There was moderate progress on scores in 16 F1 provinces. Indicator 6: Full compliance with the Borrower s procurement law and standards, monitored using agency procurement benchmark indicators Agency DOH procurement indicators Agency indicators Value N/A Manual completed maintained or slightly improved improved Date achieved Comments 10/03/ /03/2010 N/A 05/31/2011 There was continued full compliance with the Bank s procurement procedures and standards, monitored using agency procurement benchmark indicators. Indicator 7: engas roll out; quarterly reports to managers on performance against plan and budget under General Appropriations Act (GAA) program structure engas training in 16 Value regions; installation of engas in 8 regions; reporting formats agreed Quarterly Report generated N/A from engas engas has been fully used in 5 regions Date achieved Comments 10/03/ /03/2010 N/A 03/31/2012 By the end of the project, the engas was used fully in 5 CHDs, while 7 CHDs were in a transition phase, and the engas still needed to be rolled out in another 4 CHDs. In all CHDs, under the GAA program structure, quarterly reports were submitted to managers on performance against plan and budget. DOH should be congratulated for its persistence in expanding the engas, despite COA s decision to suspend the national roll-out of the engas in Indicator 8: Internal Audit (IA) staff trained; annual IA plan of scheduled audits implemented; updating and improvement in agency IA benchmark indicators Value IA conducted for 2006; IA plan developed for 2007 At least 80% IA staff trained; 2010 IA plan N/A Over 80% IA staff trained and annual IA plan of audits
13 Date achieved Comments implemented implemented 10/03/ /03/2010 N/A 03/31/2012 G. Ratings of Project Performance in ISRs No. Date ISR Archived DO IP Actual Disbursements (US$ millions) 1 11/28/2006 Satisfactory Satisfactory /23/2007 Satisfactory Satisfactory /18/2008 Satisfactory Moderately Satisfactory /29/2008 Satisfactory Moderately Satisfactory /08/2009 Satisfactory Moderately Satisfactory /09/2010 Satisfactory Moderately Satisfactory /23/2011 Satisfactory Moderately Satisfactory H. Restructuring (if any) Two level-ii restructurings took place in August 2010 and May I. Disbursement Profile
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15 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. At the time of the project appraisal, the Philippines had been making progress on health reforms at the aggregate level, but the major disparities in health outcomes (across provinces, and across income quintiles) had not been addressed. Overall health expenditures as well as public expenditures on health were lower than the average for other middle-income countries. Out-of-pocket (OOP) payments as a percentage of total health expenditures (THE), was large (54 %) which threatened the financial security of the poorest households. The country was still grappling with the impacts of two major reforms the 1991 decentralization of health services to Local Government Units (LGUs) and the 1995 reform of the National Health Insurance Program (NHIP) that had expanded health insurance coverage for the population and established the Philippines Health Insurance Corporation (PHIC) or PhilHealth. The decentralization reforms led to extreme fragmentation in health financing and the delivery system. While the 1995 national health insurance reforms addressed some of this fragmentation, as well as providing funds through PhilHealth, progress in providing healthcare for the poor was still limited. 2. The Health Sector Reform Agenda (HSRA), effective from 1998 to 2004, had begun to address the problems described above; however, progress was slower than expected. The HSRA aimed to achieve: increased financial protection for the poor and sick; supply-side measures to upgrade public health facilities in all communities to meet PhilHealth s accreditation standards; more effective regulation of the private health sector and of drugs and commodities; a stronger results-orientation and coordination between the Department of Health (DOH) and LGUs in delivering public health programs; and development of structures and processes to increase coordination among neighboring LGUs, the DOH and the private sector in planning local health systems. As implementation of HSRA s recommendations was too slow, in 2002, the DOH adopted a phased implementation strategy, beginning with select convergence provinces, and sought development partner assistance to support HSRA in these sites It has been recognized that the HSRA had limited success due to: (1) limitations in prioritizing a complex reform agenda and translating it into achievable, fiscally realistic action plans, (2) limited coordination between the DOH and PhilHealth over the reform strategy, (3) limited capacity in results-based management, (4) excessively cautious behavior by PhilHealth in scaling up the NHIP, (5) fragmented donor support, (6) constrained fiscal space, and (7) challenges with fragmented, autonomous LGUs. 4. By 2005, a new Secretary of Health had taken stock of progress, and in collaboration with development partners, defined FOURmula ONE for Health (F1). 1 Convergence provinces are pilot provinces that have committed to implement reform components in their locality. 1
16 Building on HSRA reform, F1 was set up to tackle major health sector problems, e.g. disparities in health outcomes and financial protection for the population. F1 was to organize the critical reform initiatives into four implementation components: health financing, health regulation, health service delivery, and good governance in health. F1 was particularly aimed at ensuring access to and availability of essential health packages; assuring the quality and affordability of health goods and services; securing better and sustained financing for health; and, improving health system performance in the medium term. 5. An important strength of F1 was a more comprehensive approach to health reforms and aligning them with public expenditure management and governance reform. Using the medium-term Health Sector Expenditure Framework (HSEF) and the annual budgeting process, a performance-monitoring framework for DOH, PhilHealth and convergence provinces linked budgeting and resource allocation to outputs and intermediate results. These links were intended to reduce obstacles to reform. With regard to fragmentation in financing, the Sector Development Approach for Health (SDAH) was adopted under F1 to align development partner-supported reform activities across the entire health sector under a single national implementation plan and under harmonized local health investment plans in each convergence province. 6. The Country Assistance Strategy (CAS) focused on supporting public expenditure management reform, improved governance, and better targeting of public expenditure at a time when the country s fiscal situation was fragile. The approach of the new CAS was well suited to supporting the F1 strategy by linking the health budget with reforms to health expenditure management. 7. The above-mentioned circumstances led to the design of this project, which was intended to support the overall F1 reforms, which included both PhilHealth and LGU reforms, based on the national sector support approach. Hence, the project was to finance a slice of the overall health sector reform program as part of the appropriated budget, i.e. similar to sector budget support but with no financial increments to the sector. It was also agreed that the project s outcome measures were to be based on the overall sector outcomes, rather than outcomes from specific Bank financing. Major Milestones in Philippine Health Reform 1991 Local Government Code Devolution of administrative and other functions (including health services) from the national government to local government units (LGUs) 1995 National Health Insurance Act Compulsory coverage under the National Health Insurance Program (NHIP) 1998 Health Sector Reform Agenda Adjustment for impacts of devolution and (HSRA) implementation of the NHIP 2005 FOURmula ONE for Health (F1) Accelerating gains under the HSRA 2005 Sector Development Approach for Rationalizing and harmonizing donor support Health (SDAH) 2
17 1.2 Original Project Development Objectives (PDOs) and Key Indicators i. Improving priority public health outcomes and increasing the utilization of health services by the poor in areas and for conditions or diseases subject to intervention under the project. ii. Increasing financial protection of indigents from health care costs. 8. The Loan Agreement included the following outcome indicators: Increase coverage rate of fully immunized children by at least 10% (from 80% to 90%) Increase TB case detection rate from 72% to at least 80% Increase TB cure rate from 81% to at least 85% Evidence of a statistically significant improvement (wherever feasible) or validation by an alternative method of improvement, in prevention, diagnosis or treatment rates in participating LGUs for diseases or conditions subject to performance agreements and grants (from 0 LGU to 15 LGUs) 9. Two additional outcome indicators were included in the project appraisal document (PAD), but were not included in the Loan Agreement: Increased number of indigent families enrolled in NHIP using acceptable, defined means test (up to at least 1.51 million indigent families) Insured indigent households have lower OOP spending on health, compared to uninsured households, and compared to prior periods 1.3 Revised PDOs (as approved by the original approving authority) and Key Indicators, and Reasons/Justification 10. No changes were made to the PDO and key indicators. 1.4 Main Beneficiaries, 11. The primary beneficiaries of the project were poor households identified by the means test and enrolled in PhilHealth s Indigent Program. Other beneficiaries across the Philippines included users of Government of the Philippines (GOP)-financed primary healthcare services, especially for vaccinations. 1.5 Original Components 12. Project activities were grouped into four main components: health financing, health service delivery, regulation of pharmaceuticals, and health system governance. 3
18 Component A: Health Financing (US$50 million at appraisal; US$40 million approved) 13. The component was intended to provide health insurance for indigents through financing GOP s payments to PhilHealth under the national contribution subsidy. To identify beneficiaries, LGUs were to use acceptable, defined methods of means testing, that were acceptable to PhilHealth and the Bank. Bank financing of premiums for indigent households was expected to increase over the life of the project as more LGUs implemented community-based poverty mapping (or other acceptable means tests) and used this as a basis for identifying indigent beneficiaries. 14. In support of project objectives and the health reform strategy, PhilHealth was to pursue the following reforms: (1) sustainable expansion of the regular Indigent Program; (2) better targeting of the poor through (i) collaboration to encourage LGUs to scale up community-based poverty mapping to identify poor households, and (ii) development of a policy on acceptable alternative means tests; (3) development of a partially subsidized health insurance scheme for the near-poor; (4) increased financial protection for NHIP members through (i) improved membership services, (ii) preferred provider agreements that limited extra billing, and (iii) incremental enhancement of the benefits package targeted at cost-effective services, especially services benefiting the poor and helping to achieve the Millennium Development Goals (MDGs); and (5) fostering synergies and a convergent approach through coordination with other agencies concerned with the health sector reform program. Component B: Health Service Delivery: Public Health (US$48.5 million at appraisal; US$38.5 approved) B.1 Disease Prevention, Control and Elimination Programs (US$48 million at appraisal; US$38 million approved) 15. The component was intended to support disease prevention and control measures to eliminate, or reduce and control infectious diseases and micronutrient deficiencies. This would be through provision of: Expanded Program of Immunization (EPI) vaccines (including hepatitis B vaccines); tuberculosis control (TBC) drugs; laboratory supplies; HIV/AIDS drugs; micronutrients; other drugs and related commodities; as well as information and education materials to help eradicate malaria, rabies, leprosy, schistosomiasis and filiarisis. Some of the commodities provided under this component (a minimum of around US$5 million) were to be allocated on the basis of LGU performance, as indicated under sub-component B.2. B.2 Performance-based Resource Allocation for Public Health (US$0.5 million at appraisal and as approved) 16. The project was intended to support the development of: (1) pilot service performance agreements between the DOH and participating LGUs for carrying out Part B.l of the Project; and (2) pilot performance-based public health award schemes for those 4
19 LGUs that met or exceeded their performance targets for measurable improvement in disease prevention and control in carrying out Part B.l and Part B.2 of the project. Component C: Regulation of Pharmaceuticals (US$0.5 million at appraisal and as approved) 17. The component was intended to support implementation of a master plan to upgrade the services of the Bureau of Food and Drugs (BFAD) in regulating the manufacture, importing and distribution of pharmaceuticals. This was to be achieved through support for the operating costs associated with new business processes, including greater fiscal autonomy for the BFAD; improved services at its drug quality control laboratories; and implementing a new program of providing quality seals to certify pharmacies that offer quality drugs at competitive prices. Subject to resolution of a legal question regarding use of the BFAD s fee income, at the GOP s request, the project provided an option for the unallocated portion of the loan to finance US$5 million worth of equipment upgrades in BFAD laboratories. Component D: Health System Governance (US$ million at appraisal and as approved) D.1 Health Human Resources (US$0.5 million at appraisal and as approved) 18. The sub-component was intended to support the development of strategic national initiatives in the DOH s human resources in health (HRH) master plan, especially the deployment of health professionals to rural areas to reduce the shortage of doctors and other health professionals, and provision of training, career path development, and job information services for health professionals in rural areas. D.2 Sector Management and Coordination of Local Health Systems Reform (US$ million at appraisal and as approved) 19. The sub-component was intended to support the DOH s contribution to an ECfinanced program of performance-linked local health systems reform grants for 16 F1 convergence provinces. 2 This was to assist LGUs in implementing the HSRA implementation plan. DOH was to finance local capacity building, systems development, and monitoring and evaluation (M&E). In coordination with support from other development partners, this sub-component was designed also to finance DOH s contribution to a sector-wide program of M&E for the implementation of the health sector reform program. 2 The EC-financed program provided performance-linked local health systems reform grants to LGUs in 16 F1 convergence provinces. The program, which was worth a total of US$15 million over three years, also provided US$ 1.2 million to the GOP to help strengthen the DOH s internal management systems. 5
20 D.3 Strengthening the DOH s Internal Management Systems (funded by the EC Trust Fund) 20. Building on earlier financial management reforms under the Second Social Expenditure Management Project (SEMP 2), the project was to: strengthen DOH s public financial management systems; integrate DOH management information systems; upgrade DOH materials management systems through provision of hardware, software and technical assistance; and train DOH staff in financial management, inventory and materials management, procurement, and internal audit. This part of the project was financed from a US$1.2 million grant to the GOP from the EC, and administered by the World Bank as a Trust Fund. 21. The Loan Agreement also earmarked an unallocated expenditure category of US$20 million to be allocated at a later date to project components with the fastest pace of reform. 1.6 Revised Components 22. The components were not revised. 1.7 Other significant changes 23. The project underwent level-ii restructuring twice. In August 2010, the restructuring was for the reallocation of funds from the unallocated expenditure category (US$20 million) and a reallocation from slower-performing components to fasterperforming components. The restructuring document stated that there would be no extension of the project s closing date (June 30, 2011). The table below summarizes the allocations before and after restructuring, as well as after the project s end-ofdisbursement date (August 2012). Project Component At Approval (US$) After Restructuring (US$) Actual disbursement (US$) % of utilization Component A 40,000,000 40,000,000 44,024, Component B 38,500,000 59,225,000 49,643, Sub-component 38,000,000 58,225,000 48,664, B1 Sub-component 500,000 1,000, , B2 Component C 500, , Component D 10,725,000 10,350,000 10,774, Sub-component 500, , D1 Sub-component 10,225,000 10,000,000 10,774, D2 Unallocated 20,000, Front-end Fee 275, , , Total 110,000, ,000, ,717,
21 24. The second restructuring took place in May 2011 to extend the project s closing date from June 30, 2011 to March 31, This extension was necessary to complete implementation and reimbursement of project components, particularly the health financing component. With PhilHealth then enrolling all the NHTS-identified poor households, the DOH needed time to complete documentation of enrollments and to calculate the National Government s subsidies that the project was to finance. At the time of the restructuring, DOH expected that nine months would be sufficient to complete all activities, process reimbursements, and liquidate all advances, especially those for vaccine purchases. DOH also expected to use the full amount that had been allocated. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 25. The project design was finalized under a changing policy context that had to balance the latest developments in both the Borrower s and the Bank s thinking about how a health sector reform project should be designed for a middle-income country. The Bank team sought to address the changing context and at the same time ensure that the Borrower s ownership of the project was fully secured. The project was originally conceived of as a traditional investment loan that would support health system reform in four provinces and would develop national-level policy and capacity in both the DOH and PhilHealth. This was much more modest than the final design of the project. Taking into account the lessons learned from the two Social Expenditure Management Projects (SEMP), 3 the Bank proposed implementing sector budget support through a National Sector Support (NSS) approach. This was applied to the health and the education sectors. As in the case of the SEMP projects, financing was underpinned by requirements to improve the management of specific line items. The Country Assistance Strategy for had proposed that future lending for national government agencies should be programmatic and support reform through regular government programs and budgets. At the same time, lending to LGUs should be offered separately and principally through a multi-sector local lending platform. 26. On the Borrower s side, the DOH had adopted the concept of the SDAH to harmonize donor financing for the health sector. Thus, at the macro-level, the design of the NSS approach for health was fully consistent with the Borrower s thinking and there was high ownership of the approach. 27. The DOH was also no longer interested in a narrow focus as was the case under the SEMP, which had mainly focused on procurement of public health goods and commodities. In line with F1, it expected the NSS approach to be aligned with the broad 3 In the aftermath of the Asian financial crisis of 1997, the World Bank supported the GOP in protecting basic social services (health education and social welfare) while at the same time leveraging overall improvements in levels of, and allocation of public spending in these sectors, through two social expenditure management projects (SEMP 1 and 2). These projects which operated under the broad stewardship of the DBM provided budget support for specific line items of the sector budget. 7
22 health sector reform agenda of the GOP. The design team tried to marry the expectations of both the Borrower and the Bank, and reflect these in the final project design, but the team perhaps deeply under-estimated the capacity of the DOH to implement a budget support approach on its own, with the Department of Budget and Management (DBM) providing arm s length oversight. The design team also perhaps over-estimated the speed at which F1 reforms would be implemented. 28. In its identification of components, the project design was fully consistent with the F1 reforms and included both PhilHealth reforms as well as LGU reforms. For PhilHealth, a key issue was how poor households were to be identified. At the time of the project, the LGUs had no consistent criteria for identifying poor households and thus the project proposed that the LGUs use the Community-Based Monitoring System (CBMS). The adoption and application of the CBMS was expected to align with the expansion of providing PhilHealth health insurance for poor households. 29. The LGU component was absolutely essential to increase DOH stewardship of the LGUs, and to ensure that the LGUs regularly provided health data to the DOH. A key reform element was creating peer pressure among LGUs to perform better by disseminating their annual scores on the LGU scorecard. In both health financing and LGU components, the willingness and commitment of the LGUs to reform was perhaps over-estimated. As implementation would show later, uptake of national reforms by the LGUs was slow. This demonstrates that at the project design stage, more careful thinking should have been given to the incentives provided for LGU engagement. 30. The procurement of key public health goods was a continuation of the SEMP 2, and to enhance DOH stewardship of the LGUs, two small components on strengthening regulatory capacity and governance of the DOH were added to support the F1 approach. This was consistent with the intention that the project would support all four pillars of the F1 reforms, while financing only a small part of the cost. 31. The project underwent a Quality Enhancement Review (QER) process in February The QER panel was concerned with the capacity of the DOH to operate under the new NSS approach, and recommended that more high-level stakeholders, such as the DBM, Department of Finance (DOF), and National Economic Development Authority (NEDA) be directly involved in the reform process. In line with the recommendations of the QER panel, PDOs were revised to be more modest and specific, most disbursement conditions were eliminated, the financial management risk rating of the project was clarified, the active role of the DBM in the project was clearly identified in the PAD, and financial management and actuarial assessments of PhilHealth were initiated. 32. The negotiations took place in May 2006, and the World Bank Board approved the project on June 29, Although the Loan Agreement was signed on October 3, 2006, it was not until March 27, 2007 that the project was declared effective. This perhaps indicates that some issues about readiness for implementation were not adequately addressed during the design stage. Visions differed between the DOH and the 8
23 DBM about whether to establish a special account and this delayed completion of the project s operational manual. This was finally resolved through the DOH and the DBM agreeing to utilize the DBM s reimbursement mechanisms if the DBM committed to providing the DOH with adequate up-front releases of funds so that the DOH could implement project reforms. 33. Even though the project was designed to operate within the framework of the DOH, which used a programmatic and an SDAH approach (and within these financed selected priority national elements that were ready for implementation), it should be noted that the project s design lacked flexibility. This resulted in relatively inflexible sector budget support. The project was not sufficiently sector wide to allow for financing to move frequently and flexibly from one budget line to another, without major restructuring. Additionally, the design of M&E indicators and the institutional arrangements for M&E were weak. These M&E design issues, which are described in greater details below under the M&E section, plagued the project throughout implementation. 2.2 Implementation 34. With the exception of Component B1, implementation of most project components encountered substantial delays. Factors that likely led to slow disbursement are described below. Component B1 disbursed funds the fastest throughout the whole project. Perhaps this was because procuring vaccines through negotiated contracts with UNICEF was relatively straightforward. Also the DOH had gained commodity procurement experience under SEMP 2, so this was an area where DOH capacity in implementation was already high. 35. Component A was the slowest to disburse. At the time of project negotiations, it was agreed that the CBMS would be the primary means of identifying indigent households. However, soon after the project became effective, the National Government (NG) adopted the National Household Targeting System - Poverty Reduction (NHTS-PR) under the Department of Social Welfare and Development (DSWD). The World Bank had provided support for this major policy development through technical assistance. This was the first time in the Philippines that a refined targeting mechanism, based on a well-accepted proxy means test (PMT) methodology was available. Once this tool was available, the GOP wanted to apply it to all NG-financed social assistance programs, which included NG s financing for poor households. The Bank supported the GOP s approach, although disbursements under the project were substantially delayed. PhilHealth had to cross-match the list generated through the NHTS-PR with the existing list of sponsored members. Other issues had to be resolved such as the NG-LGU cost sharing arrangement under the NHIP. However, this was a significant policy success as it led to enrollment of around 4.3 million households (approximately 20% of the population) who had never had health insurance before. Use of the NHTS-PR also paved the way for the GOP to scale up universal health care (UHC) which the Bank is expecting to support through a new lending operation. Thus, while disbursements were significantly delayed, the policy outcome was substantial. 9
24 36. Components B2 and D2 were initially delayed due to the delays in the completion of operational manuals required for their disbursement. This indicates issues in readiness to implement that should have been addressed at the preparation stage. After these issues were addressed, Component D2 progressed positively. Component B2 progressed more slowly, and only in the final months of the project was an agreement reached that the loan money could be used to reimburse funds for the Maternal, Newborn, Child Health and Nutrition (MNCHN) grants that the DOH had awarded to the LGUs in 2009 and Components C and D1 were initially delayed due to prolonged discussions about which specific BFAD- and HRH-related budget line items the NSSHRP was to finance. The implementation of Component C was also affected by the 2008/2009 legislation that ensured full income retention for the BFAD, strengthened its regulatory powers, and renamed the BFAD as the Food and Drug Administration (FDA). The specific FDA activity to be financed by the NSSHRP was finally proposed by the DOH in The FDA implemented Quality Management System (QMS) accreditation, but due to the delay, the activity could not be financed from the NSSHRP. The activities under component D1 were identified by the DOH in 2009, and procurement started in that year. However, due to lengthy procurement problems, these activities could also not be financed from the NSSHRP. 38. Component D3, funded by the European Commission Trust Fund, was also initially delayed, largely due to lack of familiarity with the new tools and lengthy reviews of investment plans, annual plans, training plans, and project procurement and management plans. Nevertheless, there was progress made in the development of the Expenditure Tracking System (ETS) though this is still in its development stage. DOH staff were trained in internal audit and finance. The Electronic National Government Accounting System was rolled out to the regions by providing hardware, software, and technical assistance. 39. It should be noted that though the project was designed to operate within the framework of the DOH, which used a programmatic and SDAH approach, and within these to finance selected priority national elements that were ready for implementation, the project was not programmatic enough to allow for financing to move frequently and flexibly from one budget line to another. With the exception of the US$20 million unallocated portion, the specific amount of financing was allocated for each project component, and restructuring was needed to reallocate the resources. Hence, the way that the project was implemented appeared to more traditional in operation than programmatic. 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 40. The project suffered from weaknesses in M&E at all stages design, implementation, and utilization. Regarding M&E design, the results framework in the project s Loan Agreement included a mix of outcome and intermediate indicators, though these were not adequate. Generally, the indicators were appropriate at the time of project design, as these were based on broader national program indicators and were the same indicators and targets as those used by the GOP. However, there were no indicators and 10
25 target values to track the progress of project components C and D1. Furthermore, six indicators in the PAD did not have baseline data. These gaps were never addressed during implementation. 41. Consistent with the SDAH, all development partners were expected to participate in the Joint Assessment and Planning Initiative (JAPI) that was organized by the DOH once or twice a year. The JAPI included field visits and a concluding workshop led by DOH staff in which development partners provided their feedback, and follow-up action was identified. While the JAPI helped harmonize development partners initiatives and reduced transaction costs for the Borrower, under JAPI it was impossible for the Bank to undertake as rigorous due diligence that is the norm in regular Bank supervision missions. Moreover, since the JAPI did not use a formal M&E framework aligned to the project, it was difficult to track and report on project indicators. This is perhaps one reason why the tracking of project s results framework indicators was not consistent over the whole project. 42. Perhaps for the same reasons for aligning with the JAPI, no proper Mid-Term Review (MTR) mission took place. The lack of a full MTR was a missed opportunity for the GOP and Bank teams to re-align project indicators and targets, clean up the results framework, and align to the situation on the ground. As mentioned before, there was a significant shift in the policy environment that impacted implementation of Component A. Despite these shifts, the lack of formal acknowledgement during the MTR and the lack of restructuring the PDOs and associated indicators that normally follows an MTR meant that at completion the performance of the project is judged as per the situation at appraisal. At the same time, there were policy shifts as well as implementation experience which could have been used to restructure the project. 43. Thus, no indicators were adjusted during project implementation, despite the fact that some indicators were no longer applicable and should have been removed or adjusted before or during project restructuring. For example, the indicator and target values for the component Increase in number of LGUs identifying the poor using acceptable means test and enrolling them in NHIP indigent program were no longer relevant by the time of project restructuring in 2010 and 2011 since the Bank, DOH, and PhilHealth agreed to use the NHTS-PR and enrolled the poor who were identified by the NHTS-PR in the NHIP Indigent Program, instead of relying on LGUs to identify the poor using an acceptable means test. 44. Based on available information, the ICR team concluded that during implementation, the results framework for the project was not properly tracked by either the Borrower or the Bank. In addition, the government did not submit annual project Progress Reports to the Bank. 4 Although according to the Loan Agreement, starting in 2007, the DOH was to submit an annual report to the Bank no later than March 31 of 4 The DOH produced annual reports on broader health collaboration, but there were no NSSHRP-specific indicators in the report. 11
26 each year, this did not occur. 5 Furthermore, efforts to identify the methods for tracking the progress of certain objectives and targets were inadequate. For example, despite being required in the PDO, at the time of project design no method was identified for tracking the utilization of health services by the poor, and this problem was not addressed during project implementation. 45. Despite the weaknesses in project M&E, specific M&E activities for Component D2 Sector Management and Coordination of Local Health Systems Reform progressed well. Although in the beginning, the DOH M&E framework initially proposed a long list of indicators, without a clear strategy for data collection, the issues were later addressed. The LGU scorecard later became one of the GOP s flagship products, and was rolled out from 16 convergence provinces to the rest of the country. While the DOH was unable to obtain health data from the LGUs on a regular basis prior to implementation of the LGU scorecard, the introduction of the scorecard, which was broadly supported under the rubric of the project, has been successful in changing this pattern and provides a framework for DOH-LGU relations that can be pursued through future reforms. 46. With regard to M&E utilization at the project level, M&E data were not used sufficiently to inform decision-making and resource allocation. Decisions about where to allocate and re-allocate project resources appear to have been based on where disbursement was quickest, which was to support the purchase of public health commodities (Component B). However, this did not take into consideration the performance-based aspect of resource allocation, which was stated in the PAD. Nevertheless, M&E data were appropriately utilized in Component D2. The DOH used the Service Level Agreements (SLA) and the LGU scorecards to monitor performance in all provinces, and scores based on the achievement of SLA performance targets were released together with the corresponding variable tranches that the DOH provided to the LGUs. 2.4 Safeguard and Fiduciary Compliance 47. Environment: The project did not trigger the environmental safeguard policy; it was rated as environmental category C, which meant that no specific environmental safeguards were required. The project did not invest in civil works or other activities in health facilities that could have any significant impact on the environment. 48. Indigenous People: The project did not have any potential adverse impacts on indigenous people. On the contrary, the project contributed positively to indigenous people who benefited from the intensified public health efforts and expanded coverage under the Indigent Program of PhilHealth. The Indigenous People Safeguard Policy (OP/BP 4.10) was triggered by this positive impact. Related to this, the DOH implemented an Indigenous People Planning Framework (IPPF), which outlined the 5 The annual report was expected to include (i) results of the monitoring and evaluation activities on the progress achieved in carrying out the project during the 12-month period preceding the date of the report; (ii) setting out the measures recommended to address problems and improve project efficiency. 12
27 measures that the DOH and PhilHealth had adopted to ensure that the health sector reform program supported by the project adequately addressed the needs and cultural preferences of indigenous people, and that the indigenous people participated in the benefits of the reform program. The results of implementing the IPPF were mixed, with some measures initiated but not completed. Some provinces also moved ahead on IP issues faster than others (e.g. Oriental Mindoro, Ifugao, and Mountain Province). 49. Procurement: During the early years of project procurement, performance was rated by the Bank team as moderately unsatisfactory. Progress occurred only in Component 2, while the other components moved very slowly, because the project encountered a number of systemic procurement challenges. First, procurement planning was not systematic, leading to stock-outs in a number of cases. Second, there were delays in the procurement of drugs and vaccines due to: (i) finalization of the Bank-required memorandum of understanding (MoU) between the DOH and United Nations (UN) agencies with regard to the procurement of drugs and vaccines from project resources; and (ii) difficulties that the DOH had in complying with the rules of the Central Bank of the Philippines regarding the purchase of dollars that were needed for advance payment to UN agencies. The DOH also planned to procure TBC drugs through the World Health Organization (WHO) using project resources, but the DOH and the WHO were not able to reach agreement on certain issues and failed to sign the MoU, leading to a shortage of TBC drugs in To address this shortage, the DOH shifted its procurement approach to national competitive bidding (NCB), and was able to procure TBC drugs and other drugs locally. The issue with the Central Bank was later resolved through the World Bank making advance payments directly to UNICEF. 50. It should also be noted that the Bank s position on procurement through negotiated contracts with UN agencies changed over time. Prior to, and in the early years of the NSSHRP, the Bank supported the procurement of vaccines and drugs through negotiated contracts with UN agencies. However, the Bank advised the DOH in 2010 that following that year, vaccines and drugs would have to be procured on a competitive basis. Nevertheless, as explained later in this document, the DOH saw the benefits of procuring vaccines through negotiated contracts with UNICEF and continued the practice with DOH s resources. 51. Financial Management: In the early years of the project, there were a number of financial management challenges, primarily due to inadequate staffing at both the agency and project level, leading to delayed recording and financial reporting and weaknesses in internal control. The DOH committed to address the weaknesses, and the situation improved gradually as more staff were hired to address financial management issues. However, despite the improvement, delays in the submission of complete quarterly financial reports, audit reports, and information from warehouses on the issuance of drugs continued to some extent. 6 The main concern was about a clause related to governance and anti-corruption. 13
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