The Sector-Wide Approach in the Health Sector

Transcription

1 TheSect or Wi deappr oach i nt heheal t hsect or Achi evement sandlessonslear ned May2010

2 HSRSP Report No The Sector-Wide Approach in the Health Sector Achievements and Lessons Learned Ministry of Health and Population Government of Nepal May 2010 I N T E R N A T I O N A L

3 Previous HSRSP Publications 2010 Management of Lamjung District Community Hospital April 2010 Pro-Poor Health Care Policy Monitoring: Household Survey from 13 Districts April Assessing Implementation of Nepal s Free Health Care Policy: Third Trimester Health Facility Survey - December 2009 Overview of Public-Private Health Care Service Delivery in Nepal November 2009 Health System Performance November 2009 Examining the Impact of Nepal s Free Health Care Policy: Second Facility Survey Report June 2009 Examining the Impact of Nepal s Free Health Care Policy: First Facility Survey Report April 2009 Cost and Equity Implications of Public Financing for Health Services at District Hospitals April 2009 Human Resource Strategy Options for Safe Delivery January Ministry of Health and Population Budget Analysis December 2008 National Competitive Bidding Process for the Procurement of Goods November 2008 International Competitive Bidding Process for the Procurement of Goods November 2008 Health Sector Strategy (translated into Nepali) October 2008 Costing Study on Incentives Packages for Nepal s Health Care Professionals August 2008 Equity Analysis of Health Care Utilization and Outcomes August 2008 Financing Pro-poor Health Care in Nepal August 2008 State-Nonstate Partnerships in the Health Sector June 2008 Monitoring Strategy and Toolkit for Pro-poor Essential Health Care Services February 2008 Rapid Costing of the Government of Nepal s Free Health Care Policy January 2008 Bottleneck Study for Timely Disbursement of Funds January Rapid Costing of Delivery and Emergency Obstetric Care November 2007 Operationalising Social Inclusion in the Health Sector September 2007 Ministry of Health and Population Budget Analysis August 2007 Nepal s Experience of Advocacy and Lobbying to Increase the Health Sector Budget July 2007 Implications of the Government of Nepal s Free Health Care Policy June 2007 Equity Analysis in Resource Allocation to Districts June 2007 Please note that all of our publications may be downloaded from our website: This paper gives an overview of the achievements and lessons learned during the implementation of the sectorwide approach to the health sector in Nepal. The opinions expressed herein are those of the authors and do not necessarily reflect the views of DFID. HSRSP provide policy and strategy support to the Ministry of Health and Population (MoHP) in implementing its sector reform agenda. Additional information on HSRSP is available by contacting: Dr. Rob Timmons, Team Leader, or Devi Prasai Prasad, Health Economist, at: HSRSP, Ministry of Health and Population, P.O. Box 8975, EPC 535, Kathmandu, Nepal. (telephone: ; fax: ; hsrsp@nphsr.rti.org). Suggested citation: RTI International (May 2010): The Sector-Wide Approach in the Health Sector: Achievements and Lessons Learned. Research Triangle Park, NC, USA.

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5 SWAp in the Health Sector 2010 Contents I. Introduction Political context Macroeconomic environment Health system issues... 4 II. Formulated and Implemented Pro-poor Health Care Policies Targeted free care policy Universal free essential health care policy Free delivery care policy Safety net for the poor Other pro-poor policies... 6 III. Major Achievements and Lessons Learned Increased health budget Developed spending capacity of the government Pooled funding as an effective aid instrument Increased allocative efficiency Decentralization of funds Pooled funds allocate greater resources to maternal health Developed innovative financing schemes Improved health care utilization and outcomes Improved health outcomes with equity Established greater coherence between policies programmes and budgets Linked expenditure to outputs Promote the roles of the private sector IV. Advance of Technical Support to SWAp Right size of technical cooperation Good mix of time-bound deliverables and unallocated funds in the work plan Reduced transaction costs and fragmentation Increased feeling of ownerships in the health sector programme i

6 Achievements and Lessons Learned 2010 V. Good Practices Ownership of sector reform by the government Harmonized the donors Equal treatment of all donors TA team established a good relationship with the MoHP Allowing TA for urgent work even during the planning phase Extended technical support to MOHP even during inception and transitional phases Better public expenditure management VI. Risks and Challenges Emerging conflicts Reducing transaction cost Bring other actors in the health sector into the sector development forum Harmonize and align policies, plans and programmes Promoting the cost effective interventions Attracting donors to pooled funds Safeguarding fiduciary risks Enhancing efficiency Ensuring Sustainability References ii

7 SWAp in the Health Sector 2010 List of Acronyms ARI AusAID AWPB BEOC BPKIHS CB-IMCI CCM CDD CEOC CPM DFID DPHO eawpb EDP EHCS EPI FMIS FP/MCH GAVI GDP GFATM GoN HDI HIV/AIDS HP HSRS I/NGO IDA IMCI IMR JAR MDG MLI MoF Acute Respiratory Infection Australian Agency for International Development Annual Work Plan and Budget Basic Emergency Obstetric Care BP Koirala Health Institute and Science Community-Based Integrated Management of Childhood Illness Country Coordinating Programme Control of Diarrhoeal Disease Comprehensive Emergency Obstetric Care Communist Party - Maoist U.K. Department for International Development District Public Health Office Electronic Annual Work Plan and Budgeting External Development Partner Essential Health Care Services Expanded Programme of Immunization Financial Management Information System Family Planning/Maternal Child Health Global Alliance for Vaccines and Immunizations Gross Domestic Product Global Fund for AIDS, Tuberculosis and Malaria Government of Nepal Human Development Index Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome Health Post Health Sector Reform Strategy International/Non-Governmental Organization International Development Association Integrated Management of Childhood Illness Infant Mortality Rate Joint Annual Review Millennium Development Goal Ministerial Leadership Initiative Ministry of Finance iii

8 Achievements and Lessons Learned 2010 MoHP MSA MTEF MYPA NFHP NHSP IP NPC ODA PFM PHCC PIU RTI SDA SHP SIP SLTHP SWAp TA TB TI ToR UML UN VAT VSC WHO Ministry of Health and Population Management Support Agency Medium-Term Expenditure Framework Multi-Year Action Plan Nepal Family Health Programme Nepal Health Sector Programme Implementation Plan National Planning Commission Official Development Assistance Public Financial Management Primary Health Care Centre Project Implementation Unit Research Triangle Institute Sector Development Approach Sub-Health Post Sector Investment Programme Second Long-Term Health Plan Sector-Wide Approach Technical Assistance Tuberculosis Transparency International Terms of Reference United Marxist-Leninists United Nations Value-Added Tax Voluntary Surgical Contraception World Health Organization iv

9 SWAp in the Health Sector 2010 I. Introduction In the simplest sense, reform means positive change. Health sector reform can be defined as sustained, purposeful and fundamental change sustained in the sense that it is not a "one shot" temporary effort without enduring impacts, purposeful in the sense of emerging from a rational, planned and evidence-based process; and fundamental in the sense of addressing significant, strategic dimensions of health systems (Berman, 1995). Other authors listed specific dimensions of health system change that were typically part of reform strategies (Cassels, 1995). Clearly, health sector reform can include a wide range of action on health systems. However, it is difficult to differentiate between major and minor changes, and sustainable and temporary changes, or purposive and crash changes, and reform and other changes. Still, the emerging critique of the concept suggests that we should be more explicit about what was sought and what is now open to criticism. We need to be clearer about what qualifies as health sector reform in order to document the lessons learned and best practices. The Sector Wide Approach (SWAp) defines a method of working between Government and donors, and should not be confused with the specific instruments of development cooperation, such as the World Bank Sector Investment Programmes (SIPs) which have been associated with the approach in particular countries. The sector development approach (SDA), goes far beyond the SIP, looking beyond actual achievements and looks at health outcomes as a whole. Both can be considered Sector Wide Approaches1 For the purpose of this short paper, the defining characteristics of a SWAp are that all significant funding for the sector supports a single sector policy and expenditure programme, under Government leadership, adopting common approaches across the sector, and progressing towards relying on Government procedures to disburse and account for all funds. However, a key message from the experience so far is that the SWAp is, as the name implies, an approach rather than a blueprint. Most programmes, even quite well-established ones, are in the midst of a process for moving over time towards broadening support to all sources of funding, making the coverage of the sector more comprehensive, bringing ongoing projects into line with the SWAp, initiating work to capture the direct expenditure of development partners that is not reflected in the government accounts, and developing common procedures and increased reliance on the Government. The Health Sector Strategy An Agenda for Change was developed through the rigorous efforts of the government and external development partners for a year with the active involvement of policymakers, lawmakers, external development partners, non governmental organizations, academicians, the private sector and other relevant stakeholders. A series of workshops, consultative meetings, and seminars were organized and several international and national consultancy reports were produced to serve the strategy. After the development of the Health Sector Strategy An Agenda for Change, the underlying intention of the Health Sector Reform Strategy (HSRS) is to move the health sector towards strategic planning and a Sector Wide Approach (SWAp). The HSRS sets out three Programme Outputs (Prioritized 1

10 Achievements and Lessons Learned 2010 Essential Health Care Services, Decentralized Management of Health Facilities, and Role for the Public Private Partnership); and five Sector Management Outputs (Sector Management, Financing and Resource Allocation, Management of Physical Assets, Human Resource Development, and Integrated Management Information System). Thus, there are a total eight HSR Outputs. The first phase has the purpose of increasing the coverage and raising the quality of Essential Health Care Services (EHCS), with a special emphasis on improved access for poor and vulnerable groups through an efficient sector-wide health management system developed with the provision of adequate financial resources. It is an operational plan meant to achieve the MDGs. The evolution of SWAp in health sector: Health Sector Strategy: An Agenda for Reform - December, 2003 Signing of Statement of intent to guide the partnership in health sector in Nepal - by GoN and 11 EDPs - February, 2004 Letter of sector development policy - written by then-deputy Prime Minister and Finance Minister - July, 2004 Nepal Health Sector Programme- Implementation Plan ( and 2010) August, 2004 Signing of Joint Financing Arrangement (JFA) between GoN, DFID and the World Bank - March, 2005 Signing of JFA with AusAid in June 2009 as third partner to provide health sector budget support 1.1 Political context The health sector reform initiative has passed through an uneasy transition as a result of a tripolar power struggle between the king, the political parties and Maoist rebels. The Maoists took up arms in 1996 to form an equitable, inclusive and federal Nepal. This insurgency intensified in 2003, disrupting the fabric of life and terrorizing the countryside. The conflict jeopardized the delivery of health services, disrupted economic activities, and threatened Nepal as a nation state. On February 1, 2005, King Gyanendra dismissed the coalition government (the third and broadest-based interim government since October 2003, when he dismissed the elected cabinet on account of its inability to hold parliamentary elections) and formed a new Council of Ministers under his own chairmanship. The conflict sharpened further. The popular movement started with the 12 points of understanding between the Seven Parties Alliance and the Maoists in 2006, followed by the April popular movement (Jana Aandolan 2). The king restored parliament as per the demands of the popular movement, and in the spirit of the popular movement, parliament cut the rights of the monarchy and suspended the king. A new interim constitution was formulated and the Maoists signed a comprehensive peace agreement in alliance with the seven parties and the government. In 2006, the Maoists joined the government, and in March 2008, won the 2

11 SWAp in the Health Sector 2010 election for constituent assembly and a national government was formed under the leadership of the Maoists. Once the Maoists entered the parliamentary system, several new armed struggles emerged and conflict intensified in the Terai region. Abduction, kidnapping and killings, as well as frequent disruptions to transportation became common, causing great disruption. Less than a year after taking office, the Maoist Prime Minister resigned, blaming the President for not endorsing the government s decision to change the Commander-in- Chief. A new coalition government was formed, headed by CPM (UML), and excluding the Maoists. After the popular movement of April 2006, people s expectation of health care grew significantly, and access to health care services was declared a fundamental human right. The Interim Constitution of Nepal 2063 (2007) enshrined the state's commitment to its citizens health for the first time in the history of Nepal (GoN 2007). The allocation of resources under the SWAp came to the Ministry of Health and Population and the role of MoHP increased to allocating the funds to addressing the demand of the people. 1.2 Macroeconomic environment Nepal's Gross Domestic Product (GDP) at producers prices increased by 2.7 percent in FY 2004/05, but is expected to increase by only 1.9 percent in FY 2005/06. The growth rate of GDP in 2006/07 increased marginally. The gap between revenue and expenditure has been widening in recent years. In FY 2003/04, the revenue-to-gdp ratio was 12.5 percent, but reached 13.1 percent in FY 2004/05. On the other hand, the ratio of government expenditure to GDP increased by 1.2 percentage point in the same period, reaching 19.2 percent in FY 2004/05. The gap between revenue and expenditure reached to 6.1 percent (MoF, 2006). Some firms have closed due to the conflict, and it is difficult to restore them. Many industries have been adversely affected by the conflict and are hardly surviving. Thus, the contribution of direct taxes is small. Widening the tax bracket offers but little hope of increasing the value added tax (VAT), and revenue mobilization would be improved only marginally. But the coalition government has to reconstruct the infrastructure that was damaged and destroyed during the conflict. Social reintegration has remained a major challenge and demands sizeable resources. Calls to increase the salaries of civil servants has been ongoing as the prices of consumable goods and services skyrocket. Furthermore, the management of shelter, food, clothes and other expenses for the over 30,000 Maoist soldiers in cantonments has put additional pressure on public funds (RTI International, 2007). Support to families of those who lost their lives during the conflict, the wounded and disappeared would certainly need additional funds. Additionally, rehabilitation and support to the 30,000 people displaced by the Koshi flood in 2008 has put additional pressure on public funds. The Government of Nepal has allocated significant resources for health sector development, increasing the health budget from 5.87 percent of the national budget in 2004/05 to 7.16 percent in 2007/08, before gradually decreasing it to 6.24 percent in 2009/10 (MoF, 2007). 3

12 Achievements and Lessons Learned 2010 Public expenditure on health as a percentage of GDP is reached 1.36 percent in 2007/08 from 0.8 percent in 2000/01. In recent years, revenue mobilisation has improved marginally. Revenue mobilisation as a percentage of GDP increased by 1 percentage point in FY 2006/07 and reached 12.1 percent compared to 11.1 percent in FY 2005/06. The ratio of the government expenditure to GDP increased to 18.4 percent in FY 2006/07 from 17.1 percent in FY 2005/06. But the gap between revenue mobilisation and public expenditure is widening - it increased by 0.4 percentage points in 2006/07 and reached 6.3 percentage points (MoF, 2008). Thus, there is little scope for increasing the public expenditure on health without increasing the GDP. This naturally affects budget allocation to the health sector. 1.3 Health system issues Structural changes were made after the introduction of the SWAp, and the Population Division of the Ministry of Population and Environment was brought under the MoHP. This reduced fragmentation and enhanced coordination in the health sector. A high level policy forum was created under the MoHP, and policy dialogue was initiated before the policy endorsement. In recent years, policymakers have placed great consideration on egalitarian ideology and equal access to and utilisation of health care, with the result that the MoHP introduced a free health care policy in The free care policy targets the poor, the marginalized and the destitute to increase their access to and utilization of health care services. On December 15, 2006 ( ), the GoN decided to provide emergency and inpatient services free-of-charge to the poor, destitute, underserved, the elderly, those living with physical and psychological disabilities, and female volunteers, known as Female Community Health Volunteers (FCHVs), at district hospitals and primary health care centres (PHCCs). On October 7, 2007 ( ) the GoN decided to offer essential health care services free-of-charge at all health posts and sub-health posts, with implementation beginning in January On November 16, 2008 ( ) the government again decided to extend the free care to the PHCC level for all. A total of 25 drugs are dispensed free-ofcharge to all at sub-health posts, and 35 at health posts and PHCCs. District hospitals made services free to the poor and destitute, with all drugs available free-of-charge. Only 40 essential drugs are made available free for those who are non-targeted. There is pressure on the government to increase funding for drugs in the context of free care. Infrastructure development and training for SBAs and other care providers, however, absorbs considerable resources. The health information management system (HMIS) has been beginning to disaggregate data by major ethnicity and castes to assess the benefits of public health expenditure. Due to changes in the government, Nepal has seen six Health Secretaries and seven Director Generals at the Ministry of Health and Population and Department of Health Services between 2004 and Similar changes were seen at the Programme Director and Programme Manager levels. 4

13 SWAp in the Health Sector 2010 II. Formulated and Implemented Pro-poor Health Care Policies After the Jana Aandolan II (Popular Movement) in 2006, a pro-poor health policy was formulated to address the needs of the poor. The objectives of the pro-poor health care policies are to increase access to and utilization of essential health care services, particularly by poor and excluded groups. The policies also strive to correct under-utilization of health care facilities, human resource, and logistics. 2.1 Targeted free care policy To date, most of the focus has been on curative care. In the first phase of implementation, free services were made available at district hospitals with fewer than 25 beds, and at PHCCs in districts where hospital development committees had not yet been established. In the second phase the following year, free services were extended to all district hospitals with more than 25 beds. In addition to this, the MoHP announced targeted outpatient service in 35 low HDI districts in July Beginning in January 2009, targeted free care for outpatient services was extended to all district hospitals. In September 2008, the Government of Nepal announced free selected essential drugs for all clients irrespective of income. 2.2 Universal free essential health care policy In October 2007, the GoN declared health services at health posts and sub-health posts freeof-charge to all to increase access to and utilization of basic health care services, particularly by poor and excluded groups. The policy was implemented in mid-january 2008, and contributes to mitigating the financial barriers to seeking care, provides relief to poor families, promoting the utilization of essential health care services, and, ultimately, contributes to improving the health status of the population. It is too early to see the effect of the policy. However, the utilization of outpatients increased by percent in the 6 months following implementation compared to the previous six months. The universal free care policy was extended to the primary health care centre level in Free delivery care policy On September 10, 2008, the President announced the free delivery care policy including a transportation stipend as an incentive to mothers, as stated in the policy and programmes of the government 2008/09. Delivery care will be provided free-of-charge to all mothers irrespective of income, type of delivery (normal, complicated and c-section) and level. In addition to free care, each mother gets NRs to defray transportation costs. This policy also employs a targeted approach, targeting services rather than beneficiaries. This certainly helps to achieve MDG 5. 5

14 Achievements and Lessons Learned Safety net for the poor In addition to the aforementioned free health care policy, a social security scheme has been formulated to protect poor clients visiting secondary and tertiary hospitals. At least five percent of the grant provided from the central level and five percent of user fees has been allocated for the social security scheme, and the poor and destitute have been treated by using these funds. Beginning in 2005/06, the GoN increased the rate allocated to poor and destitute clients to seven percent. A demand-side financing scheme (of NRs. 1,000) was introduced in FY 2008/09 to increase utilisation of treatment for kala-azar patients; free renal dialysis for senior citizens above 75 years of age, and free cardiac surgery for those under fifteen years or above 75 years at Shahid Gangalal National Heart Centre. 2.5 Other pro-poor policies Beginning in July 2008, the government agreed to provide a cash incentive of NRs to victims of kala-azar to encourage them to come to health facilities for early detection and treatment. Free community-based IMCI was in its pilot phase before the NHSP IP, and it has been scaled up to all 75 districts in the last five years. The GoN, introduced free repair of prolapsed uteri in the three years interim plan and committed to repairing 12,000 uteri in 2008/09. A series of mobile and static clinics have been arranged to repair the uteri free-ofcharge to all. In addition to this, a Skilled Birth Attendant policy and strategies have been developed and implemented to meet the needs of communities in under-served areas where a majority of poor people live. A blood transfusion policy has also been formulated at the sub-sectoral level, focusing on c-sections. Several other policies are adopted to achieve health-related MDGs. III. Major Achievements and Lessons Learned Despite intense political and ethnic conflicts, and the unfavorable macroeconomic environment, the health sector made significant progress in increasing resources for health, increasing access to and utilization of health care, and improving health outcomes. 3.1 Increased health budget General government expenditure as a percentage of GDP remained as low as one percent. As per the public expenditure review of 2004, per capita public spending on health was NRs. 340 (US$ 4) in 2003, and the total per capita health expenditure was NRs (US$13) (Prasai et al 2006). The size of the health budget increased markedly from five billion Nepali rupees in 2003/04 to billion in 2009/10. Similarly, the share of the national budget allocated for health increased significantly from five percent in 2003/04 to 7.2 percent in 2007/08, but then decreased to 6.24 percent in 2009/10. The share as well as the volume of the health 6

15 SWAp in the Health Sector 2010 budget increased markedly after the introduction of the NHSP IP in 2004/05. The budget more than tripled in the last six years, and the share increased by 2.2 percentage points in 2007/08 and decreased to 0.92 percentage points between 2007/08 to 2009/10. Global funds (GFATM, GAVI, IHP, MLI) as well as flexible parallel funds increased during the NHSP IP period. Figure 3.1: Size and share of health budget Source: RTI, Budget analysis, 2009/10 The per capita public expenditure on health increased from NRs. 187 in 2004/05 to NRs. 542 in 2009/10. The per capita public expenditure on health nearly tripled in six years. Table 3.1: Per capita public spending on health 2004/ / / / / /10 Total expenditure on Health (MoHP) * Population Per capita public spending on health in NRs Per capita public spending on health in USD Source: Statements of expenditure 2004/ /08 and Annual report of DoHS 2007/08, *estimated based on trends 7

16 Achievements and Lessons Learned 2010 Lessons Learned Higher spending capacity of MoHP attracted more domestic and international funds Evidences such as National Health Accounts, Public Expenditure Review, MTEF, Need Assessment of Health related MDGs, and report of health outcome helped at in raising the size of health budget Appreciate both pooled and non pooled contributions Advocacy with evidence and lobbying play vital role in increasing the budget for health development in 2007/08 Combined efforts of internal and external advocacies seemed effective Evidence based advocacy proved effective Consistent in message/slogan added additional force Lobbying through social committee of parliament would be appropriate: Government welcomes constructive advocacy Informal relationship plays important role in convincing and lobbying issue Media particularly press can play important role in advocacy Civil society played influential role to cut the budget of "Royal Palace" and diverted it to the health and education sectors For details, please see Nepal's experience in advocacy and lobbying in increasing the health sector budget. Research Triangle Park, NC, USA, Developed spending capacity of the government Spending capacity is the proxy for the general, financing and management capacity of the government. The spending capacity of the MoHP increased markedly in the last five years, increasing from NRs. 3.6 billion in 2003/04 to NRs 9.7 billion in 2007/08. It is evident from Table 3.2 that overall financial and management of health sector increased significantly in the review period. Table 3.2: Spending capacity of the MoHP, in millions of NRs. Description Base year SWAp 2003/ / / / / /09 MoHP Budget Expenditure Expenditure against allocation (%) Source: Statements of Expenditure, Finance Section, MoHP 2003/ /08 The MoHP also increased their absorptive capacity steadily from 67.7 percent in 2003/04 to percent in 2007/08. The gap between budget and expenditure is steadily narrowing between 2004/05 and 2007/08. The gap narrowed from 31 percent to 18.5 percent during the review period. The absorptive capacity changed by 10 percentage points between 2003/04 to 2007/08, and further increased to 14 percentage points in 2008/09. 8

17 SWAp in the Health Sector 2010 Lessons Learned Assurance of NPC and MoF in accepting rational budget proposal of MoHP helped lot to estimate real budget. Many programme managers used to inflate the budget due to the fear of budget cut by NPC and MoF. Over- budgeting corrected by reviewing the AWPB at department, MoHP, NPC and MoF levels. Uncommitted funds of donors should be excluded during budgetary exercise to correct the inflated budget, Procurement plan helped in spending the budget on drugs, medical supplies and building construction. Quarterly review of programme and financial performances helped to improve spending capacity of programme divisions. Advance release of donor fund particularly by DFID and the World Bank helped a lot to spend the budget in the planned manner. There was no shortage of fund due to the advance release of donor funds. Early sending the programme approval and the authorization letters to districts, easier procedure to disburse funds help to increase the spending capacity. Stimulates the district managers to initiate the process of procurement and to develop the expenditure plan. These help to increase the spending on health at district levels. Improving the coordination between the MoHP, DoHS and Programme Divisions/Centres in monitoring of funds contributed for spending resources. 3.3 Pooled funding as an effective aid instrument In the past, Nepal has practiced both pooled and non-pooled funding under the framework of the NHSP- IP. The absorptive capacity of government increased from 80 percent in 2004/05 to percent in 2008/09. At the same time, the percentage of the donors pooled fund that was successfully absorbed increased considerably, from 72 percent in 2004/05 to percent in 2008/09. The percentage of non-pooled funding that was absorbed also increased, growing from 44 percent in 2004/05 to 62.6 percent in 2007/08. These figures indicate that pooled funds as an aid instrument are more effective than non-pooled funds. The increases in absorptive capacity increased due to the simplicity in spending the funds, and because the government felt greater ownership over the pooled funds. Table 3.3: Percentage of pooled and non-pooled funds absorbed 2004/ / / / /09 GoN pooled fund Pooled partners' funds Total pooled funds Non-pooled funds Total Source: statements of expenditure 2004/05, 2005/06, 2006/07, 2007/08 MoHP On the other hand, the pooled fund increases feelings of ownership, improves alignments between and among the donors and government, and harmonizes budgets and programmes. 9

18 Achievements and Lessons Learned 2010 Lessons Learned Government feels greater ownership of pooled funds than non-pooled funds Allocation and flow of funds is easier when funds are pooled Fewer hassles in releasing the pooled funds Recognized the government rules and regulation in procurement and spending budget Reduced delays in reporting to pooled partners increases absorptive capacity 3.4 Increased allocative efficiency Allocative efficiency improved between 2004/05 to 2008/09. The share of the budget devoted to EHCS increased from 82.6 percent in 2004/05 to percent in 2008/09, indicating that more resources became available for MDG related activities since EHCS explicitly focuses on MDGs. The share devoted to non-ehcs decreased from percent in 2004/05 to percent in 2008/09. The share devoted to prioritized EHCS increased from 60 percent in 2004/05 to 62.7 percent in 2008/09.The share devoted to logistic management increased from 7 percent in 2004/05 to 10 percent in 2008/09. The budget for tertiary hospitals was redirected to essential health care. 10

19 SWAp in the Health Sector 2010 Table 3.4: Allocation of expenditure by outputs, in millions of NRs. 2004/ / / / /09 NRs. % NRs. % NRs. % NRs. % NRs. % Prioritized EHCS Decentralized service delivery Private NGOs Sector Development Sector Programme management Health financing resource management Logistic management Human resource management Integrated MIS Total of EHCS outputs Beyond EHCS Grand total Source: Statement of expenditure, MoHP 2004/ /09 11

20 Achievements and Lessons Learned 2010 The right mix of expenditure is essential to produce the outputs. Generally, the share of capital expenditure ranges from 15 to 20 percent, depending upon the technology and the scaling up of health care programmes. The share of capital expenditure increased steadily from 9 percent in 2004/05 to percent in 2007/08, decreasing slightly to 20.7 percent in 2008/09. Table 3.5: Expenditure by inputs, in millions of NRs. 2004/ / / /09 Level Amount Share Amount Share Amount Share Amount Share Amount Share Recurrent Capital Total Source: Statement of expenditure, MoHP 2006/07/2007/08, and 2008/09 Lessons Learned More allocation for equipment and instruments for hospitals, PHCCs and HP/SHPs contributed to producing more services, such as x-ray and laboratory services. Allocation of more funds for building construction helps to build comprehensive emergency obstetric care (CEOCs), basic emergency obstetric care (BEOCs) and birthing centres. The collaboration between the MoHP and the Department of Building Construction and Urban Development was found to be instrumental in planning, designing and implementing the construction and renovation of hospitals and other health institutions, and helped to increase capital costs 3.5 Decentralization of funds Decentralization of funds is at the core of Nepal s decentralization policy, and the GoN has made efforts to shift funds from the central to district level in order to address local health needs. Funds for safe motherhood and family planning, and for child health care have been transferred to the district level. So too were funds for hospital, PHCC and HP construction. Responsibility for procurement of drugs and medical supplies was also transferred to the districts. As a result, the share of the central level budget decreased from 59 percent in 2004/05 to 42 percent in 2008/09; the district budget, in turn, increased from 7 percent in 2004/05 to 27 percent in 2008/09. This trend shows that the SWAp was successful at transferring funds from the central to the district level. The administrative budget includes salaries and allowances, so it has fluctuated due to changes in the pay scale, growing from 34 percent in 2004/05 to 44 percent in 2005/06, then decreasing to 31 percent in 2008/09. 12

21 SWAp in the Health Sector 2010 Table 3.6: Health sector budget by level 2004/ / /09 Level Amount Share Amount Share Amount Share Amount Share Amount Share Administrative Centre District Total Lessons Learned Source: MOF, Budget details (Redbooks) 2003/04, 2004/05, 2005/06, 2006/07, 2007/08, 2008/09 Sectoral advocacy for financial decentralization put pressure to MoHP to transfer the funds from centre to district level. Better absorption of district level fund attracted additional funds. Transferring the funds and authority along with responsibility of programme implementation seems effective, thus trasferred funds to district level. Simply transferring the funds without transferring the skills on procurement increases the cost/price of goods and services. The price of drug increased many folds artificially. 3.6 Pooled funds allocate greater resources to maternal health Maternal health was of great concern to the government and to the external development partners prior to introducing the SWAp. They had doubts that there would be adequate funding for maternal health, so thy earmarked separate funds for safe motherhood. The pooled fund contribution to maternal health increased from 23 percent in 2004/05 to 68 percent in 2008/09 whereas earmarked funding fell from 77 percent in 2004/05 to 32 percent in 2008/09, revealing that the pooled fund allocates adequate funds for safe motherhood. 13

22 Achievements and Lessons Learned 2010 Table 3.7: Expenditure on safe motherhood and family planning, in millions of NRs. Pooled fund Fiscal Year GoN DFID/IDA 14 Total pooled fund Earmarked Total Expenditure 2004/ / / / / Share in % 2004/ / / / / Developed innovative financing schemes In the last three years, some innovative financing schemes, such as demand-side financing for safe delivery service, have been introduced and implemented throughout the country. In recent years, the choice was given to clients to receive delivery services from state, para-state or not-for-profit providers, whereas in the past, incentives were only given to women at government facilities. A similar type of demand-side financing has been introduced for Kalaazar case management. A unit cost is fixed and a case-based incentive mechanism has been developed for care providers for abortion care and repair of prolapsed uteri. These have increased the efficiency of funding. 3.8 Improved health care utilization and outcomes Health care utilization also increased with the increase in public health care expenditure. The NFHP 2009 survey reported that 83.5 percent of children aged months received all basic vaccinations, and that DPT3 coverage was at 89.8 percent. Immunization against measles is taken as the proxy for fully immunized children because it is the last to be given, at 9-12 months. This number increased from 79 percent in 2004/05 to 85.6 percent in The mid-term review of NHSP-1 calculated that CB-IMCI had probably been responsible for a reduction of 8 per 1,000 deaths in the under-five mortality rate, based on CB-IMCI coverage of 66 percent of the country, mostly as a result of improved treatment of pneumonia. The rate may since have gone up due to the scaling up of IMCI to all 75 districts. The reported incidence of ARI per 1000 under-five children increased from 344 in 2003/04 to 615 in 2007/08 due to the scaling up of IMCI services, thus many more sick children came

23 SWAp in the Health Sector 2010 under the treatment net, although severity has decreased due to management at the community level. Deliveries attended by health workers as a percentage of expected pregnancies increased from 18 percent in 2003/04 to 32 percent in 2007/08. The NFHP survey of 40 districts shows a further increase in assisted deliveries to 33 percent in 2009, and institutional deliveries increased from 14.1 percent in 2004/05 to 27 percent in The contraceptive prevalence rate increased from 40.2 percent in 2003/04 to 48 percent in 2006 (NDHS, 2006). The TB case finding rate ranged from per 100,000 in the review period, while an 88 percent sputum conversion rate has been sustained in the review period. Nepal has made good progress in achieving the health-related MDGs despite limited funds and capacity. Progress is on track for MDGs 4, 5 and 6. Good performance in terms of health outcomes led to additional 50 million USD financing from the World Bank in 2008/09 As far as MDG 1 is concerned, the health sector is contributing considerable resources, although it is difficult to achieve this MDG through the health sector alone. Thus, the health sector has joined hands with other sectors to reduce prevalence of stunting. Table 3.8: Progress health related MDGs Indicators Remarks MDG-1: Nutritional stunting (height for age) % Additional resources needed MDG-4: Child mortality rate/1000 live births On track MDG-5: Maternal mortality ratio/ live births ( ) 134 On track MDG-6: HIV prevalence in year/ population MDG-6: Tuberculosis prevalence rate/ 100,000 population MDG-6: Malaria prevalence rate/ population at risk Source: 10th JAR report 3.9 Improved health outcomes with equity Halt & reverse Halt & reverse Halt & reverse Need more resources On track On track Health care utilisation and public expenditure on health are two of the determinants of underfive mortality rates. Thus, increasing public expenditure on health and health care utilisation contributes to the reduction of under five mortality rates. The under-five mortality rate for the poorest wealth quintile decreased disproportionately compared to the wealthier quintile, as seen in Figure 3.1 below, dropping by 68 per thousand live births compared to a decrease of 32 per thousand live births among the richest quintile. The under-five mortality of the poorest 15

24 Achievements and Lessons Learned 2010 quintile was 166 per thousand live births in 1996 but fell to 98 per thousand live births in The greatest decline was seen in the second quintile, where it changed by 74 per thousand live births. The difference between the richest and poorest quintiles was 87 per thousand live births in 1996, but fell to a difference of 51 per thousand live births in 2006, indicating a marked improvement in the health outcome of children. Sharper declines in the under-five mortality rate were seen in the bottom three quintiles, where the rate fell from changed by per thousand live births compared to in the fourth and fifth quintiles. Figure 3.2 Trends in Under five mortality, per thousand live births, by wealth quintile Source: RTI International It is evident from figure 3.2, on the following page, that inter-ethnic inequality in the infant mortality rate (IMR) has gradually decreased over the past decade. Ethnicity could be treated as a proxy for poverty. The disparity in the IMR between Dalits and Brahmins/Chhetris has narrowed from 11 per thousand live births in 1996 to 9.2 per thousand live births in Similar improvements have been seen between all Janajatis and Newars, where the IMR fell from a difference of 27.6 per thousand live births in 1996, to 22.8 per thousand live births in The greatest reduction in IMR has been seen among Other Terai Peoples/Madhesis groups, where it decreased from per thousand in 1996 to 63.8 per thousand in 2006, a change of 41 per thousand. The IMR among Dalits fell by 35.1 per thousand live births compared to 29 per thousand live births among Muslims, all of which indicates improvements in equity for health outcomes. 16

25 SWAp in the Health Sector 2010 Figure 3.3 Trend in the infant mortality rate (IMR) by ethnicity Source: RTI International Established greater coherence between policies programmes and budgets The Second Long-Term Health Plan, (SLTHP) provides the basis for equitable, gender-sensitive, high-quality health care for the Nepali people, especially the poor, women, and other vulnerable groups. A cost-effective essential health care package (EHCS) has been proposed for the district and lower levels. Its objectives are in line with the MDG s Poverty Reduction Strategy Paper and the Tenth Five-Year Plan. The Nepal Health Sector Programme- Implementation Plan (NHSP IP) was formulated to operationalize the PRSP and the Tenth Plan. The targets of the plans harmonized with the MDGs and revised log frame of the NHSP-IP and were agreed upon by the government and development partners. The MTEF plays an important role in giving limited resources to priority programmes and building linkages between the periodic plan and the Annual Work Programme and Budget. The linkage was established between SWAp and MTEF, and the periodic plan. During the review period, sectoral policies and strategies also worked towards achieving the MDGs. For example: the safe delivery incentive scheme, a demand-side financing scheme, the Skilled Birth Attendants Policy, the Blood Transfusion Policy, the National Abortion Policy, and the National IEC strategy for safe motherhood have been developed, translated into programmes and scaled up to achieve MDG 5. The Strategy for Integrated Management of Childhood Illness (IMCI), the National immunization programme, is guided by the Multi- 17

26 Achievements and Lessons Learned 2010 Year Plan of Action (MYPA ). This programme covers all the districts and Village Development Committees (VDCs) of the country. The nutrition programme JE Vaccination was introduced and scaled up. The saving newborns lives programme was initiated to reduce the neonatal mortality rate, as this accounted for 70 percent of infant mortalities. Hib disease surveillance was initiated and a national nutrition programme was reactivated and expanded to schools and communities with the institutional rehabilitation back-up of referral hospitals to achieve MDG 1. The national strategy on HIV/AIDS was developed for to make multisectoral efforts in order to prevent and control the problem. Public-private partnership was developed for TB control and strengthening of the malaria control programme. Lessons Learned Harmonization of goals/objectives and targets helps to avoid confusion and helps to achieve the health related MDG targets. MDGs based budget exercises helped to increase the budget for health-related MDGs. Policy remains in paper if an adequate budget is not allocated to them, e.g. adolescent health Linked expenditure to outputs In the initial year, the Joint Annual Review (JAR) focused on the expenditure side and more discussion focused on inputs such as financial and human resources, drugs, equipment and technology. Discussion gradually moved to examining outputs or performance of the whole sector. Starting with the 5 th JAR, the donors and government started to commit their contributions in consideration of the performance and scaling up of the programme. More visibly, beginning with the 7 th JAR, expenditure was linked to outputs and discussion considered both inputs and outputs. For example: a programme analysis with budget was presented during the 7 th JAR, and was the marginal budget analysis for MDG-related programmes and budgets linked with outputs. The eawpb has been developed and is specifically used to develop the annual work plan and budget. This also helped to make the AWPB output-oriented. Lessons Learned Linking activity and expenditure to output is a useful exercise. Marginal budget analysis for MDGs would be useful in achieving the MDGs. Output-based budget discussion seems effective in increasing performance of the health sector. 18

27 SWAp in the Health Sector Promote the roles of the private sector In the recent years, the role of the private sector in public service delivery has increased significantly. In the course of joint annual planning and joint annual monitoring, participation of private organizations and NGOs increased particularly in safe motherhood and child health. The safe delivery incentive scheme, a demand-side financing scheme, has expanded to the private sector (not-for-profits) to achieve MDG 5. The MoHP has welcomed the role of the private sector, particularly of not-for-profits, in IMCI (integrated management of childhood illness), safe motherhood, and family planning, and these services are available in all registered private facilities. The share of the private sector in voluntary surgical contraception (VSC) increased from 27.4 percent (23,065 out of 84,015 cases) in 2004/05 to 44 percent (47,760 out of 85,819 cases) in 2006/07. About 88 percent of safe abortions were conducted in private facilities in 2006/07. A public private partnership in tuberculosis control was developed in Lalitpur municipality where it is estimated that 50% of patients with TB are managed in the private sector (Karki et al 2007 and Newell et al, 2004); this programme has since been expanded to other rural and urban areas, and is a model for other developing countries. The guidelines for the Amma Programme (safe delivery programme) have been changed and provisions have been made to implement the Amma Programme in private hospitals (not-for-profit). Under this scheme, both mothers and care providers get incentives for all three types of deliveries (normal, complicated and c-sections). Uterus prolapse remained a major health care problem and the government has explored public private partnerships to repair prolapsed uteri. Guidelines have been developed and approved by the cabinet for management, funding and performance. A contract has been signed between a private hospital and the MoHP to repair prolapsed uteri at approved rates. The MoHP has also allowed channeling funds to private hospitals for the repair of prolapsed uteri. Representation at the JAR from the private sector and civil society has increased with the increase in JAR meetings. The Ministry of Health and Population has made several efforts at drafting contracts for the private management of public hospitals, and a few modalities have been developed for management and service contracts. IV. Advance of Technical Support to SWAp The health sector SWAp has been advancing with the time. Initially, many managers were unaware of the benefits of the SWAp, and demanded quick support and expected quick results for projects. Gradually, however, policymakers and programme managers realized the importance of the SWAp and programme approach. The SWAp has been internalized at the MoHP and at the departmental level. Many district level managers and hospital superintendents, however, are less aware on the benefits of the SWAp. 19

28 Achievements and Lessons Learned Right size of technical cooperation With the provision of pooled funding from the IDA/World Bank and DFID, it was envisaged that other donors would gradually join to form a common resource envelope for the health sector. There should be the good mix of financial and technical support to increase the effectiveness of NHSP- IP implementation. A design error was noticed while formulating the financial arrangement: only 5 percent of the total fund was allocated to technical cooperation (USD 5 million out of USD 100 million). This design offers more funds to the MoHP to address health problems, and yields good results if prioritized and managed well. On the other hand, a low level of technical support hampers the allocative and technical efficiency and effectiveness of health care programmes. The technical and financial management capacity of the MoHP is relatively at low. The total financial absorptive capacity of the MoHP was less than 70 percent but increased to 80 percent in 2006/07, and if calculated for donor assistance alone, it would be even lower. The Government of Nepal has been struggling to manage the technical assistance offered by the Global Fund for AIDS Tuberculosis and Malaria (GFATM), although they have not achieved desirable results so far. The result was that Nepal was passed over funding during several subsequent rounds of GFATM funding because the MoHP is weak when it comes to formulating and managing national proposals. Many donors have employed management support agencies (MSAs) to ramp up the implementation of health care programmes. To improve the technical management of GFATM funds, the UN has been employed as an MSA by the government, for which it has been charging 13 percent of the total funding. While designing sub-sector programmes, 42.5 percent of total support for safe motherhood programme ( 8.5 Million out of 20 Million) was allocated to technical cooperation. This mix seems effective and appreciated by donor and recipients, as well as the government and non-governmental organizations. The assistance mix may vary depending upon the technical capacity of the government, nature of the programme, scope of reform, and funding policies of the donors and recipient country. Whatever the reason, the size of technical assistance seems rather small and would hardly match financial assistance. Lessons Learned The right mix of technical and financial assistance improves performance of the health system Swift technical assistance works but it should not be less than 10 percent of total assistance. Heavy financial assistance with light technical cooperation does produce desired outputs 20

29 SWAp in the Health Sector Good mix of time-bound deliverables and unallocated funds in the work plan In the beginning, technical assistance was planned as a combination of joint deliverables, and most strategic outputs were deliberately flexible in order to build the MoHP s capacity and to introduce the policy reforms. The World Bank and DFID commented that there should be clear deliverables and a defined timeframe. This approach is sufficient when national capacity is strong enough, but in cases where there is still the need to strengthen capacity, as Foster and Pearson argued, "a tightly defined and timetabled deliverable for which the consultants will be held accountable... is inappropriate, (2007). Essentially, too flexible a work plan risks being unfocused and less productive, while on the other hand, if a deliverable is defined too rigidly, the TA team will have difficulty meeting changing client demands and skills transfer becomes more difficult. Although the TA team provided adequate clarification for flexible technical assistance with joint deliverables for policy reforms and skills transfer, both the Bank and DFID asked the team to develop a supplementary work plan with defined "time-bound deliverables." The government was in favour of unallocated technical funds to address the emerging needs of the MoHP, but the donors feared that TA funds could be misused if left fully flexible. A flexible approach to TA is appropriate in a country like Nepal where needs change frequently due to political and structural changes. The majority of unallocated fund are used for monitoring the pro-poor health care policy, thus a mix of time-sensitive deliverables and unallocated funds for unforeseen programmes/activities rightly address the needs of the MoHP. Lessons Learned Flexible TA responds to the needs of the MoHP TA work plan should be a living document and should incorporate the needs of clients in a changing context TA linkage with sub sector level 4.3 Reduced transaction costs and fragmentation With the introduction of a SWAp in the health sector, transaction cost has been decreased by reducing the number of budget headings in the health sector, particularly at the district level. In 2004/05, the district level FP/MCH project, control of diarrhoeal disease (CDD), ARI, nutrition, EPI, construction and supervision were merged into one heading called the integrated district development programme. The transaction cost for the six projects was reduced, and supervision costs also decreased with the introduction of integrated supervision. Previously, a total of 15 statements of expenditure had to be prepared per year, per project, and there were 75 cost centres. If one adds to that various interim statements, a total of 13,500 statements of expenditure had to be prepared, and separate accounts had to be maintained to produce these reports. By merging the programmes and budget heads, both 21

30 Achievements and Lessons Learned 2010 time and resources could be saved. Thus, transaction cost reduced remarkably. Efforts have been made to reduce the transaction cost further by reducing the number of budget headings; a study has recommended reducing the number of budget heading from 52 to 35, which the MoHP has agreed to do, although it will take some time to be approved by the NPC and MoHP. In the past, there was a tendency to establish separate project implementation units (PIUs) for each project, each with a separate project chief, accountants, administrators and monitoring officers. At present, each reformed output has been implemented by the responsible division/centre, and all outputs are coordinated by a coordinator at the Health Sector Reform Unit of the MoHP. This approach has internalized reforms and reduced costs. Efforts have been made to further reduce the number of budget heads to lower not only transaction costs, but to help eliminate fragmentation among health care programmes; for example, CDD and ARI were merged into IMCI which is now a successful, cost-effective integrated approach to child health care. Even after integration, each vertical programme has its own supervisor to monitor performance of the programme/health institutions at the sub-district level. A total of 10 programme supervisors used to visit health institutions to monitor the programme at the district level. This has increased the cost of the programme and the recipient institution felt the burden rather than being supported. A few districts have initiated integrated supervision at the sub-district level and have demonstrated good results. Taking this model, the Department of Health Services has also started integrated supervision for all EHCS programmes/activities. One or two supervisors oversee all ten programmes, resulting in greater coordination in the whole sector. The programme supervisors have been working with limited training and the majority of them have no health related qualification, yet have been quite successful. Considering this, the same qualifications (certificate level in general medicine) could be required for all programme supervisors, so that they could be used for all 10 programme and could be used as public health supervisors, further reducing costs and increasing coordination between programmes. With the establishment of the procurement unit in the MoHP, 30 studies were designed, commissioned and monitored in 2007/08. This further decreased transaction costs. The TA quickly generated evidence of this success, leading to an important role in the policy formulation process. These all helped a lot in reducing transaction costs. Lessons Learned Before merging the budget headings, programmes should be merged with the greater consultation of programme managers. Better coordination and communication are needed between MoHP, NPC, and MoF in merging budget heads Mid-level managers are influential in reducing the budget and programme headings Better orientation should be given to managers on SWAp because they expect quick results as in project approach. Technical assistance in developing TORs, 22 facilitation and follow- up is needed for service procurement

31 SWAp in the Health Sector Increased feeling of ownerships in the health sector programme Both at the central and district levels, programme managers and finance controllers felt that pooled fund belonged to them, stating that there is no difference in budgeting, releasing, spending, auditing, and reporting of donor funds that are pooled. A commonly heard statement is "It is our fund; we can allocate, release and spend as with government funds." This indicates that feelings of ownership increased with the introduction of pooled funds. Donors also respect the ownerships of funds. For example, DFID is supposed to release funds after receiving financing and physical progress reports, however, it can now release funds in advance, knowing that the funds belongs to the government. V. Good Practices 5.1 Ownership of sector reform by the government MoHP took ownership of sector reform initiatives through the establishment of steering committees. The establishment of a national steering committee helped to solve problems, increased monitoring activities and assisted in guiding the health sector reform policy initiatives. At all JAR meetings, MoHP has taken a leading role in setting the agenda, organizing meetings and preparing plans of action. The MoHP organizes EDP and donor meetings frequently and shares policies, plans, strategies, budgets and programmes. All EDPs have offered their support to the government leadership and work in a harmonized manner. 5.2 Harmonized the donors The share of pooled partners constituted 42 percent (NRs billion out of 6.18 billion) of the total official development assistance (ODA) in 2007/08 (RTI International, 2007). Other development partners have realized the importance of a programme approach and have offered support for programmes such as child health and family health for longer periods. At the sector level, numerous donor efforts are underway, and at the Ministry of Health and Population, donors have agreed to use the common arrangement or procedure. DFID/IDA agreed to the government request to release funds in advance. The Nepal Safe Motherhood Project has been converted into the safe motherhood programme and has institutionalized the programme approach at the sub-sector level. All donors, irrespective of aid instruments and modality of funding, offer harmonized financial and technical support with wider consultation (with the MoHP and other donors). Joint annual reviews have been organized twice a year and the Annual Work Programme and Budget was reviewed in June, with progress reviews taking place in December. Learning the experiences of the SWAp in health, the Ministry of Local Development has signed up to take a sector wide approach (MoF 2008). The JAR is an example of harmonized efforts, with all donors participating in the meeting. In addition to that, the Health Sector Development Partnership Forum has been established to foster coordination between EDPs and government agencies and to harmonize efforts in 23

32 Achievements and Lessons Learned 2010 health development. The meetings are supposed to be held four times a year. However, due to frequent changes of secretary, two meetings could not be held. These help to harmonize the efforts of donors in offering financial and technical assistance as per the joint financial arrangements. The donor s ethical guidelines were also adopted and signed by all donors. 5.3 Equal treatment of all donors A total of 10 donors as well as the government signed a Letter of Intent and agreed that all assistance made by them to the sector will be fully consistent with the Health Sector Strategy - An Agenda for Reform (SWAp) and to work towards harmonization of donor support in annual planning, budgeting, review and reporting. The financing of the sector was accepted in accordance with each agency's mandate, financing mechanisms and other requirements. The GoN treated all donors equally, whether they had signed in Letter of Intent or not, and whether they had pooled their funding or not. The GoN appreciated donor contributions irrespective of the volume and aid arrangements, and accepted contributions of all types of aid (technical, financial and commodity). 5.4 TA team established a good relationship with the MoHP The team has built and maintained a good relationship with MoHP and its departments. In fact, one team member has already worked in the Ministry and has a better relationship with the senior officials of the MoHP. The new team members also made tremendous efforts to establish and maintain good relationships with the MoHP and prepared work plan as per the needs of the MoHP. The TA team respects government ownership and leadership in implementing the NHSP IP. The decentralization adviser also has close ties with the Ministry of Local Development, the Health Economist has a good working relationship with the MoHP, and strong linkages with department and division levels and with regional networks. 5.5 Allowing TA for urgent work even during the planning phase The Ministry of Health and Population has been moving toward abolishing user fees for essential health care, and technical assistance was urgently needed. As a result, DFID allowed RTI to provide the technical assistance for abolishing user fees even during the planning phase. Financial management has also been facing problems in reporting, fund flow mechanisms, expenditure management, management and technical services procurement. Thus, the absorptive capacity of the MoHP remained low. Considering this matter urgent, DFID allowed RTI to provide technical assistance for identifying bottlenecks in financial management and making recommendations for solutions. Allowing contractor work even during the planning phase is a good management practice and responded well to the needs of the MoHP. 24

33 SWAp in the Health Sector Extended technical support to MOHP even during inception and transitional phases In principle, the TA team was supposed to develop the work plan during the inception phase without contact with the MoHP during the suspension period. However, it has been providing technical support to the MoHP from the beginning, developing training modules and ToRs for studies for contracting out, conducted a few studies (equity analysis), wrote a budget analysis, prepared a status report for the JAR, supported the MoHP in producing the AWPB in the given format (output-based planning and budgeting), reviewed the reports, developed guidelines for solid waste management, and supported the free health care policy of government. These showed that the TA team extended support to the MoHP even in the inception and transitional phases that helped the MoHP a great deal. 5.7 Better public expenditure management The public expenditure review and public expenditure tracking exercises have been done routinely to assess the efficiency and equity of spending resources. Both technical and allocative efficiency have been assessed to give the best value for the money. As discussed earlier, the result of this process was that more funds were allocated for maternal and child health. Furthermore, this initiated the outsourcing of public funds to the market for the procurement of drugs and infrastructure development and consulting services. Unlike a structural adjustment programme, this process funnels funds to the market through the public treasury, increasing government accountability of fund management. VI. Risks and Challenges 6.1 Emerging conflicts The Maoists entered into the peace process and joined the government. After the constituent assembly pool, the Maoist party became the largest political party, and headed the government. But some new regional and ethnic armed forces emerged and the situation did not improve as hoped, with the number of kidnappings, disappearances, and abducted persons increasing in recent years. Thus, service delivery has been affected by emerging conflicts. Working on conflict would be a challenge to the health system. Because of these new conflicts, limited monitoring efforts have been made to monitor the use of funds in the field. Lessons Learned Do not harm either side Follow code of conduct Respect the health need sof all parties/ethnic groups Accept risk reduction strategy 25

34 Achievements and Lessons Learned Reducing transaction cost 1. Merging two joint annual reviews: Two separate joint annual reviews (JARs) are organised for a performance review of health care programmes: one with government programme managers and another with external development partners and government officials. This not only increases the transaction cost of the review but also reduce the effectiveness of the JARs. The second meeting tends to get less attention from the government programme managers as they have already discussed programme performance in greater depth in the first meeting, and see the second meeting as a mere formality. Thus, the challenge is to merge these two JARs in order to reduce transaction costs and increase effectiveness. 2. Merging steering committees: There are several steering committees formed for each project based on donor support. For example, there are several committees formed under the rubric of reproductive health and child health, so the challenge is to merge them into a single steering committee which can steer and monitor all the programmes of reproductive health and child health to reduce transaction costs and foster coordination. 3. Removing the project implementation unit (PIU): The MoHP has removed the PIU for the population and family planning project. It has also removed separate offices for specific disease control programmes and has brought them under the umbrella of disease control. However, in 2008/09 a separate PIU was established for the National TB control programme under the Global Fund to accelerate the TB control programme. It is a small unit, but increases transaction costs and violates the principle of the SWAp, so the challenge is to remove this PIU as well. 4. Further merging the budget and programme headings: As discussed earlier, budget headings have been reduced from 58 to 52 in 2004/05. A study team recommended further reducing the budget headings from 52 to 35 in 2008/09. Therefore, in NHSP IP 2 reducing budget headings has remained a challenge for the health system Bring other actors in the health sector into the sector development forum 1. Involving donors and I/NGOs in the forum: Efforts have been made to bring all EDPs into one sector development forum in NHSP IP 1 for better coordination and collaboration. Many donors as well as technical assistance groups have already been brought under the single umbrella of the Health Sector Development Forum. Despite the efforts made by the sector, major donors like India and China did not attend the JAR or the sector development forum. A few I/NGOs have joined the forum, including Save the Children and CARE International, and their budgets and programmes are reflected in the AWPB. However, many did not join the sector development forum/jar. It is difficult to bring all I/NGOs into the forum due to the size of the I/NGOs, thus, the Association of International NGOs in Nepal (AIN), an umbrella organisation of I/NGOs, will be brought to the sector development forum and JAR to represent the I/NGOs. Participation by civil 26

35 SWAp in the Health Sector 2010 society organizations helps to increase the effectiveness of aid, so the challenge is to engage them in service delivery Harmonize and align policies, plans and programmes 1. The country is in the process of developing a 2nd Three Year Interim Plan , and a new MTEF will be prepared accordingly. Therefore, the health sector's policies, plans and programmes need to be harmonized and aligned with the 2nd Three Year Interim Plan and MTEF. The Paris Declaration on Aid Effectiveness, the principle of the SWAp and the Accra Agenda for Action on Aid Effectiveness must be harmonized and aligned with the 2nd Three Year Interim Plan and the MTEF. In the context of abolishing user fees and current health financing policies, strategies must be reviewed to reduce policy conflicts between free care and user fees. 2. A country coordination mechanism (CCM) was formed for better coordination between GFATM funded programmes and budgets with other national programmes. Both PR 1 (MoHP) and PR 2 (NGOs) related programmes and budgets are supposed to be incorporated in the AWPB, but the programme and budget of PR 2 are not reflected in the AWPB, since they are the purview NGOs. The challenge is to harmonize and incorporate these in the AWPB during NHSP- IP The AWPB has incorporated the financial aid/grants of donors and entered the data into eawpb software that generates results by outputs. However, the data for technical assistance from donors is still missing. In NHSP IP 2, the challenge is harmonizing technical assistance by incorporating it into the AWPB. There is also the challenge of building the capacity of the MoHP to coordinate the TA programmes of different donors and initiate joint works to foster additional synergy Promoting the cost effective interventions During the NHSP IP 2, EHCS was developed towards achieving health-related MDGs and elements of EHCS were proven cost effective (WHO-CHOICE, ). Thus, it was easier to assess aid effectiveness in terms of health gains, but in the NHSP IP 2 the package of essential health care services was expanded. Oral health, mental health, eye care, environmental health, and rehabilitation of disability have been incorporated into the NHSP IP 2, and little is known about the cost effectiveness of these interventions in the Nepalese context. There is the risk of promoting additional elements of EHCS at the cost of MDGrelated interventions. Thus, the challenge is to ensure promotion of MDG-related costeffective interventions. 27

36 Achievements and Lessons Learned Attracting donors to pooled funds As discussed in section 3.3, pooled funding seems effective and absorptive capacity has improved markedly. This is supposed to attract non-pooled partners to the pooled funding mechanism. Several discussions have been held to bring them into the pooled fund mechanism, but country level efforts of donors have proved inadequate. The role of regional and headquarter cooperation is more important in bringing donors into the pooled funding mechanism. Only a single non-pooled donor (AusAID) switched to the pooled fund in 2009/10, and more recently GAVI agreed to join in pooled fund. The MoHP appreciates the pooled fund and in every negotiation and EDP meeting it promotes it. The challenge is for the MoHP to attract more donors to the pooled fund without reducing the funds for health development. Lessons Learned Reduce fiduciary risks and spending wisely to attract donors to the pooled fund Harmonizing sector spending is more important than compelling donors to the pooled fund Country level representative level efforts are inadequate to attract donors to the pooled fund 6.7 Safeguarding fiduciary risks Some strides have been made in controlling corruption in Nepal in According to Transparency International (TI), Nepal ranked 121st of 180 countries. In the previous year, it had ranked 131 st (Transparency International 2008), a marginal improvement. Despite These gains in addressing corruption, Nepal still remains a 'corrupt nation' scoring a 2.5 out of 5 points. In recent years, the level of fiduciary risk associated with health sector programmes has been assessed as medium to high (DFID, 2005), and the MoHP has made several efforts to reduce the fiduciary risks in health sector: establishment of a procurement unit, initiation of financial monitoring, and controlling of irregularities in public spending. Some progress has been made in areas of public financial management (PFM): the percentage of irregularities has decreased from 13.5 percent in 2003/04 to 7.76 in 2007/08, virtually cutting the number of irregularities in half in four years. This indicates a real improvement in financial management. Despite the efforts made by the MoHP, however, the cumulative figure of irregularities increased from NRs 1.5 billion up to and including 2006/07 to NRs billion in 2007/08. Every year, the sum of money that is involved with irregularities grows, in part an effect of the increasing budget. This demands aggressive measures to clear 28

37 SWAp in the Health Sector 2010 the irregularities through better application of existing rules and regulations. The MoHP cleared NRs million which is percent of the total cumulative amount of irregularities in FY 2008/09, however this figure is still far too high: irregularities as a percent of audited spending remained steady at around 8 percent and could not be reduced during the NHSP IP 1 period. The challenge to financial management is to reduce irregularities to below 5 percent of total health care spending. The MoHP has introduced an independent review of the financial system, and their recommendations have been translated into an action plan where monitoring is continuous to expedite the implementation process. Table 6.1: Irregularities and clearance of MoHP Description 2003/ / / / / /09 Total irregularities amount, in millions of NRs Irregularities as a percent of audited amount Clearance amount NA NA NA Clearance as a percent of cumulative irregularities NA NA NA Source: Office of Auditor General, 2004, 2005, Fiduciary risk grows with the SWAp, and the risk further increases due to the provision of conditional cash transfers for demand-side financing schemes such as the Amma Programme (formally known as SDIP) and Kala-azar case management. An independent review of the financial management also indicated that 60 percent of projects have variations within 5 percent of the contracted amount, and 20 percent of projects have variations of 5-6 percent of the contracted amount. Only 20 percent of the projects reviewed have no variations in building construction for health institutions. In many cases, only three bids were submitted. Under current rules, bidding documents are sold in a public forum, with the expectation that the number of documents sold should be a fair indicator of the number of bids the government can expect. However, due to unfair competition and illegal practices, the actual number of bids falls far below that. The percent of bid submitted in 2008, for example, was only 13.6 percent of the all the bidding documents sold (DMI, 2009). Intimidation and cartelling prevail particularly in the contracting of construction, goods and services. Furthermore, about half of total expenditure occurs in the last trimester (RTI International, 2009) increasing the fiduciary risk further. The proportion of irregularities remains as high as 8 percent in the health sector, whereas the national average is only 4 percent (OAG, 2009). During NHSP IP 1, monitoring of expenditure was initiated and it will be strengthened in NHSP IP 2. Monitoring of cash balances will be conducted, and the rate of disbursement will be reduced if funds are not being used. E-bidding will be piloted and will be scaled up in 29

38 Achievements and Lessons Learned 2010 NHSP IP 2. An independent review will be conducted and their recommendations will be used in preparing a plan of action. Review of expenditure priorities will be linked to NHSP IP 2, and transparency will be maintained by disclosing the list of beneficiaries of conditional cash transfers and major transactions. The health sector used the financial management information system (FMIS) extensively, reviewed the statements of expenditure and issued feedback to the cost centres in a timely manner. These helped greatly in reducing fiduciary risk at the district level. The Government of Nepal and development partners committed to monitoring and tracking progress in financial management and reduction of fiduciary risks. However, some new risks emerged: The procurement of drugs has been decentralized to the district level, as stated by DFID anti-corruption work (including strengthening of the OAG), but significant risks remain, particularly at the district level (DFID, 2005). Roughly one billion rupees have been spent for the procurement of drugs, with over half purchased at the district level. Another one billion was allocated for building construction and repair work at the district level. As a result, fiduciary risk increased significantly in the health sector in the course of 2008/09. This risk is compounded by the cartelling practices of private suppliers in the public procurement of goods and services. Cost estimates are unrealistic and frequently revised after opening bids (RTI, 2008). The drug suppliers offer large bonuses to public providers for prescribing their products or for purchasing their product at a higher price, thus heavily influencing district health managers. Advances were provided towards the end of the fiscal year with a view to spend the remaining budget without regard for the achievement of programme goals. Advances paid to staff and suppliers were not settled in a timely manner, and the fresh advances were made without settling the outstanding balances, (Upadhya & Co 2007) which raises the question of financial management and may increases fiduciary risk. The legal provisions dealing with custody of government assets and inventory were not adequately complied with, with the result that the quality of assets and inventory management was poor. Expired medicines were found to have been procured, but were not reviewed and removed from stores. Significant discrepancies in the quantity of medicines distributed annually were observed between the statements supplied by the DOHS and those shown in the DPHOs record. These discrepancies were not analyzed nor fully explained (Upadhya & Co 2007). Less transparency in financial transactions, the violation of financial rules and regulations, and irrational (piecemeal procurement rather than in bulk) and untimely public spending further increase the risk. The spending trend shows that about half (48 percent) of the total budget was spent in the last three months of the fiscal year (FMIS), which increases risk considerably. The GFATM warned of non-compliance of financial rules, lack of transparency, untimely spending, high costs, and lack of good procurement practices. While a single project may not represent the whole sector, it indicates the need for improvement in financial management. 30

39 SWAp in the Health Sector 2010 Lessons Learned Monitoring of fund flow reduces the financial risk Financial decentralization without appropriate preparation increases fiduciary risks, particularly in procurement Cash transfer at the community level, particularly in payment of incentives to health workers for safe delivery increases fiduciary risk A procurement plan with a monitoring component helps to reduce the fiduciary risk A pattern of high expenditure in the last three months increases fiduciary risk 6.8 Enhancing efficiency In the last four years, the budget for child health care programmes doubled from NRs billion in 2004/05 to NRs billion in 2008/09. The CB-IMCI programme expanded from 11 districts to 75 districts, and cases of ARI increased from 344 per 1000 in 2004/05 to 615 in 2007/08 indicating that more cases were detected. But the coverage of fully immunised children has decreased from 85 percent in 2003/04 to 78.9 percent in 2007/08. The EPI programme absorbs more resources than IMCI and nutrition programmes, but the decreasing trend of immunisation certainly raises the question of the technical efficiency of the EPI programme. The budget for FP/MCH more than quadrupled from NRs. 226 million in 2004/05 to NRs. 1,139 million in 2008/09, with the result that deliveries attended by health workers grew from 18.3 percent in 2004/05 to 31.6 percent in 2007/08. Coverage of first ANC visit as a percent of expected pregnancies decreased, however, from 73 percent in 2005/06 to 68 percent in 2007/08 and the CPR (contraceptive prevalence rate of modern methods) fell from percent in 2005/06 to 41.7 percent in 2007/08 (HMIS, 2008). This raises the question of allocative as well as technical efficiency within reproductive and child health care programmes. 6.9 Ensuring Sustainability Both the financial and strategic sustainability of health care programmes remained a challenge to the health sector. 1. As discussed earlier, providing financial incentives to mothers and care providers through the Amma Programme is hard to sustain, as the DFID fund earmarked for this purpose ends soon. The share of government funding has increased each year, with DFID funding decreasing proportionally, such that at the end of five years, the government will bear the full cost of the scheme. If the health sector does not get more than 7 percent of total national budget, sharing whole cost of SDIP could be difficult. 2. Community health insurance and community drug programmes were designed and implemented as sustainable alternative financing options, but with the introduction of free care, they are close to being shut down. These community-based initiatives were 31

40 Achievements and Lessons Learned 2010 popular at the local level and raised funds, which helped to increase health care utilisation by rural people. 3. The free health care policy has been expanding and has been extended to the district level, with the result that the cost of the policy increases with the increase in health care utilisation. It will be difficult to sustain the policy with government funding alone. Funding arrangements with EDPs and NGOs would help to sustain the policy. Lessons Learned 1. Continuity of policy is imperative for financial and strategic sustainability 2. Sustainability should be taken into account during project/programme formulation 32

41 SWAp in the Health Sector 2010 References Cassels, A "Health Sector Reform: Key Issues in Developing Countries." Journal of International Development 7(3): Department for International Development(2005). Nepal Country Assistance Plan, Monitoring in a fragile stage. DFID/Nepal Foster M (1999). Lessons of experience from sector-wide approaches in health (English). Centre for Aid and Public Expenditure, Overseas Development Institute. Prepared for the World Health Organization. Karki DK, Mirzoev TN, Green AT Newell,JN, Baral SC (2007). Costs of a successful publicprivate partnership for TB control in an urban setting in Nepal. Journal Published. BMC Public Health 2007, 7:84doi: / Ministry of Finance (2008). Nepal Country Report, 2008 Survey on monitoring the Paris Declaration, submitted to Development Assistance Committee of the Oranisation for Economic Co-operation and Development Newell, James N., Pande Shanta B., Baral Sushil C.,1 Bam Dirgh S.,2 & Malla Pushpa(2004) Control of tuberculosis in an urban setting in Nepal: public private partnership. Bulletin of the World Health Organization 2004;82: Peter Berman, ed (1995). Health Sector Reform in Developing Countries: Making Health Development Sustainable. Boston: Harvard University Press (13-33). Prasai, D.P., Bista, B.G., Sharma, T.M. & Gnawali, D.P. (2004). Public Expenditure Review of the Health Sector, Ministry of Health, HMG Nepal and DHSP, HMG/N-DFID, British Council, Kathmandu, Nepal Powell-Jackson,T., Neupane B. D., Morrison J., Tiwari,S., Costello, A.,(2008). Evaluation of the safe delivery incentive programme, Final report, Support of Safe Motherhood Programme, Nepal RTI International (2007). Nepal's experience on advocacy and lobbying to increasing health sector budget. Research Triangle Park, NC, USA. RTI International (2007). Bottleneck study for timely disbursement of funds. Research Triangle 33

42 Achievements and Lessons Learned 2010 Park, NC, USA. RTI International (2007). Budget analysis , Ministry of Health and Population, Research Triangle Park, NC, USA. World Bank(2005). State-in-conflict -- Resilient People: An Assessment of Changes in Poverty in Nepal between and Poverty Reduction and Economic Management Sector UnitSouth Asia Region, World Bank Transparency International (2008). Report, retrieved from on Sept 30, =Search Transparency International (2007). Country reports: Asia and the Pacific p.207. Transparency International T R Upadhya & Co(2007). Findings of financial management review of health sector (HSP) for FY 2004/05 & FY2005/06. 34

43 HealthSectorReform SupportProgramme MinistryofHealthandPopulation P.O.Box:8975EPC535 Kathmandu,Nepal Phone: Fax: URL: