Performance-based contracting: a case study of non-profit hospitals in Uganda

"Performance-based contracting (PBC) and similar approaches to tie funding to measured performance have become major characteristics of innovative financing mechanisms. The World Bank and Uganda s Ministry of Health pilot tested PBC in five districts for a period 2003 to 2006. This PhD examines the response to this pilot among private-not-for-profit (PNFP) hospitals. A multi-level analysis was undertaken to explore essential up-stream and downstream institutional relationships and functions for PBC success. Agency-based and processbased organisational theories were used as alternative frameworks to build explanations of the response actions. In -depth case studies were carried out using mixed methods among PNFP hospitals that were assigned to different mix of PBC pilot components (performance targets, service output metering, performance feedback and financial bonuses). Seven PNFP hospitals participated in the PBC pilot while an additional three non-participating public hospitals provided opportunity for comparative analysis. In-depth interviews (28) covered hospital management teams (HMTs) and members of their Board of Governors (BOG) in all the ten hospitals. Five district health officials, two implementers of PBC pilots and two officials from Uganda Catholic Medical Bureau (UCMB) were also interviewed. A survey of 560 hospital staff at baseline and 741 after 12 months was undertaken among the 10 hospitals to measure changes in perceptions relevant to hospital performance. Participant observations were undertaken during meetings for PBC pilot activities as well as meetings for reviewing the performance of health activities at national and district levels. Major findings: Upstream support functions like financial disbursement, staff movements and costs of service provision formed contextual constraints for the hospitals to respond to PBC. Likewise, governance relationships between HMT and BOG provided additional constraints for PBC success. Hospital managers were expected to respond to several performance-focused interventions - many of which were contradictory to the PBC targets. Among the difficulties observed during the PBC pilot implementation, poor metering of performance and inadequate financing for the essential pilot elements were particularly problematic. The implementation arrangements generated unanticipated negative performance influences especially among the control group -a situation that may overestimate the pilot effectiveness. Findings show that financial bonuses at the organization level can create either motivation or demotivation among staff depending on the hygiene of the bonus allocation processes within an organization. Results from the staff surveys indicate that the drivers for performance improvements in the hospitals were related to job satisfaction, performance governance of work teams, availability of medicines and supplies, as well as staff satisfaction with their financial benefits. Conclusions: PBC may not achieve optimal effectiveness in settings without a package of supplementary interventions for improving resource inputs, performance governance and motivating the workforce. Financial incentives as predicted from agency theory were not sufficient for PBC success. Micro-care approaches aimed at improving the organisational processes (process-based theory) for better performance will be required for greater effectiveness of PBC initiatives and policies. Policy prescriptions and implementation arrangements for PBC interventions need to provide for on-going monitoring of mechanisms and consequences as a basis for mitigating harmful effects on health systems and optimizing the good."