An Assessment of Provider Payment Mechanisms (PPMs) in Ethiopia: Implications for Redesign of PPMs and Progress Toward Universal Health Coverage

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ABSTRACT Ethiopia has made great strides in improving population health but sustaining health system and population health improvements in the current fiscal environment is challenging. Provider payment, as a function of purchasing, is a tool to use limited health resources better. This study describes the design and implementation of Ethiopia’s provider payment mechanisms (PPMs) and how they influence health system objectives and contribute to universal health coverage goals. The research team adapted the framework and analytical tools of the Joint Learning Network for Universal Health Coverage guide for assessing PPMs. Data were collected through literature review and key informant interviews with 11 purchasers and 17 health care providers. Content analysis was used to describe PPM design and implementation arrangements, and thematic analysis was used to distill effects on equity in resource distribution and access to care, efficiency, quality of care, and financial sustainability. The study revealed the PPMs had positive and negative consequences. Line-item budgets were perceived to be predictable and sustainable but had little effect on efficiency and provider performance. Fee-for-service was perceived to have negative effects on efficiency and financial sustainability but viewed positively on its ability to incentivize quality health services. Capitation and performance-based financing effects were viewed positively on equity in distribution of resources and quality respectively, but both were perceived negatively on their high administrative burden to providers. Ethiopia may consider a more nuanced approach to design blended provider payment to mitigate negative consequences while providing incentives for better quality of care and efficiency.