Setting health insurance remuneration rates of private providers in Kenya: the role of costing, challenges and implications

Abstract

Successful health financing depends on prudent design of resource collection, pooling and purchasing. One of the critical purchasing design issues is the provider payment mechanism and the remuneration rates, which need to set appropriate incentives to health providers. In order to set remuneration rates, cost information is required, but this is not known in many developing countries. This paper illuminates the role of costing and the challenges of resetting health insurance remuneration rates for private hospitals in Kenya and discusses the implications and lessons. The results and proceedings of costing studies from Kenya are reviewed, which reveals methodological and practical challenges as to revising remuneration rates. The costing results are characterized by high variability, which is, among other factors, due to suboptimal resource use at some hospitals and provider payment mechanisms that incentivise over-provision. In such a context, hospital-specific remuneration rates are advisable. In conclusion, remuneration rate setting is not just about translating costing results into a price tag, but other factors have to be considered in a low-income country context in order to balance out health sector objectives and provider interests. Inclusion of providers in developing the costing methodology proves important to increase acceptability of results.