PARTNERSHIPS FOR A HEALTHIER INDONESIA UNLOCKING CONSTRAINTS FOR BETTER PRIVATE SECTOR PARTICIPATION PARTNERSHIPS FOR A HEALTHIER INDONESIA UNLOCKING CONSTRAINTS FOR BETTER PRIVATE SECTOR PARTICIPATION ACKNOWLEDGMENTS This document has been prepared by Vikram We would also like to thank all the stakeholders Rajan (Senior Health Specialist, World Bank) in the health sector (the government, private and Massimiliano Calì (Senior Economist, World sector providers, investor groups, consulting Bank), in collaboration with Dev Terway (Health firms, and other development partners) who Care Consultant, World Bank Group), and with the shared their valuable insights with us. The team assistance of Pui Shen Yoong (Economist, World would also like to thank Rodrigo A. Chaves Bank). It is a joint product of the Health, Nutrition (Country Director, Indonesia) and Enis Baris and Population (HNP) and the Macroeconomics, (Practice Manager, East Asia and Pacific, HNP) Trade and Investment (MTI) Global Practices of for their overall guidance. The opinions and the World Bank Group. The team would like to conclusions shared in this document are the sole thank Tomio Komatsu (Senior Investment Officer, responsibility of the authors International Finance Corporation [IFC]), Jeffrey Delmon (Senior Public-Private Partnership [PPP] Specialist, World Bank), Dhawal Jhamb (Investment Officer, PPP Advisory Services, IFC), Natasha Beschorner (Senior Digital Development Specialist, World Bank), Pandu Harimurti (Senior Health Specialist, World Bank), Reem Hafez (Senior Economist, Health, World Bank), Eko Pambudi (Health Specialist, World Bank), and the Health Policy Plus private sector team for useful comments, as well as Nabil Rizky Ryandiansyah (Consultant, World Bank) for excellent research assistance. The layout design was done by Indra Irnawan. CONTENTS EXECUTIVE SUMMARY 1 section one Introduction 5 section two Demand for and supply of health services and the role of the private sector 9 Growing demand for health services 10 Supply of health services has increased, but the quality is uneven 12 Private sector can help close the gaps between demand and supply 14 Private sector involvement also poses risks that call for proper oversight 15 section three The markets for health care providers 17 Primary health care 18 Secondary/specialist health care providers 24 Diagnostics providers 29 section four Addressing constraints to private sector participation in health 31 The government should articulate a clear private sector engagement strategy for health 33 Revenue and expenditure reforms should address BPJS-K financial deficits 34 BPJS-K should strengthen its strategic purchasing function to improve quality of services and fill supply-side-gaps 36 Reforms in health education and in recognition of qualifications are needed to expand the quantity and quality of HRH 39 The government should ease establishment rules for hospitals to facilitate private investments, including in primary care 46 MoH and BPJS-K should strengthen their capacity to plan, design, manage, and monitor high-impact PPPs 48 The government should strengthen hospital and primary accreditation capacity to facilitate empanelment by BPJS-K 54 MoH should clarify and ease e-health regulations to foster digital health innovations 56 APPENDIXES 63 Abbreviations & Acronyms AI Artificial Intelligence FHP Foreign Health Professional AP Availability Payments GDP Gross Domestic Product AR Accounts Receivable GNI Gross National Income ASEAN Association of Southeast Asian Nations GoI Government of Indonesia ASSRI Asociasi Rumah Sakit Swasta Indonesia GP General Practitioner or Indonesian Private Hospitals Association HHG Hermina Hospital Group BKPM Badan Koordinasi Penanaman Modal or HIS Hospital Information Systems Investment Coordinating Board HNP Health, Nutrition and Population BMC Bhubaneswar Municipal Corporation HPV Human Papillomavirus Virus BPJS Badan Penyelenggara Jaminan Sosial (BPJS) or National Social Insurance HRH Human Resources for Health Agency Information and Communication ICT BPJS-K Badan Penyelenggara Jaminan Sosial - Technology Kesehatan or National Social Insurance Ikatan Dokter Indonesia or Indonesian IDI Agency - Health Doctors Association Bappenas Badan Perencanaan dan Pembangunan Indonesia Demographic and Health IDHS Nasional or Ministry for National Survey Development Planning IFC International Finance Corporation BUMD Badan Usaha Milik Daerah or Provincial/ Municipal-Owned Enterprises IFLS Indonesia Family Life Survey BUMN Badan Usaha Milik Negara or State- IIGF Indonesia Infrastructure Guarantee Owned Enterprises Fund COB Coordination of Benefits INA-CBG Indonesia Case-mix Based Groups CSR/KTJS Social Responsibility Partnership ISQua International Society for Quality in Computerized Tomography Scan Health Care CT Scan IT Information Technology DAK Dana Alokasi Khusus or Special Allocation Fund JKN Jaminan Kesehatan Nasional or National Dinas Kesahatan or District Health Office Health Insurance Scheme DinKes KAFKTP Komisi Akreditasi Fasilitas Kesehatan DJSN Dewan Jaminan Sosial Nasional or Tingkat Primer or Primary Care National Social Security Council Accreditation Commission DNI Daftar Negatif Investasi or Negative Komisi Akreditasi Rumah Sakit or KARS Investment List Hospital Accreditation Commission DRG Diagnosis-related Group Kapitasi Berbasis Komitmen or KBK EMR Electronic Medical Record Commitment-based Capitation KKI Konsil Kedokteran Indonesia or FBC Full Business Case Indonesian Doctors’ Council KPBU Kerjasama Pemerintah Dengan Badan PHC Primary Health Care Usaha or Government Cooperation with Business Entities PMK Peraturan Menteri Kesehatan or Minister of Health Regulation KSO Kerjasama Operasi or Operational Cooperation Contract PPP Public-Private Partnership LPDP Lembaga Pengelola Dana Pendidikan R&D Research and Development or Indonesia Endowment Fund for RPTKA Rencana Penempatan Tenaga Kerja Education Asing or Foreign Worker Utilization Plan MCU Medical Checkups RSCM Rumah Sakit Cipto Mangkukusumo or MMR Maternal Mortality Rate the Jakarta National Hospital Ministry of Finance SIP Surat Ijin Praktek or Practice License MoF Departemen Kesehatan or Ministry of SUPAS Survey Penduduk Antar Sensus MoH Health TB Tuberculosis MRA Mutual Recognition Arrangements UHC Universal Health Coverage MRI Magnetic Resonance Imaging UI University of Indonesia MTI Macroeconomics, Trade and Investment VGF Viability Gap Funding MTKI Majelis Tenaga Kesehatan Indonesia WHO World Health Organization or Indonesian Health Practitioners Assembly NCD Noncommunicable Disease NTT Nusa Tenggara Timur or East Nusa Tenggara NUS National University of Singapore OBC Outline Business Case OECD Organisation for Economic Co-operation and Development OOP Out-of-pocket OTC Over-the-counter PBI Penerima Bantuan Iuran or Public Subsidy for Insuring the Poor PDF Project Development Facility PERSI Perhimpunan Rumah Sakit Seluruh Indonesia or Association of All Indonesian Hospitals PERKENI Perkumpulan Endokrinologi Indonesia or Indonesian Society of Endocrinologists PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation vi EXECUTIVE SUMMARY 1 EXECUTIVE SUMMARY PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation The supply of health care services in Indonesia a large extent. Nonetheless, increasing private has grown along with the demand for health sector involvement in the health sector potentially services but public sector health services offers more benefits than costs. The challenge expansion remains strained. The demand is to manage trade-offs between equity and for health services in Indonesia collects low efficiency, growth and access to health, and fiscal revenues and allocates relatively little private and public sector participation. of its budgets to health services. As a result private providers have started to step up The private sector is already active at varying their investments and out-of-pocket (OOP) levels across all main health service sectors in expenditures in health remain high. According Indonesia—primary, specialty, and diagnostics. to the Investment Coordinating Board (Badan Data on utilization rates suggest that it provides Koordinasi Penanaman Modal or BKPM), private close to half of outpatient health services and investment in the health and human services 30–40 percent of inpatient services in Indonesia. subsector reached US$148.7 million in 2018, The private sector’s presence in the primary care growing some 130 percent per year, on average, market is highly fragmented and is dominated since 2014. However, Indonesia’s annual inpatient by small providers with single doctor or multiple admission rates, bed-to-population ratio, and doctor clinics. The dominant form of private doctor-to-population ratio remain among the providers is general practitioner (GP) clinics, which lowest in the region and well below World are generally small and often consist of a single Health Organization (WHO) recommended person business. Through providing online access standards. The quality of health services offered to consultations, medications, and information, in Indonesia also remains low, even for wealthier the emergence of digital health providers (such as Indonesians who can afford better quality care. HaloDoc, YesDoc, and Alodokter) can help address 2 the limited access to primary health services The private sector involvement represents an particularly to underserved populations due to opportunity to improve the availability and geographical location or socioeconomic status. quality of health services by introducing better health products and medical technologies. Private investment in the secondary/specialist Increased private investments that can bring health care subsector has grown rapidly, given better quality of services, improve access, and the recent opening of the sector to foreign introduce efficient models of service delivery investments and the rapid development are key to ensure that supply meets demand. of the National Health Insurance Scheme Besides providing needed scarce capital, ( Jaminan Kesehatan Nasional, JKN). Unlike greater private investment could promote primary care, private investments in this segment local innovation, technology transfer, and are dominated by hospital groups (including low-cost solutions for health services and Siloam, Hermina, Mitra Keluarga, and Awal Bros), products such as medical devices and drugs. which own many of the specialty hospitals. In spite of recent growth, they remain relatively However, increased private sector involvement small by international standards confirming is not a panacea and also poses challenges. the growth opportunities of the sector. The Regulating private sector providers can be difficult diagnostics sector has a similar structure, with to implement without effective regulatory levers a few specialized groups (including Prodia, and incentives. An expansion of the private BioMedika, and Paramita) dominating the private sector could even worsen or create inequities landscape and ample room existing for increased in the distribution and quality of health services. investments in light of rapidly rising demand. Evidence does not necessarily support the assumption that private sector delivery by itself The further development of private sector provides better quality care more efficiently. participation in the sector would require Similarly, for public-private partnerships (PPPs), addressing a number of key regulatory/policy results can be mixed and effectiveness depends and nonregulatory constraints. The major on government commitment and capacity to constraints include (a) lack of a clearly articulated EXECUTIVE SUMMARY strategy for private sector engagement by the BPJS-K should strengthen its strategic Government of Indonesia (GoI); (b) sustained and purchasing function to improve quality of increasing financial deficit of the social health services and fill supply-side-gaps: (a) clarify insurance agency or Badan Penyelenggara roles of the MoH and BPJS-K to strengthen the Jaminan Sosial - Kesehatan (BPJS-K)—the largest purchasing role of BPJS-K; (b) BPJS-K, with the source of demand for many private providers— MoH, to strengthen performance-based capitation which constrain the ability of private providers to and hospital payments to incentivize broader plan; (c) underutilization of the BPJS-K strategic health sector results; (c) the MoH, with BPJS-K, purchasing function to drive improvements in to target underserved areas and populations service provision and quality; (d) inadequate by introducing incentives; (d) the MoH, with availability of skilled health professionals; (e) BPJS-K, to develop an effective referral process restrictive establishment rules for private sector regulation and modify/develop the necessary players—foreign in particular; and (f) lack of an information systems to make this more patient enabling government environment to design, centric, transparent, and supply evidence driven; manage, and monitor PPPs. The other constraints (e) BPJS-K, with the MoH, to strengthen guidelines are (g) poor capacity of the hospital and primary on quality of care by introducing clinical pathways, care accreditation systems; and (h) unclear and instituting clinical audits, strengthening monitoring at times overly restrictive e-health regulations. of quality of care, and embedding quality- based criteria for reimbursement of providers. Possible options to address Reforms in health education and in recognition of qualifications are needed to expand the each of these constraints quantity and quality of HRH: (a) Increase are described below the domestic production of quality health 3 professionals by expanding the capacity of the The government should articulate a clear tertiary education sector; (b) relax restrictions private sector engagement strategy for health: to the hiring of foreign health professionals (a) The Ministry of Health (Departemen Kesehatan, (FHPs), thus enabling the system to expand MoH), with BPJS-K, to prepare a database of the stock of qualified human resources for private (and public) providers using multiple health (HRH); and (c) reduce requirements to information sources and (b) the MoH, with BPJS-K, convert medical qualifications of Indonesian and the Ministry of National Development physicians who studied abroad. Planning (Badan Perencanaan dan Pembangunan Nasional, Bappenas to prepare a private sector The government should ease establishment engagement strategy, with differential strategies rules for hospitals to facilitate private for various subsectors, to fulfill supply-side gaps investments, including in primary care: by improving access, quality, and efficiency. (a) The MoH could remove the need for a recommendation letter from the local Revenue and expenditure reforms should governments for the establishment of hospitals address BPJS-K financial deficits: (a) Simplify and have a transparent set of criteria for the overall tobacco tax structure and increase investment, endorsed by local governments, to tobacco excise taxes at the national level, with replace it; (b) the MoH could remove the restriction potential earmarking to BPJS-K; (b) update JKN on the scope of services for foreign hospitals; premiums based on actuarial analysis; (c) subsidize and (c) the President (through the decree on premiums for the informal sector to address Negative Investment List [Daftar Negatif Investasi, adverse selection by attracting and retaining a DNI] could expand foreign equity limits to 100 larger pool of healthy members; (d) address open- percent across all health services sectors. ended hospital payments where most spending occurs by introducing a budget and/or volume MoH and BPJS-K should strengthen their ceiling; and (e) introduce an explicit benefit capacity to plan, design, manage, and monitor package commensurate with available resources. high-impact PPPs: (a) The Ministry of Finance PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation (MoF) and Bappenas, with MoH and BPJS-K, MoH should clarify and ease e-health to establish a cross-government coordination regulations to foster digital health innovations: mechanisms (also involving Indonesia (a) The MoH and BPJS-K should develop data Infrastructure Guarantee Fund [IIGF] and local privacy standards as well as pass the necessary governments) as well as public-private platforms legislation in consultation with stakeholders; (b) to identify a pipeline of ‘high-impact PPPs’ that the MoH and BPJS-K should develop protocols have private sector interest; (b) the MoH, with for sharing data with privacy protections and BPJS-K, to identify clear gaps which could be consider using digital health providers for data fulfilled by the private sector, including PPPs, analytics and service delivery; (c) the MoH, based on demand patterns (population, disease with BPJS-K, could develop legislation that burden, and utilization of services) as well as focuses on e-prescriptions to improve access using available data on public and private sector to prescribed medications, while maintaining provision; (c) the MoH and BPJS-K, with the MoF necessary safeguards; (d) the MoH could lift and Bappenas, to develop capacity as well as restrictions on foreign telemedicine providers, identify clear roles and responsibilities to design specifically in pathology and radiology; and (e) and manage the PPP transaction process, manage the GoI to focus on the upgrading of mobile and monitor PPPs, and evaluate PPP results. infrastructure in remote regions to improve access to 3G and the use of smartphones. The government should strengthen hospital and primary accreditation capacity to facilitate empanelment by BPJS-K: The MoH and the Primary Care Accreditation Commission (Komisi Akreditasi Fasilitas Kesehatan Tingkat Primer, 4 KAFKTP), to expand capacity (for facilitation and accreditation) and the latter to become fully independent of the MoH (both financially and institutionally) and (b) the Hospital Accreditation Commission (Komisi Akreditasi Rumah Sakit, KARS), to expand its capacity to cover the increased demand for hospital accreditation services. section 1 . 5 Introduction PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Indonesians have become healthier in recent As the Indonesian population grows older, new decades as confirmed by the progress on key challenges are emerging. Noncommunicable health indicators. Over 1960–2016, average life diseases (NCDs) already account for the largest expectancy increased from 45 to 69 years.1 Under- share of the disease burden (66 percent),6 nearly five mortality declined nearly tenfold to 25 per doubling since 1990. NCDs are likely to rise 1,000 live births, while infant mortality declined further as the share of the population ages 65 sixfold to 21 per 1,000 live births over the same years and above doubles to 10 percent between period. The share of pregnant women receiving 2015 and 2030. Moreover, unhealthy lifestyle four or more antenatal care visits has also choices contribute to the prevalence of NCDs. increased, from 55 percent in 1991 to 77 percent Indonesia has one of the highest rates of cigarette in 2017.2 Importantly, Indonesia has charted consumption in the world: about half the adult remarkable progress on its path towards universal population (about 85 million people) smoke, health coverage (UHC). With the introduction including 68 percent of adult males. Tobacco is an of National Health Insurance Scheme (Jaminan important risk factor in the top five leading causes Kesehatan Nasional, JKN) in 2014, health insurance of death in Indonesia, which are stroke, ischemic coverage rates have increased significantly from heart disease, diabetes, TB, and cirrhosis.7 27 percent in 2004 to around 80 percent in 2018.3 Regional and income-related inequalities in Despite these advancements, significant health outcomes persist. National averages 6 challenges remain in improving maternal obscure wide disparities in health outcomes health and nutrition and in tackling persistent between urban and rural areas, the rich and communicable diseases. Indonesia’s maternal poor, and East and West Indonesia. In 2012, the mortality ratio remains high relative to its income under-five mortality in the Eastern Indonesian level at 126 per 100,000 live births in 2015 (from provinces of East Nusa Tenggara (Nusa Tenggara 446 in 1990).4 This means that one Indonesian Timur, NTT) and Maluku was close to 60 per 1,000 mother dies in childbirth every 1.4 hours on live births, much higher than the (then) national average. In addition, a third of children under five average of 40 per 1,000.8 In addition to large years or 9 million children suffer from stunting in regional disparities, income-related inequalities9 2018,5 the fifth highest prevalence in the world. remain across the country. Although the gap in Finally, Indonesia is now the second largest health outcomes between the richest and poorest contributor to the global tuberculosis (TB) burden, households has decreased over the last two with over 1 million cases reported in 2017 (WHO decades, under-five and infant mortality rates are and MoH Indonesia 2018). New challenges such as still more than double among poorer households.10 multidrug-resistant TB have also emerged. 1 World Bank World Development Indicators; latest data available on April 1, 2019. 2 Refers to the share of women ages 15–49 years who attended antenatal care visits once each in the first and second trimesters and twice in the third trimester. Source: Indonesia Demographic and Health Survey (IDHS) 2017. 3 Susenas household survey, various years, and estimation from online Badan Penyelenggara Jaminan Sosial - Kesehatan (BPJS-K) database (health facilities). 4 Based on World Health Organization (WHO)-United Nations Children’s Fund-World Bank estimates 2017. Census data indicate that the maternal mortality rate (MMR) may be even higher; the official MMR used by the Government of Indonesia (GoI) is 305 per 100,000 live births, Survey Penduduk Antar Sensus (SUPAS) 2015. 5 MoH Riset Kesehatan Dasar (Riskesdas) survey, 2018. 6 Institute of Health Metrics and Evaluation 2017. 7 Ibid. 8 IDHS 2012 is used to compare between regional and national estimates as this is not yet available for IDHS 2017. 9 The consumption Gini Index, a measure of income inequality, grew from 30 (2003) to 40 (2016). 10 World Bank staff calculations from IDHS 2017. 7 The private sector can play an important There has been increased utilization of role in driving better health outcomes for all outpatient and inpatient private sector health Indonesians. In many developing countries where services by all Indonesians, including the poor public resources are limited, the private sector (bottom 40 percent of the population in terms could help ensure that the supply of health care of wealth, Table 1). Also, with the introduction services meets the demand. Indonesia is no of JKN in 2014, utilization rates have almost exception, particularly at a time when growing doubled on average for inpatient care and for incomes and demographic and epidemiological the poor, including in private sector facilities. transitions increase the demand for health While outpatient utilization rates have increased services and public sector providers are already only marginally, even post JKN, private sector strained. The private sector could also introduce utilization constitutes between one-half and efficiency and innovations through technology. almost two-thirds of total outpatient utilization. Examples include digital health, telemedicine, low-margin high-volume specialty care, and innovations in diagnostics and radiology. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Of course, increased private sector involvement Considering these trade-offs, this report is not a panacea. An expansion of the private investigates the opportunities and constraints sector could even worsen or create inequities in the to more and better private sector participation distribution and quality of health services (Chanda in the Indonesian health services sector. It 2002) by creaming off the top consumers and focuses on three key segments of the health care human resources in the system. In addition, a rapid market—primary care (including digital health), expansion of the private sector in the health sector secondary/specialist health, and diagnostics,11 may generate the challenges of ensuring quality drawing from interviews with existing private of care in a system with limited oversight capacity. providers as well as recent secondary evidence The challenge is to manage trade-offs between to illustrate challenges faced on the ground. This equity and efficiency, growth and access to health, report also benefits from discussions with policy and private and public sector participation. makers from various government agencies on issues related to the report but not necessarily done only for the report. The report identifies some of these constraints and proposes possible recommendations to address them. While the list of factors and corresponding recommendations are not necessarily exhaustive, it does highlight key priority areas to be considered. The report concludes with some options for reforms that could help unleash the potential of the private sector to contribute towards a healthier, happier, and more productive Indonesia. 8 Tabel 1 Inpatient and outpatient utilization rates for private and all facilities Function 2011 2012 2013 2014 2015 2016 2017 2018 Outpatient National 13.4 12.9 13.5 14.4 17.0 16.1 13.3 15.1 utilization (all) Bottom (40%) 12.2 11.8 12.3 13.2 16.0 15.1 12.2 14.3 Outpatient National 8.4 8.5 9.1 9.8 10.8 10.1 8.5 9.1 utilization (private) Bottom (40%) 6.7 6.8 7.4 8.1 8.9 8.3 6.8 7.5 Inpatient National 2.1 1.9 2.3 2.5 3.6 3.7 4.2 4.7 utilization (all) Bottom (40%) 1.4 1.3 1.6 1.7 2.6 2.7 3.1 3.6 Inpatient National 1.0 0.8 1.1 1.2 1.7 1.7 2.0 2.2 utilization (private) Bottom (40%) 0.5 0.4 0.6 0.6 0.9 0.9 1.1 1.3 Source Susenas 11 Given the large scope of private sector health delivery, the report focuses on three subsectors that were most service delivery oriented. Hence, this excludes other important subsectors such as pharmaceuticals and medical technology, which could be covered as part of additional analytical work. section 2 . 9 Demand for and supply of health services and the role of the private sector PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Growing demand for health services Out-of-pocket (OOP) expenditures on health compared with about one-fifth of Indonesians are high in Indonesia compared to developed who are poor or vulnerable to poverty (Figure 1). countries. In 2016, public health spending Similarly, the middle and upper classes are more made up nearly half (45 percent) of total health likely to go to a hospital for childbirth instead of the spending in Indonesia but this was followed by local health center or clinic and they are more likely private or OOP expenditures, which accounted to be attended by a doctor rather than a midwife for about 35 percent.12 Social health insurance or nurse. As economic growth and urbanization accounted for about 17 percent and development continue to boost the expansion of the middle class, aid accounted for the rest. The share of OOP demand for better quality health services—at least spending has decreased in recent years and is on as perceived by the patient15 —will continue to grow. par with other lower-middle-income countries, but it remains nearly triple the average level in developed countries.13 The high OOP share is in Middle- and upper-class Indonesians are Figure 1 part due to low public health expenditures and more likely to use private health services 10 the fact that public facilities lack trained staff, (Choice of health care by consumption class, percent diagnostic capacity, and medicines, driving patients of households) to pay out of pocket for better quality services. The demand for privately funded health services in Indonesia is likely to rise further as 19 24 34 53 62 several trends persist. Continued expansion of the middle class, especially in urban areas. The growth of the Indonesian economy, along with the increase in the share of the population living in urban areas, has facilitated the emergence of a large middle class14 that requires more and better health services. The middle class expanded at 10 percent per year between 2002 and 2016 and now represents a fifth of the population (World Bank, 2019). Growing affluence, along with Poor Vulnerable Aspiring Middle Upper limitations in public service delivery, is increasing middle class class class the demand for private health services, especially in urban areas. In 2018, half of the households classified Public hospital Puskesmas Private hospital Others as middle class and 62 percent of the upper class used private hospitals for inpatient treatment, Source World Bank staff calculations using Susenas 2018.. 12 MoH National Health Accounts, 2016. 13 According to WHO/World development Indicators data, OOP makes up only 13 percent of total current health expenditures in high-income countries. The average for lower-middle-income countries excluding Indonesia is 40 percent. 14 Defined as those who have less than a 10 percent chance of being poor or vulnerable in the future, given their current consumption 15 Patients may be able to perceive better services using proxies on how good the services are, but they may not be able to make a judgment on whether they received the appropriate treatment or not. Demographic and epidemiological shifts. private companies, who are required to make Demographic, epidemiological, and financing contributions to BPJS-K). While the premium transitions will further increase the demand for for the poor is completely covered through a health services. The rising burden of NCDs, in public subsidy, Public Subsidy for Insuring the addition to existing communicable diseases and Poor (Penerima Bantuan Iuran, PBI), the remaining perinatal conditions, will increase the demand population pays for the premium through payroll or for health services, especially as the needs move voluntary contributions (for informal sector nonpoor). toward continuous, chronic care rather than just acute, episodic care. Demand could also increase With the introduction of JKN, Indonesia’s private due to more frequent visits to facilities, longer hospitals have seen a significant increase in the treatment periods, and more specialized care at total number of patients seeking treatment. the primary and referral levels, as well as due to While most rural Indonesians only have access complications that arise from the lack of early to a puskesmas (public primary health centers) as diagnosis and effective treatment. a means of primary care, populations in urban or semi-urban areas can also access several private Expansion of health insurance. In 2014, Indonesia sector providers for primary care, and if required, introduced JKN and committed to achieving UHC can be referred to specialist treatment by either by 2019. As of April 1, 2019, nearly 220 million public or private providers that are empaneled by Indonesians or about 82 percent of the total BPJS-K. As a result, inpatient and to some extent population were covered by the scheme,16 making outpatient utilization rates have increased since it the largest single payer social health insurance 2014, especially among the bottom 40 percent scheme in world. JKN provides a generous benefit (Figure 2). Major hospital groups such as Siloam, package covering all medically necessary treatment Mitra Keluarga, and Hermina have long-term with no caps or co-payments. It is separated expansion plans for hospitals in second-tier cities, 11 into two categories: BPJS-K (for nonemployees, where increasing incomes and enrolment in self-employed, or informal workers) and BPJS private insurance have increased the demand for Ketenagakerjaan (for employees of public and private providers. Figure 2 Inpatient and outpatient utilization rates have increased after JKN introduction (2014) 16% 14% 12% 2011 2013 2018 10% 8% 6% 4% 2% 0% National Bottom (40%) National Bottom (40%) Outpatient utilization (all) Inpatient utilization (all) Source World Bank staff calculations from Susenas. 16 Source: BPJS-K online dashboard. Accessed April 12, 2019. https://faskes.BPJS-K-kesehatan.go.id/aplicares/#/app/peta PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Supply of health services has increased, but the quality is uneven As the demand for health services has risen, so does not collect sufficient revenues for a country has the overall supply of health care services, of its size and income level, constraining the but public services are underfunded. Total overall envelope available for public spending per capita spending on health care has steadily (at 14.7 percent of GDP in 2017, Indonesia has increased in Indonesia, growing by 14 percent one of the lowest revenue-to-GDP ratios in the per year between 2000 and 2015.17 Nonetheless, world). However, this is also due to a relatively low public expenditure on health only amounts to 1.4 allocation of public expenditures to health. Even percent of gross domestic product (GDP)—almost the Dominican Republic, with a similar revenue- half of what other lower-middle-income countries to-GDP ratio and GDP per capita, spent twice the spend. This is in part due to the fact that Indonesia amount on health as a share of GDP (Figure 3). 12 Figure 3 Indonesia spends less on health compared to countries with similar per capita income (Y-axis: General Government health expenditures as a share of GDP, X-axis: log GDP per capita in 2011 purchasing power parity terms) 10 Thailand 8 Dominican Republic Indonesia 6 Vietnam 4 Malaysia 2 0 6 7 8 9 10 11 12 -2 Source World Bank staff calculations from World Development Indicators. Note Data on GDP per capita for 2017; data on general government health expenditure from 2015. 17 Indonesiaspends US$49 per capita on health, well below the recommended US$110 per capita needed to deliver an essential package of UHC (according to the Disease Control Priorities initiative, DCP3). In share of GDP terms, total current health spending in Indonesia is among the lowest in the world at 3.3 percent of GDP. As the expansion in public services is unable masks the maldistribution of beds across to meet the demand for health care, private the country, as the ratio ranges from 0.68 in providers have started to step up their West Nusa Tenggara to 2.24 in Jakarta.18 Many investments. According to the Investment Indonesians, especially in eastern provinces, Coordinating Board (BKPM), private investment still face significant physical and time barriers in the health and human services subsector in accessing health care (World Bank 2016), reached US$148.7 million in 2018, growing some resulting in high morbidity and mortality rates and 130 percent per year on average since 2014 the inefficient use of potentially productive time (Figure 4). Most of the increase is due to growth in by patients as well as of accompanying family domestic investment, which still accounts for the members and friends (Schoeps et al. 2011). bulk of private investment in the health sector, but foreign investment has also charted remarkable The perceived quality of health services growth, increasing by 73 percent per year offered in Indonesia also leaves much to be over the same period to US$43 million in 2018. desired, especially for wealthier Indonesians There is clearly still scope for increased private who can afford better quality care. In 2015, sector participation, as domestic and foreign it was estimated that 600,000 Indonesians investments in health accounted for only 0.45 and sought medical tests and treatment abroad, 0.15 percent, respectively, of total investments. spending US$1.4 billion,19 mostly in Malaysia, followed by Singapore and Thailand. When Notwithstanding the increase in the public indirect spending is included, it is estimated that and private supply of health care services, Indonesia is losing some US$4 billion a year due pockets of the Indonesian population remain to outbound medical tourism (Lim et al. 2018). underserved. Indonesia’s annual inpatient However, while Indonesian patients with the admission rate remains one of the lowest in financial means can seek medical treatment 13 the region and despite recent increases the abroad, the domestic market—particularly for bed-to-population ratio remains low at 1.16 those that fall just below the affordability line per 1,000 people—more than half the WHO- of foreign medical treatment—remains the recommended standard of 2.5 beds per 1,000 prime targets for the top domestic hospitals. people. Furthermore, the national average Figure 4 Investment in health has increased significantly, especially since reducing some restrictions in 2016 120,0 100,0 80,0 60,0 40,0 20,0 0,0 2012 2013 2014 2015 2016 2017 2018 Domestic investment in health in USD mn Foreign investment in health, USD mn Source BKPM, World Bank staff calculations. 18 MoH Profil Kesehatan 2017. 19 https://www.liputan6.com/bisnis/read/2455394/berobat-ke-luar-negeri-orang-ri-habiskan-rp-182-triliun PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Private sector can help close the gaps between demand and supply The unmet demand for health services in The private sector also plays a critical role in Indonesia represents an opportunity for the improving the availability and quality of health private sector. Globally, the private sector plays products and the development of medical an important role in health financing and health technologies. The private sector plays a critical service delivery. This is especially the case in role in research and development (R&D) and lower-middle-income countries such as Indonesia manufacturing of medicines, commodities, and where limited fiscal space and competing medical devices, spending over US$135 billion a development priorities constrain the amount of year on pharmaceutical R&D. In emerging markets public resources that can be channeled toward such as Indonesia, greater private investment could addressing public health needs. Private providers promote local innovation, technology transfer, can also help improve access to health care and low-cost solutions to improve the availability services by lower-income populations, especially of medical devices and drugs. Again, the private if they are linked to social health insurance sector also has a role to play in diminishing 14 schemes. Indeed, analysis by World Bank inequities: in Tanzania, for example, AirTel Tanzania (2010) shows that the rise in private physicians sends free text messages about infant care to in Indonesia has been associated with greater mothers and pregnant women, helping reduce utilization of health services by the poor, through a infant mortality by 64 percent and maternal reduction in the congestion in clinics. mortality by 55 percent (West 2015). Advancements in telemedicine can also help develop the quality of human resources for health (HRH), for example, through remote diagnosis and training. Private sector involvement also poses risks that call for proper oversight This is not to say that greater involvement of the On average, the puskesmas had 26 components private sector automatically improves the overall available compared to private GP clinics that quality of care or efficiency. Evidence does not had only 20 components. There are significant necessarily support the assumption that private gaps in the readiness of private sector clinics to sector delivery by itself provides better quality care serve patients: for example, only 35 percent of more efficiently. While the private sector performs all private primary health facilities had facilities better on drug supply, timeliness, and patient for basic diagnostics compared to 66 percent of hospitality, some reviews point to poor quality of puskesmas. 22 Among private sector facilities, those care and worse patient outcomes and efficiency empaneled for BPJS-K tend to be more supply- than in the public sector—partly because of the side ready than those that were not. For all the perverse incentives for unnecessary testing and specific clinical and outreach services, such as for treatment that are provided by fee-for-service child health, immunization, and communicable systems (Basu et al. 2012; Berendes et al. 2011; diseases, the puskesmas were better prepared Herrera et al. 2014; Patouillard et al. 2007). This may than the private clinics to offer services. 15 also be reflective of the enormous heterogeneity of providers in the private sector. Without the necessary regulation, private sector health care expansion may lead to In Indonesia, a study on primary health care distortions in service provision, including (PHC) supply-side readiness indicated that the distribution, quality, and price of health publicly funded puskesmas were in fact services. These distortions arise from the failures more prepared to provide both general and usually associated with health care markets specific PHC services compared to private due to the underlying information and power general practitioner (GP) clinics. The general asymmetry between providers and patients service readiness—an index20 of tracer indicators associated with many health care interventions that measures supply-side readiness as a key (Doherty and McIntyre 2013). Hence, normal prerequisite for improved quality of care21 —for market mechanisms that provide incentives for public primary health facilities was 78 percent profit making can threaten broader health policy while private health facilities was 61 percent (Rajan objectives such as the achievement of equitable, et al. 2018). Put differently, to assess the facilities’ efficient, and sustainable health systems (Afifi, readiness for provision of general health care Busse, and Harding 2003). In the context of an services, this report analyzed the availability of expanding private health sector, it is important about 34 components—including basic amenities, that regulatory frameworks are established to equipment, diagnostics, and essential medicines. ensure that these potential market failures are 20 Service readiness is measured by a set of tracer indicators across five domains: basic amenities, basic equipment, standard precautions for infection prevention, diagnostic capacity, and essential medicines. 21 The results of this study should not, therefore, be interpreted as a study on quality of care outcomes at the public and private sector PHC facilities in Indonesia but as a measure of supply-side readiness as a necessary, but not sufficient, prerequisite to improve quality of care. 22 Part of the reason for the low level of capital equipment of private primary care clinics is their low profitability which typically does not suffice for capital investments beyond the basic level. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation mitigated and private health markets contribute competition. Pharmacies and laboratory services to achievement of health policy goals. Regulatory are also easy to regulate, so they also see high frameworks clarify policy objectives, establish levels of private provision. On the other hand, it instruments for regulation (such as legislation is more difficult to monitor services provided by or voluntary incentives), set up regulatory informal health providers or unauthorized drug structures, ensure dialogue between the retailers operating in more remote areas. It is members of regulatory networks, and monitor estimated that in many low-income and lower- the effectiveness of regulation (Afifi, Busse, and middle-income countries about 28.5 percent of Harding 2003). medicines can be counterfeit or substandard (Almuzaini, Choonara, and Sammons 2013). Regulating private sector providers can be more difficult and expensive than public sector The private sector does offer some advantages providers (Wadge et al. 2017). It is important to over the public sector and can be a policy note that the impact of private sector participation option, if the distortions arising due to the health in health can also differ by subsector, depending market failures are mitigated (Doherty and on the barriers to entry. There is a strong case for McIntyre 2013). Hence, increasing private sector private sector involvement in outpatient services, involvement in the health sector needs carefully for instance, because it is easier to establish criteria designed and well-implemented policies and for licensing and regulating service provision, regulations to ensure that the potential benefits making them more contractible and open to outweigh the costs. 16 Tabel 2 Potential benefits and costs of increased private sector participation in the health sector POTENTIAL BENEFITS POTENTIAL COSTS Reduce the patients’ burden of public sector structures Reduce the quality of and accessibility to health services for the poor Expand the range and quality of health services Internal brain drain (poaching of the private sector from the public sector) Help retaining health professionals Reduce support for quality public health services Facilitate positive spillovers to public sector (for example, Deteriorate quality of training due to private sector-led via exchanges of ideas, knowledge, imitation effects) expansion Use of private sector to reach public sector objectives (for example, public-private partnership [PPP]) Upgrade and expand the health services infrastructures Expand health training facilities Facilitate expansion of health insurance Source Cali and Stern 2009 section 3 . 17 The Markets for Health Care Providers PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Primary Health Care The primary care market is highly fragmented as referral centers to their hospitals for patients in Indonesia, consisting mostly of puskesmas or covered by private insurance and OOP payers. publicly funded community health care centers However, the absence of clear economies of scale and private GP clinics. There are roughly 9,909 and the importance of patients’ relation with the puskesmas across the archipelago. 23 Although GP—as opposed to the brand of the clinic—have there are no reliable statistics on the number of largely kept the private sector highly dispersed. private primary care providers, there are at least GP clinics represent the highest number of private an estimated 10,000 private GP clinics that have primary care facilities across the country, with been approved by BPJS-K. Since the introduction many being individual or group GP clinics that of BPJS-K, the number of GPs has seen a provide outpatient services. significant increase in their patient numbers, and they have been instrumental in relieving some of While there are no specific data on the cost the demand from puskesmas and public hospitals. structures of these private primary care clinics, 18 the fact that supply-side readiness in these Each puskesmas covers a large catchment area, clinics is lower than that of puskesmas may and their growth has not kept pace with demand indicate that this is a lower-margin business that growth, thus opening further opportunities for may need specific investments and incentives private sector participation. Each puskesmas from the public sector to improve quality and meets the needs of close to 30,000 people, performance. In terms of broader health system mostly catering for outpatient services although efficiency, this would be beneficial as early about a third of them also provides inpatient care. diagnosis and treatment at the primary care level The supply of public PHC facilities grew at 0.4 (primary and secondary prevention) would be percent per year from 2013 to 2017, suggesting much less expensive than treating complications that the government’s focus has been to expand of undiagnosed and untreated diseases at the secondary and tertiary care facilities rather hospital level,24 justifying public financing. In than primary care facilities. This creates further addition, most OOP expenditures to purchase investment opportunities for the private sector services at the private clinics are inefficient by whose growth presents challenges as well. themselves. While health care groups have developed The Ministry of Health (Departemen Kesehatan, some chains of primary clinics, the private MoH) and the Indonesian Doctors Association sector remains dominated by single-practice (Ikatan Doktor Indonesia, IDI) allow for the GP clinics. Some hospital groups have invested issuance of three practice licenses (Surat Ijin in primary care clinic chains, such as Mayapada Praktek, SIPs) to both GPs and specialist doctors. Clinics, Siloam Clinics, and Brawijaya Clinics. The implementation of this is strict for GPs where These clinics are located mostly in Jakarta and they can utilize their SIPs at a private or public Bali and serve as outpatient service providers or hospital, a clinic, and a private practice. GPs are 23 Asof end-2017. Source: MoH, Profil Kesehatan 2017. 24 Diagnosis and treatment of hypertension to control blood pressure versus treatment of complications like cardiovascular disease or stroke. not required to utilize all three licenses. However, The role of JKN in (re-)shaping PHC 19 many doctors work at one hospital in the morning hours, one in the afternoon/evening hours, and at a private practice (usually at their home). The The JKN scheme is increasingly responsible regulations require that a doctor obtain an SIP for the growing demand for PHC, with BPJS-K from the local district Department of Health (Dinas now covering all public clinics and around half Kesehatan, DinKes) where they practice. of the private ones. BPJS-K patients can receive treatment under BPJS-K coverage across the The market is dominated by domestic investors, country in all of the 9,909 puskesmas and in as foreign investors are essentially not allowed approximately half of the 10,000 private clinics to invest in the PHC sector under current and pratama clinics (primary care outpatient regulations. The latest Negative Investment clinics). There are also an estimated 2,100 private List (Daftar Negatif Investasi, DNI) (Presidential hospitals, 1,200 dentists, and 1,050 opticians that Regulation No. 44/2016) reserves virtually all cater to BPJS-K patients. 26 On the other hand, of the PHC services to domestic investors. 25 private hospitals and clinics are not authorized Foreign investors are instead allowed to invest to receive BPJS-K patients for GPs, so a majority in outpatient polyclinics but are required to of patients that receive primary care at hospitals provide specialist doctor outpatient services come from private insurance, employee benefits, (such as dental clinics and rehabilitation services). and OOP payers. GPs that are certified to receive However, specialist doctors in Indonesia typically BPJS-K patients at their private practice now prefer to work at hospitals where they can provide benefit from increased patient flow, particularly higher-value inpatient services, or at their own in areas that are underserved by hospitals and private practice for outpatient services; hence, clinics. foreign specialized outpatient polyclinics are rare. 25 These restrictions apply to Indonesia Standard Industrial Classification or Klasifikasi Baku Lapangan Usaha Indonesia (KBLI) 86103, 86104, and 86109. 26 https://www.thejakartapost.com/academia/2018/04/06/qa-BPJS-K-kesehatan-health-for-all-indonesians.html. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation BPJS-K pays PHC clinics through a capitation BPJS-K empanelment appears to greatly scheme based on registered patients, which enhance the patients’ flow to private health should incentivize prevention. The base rates care centers in areas interviewed. Interviews were calculated using the capitation structure conducted for this study in Bali suggest that a applicable under the Jaminan Kesehatan number of GPs have opened BPJS-K-empaneled Masyarakat (Jamkesmas)—the social health certified clinics and have seen a significant insurance scheme for the poor and near-poor that increase in the number of patients they treat (up to was wrapped into JKN in 2014 (Britton, Koseki, 50 percent) since they were BPJS-K empaneled. and Dutta 2018). The capitation rates for private However, this varies across the country and a facilities were then adjusted to account for higher majority of the population is still enrolled by cost structures in the private sector. The maximum puskesmas to receive capitation compared to capitation amount for private sector facilities is the population enrolled by private sector clinics. IDR 10,000 per member per month versus IDR This increased demand for basic health services 6,000 per member per month for a puskesmas. is also encouraging GPs to establish home-based Primary clinics are paid a set amount per month clinics to treat additional patients outside of per member assigned to their clinics, regardless working hours, an option that requires the use of of whether they have provided any service to multiple SIPs (up to three) that doctors can avail in that member. Thus, in theory, this payment Indonesia. At the same time, private insurance and arrangement should incentivize providers to OOP expenditures are still an important source of focus on preventive care. Some disease-specific demand for many private GP clinics, particularly services such as family planning are reimbursed in more affluent urban areas, where the need to separately (non-kapitasi ). empanel with BPJS-K is less stringent among private facilities. 20 The JKN has helped consolidate the role of primary care clinics as the first point of call for The availability of health centers is disparate all nonemergency illnesses thus enhancing across regions reflecting different population the use of their services. Unless they are in densities and relative market size. In particular, emergencies or labor and delivery, BPJS-K primary health centers are concentrated in areas patients are required to access primary clinics with higher population and incomes, including which become the gatekeepers of the health Java-Bali. However, given the high populations system. While puskesmas typically have basic in these areas, the number of centers per 1,000 diagnostic equipment (blood glucose, cholesterol, is lower than in more sparsely populated regions and uric acid tests), that is not always the case in eastern Indonesia (Figure 5). At the same time, in private facilities. The latter often cannot afford the sparse population implies that there are many the capital costs associated with such equipment villages in more remote regions without any and cannot ensure the volumes needed to make health centers (Figure 6). these investments profitable. If specialist care is necessary, the primary care clinic must refer the patient to either Class C or D hospitals. These hospitals then become the gatekeepers for further specialized care, where the providers from these hospitals must refer the patient up to Class A or B hospitals should the patient want or need care at that highly specialized level. 27 According to the WHO, ‘digital health’ or e-Health is defined as the cost-effective and secure use of information and communication technologies (ICTs) for health- and health-related fields. It also includes mobile health (m-Health), which involves the provision of health services and information through mobile technologies. Figure 5 Number of health centers per 1,000 people < 0,1 0,27 - 0,41 0,1 - 0,18 > 0,41 0,18 - 0,27 Source Podes Survey 2018. 21 Figure 6 Share of villages without health centers < 20% 60 - 80% 20 - 40% > 80% 40 - 60% Source Podes Survey 2018. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Digital health providers example, video call with health professionals and educational videos). The scarce availability of primary health HaloDoc and AloDokter are the two key domestic infrastructure makes it difficult for individuals players in the Indonesian digital health market, to access the health systems, particularly in the providing online access to consultations, less-affluent parts of the country; the emergence medicine, and information. HaloDoc was of digital health providers may eventually help incorporated in 2016 with the aim to ease the end- relieve that constraint.27 A number of companies to-end experience for patients, by providing online are starting to provide digital health services in appointments, consultations, diagnostic referrals, Indonesia acting as a first point of contact with and medicine delivery through the ride hailing app health professionals. For example, HaloDoc GoJek, delivering medicine as quickly as within one provides online consultations, helps set up doctors’ hour from the order. HaloDoc has also partnered appointment, and provides last-mile delivery of with private insurance groups to provide services to over-the-counter (OTC) medicines from pharmacies those covered by employee benefits.29 AloDokter or hospitals to the patient. The latter service is Indonesia’s leading health content portal (similar could also help alleviate logistical difficulties that to WebMD in the United States) providing good- pharmaceutical companies and retail pharmacies quality, relevant health information for patients in face with inventory management, expiration of Bahasa Indonesia. The platform has eventually medications, and distribution costs of medicines started to also provide direct chat facilities with to remote regions. Similarly, AloDokter is an online doctors, as well as artificial intelligence (AI) bot- platform which provides medical-related content in assisted question and answer sessions where Indonesia encouraging preventive care and helping patients can inquire about specific conditions and 22 people gauge the need for a medical checkup treatment options. According to AloDokter, they (MCU). have over 20 million unique monthly users and 1 million patients using the chat platform to interact Besides the promise for the people with limited with doctors on the platform. physical access, the digital health sector is currently growing on the back of technology- While the uptake of appointments, medicine savvy urban populations in Indonesia. The great delivery, and online content consultation has penetration and use of mobile broadband devices seen growth, mobile consultations with doctors in Indonesia—even relative to countries at similar have remained slow, as this requires patient level of income (Figure 7)—has helped create behavioral change. Younger patients typically call a large base of customers for digital services, a doctor through a platform for a general illness but including health services. This base is particularly will opt to see a specialist in person. This pattern concentrated in urban areas where a more tech- is consistent with that on many global digital savvy population is reducing transaction costs health platforms. An exception has been pediatric by exploiting the benefits of digital connectivity. 28 consultations, which have experienced significant Most of the emerging digital health services growth through the HaloDoc platform, as many first- are provided through mobile platforms, which time parents prefer the peace of mind of speaking make them particularly suitable to Indonesia’s to a doctor when their child is ill. Dermatologists also pattern of online usage, although the relatively have seen an increase in mobile consultations, as slow download speed in the country can make many of the diagnoses can be made over the phone it challenging to use video-based services (for and often require only OTC medicines. 27 According to the WHO, ‘digital health’ or e-Health is defined as the cost-effective and secure use of information and communication technologies (ICTs) for health- and health-related fields. It also includes mobile health (m-Health), which involves the provision of health services and information through mobile technologies. 28 Data collected by the leading digital health providers in Indonesia suggest that users under 30 years of age are increasingly using their mobile phones to find health information online. 29 The potential prospects of this business model in Indonesia have been confirmed by two significant rounds of funding, which have secured HaloDoc a total of US$76 million in 2017–2019. Figure 7 Indonesia has a relatively high penetration of mobile broadband 200 Low Middle Income High Income Income 150 Indonesia 100 World OECD 50 ASEAN Indonesia 6 7 8 9 10 11 12 Log GNI per capita (current US$) Source ITU 2017 and World Development Indicators 23 Other digital providers are also emerging in wearables and other mobile medical devices providing appointment and telemedicine services. could eventually improve a doctor’s ability to YesDok is a digital health service launched in 2017 remotely monitor patients’ overall health and to that focuses on providing mobile consultations 24 provide tailored guidance for both medication and hours a day. Other providers such as DokterSehat overall wellness. In addition, the progress in AI and KlikDokter are health content providers that also may enable digital companies to provide tailored have chat and appointment services for physicians advice to individuals on the basis of information and diagnostics. Foreign providers such as Practo such as symptoms and patients’ history. Besides (India) and RingMD (Singapore) are seeking to health care provision, opportunities exist for digital provide telemedicine services direct to Indonesian health providers to create technology solutions patients with doctors abroad. Lifetrack Medical for accessibility, coordination of benefits, and Systems provides tele-radiology for hospitals and integration of hospital information systems (HISs) diagnostic chains. The shortage of radiologists in to mobile devices. Indonesia means that hospital groups or diagnostic providers could potentially utilize excess radiology Digital platforms could also be utilized by capacity in markets such as India and the Philippines BPJS-K to provide preventive health information. to increase the efficiency of operations in the A key focus for future cost savings of BPJS-K is Indonesian market. on preventive health and providing access to health care information to the public. Given the While, to date, the ability of a patient to receive development of a wide range of health-related digital health services is limited to written or content, digital platforms are well positioned to verbal interactions, the rapid technological provide the infrastructure for BPJS-K to provide advances may enable the sector to vastly targeted information campaigns to both health expand its services. In particular, the increase care workers and the general public. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Secondary/specialist Health Care Providers Market landscape About a fifth of Indonesia’s hospitals are specialist hospitals. The specialist hospital market in Indonesia mostly consists of stand- Private investment in the secondary/specialist alone hospitals that are either family-owned health care subsector has grown rapidly. The or have a few small investors that make up the number of private hospitals has grown by 9.2 ownership structure. The larger, conglomerate- percent per year over 2014–2017—a much faster owned hospital groups such as Siloam Hospitals rate compared to the growth in the number of (Lippo Group) or Mitra Keluarga (Kalbe Farma) public hospitals, which increased by 1.3 percent maintain majority ownership, with foreign or per year over the same period.30 As of end-2017, domestic investors in the minority. Hermina about 60 percent of all 2,198 hospitals in the Hospital Group (HHG) is the largest mid-market country were privately owned.31 By contrast, the private chain that provides practicing doctors number of hospitals owned by the MoH and state- with ‘sweat equity’32 in the hospital where they 24 owned enterprises (Badan Usaha Milik Negara, operate, allowing for rapid expansion in second- BUMN) has decreased substantially over the past and third-tier cities. These three hospital groups— two decades. Siloam, Hermina and Mitra Keluarga—are the Figure 8 Total number of hospitals by ownership Ministry of Health Ministry of Health 14 59 Private Subnational Private 1334 government 550 Subnational government 672 357 2000 2017 Army/police 164 Army/police State-owned enterprise 111 /other department 14 State-owned enterprise /other department 68 Source MoH, World Bank staff calculations. 30 World Bank staff calculations using data from the MoH (Profil Kesehatan 2017). Latest data available as of April 12, 2019. 31 MoH, Profil Kesehatan 2017. 32 Sweat equity shares means equity shares that are issued by a company to its directors or employees at a discount or for consideration, other than cash, for providing their know-how or services. The consensus among practicing doctors is that the equity model can be attractive in recruiting high-profile specialists in second- and third-tier cities. major players in the industry, with Siloam leading groups. Malaysia’s Creador, for example, has a in terms of number of hospitals and revenues minority stake in Hermina. (around US$50 million), but the other two groups are in close proximity. The number of lower-level hospitals, which are gatekeepers to higher-level specialist care, Many private hospitals have been built (or have has grown faster than the higher-level ones, a been planned) following the implementation possible result of the BPJS-K referral system. As of JKN, with the intent to capture the increased mentioned previously, BPJS-K requires patients demand for specialist services.33 Two of to access services first through the primary care Indonesia’s leading private hospital groups— level and be referred up to Class C and D hospitals Siloam and Hermina—have opened 20 branded should the need arise. If further specialist care is hospitals since 2016, with another 20 hospitals in required, these hospitals will further refer up to the pipeline by the end of 2020.34 Most of Siloam’s Class A and B hospitals. Stakeholders note that hospitals have been acquisitions or management since Class C hospitals are at a higher level than buy-outs of existing hospitals, whereas Hermina Class D and get higher reimbursement rates, but has mostly built greenfield hospitals, focusing can still accept referrals directly from primary on Type ‘C’ hospitals to receive BPJS-K referrals. care, more facilities are upgrading to Class C Indeed, most general hospitals in Indonesia are hospitals. As such, the proportion of Class C and of Type C or D, which only offer basic services.35 Class D hospitals has grown quite rapidly in the Foreign operators from Malaysia, India, and last years (Figure 9). Singapore have also invested in private hospital 25 Figure 9 Breakdown of Indonesian private hospitals, by class (2011–2017) 100 80 60 67% 44% 81% 46% 51% 52% 53% 46% 47% 40 20 0 2011 2012 2013 2014 2015 2016 2017 A B C D Source Britton, Koseki, and Dutta (2018). 33 Britton, Koseki, and Dutta 2018. 34 This is based on information collected through interviews with the companies. 35 MoH Regulation No. 340/2010 classifies all general hospitals according to the services provided, with A being the most advanced and D being the most basic. Type A provides, at a minimum, four basic specialist services, five medical support specialist services, twelve other specialist services, and thirteen subspecialist services. Type B provides, at a minimum, four basic specialist services, four medical support specialist services, eight other specialist services, and two subspecialist services. Type C provides, at a minimum, four basic specialist services and four medical support specialist services. Type D provides, at a minimum, two basic specialist services. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Key players largest hospital and clinic network in Indonesia, with 34 hospitals and approximately 6,000 beds.36 Eleven of its hospitals are located in the Greater Since many large (200-bed plus) private Jakarta area, with the remainder across Java- hospital groups are owned by conglomerates, Bali, Sumatra, Kalimantan, Sulawesi, and Nusa the need for foreign capital has remained Tenggara. Siloam’s current focus is on acquiring limited to minority foreign equity stakes (as existing hospitals in smaller cities and bringing detailed below). A majority of foreign investment them under Siloam management. It plans to have has flowed into hospitals, specialized health up to 40 hospitals and 30 outpatient clinics by care groups, or start-up health care technology 2020, primarily focused on the middle- and upper- ventures. The large domestic players such as middle-class segment. Siloam accepts BPJS-K Lippo Group (Siloam Hospitals) and Kalbe Farma patients at 24 out of its 34 hospitals. Moreover, (Mitra Keluarga) have been rapidly expanding hospitals in smaller cities accept BPJS-K referrals their hospitals as complementary businesses to from provincial public hospitals. their dominant real estate and pharmaceutical business, respectively. HHG and Awal Bros HHG has traditionally focused on the middle- Hospitals are involved only in health care services income segment and has an operating model and have taken on foreign and domestic private where doctors are shareholders in their operating equity funding, respectively. hospital. Hermina currently operates 30 hospitals with approximately 3,000 beds and has the Siloam Hospitals is majority owned by the Lippo largest coverage of hospitals across Indonesia of Group, with a 15 percent minority stake held any private group. This doctor-owner model has by CVC Capital Partners. Siloam maintains the allowed Hermina to rapidly expand in second-tier 26 Tabel 3 Major hospital groups in Indonesia, 2018 Number of Number of hospitals New hospitals planned Company Hospital name hospitals serving BPJS-K in 2019 Siloam International Hospitals Siloam 34 24 7 HHG Hermina 30 30 4 Mitra Keluarga Karyasehat Mitra Keluarga 20 12 2 Awal Bros Awal Bros 12 n.a. n.a. Source Company websites and press clippings. Information valid as at end-2018. Tabel 4 Financial performance of market-listed hospital groups, end-2018 Assets Liabilities Equity Sales P/E ratio D/E ratio ROA ROE NPM Mitra Keluarga 4,976 718 4,258 2,033 35.31 0.17 13.89 16.23 34.01 Hermina 3,950 1,566 2,384 2,288 51.78 0.66 5.47 9.06 9.44 Siloam 7,701 1,390 6,312 4,396 1,463.03 0.22 0.17 0.2 0.29 Source Indonesia Stock Exchange, Statistics 2018. Note P/E = Price to earnings; D/E = Debt to equity; ROA = Return on assets; ROE = Return on equity; NPM = Net profit margin. 36 Siloam Prospectus, 2019. 27 cities with specialist practitioners as shareholders. its distribution and logistics platform, which All Hermina hospitals accept BPJS-K patients, with allows for efficient distribution of pharmacies some of the hospitals having up to 50 percent and consumables throughout Mitra Keluarga’s of patients coming through BPJS-K referrals. hospital chain. This has allowed the group Hermina plans to open 40 hospitals by 2020 and to become the hospital of choice for private has started entering into hospital management middle-income customers in the Greater Jakarta agreements as it has done in Provita Jayapura area. Kalbe Farma’s vast doctor network has Hospital (Papua). Hermina’s focus is to expand also become a convenient recruiting ground Class C hospitals through greenfield or managed for doctors across Indonesia. The group is service agreements. As a pure health care now planning an acquisition and greenfield operator, Hermina is in a good position to develop expansion of hospitals in second- and third-tier PPPs in the form of joint ventures, particularly for cities focused on BPJS-K customers. Backed by the diagnostics sector and Centers of Excellence Kalbe Farma, Mitra Keluarga has the capital and due to its doctor shareholder model, which allows human resources to develop PPPs, particularly for greater incentives to specialist doctors. in the area of diagnostics and specialty centers. As one of the largest pharmaceutical producers Mitra Keluarga has 13 hospitals mostly in the (both branded and generic), Kalbe Farma has Greater Jakarta area, with approximately 2,200 a strong relationship with the government as beds. Its greatest advantage is the fact that it is a major pharmaceutical provider to BPJS-K. part of Kalbe Farma (the parent company) and PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation The role of JKN and private hospitals off with their employee benefits where required. Siloam and Hermina indicated that it was in their interest to accommodate BPJS-K patients and The initial uptake of BPJS-K patients by private provide patients with the same level of service hospitals was limited upon its rollout in 2014, to their privately insured or OOP patients, as they as many providers initially feared that basic would be paying customers in the future. One services would be overrun by BPJS-K patients. leading hospital group indicated that for four of its Private hospital groups were reluctant to take hospitals in the Greater Jakarta area, some 40–50 on a government body such as BPJS-K as a percent of the patients were using BPJS-K. client. Those that did take on clients did view this cooperation between BPJS-K and private Today, private hospitals are required to have hospitals as a PPP. One medical director said BPJS-K patients referred for specialist services there was a moral obligation on part of private at their facilities either through puskesmas health care providers to offset the sudden or government hospitals. The determination increase in demand of medical services that was of which hospital receives which patient for overburdening the public health care system. In specialized care is determined by BPJS-K addition, the national socialization program for the based on geography and the availability of the public was not well coordinated, and there was specialized services at the respective private a lack of understanding on the types of services hospitals. Private hospital groups that have a covered by BPJS-K. broader geographic footprint are in a better position to take advantage of BPJS-K patients, However, the uptake of BPJS-K services many of whom access health care in second- increased significantly in 2015–2016, particularly or third-tier cities. Since the coordination of 28 with lower-income patients, once the BPJS-K health insurance benefits of BPJS-K and private outreach program informed the public that their insurance remains complicated at the hospital health care costs were now covered if patients level (and reimbursement for the patient), many go through the referral system. With incremental patients have opted to pay OOP once they reach growth in private health insurance coverage, as the threshold of their BPJS-K coverage. well as an increase in health insurance provided through employee benefits, many of the hospitals serving the middle-income segment are seeing an overall increase in the number of patients utilizing BPJS-K where possible, and then topping Diagnostics providers Market landscape Hospitals can achieve high patient volumes and can compete with diagnostic centers that generally service hospitals without full The diagnostics market in Indonesia works on diagnostics, primary clinics, and doctors that a referral model, primarily due to the capital- are allowed to refer higher-parameter tests to intensive business model that requires high centers that can provide it. The pathology model volumes of tests to break even. In Indonesia, in Indonesia has also encouraged doctors to refer most diagnostics providers work on the tests to specialist diagnostic centers in exchange Operational Cooperation Contract (Kerjasama for a flat fee to the referring doctor, a percentage Operasi, KSO) model, where a provider leases of the value of the referred lab test, or a flat fee diagnostic equipment and negotiates an annual for a certain number of referrals within a given fee (paid monthly) based on the total number period. Hospitals have had little control over their of tests it conducts. This model is popular doctor’s referring tests outside of the hospital with pathology providers, as it provides time diagnostic facilities, as, in the past, they could not 29 for a provider to build patient footfall into their compete on pricing with stand-alone diagnostic laboratories. A few key players in the markets centers because they lacked the volume of tests. dominate with over 80 percent of pathology Hospitals had generally accepted this practice, tests between them, with the leading diagnostics so as not to upset a supplemental line of income providers being Prodia, BioMedika, and Paramita. for doctors. However, in many cases, hospitals Almost all operate hub-and-spoke models where were unable to provide the required pathology they utilize sample collection centers within an tests in- house because they could not justify the urban area and a central lab where all samples are investment to compete with the likes of Prodia. delivered to be tested. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Key players have indicated interest in partnering with groups that are BPJS-K partners. A joint venture, as described by a foreign private equity director, Prodia has 150 diagnostic and sample collection would potentially involve developing greenfield centers across Indonesia, making it the dominant diagnostic centers that could serve both privately player in the pathology market (estimated to insured and BPJS-K patients. Another method control two-thirds of the private market). It also would be to inject capital for upgrading pathology employs the largest number of pathologists and and radiology services in existing centers to conducts the largest number of high-parameter ensure the ability to provide higher-value tests pathology tests in Indonesia. It has cooperated referred by BPJS-K. At present, only routine with BPJS-K to provide free Human Papillomavirus laboratory tests and x-rays/magnetic resonance (HPV) tests for qualified patients and is one of the imagings (MRIs) are covered by BPJS-K at public few labs to do so in Indonesia. It is in the strongest hospitals and clinics, and if additional higher-value position to develop PPPs with its geographic tests are required, the coverage is on a case-by- reach, referral partner hospitals, and total number case basis, with many patients required to pay out of tests conducted annually. of pocket. BioMedika has 15 clinics across Jakarta and Bali Radiology and advanced pathology equipment and a referral network in the Greater Jakarta area are expensive, and many single private for both pathology and radiology services. It has hospital operators remain reluctant to invest stated that it would be interested in looking at in expensive MRIs. However, some hospitals PPPs along with private investors. The group has that experience higher volumes and demand— experienced growth in preventive lab tests as including BPJS-K patients—have begun to see the 30 more middle- and upper-income patients take benefits of investing in higher-value equipment greater control over their health care decisions. with higher utility rates of the equipment. Private equity investors have also expressed confidence Paramita is one of the market leaders in MCU for that once there is a coordination of benefits employee benefits alongside Prodia. It provides (COB) mechanism between BPJS-K and private routine tests for employee benefits, BUMN insurance, it will allow for patients to be covered employees, private patients, and insured patients. for higher-value tests through employee benefits Its network is in areas with high numbers of or private insurance. industrial or agricultural employees. It is efficient at operating at high volumes and low margins per test. This places it in a favorable position to work with BPJS-K patients. While the private diagnostic market is currently not so well developed, compared, for instance, to India and Malaysia, it is one of the most interesting perspective investments for the private sector. Health care groups in India, the Philippines, and Malaysia, and two private equity funds contacted for this report, have expressed interest in developing joint ventures with Indonesian providers to address capacity issues, with a starting point in diagnostics. Currently, a digital diagnosis performed by a foreign doctor abroad is not valid for a diagnosis and will have to be signed off by an Indonesian doctor for treatment. Since diagnostics achieve efficiency with higher volumes, foreign investors section 4 . 31 Addressing Constraints to Private Sector Participation in Health PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation While the private sector is already an integral Addressing these constraints would require part of health service provision, a number the GoI to engage the private sector effectively of factors still constrain greater and better while also ensuring that its regulatory role is private participation in each of the three not captured. The private sector should be an segments of the sector considered. This section important partner in designing and delivering identifies some of these factors on the basis the reforms addressing the constraints. This of field interviews gathered for this report as partnership can be facilitated through the various well as recent secondary evidence. For each organizations through which the private sector of these constraints it then proposes possible is organized, such as IDI, the Association of All recommendations to address them. While the list Indonesian Hospitals (Perhimpunan Rumah Sakit of factors and corresponding recommendations Seluruh Indonesia, PERSI), and the Indonesian is not necessarily exhaustive, it does highlight key Private Hospitals Association ( Asosiasi Rumah priority areas which should be considered. Sakit Swasta Indonesia, ASSRI). These associations 32 can be valuable sources of inputs and cooperation The list of constraints includes (a) lack for the GoI (see Annex 2 for more details on of a clearly articulated strategy for private these associations). At the same time, they also sector engagement by the GoI; (b) sustained represent the providers of health services, so their and increasing financial deficit of the public needs have to be always set in the context of the insurance scheme BPJS-K—the largest source benefits for the users of the health system of demand for many private providers—which constrain the ability of private providers to plan; (c) underutilization of the BPJS-K strategic purchasing function to drive improvements in service quality; (d) inadequate availability of skilled health professionals; (e) restrictive establishment rules for private sector players—foreign in particular; (f) lack of an enabling government environment to design, manage, and monitor PPPs; (g) poor capacity of the hospital and primary care accreditation systems; and (h) unclear and at times overly restrictive e-health regulations. The government should articulate a clear private sector engagement strategy for health There has been increased utilization of incentives to fulfill such gaps through differential outpatient and inpatient private sector health reimbursement rates by BPJS-K or by planning a services by all Indonesians, including by the poor, pipeline of high-impact PPPs. For example, the which has increased even further (for inpatient current health PPP pipelines are limited to the services) after the introduction of JKN in 2014. expansion of infrastructure in a few hospitals. For The BPJS-K, which already contracts with about the private sector, this could be available as a 10,000 private primary care facilities and 1,500 public good to plan expansion of their services private hospitals and specialized clinics, is the key and match it to clearly identified needs. lever through which the government engages with the private health sector for UHC. In addition, the Recommendations MoH and the local governments are responsible for the licensing of health facilities. The GoI 1. The MoH, with BPJS-K, should prepare a had introduced hospital-level accreditation database of private (and public) providers for both the public and private sectors in 1995 using multiple information sources, including 33 and the Hospital Accreditation Commission supply-side readiness of these facilities in (Komisi Akreditasi Rumah Sakit, KARS) has terms of services provided, human resources, been independent since 2011. Based on the two infrastructure, and equipment. decades of experience in hospital accreditation, 2. The MoH, with BPJS-K, and the Ministry of a Primary Care Accreditation Commission (Komisi National Development Planning, (Badan Akreditasi Fasilitas Kesehatan Tingkat Primer, Perencanaan dan Pembangunan Nasional, KAFKTP)was established in 2016 with a vision Bappenas), should prepare a private sector to expand capacity, become fully independent, engagement strategy to fulfill supply-side gaps cover both the public and private sectors, and by improving access, quality, and efficiency, eventually get accredited by ISQua.37 including putting in place a cross-government coordination platform to identify and resolve However, despite increased private sector various private sector constraints in health. utilization, and different levers of engagement While preparing this strategy, it would be already being implemented, there is a lack necessary to have differentiated options for of a clearly articulated strategy for private each subsector, given the differences in their sector engagement in health, led by the MoH. market structures. To begin with, there are no available data to the extent of private sector provision, the services they provide, and their supply-side readiness, despite having some of these data with BPJS-K, licensing authorities, and the KARS. Such data could help with identifying key gaps on the supply side in terms of quality and access, which could then be used by the MoH and BPJS-K to plan for 37 International Society for Quality in Health Care—an accreditor of accreditation agencies PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Revenue and expenditure reforms should address BPJS-K financial deficits BPJS-K has been facing an increasing financial At the same time, 95 percent of puskesmas meet deficit since its inception, which is expected all targets and receive the full capitation amount, to grow further, if unaddressed. In 2017, BPJS-K which raises questions on the effectiveness of the recorded a deficit of IDR 8.6 trillion that has KBK scheme to incentivize performance. increased to IDR 19.3 trillion in 2018. Out of that, only 10.3 trillion is covered by the government, While some hospital providers may benefit in leaving BPJS-K with IDR 9.1 trillion of unresolved the short run, any medium-term planning to deficit. Throughout the first four months of this deepen services, expand geographical reach, year, BPJS-K’s deficit has continued unabated, improve quality, or introduce innovations is reaching IDR 3.7 trillion. affected due to the uncertainty caused due to the fiscal deficit. Three out of the four largest A number of structural design features of the hospital groups and two of Indonesia’s leading JKN contribute to BPJS-K’s financial deficit. To diagnostic chains reported this as a key issue that 34 start with, JKN’s generous open-ended benefits affects their investment plan. Hence, addressing package includes only a few exceptions as part BPJS-K deficit sustainably is not only necessary of a negative list (Tandon et. al. 2016), and some for Indonesia to achieve UHC, but it would also actuarial estimates (Hidayat, et al. 2015) indicate provide a more stable ecosystem to crowd in that the program is under resourced for the private sector investment. generous benefits package it offers. In addition, short activation periods for new or returning Recommendations members and poor contribution compliance, especially with the informal sector nonpoor, further encourages adverse selection. Members The GoI (the Ministry of Finance [MoF], Bappenas, from this segment are incentivized to only sign National Social Security Council [Dewan Jaminan up when sick and stop paying once treatment Sosial Nasional, DJSN], BPJS-K, and MoH) could has been received. Currently, it also has no co- implement a ‘package of reforms’ on the revenue payments or global caps on hospital expenditures, and expenditure side to make BPJS-K financially which is where the bulk of the expenditures viable. The World Bank’s Public Expenditure (around 80 percent) occur. Finally, the incentives Review39 for the MoF identifies such a package in to strengthen primary care are still weak, leading detail, which is summarized as follows: to ineffective ‘gate-keeping’ and referral. In 2016, the GoI implemented Commitment-based On the revenue side Capitation (Kapitasi Berbasis Komitmen, KBK)—a capitation payment to primary health facilities 1. Simplify the overall tobacco tax structure that is linked to agreed performance indicators.38 and increase tobacco excise taxes at the 38 Currently, there are only three ‘performance-based’ indicators: contact rate (150 contacts per 1,000 people per month); referral rate for services that could have been treated at puskesmas based on an agreed set of services (below 5 percent); and rate of visit of chronic disease patients (at least 50 percent of those enrolled to PROLANIS—at-risk chronic disease tagged patients—program visit regularly). 39 World Bank 2019. national level, with potential earmarking On the expenditure side to BPJS-K. A simulation suggests that an increase of tobacco tax by 12 percent will 1. Address open-ended hospital payments41 increase cigarette prices by an average of 5 where most spending occurs by introducing a 35 percent, cut demand for cigarettes by nearly budget and/or volume ceiling. Options could 2 percent, and raise government revenue by include introducing global budgeting, 42 base- 6.4 percent (approximately IDR 11 trillion) with rate-adjusted Diagnosis-related Groups (DRGs) minimal impact on employment in the tobacco payments, 43 or spending caps. industry. 40 2. Introduce an explicit benefit package44 2. Update JKN premiums based on actuarial commensurate with available resources. A analysis. Using actual claims data will allow for transparent process as well as the use of an premiums to be set more accurately to reflect evidence-based approach through the use of expanding coverage and growing utilization JKN claims data and economic evaluations patterns. could help prioritize more cost-effective 3. Subsidize premiums for the informal sector to interventions. In addition, moving from a address adverse selection by attracting and negative to a positive list could further help retaining a larger pool of healthy members. rationalize spending. This would drive down the cost per member 3. Strengthen the purchasing role of BPJS-K per month among this subgroup, bring in as discussed under constraint 4.3 in the additional resources to BPJS-K. following subsection. 40 Araujo et al. (2018) shows that an increase in excise tax by 12 percent will result in increased cigarette prices in Indonesia by an average of 5 percent, lowered demand for cigarettes by 1.9 percent, and higher excise tax revenue by 6.41 percent, and an annual revenue gain of IDR 10.9 trillion. Under this scenario, the average excise tax burden on cigarettes would be just 49 percent of the retail price, still below the 57 percent legal limit and well below the 70 percent WHO recommendation. 41 While hospitals are reimbursed based on the Indonesia Case-based Grouping, there is no ceiling to the amount a hospital can claim. 42 Global budgeting is a fixed payment for all services and for the entire enrolled (or eligible) population for a given period. 43 In base-rate-adjusted Indonesia case-mix based groups (INA-CBG), the payment is made up of a base rate multiplied by the case group weight; if the volume goes up too much, the base rate is reduced to keep total hospital expenditure within the BPJS-K projected budget. 44 Moving to a positive list of services covered. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation BPJS-K should strengthen its strategic purchasing function to improve quality of services and fill supply-side-gaps Even though BPJS-K is the largest single An analysis of the supply side shows that purchaser of health services, its role has improvements in service delivery after the been more of a passive purchaser, making introduction of JKN have been mixed. While payments to providers and carrying out other there has been an overall improvement in service administrative functions. This is in contrast readiness between 2011 and 2016, the 2011 with what BPJS-K should be doing as a strategic service readiness census of public sector health purchaser of health services that make it possible facilities, 46 as well as the 2016 Quantitative Service to create provider incentives for more effective Delivery Survey, revealed that not even one and efficient service delivery, such as improving puskesmas met all the tracer service readiness access, increasing quality of care, and reducing indicators (Rajan et al. 2018). The main areas costs of services. This is in part due to the limited that still need improvement include availability authority it has to do so, as most of the strategic of privacy for patients, health care waste purchasing functions (for example, deciding the management, availability of all basic equipment, 36 benefit package, determining provider payment drugs and diagnostic kits stock-outs, availability arrangements, and setting reimbursement rates) of clinical guidelines, and staff training. Private are housed within the MoH, although the original sector clinics lag puskesmas in terms of service 2004 social security law allocated most of the key readiness. There is significant variation across purchasing functions to BPJS-K. 45 Indonesia with districts in eastern Indonesia being Tabel 5 Responsibilities of JKN de jure and de facto By Law By Regulation In practice President with inputs President with inputs President with inputs Premium setting from MOF, BPJS-K, from MOF, BPJS-K, from MOF, BPJS-K, DJSN, and MOH DJSN, and MOH DJSN, and MOH Determine the benefit package Unspecified MOH MOH Develop provider payment systems BPJS-K BPJS-K/MOH MOH* Set payment rates BPJS-K BPJS-K/MOH MOH Contract with providers BPJS-K BPJS-K BPJS-K/MOH Monitor quality BPJS-K BPJS-K/MOH BPJS-K/MOH Source World Bank analysis 2018. 45 Overviewof Strategic Purchasing Functions Under JKN. 2018. Jakarta. World Bank 46 Thereadiness to provide basic services was measured by a set of 38 tracer indicators that were collected as part of the 2011 Health Facility Census (Rifaskes) across five domains: basic amenities, basic equipment, standard precautions for infection prevention, diagnostic capacity, and essential medicines less supply-side ready than the national average. into account that puskesmas also receive other However, those private clinics empaneled by financing sources. This could help improve the BPJS-K are more service ready than private clinics overall system efficiency and quality of care. that were not, showing that the BPJS-K could be used as an effective lever to drive better service Due to the acute shortage of specialized delivery through the public and private sectors. doctors across the market, if a doctor is well Interviews with leading providers mentioned the regarded and has a strong reputation in the absence of the requirement to implement specific market, he/she does not require referrals from clinical pathways and the low capacity of BPJS-K external parties, BPJS-K included. There is also to incorporate outcome-based measures of no obligation within private hospital groups that a quality of care as factors that create incentives for reputable doctor is required to treat BPJS-K-referred providers to compromise on quality of care. patients. Since many upper- and middle-class patients pay for services out of pocket, the doctors Compounding the low ability of private clinics themselves are generally not affected by delays in to invest in their own supply-side readiness, payments through or claims processing through they also tend to receive a lesser amount of the hospital system. For other providers though, overall BPJS-K capitation as a potential source the decision-making process for sending a patient of revenue for them to improve basic PHC with a specific medical case to a hospital remains services. The PHC service package covered opaque to the providers. One of Indonesia’s largest under capitation includes 144 competencies or private hospital groups, HHG, explained that BPJS-K services that each primary care health facility had informed them that there is a quota system for that enrolls people for capitation payments is patient referrals to private hospitals, which takes into meant to perform. However, the package of account the availability of the specialist doctor (or services covered under JKN was never accurately subspecialist) service, the geographic location of the 37 costed nor was it based on whether facilities hospital in relation to the patient, and the track record could actually provide all services. Instead, the of the hospital in providing the required specialist capitation amount is determined based on the treatment. The criteria under which a selected number of doctors and dentists in the facilities, patient is sent to a specific hospital remains opaque and the number of beneficiaries assigned to to medical directors; however, they indicated that facilities. This adversely affects remote areas many of the patients that are referred by BPJS-K, where the costs of service delivery can be particularly in the Greater Jakarta area, are sent based significantly higher, districts where disease on geographic proximity to the respective hospital. burden is more pronounced, or facilities with a The opaque nature of the referrals process, however, low provider to beneficiary ratio. In addition, the raises the possibility for rent-seeking by referees process of enrolment for capitation payments to send patients to specific hospitals. There is a usually begins with the puskesmas, after which regulation that gives some guidance on the current the person is free to change his/her own referral process, that is, for puskesmas or private provider. There is a relatively low proportion of clinics to refer patients to hospitals from a Class D to population enrolled for capitation under private A, in a sequential manner. The logic of this is primarily providers compared to puskesmas. 47 Hence, from a cost-saving perspective, namely to let BPJS-K, could focus more resources and provide patients needing lower levels of care to attend lower greater incentives for private providers to fill levels of facilities. However, it is not entirely clear geographical gaps, including through the use of how this actually plays out in the provider setting as digital technologies. Similarly, it could also focus there is not much information on the readiness of on strengthening private primary care providers these facilities. Based on some field visit interviews, by basing capitation payment amounts on actual it emerged that primary providers use their tacit cost of services rather than inputs only, taking knowledge of facilities that may be ready to provide 47 Purchasing of Primary Health Care Under JKN. 2018. Jakarta. World Bank. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation such services to refer patients there, which may 2. BPJS-K, with the MoH, should strengthen need exceptions. Patients may not be getting choice performance-based capitation and hospital and may have to be referred more than once as the payments to incentivize broader health facilities may just not be ready at the lower levels. It is sector results. Moving beyond the current unclear whether the cost-saving objective of BPJS-K KBK performance indicators, indicators and is being achieved; this may cause more hardship verification systems should be introduced to and OOP expenses to patients and create further incentivize providers to improve the quantity complications or even mortality (in emergencies) due and quality of service delivery. In addition, to such delays. primary care provision should be strengthened, and additional capitation should be explored Leading private providers of diagnostics in after a through costing exercise, in addition Indonesia have largely been reluctant to have to linking financing to performance. BPJS-K patients referred to their facilities for 3. The MoH, with BPJS-K, should target the reason of pricing. Diagnostics in emerging underserved areas and populations markets tends to be a volume-based business, which by introducing incentives. Using both for common diagnostic tests generally rests on low demand-side financing through the JKN, and margins. The real revenue is generated in higher- supply-side financing through the Special parameter tests, both for pathology and radiology, Allocation Fund (Dana Alokasi Khusus, where specialist doctors are also required to provide DAK), incentives for investments to improve a diagnosis for the test results. in areas that are underserved, such as in eastern Indonesia, should be introduced. 4. The MoH, with BPJS-K, should develop an Recommendations effective referral process regulation, and 38 modify/develop the necessary information systems to make this more patient centric, 1. Clarify roles of the MoH and BPJS-K to transparent, and driven by evidence of supply. strengthen the purchasing role of BPJS-K. 5. BPJS-K, with the MoH, should strengthen There needs to be clarity on who is responsible for guidelines on quality of care by introducing selecting the benefit package, setting contribution clinical pathways, instituting clinical audits, rates and provider payment arrangements, strengthening monitoring of quality of care, and monitoring service delivery and quality and embedding quality-based criteria standards. There are many different models for reimbursement of providers. followed, and most health insurance agencies have independence for many operational aspects of scheme implementation such as tariff-setting, contracting, provider payment methods, and, to a lesser extent, benefit package definition. However, provider accreditation and quality assurance are more commonly managed by the MoH. Reforms in health education and in recognition of qualifications are needed to expand the quantity and quality of HRH The key requirements for a health system to of specific fields specialists has led to hospitals function and grow is the availability of adequate providing much higher salaries and incentives health workers, which is an important concern to specialists for them to practice exclusively at in Indonesia. At 0.38 doctors per 1,000 people, their hospitals. While this ensures the exclusive the ratio of medical doctors to the population services of a specific doctor, higher specialist remains well below the WHO-recommended salaries can disrupt business models if they are ratio of 1 doctor per 1,000 people. Indonesia has a unable to meet financial targets. significantly lower density of both physicians and nurses/midwives than countries at a similar level Compounding the issue of overall quantity of of income per capita (Figure 10). This scarcity of HRH are inequalities in the distribution of HRH human resources has been amplified over time. between geographical regions and provinces Between 2006 and 2012, the density of physicians and between urban and rural areas. For example, did not grow, while the density of nurses and the physician-to-population ratio in Kalimantan midwives decreased in 2007–15, leaving Indonesia and Maluku-NTT-Papua is, respectively, one- 39 with densities on par with low-income countries. half and one-third of that in the Java-Bali This makes it difficult for the system to cope with region (Tandon et al. 2016). The geographic the increasing demand for health services. maldistribution for specialists is even worse than for physicians. Most specialist doctors are The shortage of HRH is particularly acute located on the islands of Java, South Sumatra, for specialist doctors and nurses, which all and Bali, with limited specialists elsewhere. This is private hospital groups interviewed for this primarily due to economic factors, with specialists report identified as the greatest challenge in preferring to practice in urban areas where expanding investment. Shortages are apparent hospitals can provide higher-value services. in diverse areas as pathology, radiology, oncology, For example, an estimated 90 percent of the and cardiology. These shortages are particularly 105 endocrinologists practicing in Indonesia are problematic also in light of the expected rise in located in the Greater Jakarta area, Bandung, chronic diseases such as cardiology, diabetes, and Surabaya. 48 Across Indonesia there is also stroke, and cancer. Newer private hospitals have an acute shortage of nurses in puskesmas and focused on establishing specialist practices to hospitals compared to the MoH standards. 49 draw a greater portion of their patients from BPJS-K, but they have to compete for the limited Besides the shortages, it is also the quality of supply of specialist doctors with the more HRH—GPs—which appears concerning and established private hospitals in Jakarta and other deteriorating over time. Health care workers second-tier cities. The competition for human across Indonesia show a limited knowledge of resources limits the ability of hospitals to expand the basic notions of curative care as Table 6 specialist Centers of Excellence. The shortage illustrates. The table presents the results of a test 48 Indonesian Society of Endocrinologists (PERKENI). 49 The MoH standards require employment of six nurses for each regular puskesmas and 10 nurses for each puskesmas with beds, while for Types A and B hospitals, the standard is one nurse for every bed and for Types C and D hospitals, two nurses for every three beds. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Figure 10 Indonesia has a lower density of health workers than its income level suggests Number of physicians per 1,000 people in 2006, 2009, and 2012 versus gross national income (GNI) per capita 20 18 16 14 12 10 8 6 IDN 2010 4 IDN 2007 IDN 2015 2 0 6 7 8 9 10 11 12 40 LOG GNI per capita ( Current US$ ) Number of nurses and midwives per 1,000 people in 2007, 2010, and 2015 versus GNI per capita 8 World OECD 7 ASEAN Indonesia 6 5 4 3 2 1 IDN 2009 IDN 2012 IDN 2006 0 6 7 8 9 10 11 12 Source World Development Indicators carried out across two waves of the Indonesia appear to perform particularly poorly. Worryingly, Family Life Survey (IFLS), which suggest that as the quality appears to be deteriorating over time, of 2014, the majority of Indonesian health care with statistically significant drops in each of the workers (physicians, midwives, paramedical measures of quality except for prenatal care in nurses, and village midwives) are unable to follow public facilities.50 The trend is common across the minimum required standards to deal with the regions and the quality of responses appears basic clinical cases of prenatal and adult curative to have deteriorated faster in private rather than care (see Box 1 for the methodology). Across the public sector facilities. main regions surveyed, health workers in Sumatra Tabel 6 The quality of PHC workers is relatively low and deteriorating (Share of basic diagnostic and treatment procedures correctly identified by health care workers across three types of curative cares) National Java-Bali 2007 2014 p-value (2007–14) No. 2007 2014 p-value (2007–14) No. Prenatal Care Public 46.30 45.10 0.145 487 47.48 46.44 0.234 336 Private 45.06 39.40 0.0001 210 45.40 40.14 0.004 134 Child Curative Care Public 63.80 58.93 0.000 503 65.97 61.94 0.003 335 Private 62.69 51.99 0.000 268 62.85 53.08 0.000 181 41 Adult Curative Care Public 55.51 48.19 0.000 502 58.26 50.85 0.000 335 Private 54.55 40.01 0.000 237 56.01 39.60 0.000 149 Sumatra Other 2007 2014 p-value (2007–14) No. 2007 2014 p-value (2007–14) No. Prenatal Care Public 40.48 41.24 0.364 97 49.42 43.66 0.038 54 Private 43.37 36.65 0.012 54 47.13 41.63 0.155 22 Child Curative Care Public 57.33 52.58 0.039 100 62.62 53.43 0.002 68 Private 61.64 48.99 0.000 58 63.79 51.15 0.000 29 Adult Curative Care Public 49.31 42.15 0.001 99 50.94 43.85 0.016 68 Private 50.72 36.68 0.000 57 54.55 48.09 0.084 31 Source Authors’ elaboration on IFLS data. Note The table reports the share of procedures correctly identified (that is, either mentioned spontaneously or when prompted) across PHC workers interviewed in both waves of the survey (see Box 1 for the methodology); p-values indicate the level of statistical significance of the difference between the measures in 2007 and 2014 (from one-tail t-test); No. indicates the number of health care workers interviewed in each wave. 50 Table 6 includes a balanced panel data of individuals who are interviewed in each of the two waves thus ensuring full consistency of the samples. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Box 1 not mention spontaneously should be followed in each case. Table 6 and 7 reports the share of basic procedures Measuring diagnostic and treatment (across all PHC workers interviewed) correctly identified ability using IFLS vignettes (that is, either mentioned spontaneously or when prompted). These shares are computed out of a total of nine vignettes questions for adult curative care, 12 The ability of health providers to diagnose illness questions for child curative care, and 18 questions for correctly is measured using community and health prenatal care for each respondent.51 vignette questions from the IFLS (http:/ /www.rand. org/labor/FLS/IFLS/) 2007 and 2014. The enumerator For the public sector, only puskesmas and auxiliary presents the health vignette or case to the health worker puskesmas (pustu) are included, whereas private and asks how the worker would proceed. Three vignettes practitioner ratings were obtained for nurses, midwives, are conducted related to diagnosis and treatment of and physicians. At public health facilities, the vignettes conditions common in prenatal, child, and adult care, were conducted with the highest-level health worker respectively. For example, one vignette has a mother present when the enumerator arrived to conduct the bringing in a child suffering from diarrhea for more facility survey, and responses are used as the puskesmas than two days. Among the items that the interviewer or pustu score. In cases where no physician was present, records is an indication of whether the health provider the person questioned could have been a midwife, takes the temperature of the patient and asks about paramedic, or nurse, which is considered representative frequency of diarrhea and about the nature of the stool. of the quality of care provided at that facility at that time. The health worker is then prompted to list the standard Source: Adapted from World Bank 2010. diagnostics and treatment procedures for each case. The enumerator then asks the respondent on whether each of the minimum standard procedures that he/she did Source: Bitran 2013; Missoni 2010. 42 Tabel 7 The quality of PHC workers is worse in private than public sector (Share of basic questions on three types of curative cares answered correctly by health care workers) National Java-Bali Sumatra Other 2007 2014 2007 2014 2007 2014 2007 2014 Prenatal Care Public 45.64 44.04 47.05 47.14 38.98 39.93 49.09 35.67 Private 44.18 38.49 46.48 40.11 37.32 33.40 45.70 40.75 p-(Publ.-priv. diff.) 0.0301 0.0000 0.2833 0.0000 0.1244 0.0000 0.0301 0.0181 Child Curative Care Public 63.59 58.40 65.50 61.94 56.18 51.06 65.24 52.90 Private 61.96 49.87 64.29 52.23 55.07 44.76 61.90 46.97 p-(Publ.-priv. diff.) 0.0266 0.0000 0.1233 0.0000 0.2660 0.0000 0.0625 0.0000 Adult Curative Care Public 55.47 48.24 58.43 50.98 48.05 42.36 52.31 44.18 Private 53.10 39.26 56.15 41.68 46.54 33.77 51.13 38.22 p-(Publ.-priv. diff.) 0.0017 0.0000 0.0125 0.0000 0.1747 0.0000 0.2773 0.0026 Source Authors’ elaboration on IFLS data. Note The table reports the share of procedures correctly identified (that is, either mentioned spontaneously or when prompted) across all PHC workers interviewed (see Box 1 for the methodology); p-values indicate the level of statistical significance of the difference between the measures in 2007 and 2014 (from one-tail t-test). 51 This analysis does not include all vignettes in the IFLS data The quality of PHC workers is lower in private The lack of skilled health workers is also in than public facilities, and the gap expanded part due to restrictions on the entry of foreign between 2007 and 2014. Table 7 shows the health professionals (FHPs) including doctors, differences in the health care quality test between dentists, and health practitioners. According private and public primary facilities in each year to the MoH Decree No. 67/2013, FHPs can only (for all health care workers). The scores of public work in Indonesia as long as there is a bilateral health workers are marginally higher than those relationship with the origin country. The definition of private workers in 2007 although generally of ‘bilateral relationship’ is unclear. There are statistically significant. At the national level, the additional restrictions as follows: gap in 2007 was between 1.5 (for prenatal care) and 2.5 percentage points (for adult curative care), 1. The FHP can only provide the following with similar differences across the country. This services: health services, health education gap increased substantially in 2014 to between services, social activities, and health research. If 5.5 (for prenatal care) and 9 percentage points the FHP aims to offer health services to patients, (for child curative care). In Sumatra, for example, an Indonesian worker must be a mentee of the private health workers could correctly identify, foreign worker during their tenure. The FHP can on average, only a third of the basic procedures only be hired to provide health services if and for prenatal and adult curative cares in 2014. The only if there is a lack of supply of such skills or results indicate similar issues also for physicians in lack of resources. primary care facilities, with low and deteriorating 2. The health institution (the user) employing the quality particularly in the private sector. The FHP should be a minimum Class A or Class B results are shown in Tables A1 and A2 in Annex 1. hospital (offering specialist services) and should have operated for a minimum of two years. These severe shortages in skills point to an 3. The user shall also provide financial evidence 43 issue of undersupply of health professionals that show their ability to cover the FHP’s living from tertiary education institutions. While costs for the next two years. there has been an increase in such a supply, 4. Doctors and dentists are required to have mainly driven by private universities (Tandon specialist degrees, while health practitioners et al. 2016), the production of HRH is still well must have at least a bachelor’s degree for below the needs of the system. At the same time, health practitioners. In addition, the FHP must Indonesia has also made significant investments have ‘excellent’ Bahasa Indonesia skills that in improving the quality assurance system of are proven with a certificate from the Center of health professional education by strengthening Bahasa Indonesia. the school accreditation system and introducing 5. The FHP should also take and pass a nationally standardized competency testing for ‘competence certification test’ conducted graduate certification. While this was much needed by the Indonesian Doctors’ Council (Konsil because of the rapidly growing number of health Kedokteran Indonesia, KKI) or Indonesian professional schools, especially private, it may Health Practitioners Assembly (Majelis Tenaga have the effect of slowing the growth of medical Kesehatan Indonesia or MTKI). This can only take schools—particularly the smaller ones—as it implies place once the Ministry of Manpower receives a higher level of requirements to establish each and approves a work plan (RPTKA) from the school (World Bank 2014). Since 2014, the GoI user for the FHP, similar to conditions on foreign provides scholarships for postgraduate studies professors. Once the FHPs pass the test, they abroad, including for doctors, to specialize under can obtain a temporary registration letter (Surat the Indonesia Endowment Fund for Education Tanda Registrasi Sementara) and SIP that is valid (Lembaga Pengelola Dana Pendidikan, LPDP) for only one year, subject to renewal only for scheme. The types of specialties are decided the following year. based on needs and can include obstetrics, gynecology, pediatrics, internists, radiology, clinical pathology, anesthesiologist, surgery, and medical rehabilitation/physiotherapy. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation These conditions make the entry of the FHPs that are trained in their field of specialty are to Indonesia extremely cumbersome and sometimes unable to practice as specialists for time-consuming, both from the user and the long periods. Anecdotally, in practice, this can FHP’s point of view. According to the MoH, it take up to 9–24 months, and the period varies only received five applications from the FHPs across medical schools in Indonesia. This policy requesting recommendations or renewals can be a deterrent for specialists to return to of permits to practice in 2017. Among 95,000 Indonesia following their training, particularly practicing doctors in 2015, only 41 were foreign, a when host countries such as the United States, much lower number than other smaller countries Australia, Germany, and the United Kingdom and with more advanced health systems in provide opportunities to practice medicine in- the region, including Singapore, Malaysia, and country following their training. This ‘adjustment Thailand (Figure 11). period’ is not unique to Indonesia, but with one of the lowest specialist-to-patient ratios globally, the Restrictions on the entry of Indonesian doctors policy deters Indonesian specialists from returning that receive specialist training abroad add to to practice in Indonesia. the problem of shortages. Currently, regulations (Indonesia Medical Council Regulation No. Recommendations 41/2016) require that doctors who study their specialization abroad must undergo a domestic 1. Increase the domestic production of quality ‘adjustment period’ of 6–24 months during which health professionals by expanding the they are required to take an equivalency exam and capacity of the tertiary education sector. undergo residency training under the mentorship While this is a difficult undertaking, other of a doctor in their field of specialization. These countries in the region, such as Singapore, 44 regulatory requirements mean that doctors Thailand, and the Philippines, have managed to Figure 11 Indonesia has a much lower share of foreign medical practitioners than other countries in the region 18 4000 16 3500 3726 15,73 Number of Foreign Doctors 14 Share Foreign to Total (%) 3000 12 2120 2500 10 2000 8 1500 6 7,05 1000 4 247 2 500 41 0,02 0,45 0 0 Indonesia Malaysia Thailand Singapore Share Foreign to Total (%) Foreign Doctors Source Laporan KKI 2015, Malaysian Medical Council Annual Report, Thailand Medical Council (http:/ /tmc.or.th/statistics.php), and Singapore Medical Council annual report 2016. Note For Indonesia, the foreign doctors’ number is based on permits for technology transfer. For Malaysia, the cumulative number of arrivals is reported since 2000 until 2015, for full registration with a conditional permit. Data for Singapore is for 2016, while that for Indonesia and Malaysia is for 2015. Box 2 The curriculum follows that of Duke’s Medical School: Duke-NUS cooperation to expand the first year focuses on pre-clerkship, the second year domestic supply of physicians in is dedicated to clerkship, third-year students begin their Singapore research, and in the final year students are expected to participate in the advanced clinical rotations. The school also offers a doctoral degree in integrated biology and medicine, as well as an M.D.-PhD degree in which One interesting aspect of Singapore’s health care system students can accelerate their studies to earn a PhD. development is the effort to improve medical education. This case provides an illustration of the important links Research is an important component of the learning between the health and education sectors, which are process and it receives a great amount of resources. examined in this report. Development in the education By 2016, members of the school have made over sector also helps resolve matters related to the capacity 2,800 publications in refereed journals, 63 patents, and available in the health system. many other awards. The main research areas include neuroscience and behavioral disorders, cancer and stem One notable example is the cooperation between cell biology, emerging infectious diseases, cardiovascular the National University of Singapore (NUS) and Duke and metabolic disorders, and health services and University (USA). Together they established the Duke- systems. SingHealth, the largest health care group in NUS Medical School in 2005, which started to accept Singapore, has partnered with the Duke-NUS School to students in 2007. The school follows the American promote clinical research at affiliated hospitals, clinics, model of post-bachelor medical education (students can and specific research locations. only do their medical studies after earning a bachelor’s degree). Successful completion of the four-year program will award the students a joint MD degree from both Source: Presisi and University of Adelaide 2018. Duke University and NUS. 45 expand domestic supply without compromising facilitating mobility of medical practitioners the quality of HRH. To that end, different within ASEAN; (ii) exchanging information countries have followed different routes, but and enhancing cooperation in respect of one common trait has been the involvement of mutual recognition of medical practitioners; the private sector in providing health-related (iii) promoting adoption of best practices on tertiary education. For example, Singapore has standards and qualifications; and (iv) providing developed a successful model of cooperation opportunities for capacity building and training with a foreign university enhancing the of medical practitioners, in the ASEAN region. domestic curriculum and research capacity In addition, Indonesia could consider relaxing (Box 2). It would also be important to continue other requirements to the hiring of foreign HRH implementing reforms to regulate the quality of in the MoH Decree No. 67/2013. medical education that began in Indonesia. 3. Reduce requirements to convert medical 2. Relax restrictions to the hiring of FHPs thus qualifications of Indonesian physicians enabling the system to expand the stock who studied abroad. The current system of of qualified HRH. To that end, Indonesia recognition of qualification could be made both should increase the use of Mutual Recognition less burdensome and less time-consuming. Arrangements (MRA) of qualifications for This could incentivize more qualified Indonesian medical practitioners, which is currently a health professionals to return and could also necessary requirement to employ foreign encourage more Indonesians to pursue medical professionals. A starting point would be to use studies abroad thus increasing the overall the existing Association of Southeast Asian availability and quality of skills in the country. Nations (ASEAN) framework, which aims at (i) PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation The government should ease establishment rules for hospitals to facilitate private investments, including in primary care The MoH is the lead regulator for private sector in 2016. As noted previously, eliminating investments in hospitals, although licensing the reservation for domestic investors in the requirements also involve the local government, hospital sector in 2016 has been associated which may create an extra barrier to with a rapid rise in foreign investments. That is investments. Potential investors need to obtain a consistent with the findings of the econometric recommendation letter by the local government analysis, which suggests that raising foreign (province or district level according to the equity limits significantly increases foreign as well hospital class) to establish hospitals before the as domestic investments (World Bank 2018a). MoH will issue the license.52 Usually, this is done However according to the DNI (Presidential to help make more systematic investments in Regulation 44/2016), foreign equity is still capped health facilities. In addition, given the variation, at 67 percent (70 percent for ASEAN investors) local governments may have better information for general hospitals as well as specialist about local needs. However, in practice, given medical and dental services. In addition, in the the discretion in providing this recommendation, major cities of Sulawesi island—Makassar and 46 this requirement may create a further barrier to Manado—the prohibition of foreign investments investment rather than have any clear benefits. still persists (Table 8). In addition, policy makers To the contrary, additional hospitals may increase in the health sector demand an economic needs the competition with existing ones, potentially test for new foreign investment. The assessment decreasing the price of services. However, it is often lacks transparency, particularly given that still important that the quality of care provided there is no clear threshold on the evaluation is up to the standards set by the regulator. results. Foreign investments in hospitals are also subject to additional establishment restrictions Foreign investments in specialty care are in terms of scope and size. The MoH Decree subject to further restrictions on establishment, No. 340/2010 (Article 12) rules that foreign despite the partial liberalization of the hospital hospitals must have a minimum of 200 beds. Tabel 8 Restrictions on foreign ownership in health services Business type Conditions Basic medical clinic services: private maternity hospitals, clinics, general medical services/public medical clinics, residential Domestic capital: 100 percent health services, and basic health services facility • Foreign capital ownership: maximum 67 percent (70 percent for investors from ASEAN countries) Hospitals • Can be conducted in all capital cities of provinces in eastern Indonesia except Makassar and Manado • Foreign capital ownership: maximum 67 percent (70 percent Basic and special medical clinics: specialized medical services, for investors from ASEAN countries) clinics specialized in dental services, nursing services, and other • Can be conducted in all capital cities of provinces in eastern hospital services (for example, medical rehabilitation clinic) Indonesia except Makassar and Manado Source Based on Perpres No. 44/2016 52 See Article 64, Health Ministerial Decree No. 56/2014. Moreover, foreign investors may only establish higher than in Singapore, Malaysia, and Thailand. hospitals with specialty and subspecialty services These comparator countries have the most (the MoH Decree No. 56/2014, Article 65). advanced health systems in southeast Asia, which in fact attract large numbers of high-income Foreign investments are prohibited altogether Indonesian patients. This is consistent with the in primary care, forgoing the opportunity of idea that openness to foreign private investments attracting a source of much-needed capital in health may not harm—and in fact may well as well as expertise in the sector. According to benefit—the quality of the national health systems. the DNI, all types of basic medical clinic services, including maternity hospitals, clinics, general Recommendations medical services/public medical clinics, residential health services, and basic health services facilities, 1. The MoH could remove the need for are reserved to domestic investors. The rationale the recommendation letter from the of this restriction is not compelling, as foreign local governments for the establishment primary care providers are not intrinsically more of hospitals and have a transparent set risky or problematic than private domestic of criteria for investment, endorsed by providers. If anything, foreign providers may the local governments, to replace it. help expose the Indonesian health system to 2. The MoH could remove the restriction on the global knowledge and best practices. the scope of services for foreign hospitals. 3. The President (through the decree on DNI) As a result of these restrictions, foreign could expand foreign equity limits to 100 investments in health services in Indonesia percent across all health services sectors. are more restricted than in comparator These measures could encourage investments countries in the region. Figure 12 shows that in new hospital and PHC development, which 47 the restrictiveness of Indonesia’s regulations in are likely to boost competition, and improve relation to foreign investments is considerably the quality of and/or access to health services. Figure 12 Restriction index by selected individual components of four selected ASEAN countries Commercial presence 1,00 0,80 0,60 0,40 0,20 0,00 Other discriminatory Movement of people measures Indonesia Malaysia Thailand Singapore Source Presisi and University of Adelaide 2018. Note The Services Trade Restrictiveness Index (STRI) has been constructed on the basis of the analysis of regulations of the provision of health services across following Dee (2009) and Organisation for Economic Co-operation and Development (OECD) STRI. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation MoH and BPJS-K should strengthen their capacity to plan, design, manage, and monitor high-impact PPPs The GoI has introduced a primary PPP However, the pipeline of health sector PPPs regulation, Presidential Regulation No. 38/2015 in Indonesia is still very thin, with about five (PR 38/2015), which provides the basis for a projects in the pipeline, mostly focused on consistent PPP project development process, building hospital infrastructure. These PPPs, overseen and facilitated by Bappenas and the even if they are filling in supply-side gaps, are MoF. This process comprises completion of an limited in their ability to improve quality of care or outline business case (OBC) and a full business efficiency of services as they are not bundled with case (FBC), usually followed by a competitive the provision of clinical services. In low-/middle- tender. In addition, the government has introduced income markets like Indonesia, where quality mechanisms for the provision of Viability Gap of care and human resources are key issues for Funding (VGF), Availability Payments (AP), and the health sector, it is all the more important guarantees, which can be used to improve the that provision of services is also prioritized commercial viability of PPP projects. In addition, through PPPs, and not just infrastructure.54 As 48 by the creation of the PPP Joint Office and the MoF shown in Figure 13, there are many types of PPPs Project Development Facility (PDF), an improved that have been implemented globally, most of pipeline of PPP projects is beginning to develop, which include clinical services of some form. focused primarily on infrastructure to begin with.53 Figure 13 Types of PPPs and their relation to complexity and private sector involvement Integrated: Private sector provides all assets abd services. This includes design, construction or Complexity & Private Sector Involvement refurbishment of infrastructure (hospitals, ambulatory care, polyclinics, primary care facilities, maternal & pediatric clinics etc.) as well as all services, including medical services, outpatient, or in/outpatient, on a long term basis typically ranging from 10 to 30 years. Health Facility PPP: Unlike an integrated PPP, this model (known as PFI in UK) retains government control of cllinical services, but private sector provides detailed design, construction or refurbishment of infrastructure. May include provision of hard facilities management or a mix of hard/soft facilities management. Terms to Know Specialized Clinical Services/Diagnostic Services: The public sector identifies specialist services (dialysis, radiotheraphy, day surgery, etc.) Hard Facilities Management (Hard FM) or diagnostic services (lab services, imaging, nuclear medicine, etc.) to The provision of building be provided by a private operator. maintenance services as part of long-term PPP Management Contract: Operation of a hospital/health facility against contract. a management fee. Soft Facilities Management (Soft FM) Managed Equipment Services (MES): Typically includes the initial Covers support services, purchase, installation, financing, maintenance and replacement of such as cleaning, catering, a board range of medical equipment or a sub-set of equipment, ie. laundry, and security. imaging equipment. Source World Bank Group Global Health PPP Toolkit 53 World Bank 2018b. 54 World Bank Group Global Health PPP Toolkit. In addition, many of these PPPs can have a ‘high As a follow-up to the Presidential Regulation impact’, in terms of enabling access to a larger No. 38/2015, the MoH has developed an MoF population group, increasing efficiency due to decree PMK 40/2018, as a regulation for larger economies of scale as well as intervening PPPs. This is a good first step as it indicates the at lower levels of care, improving quality by government’s commitment to use private sector standardizing processes, and reaching out to solutions or PPPs for improving the health sector. underserved populations. These include PPPs While the PMK 40/2018 has a strong infrastructure such as expanding quality diagnostic services focus at the hospital level, it also includes other (radiology and pathology) using hub-and-spoke facilities (primary care clinics, laboratories, models, integrated provider networks of primary and health polytechnics) as well as services. and hospital care, and specialist services (such as eye care); managing supply chains and managed The types of PPPs as defined in the PMK equipment services; and potentially using 40/2018 are for infrastructure (Kerjasama digital health solutions (for data management Pemerintah Dengan Badan Usaha (KPBU) or and analytics as well as service delivery). Two Government Cooperation with Business Entities) examples of implementing a radiology PPP services (contracting through BPJS-K), health in Jakarta and one in Jharkhand, India, are information, advocacy and capacity building provided in Box 3 and Box 4, respectively. (Social Responsibility Partnership or CSR/ Box 3 however, felt somewhat pressured by the hospital to 49 invest in an additional CT Scan, while the number of Diagnostics PPP - Jakarta National patients requiring diagnostic imaging has remained the Hospital (Rumah Sakit Cipto same at about 50–60 patients per day. The operator Mangkukusumo, RSCM), Jakarta said that for the past 18 months, it noticed significant delays in accounts receivable (AR), with payment from BPJS-K delayed an average of 4–5 months. Unlike for private hospitals, there is no provision for a 1 percent There is an existing PPP model in radiology at RSCM, interest payment for delays for public hospitals that where a private investor has placed Computerized have services agreements with private investors, so the Tomography Scan (CT Scan) units at the hospital in private investor has to simply accept delayed payments a revenue share agreement with the hospital. The as part of working with the leading public hospital. operator also provides the technical assistance required to operate the units, and the hospital provides the The investor anticipates that the BPJS-K deficit problem space and the required permits to operate the unit. will eventually be resolved; however, it said that public hospitals tend to have greater leverage over private The private investor has been in a working relationship investors because they are the first option for BPJS-K with RSCM for the past six years, and before the patient referrals, and since RSCM is affiliated with the introduction of BPJS-K referrals, it was receiving an University of Indonesia (UI) faculty of medicine, and average of 30 patients per day for diagnostic imaging. is the teaching hospital for UI. The investor indicated Following the introduction of BPJS-K referrals, it saw that if private investors feel that PPPs are not a win- the numbers increase to 50–60 patients per day, which win proposition, the incentives to invest may dissipate. eventually led to a request from RSCM to invest in an More importantly, if payment delays continue, they additional CT Scan unit to account for the increased can eventually threaten to disrupt business operations, patient numbers. The investor was initially reluctant which can result in a losing proposition for the private to invest in an additional CT Scan, as their projections investor. It would like to see a win-win proposition found that the average number of patients requiring where both private investors can allocate capital for imaging would drop or remain the same, partly due to investment in services and human resources, and BPJS-K starting to restrict the number of services that the hospital can improve its operational efficiency were covered for BPJS-K patients. The private investor, and improve the overall patient experience. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Box 4 Manipal Hospitals and Philips, which provides lower- cost imaging devices such as MRIs and CT Scans. Diagnostics imaging PPP - Jharkhand, India A 10-year concession agreement was signed in November 2015 between HealthMap Diagnostic and the Government of Jharkhand. HealthMap as the operator The state of Jharkhand in India has a population of will be responsible for the financing, operating, and 30 million and an extreme shortage of specialists in maintenance of the radiological equipment placed at the state. The critical need for diagnostic services government hospitals. The government will channel and radiologists, particularly in rural areas, led to the required volumes of patients to ensure that the an 84 percent shortfall of radiologists in district and radiology units are being utilized at an efficient capacity. smaller hospitals. The Government of Jharkhand The agreement also provides an annual review and sought a PPP with a private sector provider to develop followed by an overview of the services, which if modern radiology services in all 24 district hospitals satisfactory can be renewed for another 10-year term. across the state, in a hub-and-spoke model. The arrangement allows for public hospitals to tap into the network of radiologists that work in the private The International Finance Corporation (IFC) assisted sector and improves accessibility for patients and timely the Government of Jharkhand to structure and analysis of diagnostic results. Installing standardized develop a model of radiology centers across the state, diagnostic units across all 24 state hospitals and imaging and the competitive bidding process was awarded equipment allowed for greater reliability of results and to HealthMap, a diagnostics provider in Ranchi, lessened the need for additional testing thereby reducing Jharkhand. The company was a joint venture between costs for both the public hospitals and the operators. 50 Tabel 9 Different types of PPPs according to PMK 40/2018 KPBU KSO CSR/KTJS Health infrastructure and medical Buildings, medical Related medical equipment grants, promotive and Scope devices, and related devices and services preventive activities, and capacity- services building activities Long (10–20 years) Short (3–5 years) Period according to Occasional/one-off according to contract contract Private enterprises Enterprises in the form of limited liability in the form of companies, foreign legal entities, limited liability cooperatives, foundations, forms of Private enterprises company, foreign private enterprises that are not legal in the form of limited legal entity, entities (individuals and firms), mass liability company, Enterprises provisions cooperative, BUMN, organizations, nongovernmental foreign legal entity, or Badan Usaha organizations, philanthropic cooperative, BUMN, Milik Daerah (BUMD) organizations, universities, media, or BUMD or Provincial/ communities, and other organizations all Municipal-Owned of which have social responsibility in the Enterprises field of health, BUMN, or BUMD Profit value for enterprises Yes Yes No Source Based on Perpres No. 44/2016 KTJS), and for medical devices and services aspects of the law to clarify some of these Kerjasama Operasi (KSO) or Operational issues and make it more service oriented, the Cooperation Contract. The differences in current regulation allows for the health sector these types of PPPs are given in Table 9. to move forward with planning, designing, and implementing high-impact PPPs. Under the KPBU type of PPP, the PMK has specified the following for hospitals and Box 5 illustrates a network PPP, consisting includes infrastructure and equipment of both hospital and primary clinics, for both provision as well as operational management, infrastructure upgrading and service delivery. such as hospital management, provision of various services listed below, and human In addition to having an enabling law or resources required for the same. regulatory framework, one of the key aspects that was found that determined success is the 1. Medical services including emergency services, ability to plan, design, and manage PPPs, with a general medical services, basic specialist specific expertise in the health sector. A World medical services, supporting specialist medical Bank Group Independent Evaluation Group report services, other specialist medical services, on health PPPs in 2016 found that among World subspecialty medical services, and medical Bank Group projects that led to contract closure, services for dental and oral specialists the largest success factors are project design 2. Pharmaceutical services including the and government commitment. Project design management of pharmaceutical preparations, factors were cited in 76 percent of the successful medical devices and consumable medical cases, followed by government commitment, materials, and clinical pharmacy services found to be a success factor in 72 percent of the 3. Midwifery and nursing services projects. An important aspect of success is the 51 including general nursing and specialist willingness or the capacity of governments to nursing care and midwifery care undertake PPPs. Similarly, lack of government 4. Clinical supporting services including blood capacity or commitment is the main reason PPPs bank services, intensive care for all age do not pass from the options report stage to the groups and types of diseases, nutrition, bidding assistance stage. Other studies have also instrument sterilization, and medical records found that effectiveness is found to be dependent 5. Nonclinical support services including on a more active regulatory role from the laundry/linen services, catering/kitchen government (Torchia, Calabro, and Morner 2013). services, engineering and maintenance of facilities, waste management, warehouses, In Indonesia, as in most countries, the main ambulances, information and communication PPP unit functions lie between the MoF and systems, mortuary, fire management Bappenas level for broader PPP planning, systems, medical gas management, design, and management.55 However, capacity and clean water management in the MoH to take some important sectoral functions remains limited. There is a small team The overall PMK 40/2018 looks broad enough in the center for health financing that functions to do various types of PPPs but has less clarity as the ‘health PPP team’ for the MoH and usually on nonhospital and service-oriented PPPs. takes the lead on health PPP-related matters, For example, whether specific PPPs will be including most recently the development of the applied such as for laboratory networks, data PMK 40/2018. Similarly, in BPJS-K, there is some management services, logistics and supply capacity in terms of engaging the private sector chain management, digital health services or in the empanelment of providers and in entering an integrated network of hospitals and clinics into contracts or agreement for purchasing is less clear. While there is scope to improve services. However, BPJS-K does not do many of 55 A recently concluded study by the World Bank (2018b) in Indonesia has already made recommendations on how these could be improved, and hence they are not covered in this report PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Box 5 Maharashtra-based medical institute and specialist hospital operator, was selected as the private partner. PPP - Bhubaneshwar health network The bidding process for the private partner was unique as the bidders were required to provide a minimum Odisha is a low-income state in India where the largest number of beds allocated within the hospital facilities for public hospital is in the state capital, Bhubaneshwar. patients who fell below the poverty line. The key terms Capital Hospital, the state’s main public hospital was of the transaction ensured that there is bare minimum overcrowded and ran above 100 percent capacity. OOP expenditure for poor and underprivileged patients— These issues along with frequent downtime for zero consultation fees and inpatient costs and highly essential equipment and the lack of medical staff subsidized outpatient costs, with service fees being led to inefficient services for patients. The state also covered by social health insurance. Another requirement operated five clinics in Bhubaneshwar; however, was for BMC to integrate its Hospital Management these were underperforming and underutilized. The Information Systems, so that data required for public state government has had difficulty in maintaining health statistics were directly transmitted to the MoH. and expanding health facilities in Bhubaneshwar and sought private sector assistance to improve capacity. The government decided to upgrade the five clinics and to establish a greenfield multispecialty hospital that In 2016, the Bhubaneswar Municipal Corporation (BMC) would have a total of 500 beds between the new hospital that operates Capital Hospital launched a bidding and the upgraded clinics. The private partner will lead process to find a private partner to improve existing the design, refurbishment, and upgrading of the clinics facilities and to build a new multispecialty hospital and develop the greenfield multispecialty hospital; that would relieve the burden on Capital Hospital. procure and install equipment; and staff, maintain, In April 2017, Krishna Institute of Medical Science, a and operate the network for a period of 34 years. 52 the upstream as well as downstream functions identify a pipeline of ‘high-impact’ PPPs that needed to plan, design, and manage PPPs. Many helps fulfill supply-side needs and also ensures countries that have taken health PPPs forward, that these plans have private sector interest; such as Australia, have good capacity on both 3. Developing capacity to design and manage the broader PPP unit as well as health sector the PPP transaction process, including capacity. Some of the key functions needed to hiring and managing transaction advisors; be performed by the PPP team, in coordination 4. Developing capacity for managing with other units in the MoH, with BPJS-K and and monitoring PPPs post transaction other relevant institutions, would include completion in the MoH, BPJS-K, and involved local governments; and 1. Having data and information on demand 5. Developing capacity to evaluate PPPs in terms patterns and supply-side readiness for of health sector goals of access, quality, better planning: identifying clear gaps efficiency, equity, or financial protection. based on demand patterns (population, disease burden, and utilization of services) In terms of funding for PPPs, the government as well as using available data on public and has supply-side financing mechanisms such as private sector provision, the services they the provision of VGF, AP, and guarantees, which provide, and their supply-side readiness; can be used to improve the commercial viability 2. Developing an umbrella public-private of PPP projects. At the same time, it envisages platform for the health sector as well as BPJS-K as the main purchaser of services, and sub-sectoral fora and cross-government hence, operational financing. There are some coordination mechanisms (MoH, BPJS-K, models of financing in the PMK 40/2018, but Bappenas, MoF, Indonesia Infrastructure there may be more clarity required on how Guarantee Fund (IIGF), and local governments) these both would work together as necessary to to discuss and resolve constraints as well as structure a deal where both infrastructure and 53 services are envisaged, such as an integrated Recommendations hospital and clinic network or building and operation of a network of diagnostic facilities. 1. The MoF and Bappenas, with the MoH and Leading hospital groups have indicated that BPJS-K, should establish cross-government establishing PPPs with government providers coordination mechanisms (also involving IIGF in the specific areas of pathology and radiology and local governments) and public-private are attractive due to the rapid increase in patient platforms to identify a pipeline of high- volumes due to BPJS-K referrals. In addition, impact PPPs that have private sector interest. many hospital providers have been told by 2. The MoH, with BPJS-K, should identify clear BPJS-K that they would prefer them to invest in gaps which could be fulfilled by the private more remote or underserved regions. However, sector, including PPPs, based on demand these providers also mention that to make more patterns (population, disease burden, and informed choices, they would be better placed utilization of services) as well as using available if they get more information on the demand and data on public and private sector provision.56 utilization rates as well as have a platform where 3. The MoH and BPJS-K, with the MoF and they could see how their investment risk could Bappenas, should develop capacity be mitigated. These structured platforms for as well as identify clear roles and discussing these issues and potential solutions responsibilities to design and manage for the health sector across various arms of the PPP transaction process, manage and government (MoH, BPJS-K, Bappenas, MoF, IIGF, monitor PPPs, and evaluate PPP results. and local governments) do not exist as of now. 56 Referred under constraint #1 also.. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation The government should strengthen hospital and primary care accreditation capacity to facilitate empanelment by BPJS-K Indonesia has recently established KAFKTP, been accredited to date. The MoH said that based on two decades of experience in hospital 341 unaccredited hospitals have committed accreditation. Accreditation is a voluntary process to finishing the accreditation process by June that is followed by providers to improve quality of 30, 2019. A recent media report indicated services by ensuring that not only the necessary that 19 hospitals in the Greater Jakarta area inputs (such as infrastructure, equipment, and were taken off the BPJS-K referral hospital human resources) are in place but also that both list as they were not accredited by KARS.58 clinical and managerial processes are improved. Accreditation involves a hands-on process of Similarly, for primary care accreditation to work, expert mentoring of facilities to improve their the credibility of KAFKTP, and its processes, managerial processes, clinical care standards, needs to be strengthened. Accreditation of and community health programs (in the case of PHC facilities began in 2015, with the enactment PHC). Facilities are required to be reaccredited of the MoH Regulation No. 46/2015 and the 54 every three years to provide an incentive to establishment of KAFKTP. While the current maintain standards. While accreditation does not capacity of KAFKTP is limited (owing to its nascent lead to improved clinical outcomes by itself, it is stage), the vision is to expand its capacity, become an important part of a ‘package’ of interventions fully independent, cover both the public and that improve the performance of health facilities. private sectors, and eventually get accredited In addition to building capacity, it also provides a itself, by ISQua. At present, the KAFKTP covers governance framework for the sector, directing only the public sector. investments and signaling to beneficiaries and payors managerial and clinical competence. It is also important that KAFKTP develops credible quality assurance and validation The new policy of the MoH is to make mechanisms, as well as makes its standards accreditation of hospitals and PHC facilities and results transparent. There are four levels a prerequisite for empanelment by Badan of accreditation for PHC facilities, namely dasar, Penyelenggara Jaminan Sosial - Health (BPJS- madya, utama, and paripurna, based on the Health) as a JKN provider, by 2019 and 2021, scores achieved across nine major standard areas. respectively. However, while most C-Class For the public sector, plans for accreditation of hospitals in the Jakarta area have been required puskesmas include a staggered approach, where to accept BPJS-K patients, there have been at least one puskesmas in 5,600 subdistricts is significant delays in uptake of patients as many to be accredited by 2019. According to the MoH private hospitals have not been accredited by reports, 7,518 puskesmas have been accredited KARS.57 As of December 2018, approximately as of December 2018, of which 32 percent have 2,200 private hospitals have been empaneled received the basic level (dasar) accreditation, by BPJS-K-signed contracts to provide services. 56.5 percent mid-level (madya), 10.6 percent However, only 1,759 private hospitals have superior level (utama), and only 1 percent the 57 KARS was established by the MoH as a domestic equivalent to Joint Commission International, an international hospital accreditation body. 58 https://www.thejakartapost.com/news/2019/01/06/BPJS-K-kesehatan-terminates-contracts-with-dozens-of-hospitals.html. 55 highest level ( paripurna).59 Once accredited, Recommendations the status is retained for three years. While the MoH has been focused on increasing coverage, from 2018, it will shift attention to increasing the 1. The MoH, and KAFKTP, should develop and proportion of puskesmas that achieve higher implement a business plan that outlines the levels of accreditation. This is very important vision to expand its capacity (for facilitation and as higher levels of accreditation require more accreditation), become fully independent from stringent adherence to outreach, managerial, and the MoH (both financially and institutionally), clinical standards, which are challenging to reach. and cover both the public and private sectors. Though puskesmas accreditation has reached 2. KARS should expand its capacity to cover the several districts/cities and all 34 provinces across increased demand for hospital accreditation Indonesia, the number of accredited puskesmas services. is much lower in eastern provinces such as Papua, Maluku, and NTT. 59 Indonesia Health Profile, MoH, 2018. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation MoH should clarify and ease e-health regulations to foster digital health innovations The MoH is currently developing e-health with hospitals, clinics, and insurance groups to regulations in collaboration with both digitize employee health benefits. Digital health traditional health care providers and digital providers will be leading this integration of health providers. The primary focus of e-health ecosystems to bring together HISs, EMR, or IT regulations from the MoH perspective is to solutions for finance and procurement. If digital safeguard patients’ medical records and data. health providers can integrate platforms by The MoH is working closely with digital health bringing together appointments, consultations, providers to develop regulations on e-health, diagnostics, and pharmacies, it will lead to more e-prescriptions, and telemedicine specifically for efficient operations for health care providers diagnostics. BPJS-K maintains a digital footprint and more efficient patient pathways. One of the for those patients that have downloaded and constraints to this is a lack of clarity on data utilized their application, as well as patients that standards as well as standards of interoperability have been referred through BPJS-K to private for the health sector that impedes development of 56 providers for specialist treatment. Digital health such solutions on a larger scale. providers see the potential in collecting patient data and extracting relevant information that The growth of e-commerce platforms in the last could be monetized and be useful to health five years in Indonesia has also led to companies care providers, pharmaceutical companies, and that provide the delivery of prescription and medical device manufacturers. While digital OTC drugs. The MoH expressed concerns over health providers have confirmed that discussions the legality of delivery services that seek to are under way to develop data privacy standards provide prescription drugs through digital health for e-health, there was no indication as to when applications. While OTC drugs are allowed to be these regulations would be issued, stating that it is purchased online and delivered directly to the a work in progress. patient, concerns remain over prescription drugs. In particular, there are concerns over drugs that The ability for digital health providers in contain psychoactive substances, to ensure that Indonesia to integrate with private health care digital platforms do not enable the abuse or providers or BPJS-K has been limited due to unregulated purchasing of such drugs. Mobile the general lack of integrated hospital HISs applications can currently provide the delivery and electronic medical records (EMRs), for both of prescription medications, and a physical public and private health care providers. Many prescription is required to purchase the medicine health care providers lack information technology either at a hospital or pharmacy. The MoH is (IT) systems due to financial considerations, as developing a draft legislation for an e-prescription the solutions can be expensive. There has been regulation and is consulting with digital health progress however as Indonesia’s leading private providers and pharmacy groups to identify risks hospital group, Siloam, recently implemented an and potential mitigation measures. The MoH EMR in 2018, and HHG and Mitra Keluarga recently realizes the benefits and convenience to patients implemented an HIS across all their hospitals. if they can have their medications delivered and Until recently, hospital groups were unable to prescriptions renewed utilizing digital platforms. provide patient data from one hospital to another A major constraint in developing e-prescriptions digitally. Digital health providers are now working is that there are limited HISs and EMRs in place across public and private hospitals, which are in supply of specialist doctors. Many specialists tend turn connected with pharmacies and digital health to practice in urban areas where the flow of patients applications. A universal basic data standard for IT is higher and where hospitals will have equipment systems at hospitals and diagnostic centers would where they can provide higher-value services. In allow easier collection of data and transfer of data the cases of sub-specialists or surgeons, many between health care service providers and digital are working over capacity as the demand for their health applications. services exceeds the supply of the specialists. As a result, many specialist doctors are working at Existing forms of digital health are already full capacity, and are unable to add digital patients being used by Indonesia’s diagnostics providers to their schedule. Digital health can provide a (including hospitals) particularly since imaging solution for access to primary care by providing for or pathology tests can be sent through email or mobile consultations for patients that do not have mobile devices or specialized digital platforms access to health care facilities. With existing mobile to be analyzed by specialist radiologists or infrastructure, doctors in second- or third-tier cities pathologists. BPJS-K has also developed its could provide mobile consultations with medical own internal database that provides primary staff in the field where doctors are unable to reach. care physicians a database of hospitals for Based on tele-consultations, an assessment could specialist referrals. Specialist doctors are be made by a doctor if the patient requires additional normally only allowed three SIPs. However, at care or if the patient should come to the nearest the discretion of DinKes, officials occasionally hospital for further tests. provide additional SIPs to specialists such as radiologists or pathologists to practice at hospitals Despite having a relatively high penetration of that provide diagnostic services. Radiologists mobile Internet, digital infrastructure remains a can work remotely or are based at one location major challenge in Indonesia, which constrains 57 where they can receive images and test results digital health’s ability to provide health through digital means and can sign off on their care access to patients. Indonesia’s Internet analysis and diagnosis. A chief operating officer penetration is 50 percent, not far from southeast of Jakarta’s leading diagnostic provider has said Asia average of 58 percent and below the global that telemedicine could solve the problem in average of 53 percent (We Are Social 2018). the near future with automated interpretation of However, the average quality of connections—as diagnostic results. At present, regulations require measured by download speed—is poor (Figure that a laboratory or radiology result requires the 14). This could make it difficult to use some of sign-off from a qualified Indonesian pathologist the e-health services such as video-based or radiologist, in-country, for a patient to be remote consultations. In addition, the quality treated. Telemedicine for diagnostics is already of infrastructure is heterogenous across the commonplace in the Philippines and India, and archipelago, with sparsely populated remote due to Indonesia’s specialist shortage, foreign regions—such as in Eastern Indonesia—that still joint ventures could address this shortage initially have limited access to fast mobile broadband in the private health care market. It is unclear that Internet (Figure 15). Telemedicine in Indonesia is these restrictions have much benefit, especially an obvious solution to provide last-mile access, given the shortage of specialists in Indonesia. primarily due to the logistical difficulties in remote provinces. However, until data security Digital health providers face the same problems and mobile infrastructure are not adequate, the of health care service providers with the lack implementation of these solutions will be limited. of human resources, specifically for specialist doctors. Patients in remote areas are at a minimum able to visit a GP at a puskesmas or primary care clinic. However, access to specialist doctors in remote areas is rare. The digital health platforms are aiming to address this lack of access to specialist doctors but are constrained by the same limit in 58 0 5 10 15 20 25 30 35 Aceh: Banda Aceh Figure 15 Figure 14 South Sulawesi: Makassar 0 20 40 60 80 100 120 140 160 180 Riau: Bengkalis (Palapa Ring West) Singapore South East Sulawesi: kendari Hong Kong Source We Are Social 2018. Bali: Denpasar - Nusa Dua South Korea Gorontalo World Nias: Gunung Sitoli Thailand PARTNERSHIPS FOR A HEALTHIER INDONESIA North Sulawesi: Manado Vietnam East Java: Rural, around Madiun Central Sulawesi: Luwuk Malaysia Unlocking Constraints for Better Private Sector Participation Jakarta Philippines Average MBps for fixed Internet connections Bandar Lampung: Kota Agung Indonesia North Sumatera: outside Medan Digital infrastructure quality is poor in Indonesia 0 10 20 30 40 50 60 Maluku Utara: Ternate Netherlands North Sulawesi: outside Manado Singapore Maluku: Tual U.A.E. Download throughout Telkomsel long-term evolution (MBps) Bengkulu South Korea Central Kalimantan Hong Kong East Kalimantan: Samarinda World Sumba: Waingapu Vietnam Papua: Jayapura Malaysia connections. Both the figures contain the three top-ranked countries followed by a selected sample of Asian countries. Thailand Papua: Merauke Philippines Papua Barat: Manokwari Note Left hand side panel is average MBps for fixed Internet connections and right hand side panel is average MBps for mobile Internet Indonesia Papua: Wamena (satellite) Average MBps for mobile Internet connections Maluku: Saumlaki (satellite) Recommendations 4. The MoH could lift restrictions on foreign telemedicine providers specifically in pathology and radiology. As these two 1. The MoH and BPJS-K should develop specialist functions are non-patient facing, the data privacy standards as well as pass the doctors do not necessarily need to be in the necessary legislation in consultation with country, and the additional specialist doctors stakeholders, including health care service can address the shortage of specialist doctors providers and digital health providers. Medical in the short term. Countries such as India and data are frequently the target of hackers, and the Philippines that have an adequate supply BPJS-K should invest in IT security to prevent of pathologists and radiologists can create joint the disclosure of confidential medical records. ventures with both public and private providers, As some digital platforms are already collecting to alleviate some of the burden of the number their own data on their users, a timely issuance of tests that Indonesian specialist doctors have of protection of digital patient data would be to conduct. Providing doctors with a balanced beneficial to patients as well as would make workload will improve the analysis and provide clear the type of data private companies can for more accurate diagnostics, which in the end collect on their users. will benefit the patients. The MoH and BPJS-K 2. The MoH and BPJS-K should develop would need to come up with revisions in the protocols for sharing of data with privacy regulations for foreign doctors, and they could protections and consider using digital relax restrictions only in specialist areas that health providers for data analytics and face an acute supply shortage. service delivery. This could enable the MoH 5. The GoI should focus on the upgrading of and BPJS-K to use digital health providers mobile infrastructure in remote regions that are strong in providing technology to improve access to 3G and the use of 59 solutions that could assist BPJS-K in the smartphones. The improvement in connectivity development of applications with the data through smartphones can help in improving analytics and telemedicine that could improve last-mile access to patients in regions where access to health care, specifically in remote there is a limited number of health care workers. regions of the archipelago. In working with This would enable many digital health solutions digital health providers, they can institute a to enable remote diagnostics and consultations, nationwide standard of IT systems to integrate not to mention support for frontline community across health care service providers and health workers. ensure interoperability between the various stakeholders. 3. The MoH, with BPJS-K could develop legislation that focuses on e-prescriptions to improve access to prescription medications, while maintaining necessary safeguards. E-prescriptions can help increase patients access to appropriate medication and also potentially improve adherence through linked digital solutions. However, it would also be important to safeguard from abuse of prescription medication, and the MoH can require that e-prescriptions could be restricted to certain classes of drugs. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Summary Table of The table below summarizes the recommendations for various constraints grouping them as regulatory reforms needed, institutional coordination Recommendations mechanisms that need be set up, as well as capacity building that needs to be carried out to ensure better private sector participation to improve the health sector in Indonesia. CONSTRAINTS RECOMMENDATIONS Regulatory reforms Lack of a clearly articulated strategy The MoH, with BPJS-K, and Bappenas, should prepare a private sector for private sector engagement engagement strategy, with differential strategies for various subsectors, to fulfill supply-side gaps by improving access, quality, and efficiency. Sustained and increasing financial • Simplify the overall tobacco tax structure and increase tobacco excise deficit of BPJS-K taxes at the national level, with potential earmarking to BPJS-K. • Update JKN premiums based on actuarial analysis. • Subsidize premiums for the informal sector to address adverse selection by attracting and retaining a larger pool of healthy members. • Address open-ended hospital payments where most spending occurs by introducing a budget and/or volume ceiling. • Introduce an explicit benefit package commensurate with available 60 resources. Underutilization of the BPJS-K • The MoH, with BPJS-K, should target underserved areas and populations strategic purchasing function to drive by introducing incentives. improvements in service provision • BPJS-K, with the MoH, should strengthen performance-based capitation and quality and hospital payments to incentivize broader health sector results. Inadequate availability of skilled • Continue to implement reforms to improve quality of medical education. health professionals • Relax restrictions to the hiring of FHPs thus enabling the system to expand the stock of qualified HRH. • Reduce requirements to convert medical qualifications of Indonesian physicians who studied abroad. Restrictive establishment rules for • The MoH could remove the need for the recommendation letter from private sector players—foreign in the local governments for the establishment of hospitals and have particular a transparent set of criteria for investment, endorsed by the local governments, to replace it. • The MoH could remove the restriction on the scope of services for foreign hospitals. • The President (through the decree on DNI) could expand foreign equity limits to 100 percent across all health services sectors. Unclear and at times overly • The MoH and BPJS-K should develop data privacy standards as well as restrictive e-health regulations pass the necessary legislation in consultation with the stakeholders. • The MoH and BPJS-K should develop protocols for sharing of data with privacy protections and consider using digital health providers for data analytics and service delivery. • The MoH, with BPJS-K, could develop legislation that focuses on e-prescriptions to improve access to prescription medications, while maintaining necessary safeguards. • The MoH could lift restrictions on foreign telemedicine providers specifically in pathology and radiology. CONSTRAINTS RECOMMENDATIONS Institutional coordination platforms Lack of a clearly articulated strategy The MoH, with BPJS-K, should prepare a database of private (and public) for private sector engagement providers using multiple information sources. Underutilization of the BPJS-K Clarify roles of the MoH and BPJS-K to strengthen the purchasing role of strategic purchasing function to drive BPJS-K. improvements in service provision and quality Lack of an enabling government • The MoF and Bappenas, with the MoH and BPJS-K, should establish a environment to design, manage, and cross-government coordination mechanisms (also involving IIGF and local monitor PPPs governments) and establish an umbrella public-private platform for the health sector as well as sub-sectoral fora to identify a pipeline of high- impact PPPs that have private sector interest. 61 • The MoH, with BPJS-K, should identify clear gaps which could be fulfilled by the private sector, including PPPs, based on demand patterns (population, disease burden, and utilization of services) as well as using available data on public and private sector provision. Capacity building Underutilization of the BPJS-K • The MoH, with BPJS-K, should develop an effective referral process strategic purchasing function to drive regulation and modify/develop the necessary information systems to improvements in service provision make this more patient centric, transparent, and driven by evidence of and quality supply. • BPJS-K, with the MoH, should strengthen guidelines on quality of care by introducing clinical pathways, instituting clinical audits, strengthening monitoring of quality of care, and embedding quality-based criteria for reimbursement of providers. Inadequate availability of skilled Increase the domestic production of quality health professionals by health professionals expanding the capacity of the tertiary education sector. Lack of an enabling government The MoH and BPJS-K, with the MoF and Bappenas, should develop capacity environment to design, manage, and as well as identify clear roles and responsibilities to design and manage monitor PPPs the PPP transaction process, manage and monitor PPPs, and evaluate PPP results. Poor capacity of the hospital and • The MoH, and KAFKTP to (a) expand capacity (for facilitation and primary care accreditation systems accreditation) and (b) become fully independent from the MoH (both financially and institutionally). • KARS should expand its capacity to cover the increased demand for hospital accreditation services. Unclear and at times overly The GoI should focus on the upgrading of mobile infrastructure in remote restrictive e-health regulations regions to improve access to 3G and the use of smartphones. PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation 62 APPENDIXES 63 ANNEXES PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Annex 1 HRH - Quality Assessment using Clinical Vignettes Table A1 The quality of physicians in primary care is relatively low and deteriorating (Share of basic diagnostic and treatment procedures correctly identified by physicians across three types of curative cares) National Java-Bali 2007 2014 p-value (2007–14) No. 2007 2014 p-value (2007–14) No. Prenatal Care Public 47.59 46.68 0.239 361 48.36 47.45 0.288 249 Private 44.48 31.92 0.003 31 44.74 25.56 0.001 14 Child Curative Care Public 66.30 60.66 0.000 361 67.91 62.92 0.002 247 64 Private 64.56 56.58 0.000 95 65.53 56.62 0.000 73 Adult Curative Care Public 58.38 51.97 0.000 360 60.58 54.51 0.000 247 Private 57.45 44.73 0.000 100 58.13 43.66 0.000 76 Sumatra Other 2007 2014 p-value (2007–14) No. 2007 2014 p-value (2007–14) No. Prenatal Care Public 43.14 43.46 0.552 66 49.77 47.14 0.217 46 Private 42.86 37.97 0.272 14 50.88 33.33 0.121 3 Child Curative Care Public 60.57 55.10 0.058 67 65.96 56.74 0.005 47 Private 60.00 55.00 0.1470 15 64.29 59.52 0.3091 7 Adult Curative Care Public 53.44 45.87 0.006 66 53.77 47.20 0.055 47 Private 54.55 43.18 0.003 16 56.82 57.95 0.461 8 Source Authors’ elaboration on IFLS data. Note The table reports the share of procedures correctly identified (that is, either mentioned spontaneously or when prompted) across physicians in PHC interviewed in both waves of the survey (see Box 1 for the methodology); p-values indicate the level of statistical significance of the difference between the measures in 2007 and 2014 (from one-tail t-test); No. indicates the number of physicians interviewed in each wave. APPENDIXES Table A2 The quality of PHC workers is worse in private than public sector (Share of basic questions on three types of curative cares answered correctly by physicians in primary care facilities) National Java-Bali Sumatra Other 2007 2014 2007 2014 2007 2014 2007 2014 Prenatal Care Public 46.44 47.47 46.93 49.13 41.85 42.44 49.03 41.87 Private 44.39 34.30 44.44 33.65 42.48 32.83 48.61 46.05 p-(Publ.-priv. diff.) 0.0572 0.0000 0.0609 0.0000 0.4131 0.0003 0.4467 0.1294 Child Curative Care 65 Public 65.73 61.14 66.90 63.40 58.25 55.47 68.14 57.58 Private 65.45 55.35 66.07 55.87 59.29 50.73 69.81 60.16 p-(Publ.-priv. diff.) 0.4090 0.0000 0.2701 0.3682 0.3737 0.0615 0.3085 0.2477 Adult Curative Care Public 57.65 52.29 59.70 54.41 51.90 47.13 54.07 48.66 Private 58.54 45.72 58.62 46.23 56.49 40.64 60.93 51.52 p-(Publ.-priv. diff.) 0.2151 0.0000 0.2114 0.0000 0.0489 0.0074 0.0174 0.2177 Source Authors’ elaboration on IFLS data. Note The table reports the share of procedures correctly identified (that is, either mentioned spontaneously or when prompted) across all primary physicians interviewed in primary care facilities (see Box 1 for the methodology); p-values indicate the level of statistical significance of the difference between the measures in 2007 and 2014 (from one-tail t-test). PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation Annex 2 The main private sector associations in health services THE INDONESIAN DOCTORS ASSOCIATION ASSRI (IDI – IKATAN DOKTER INDONESIA) ASSRI encompasses all private sector hospitals IDI is Indonesia’s largest doctors association and works with service providers to inform the for GPs, specialist doctors, dentists, and dental public about the quality and excellent service surgeons. It advances public health and advocates of Indonesian private hospitals. Since the for the interests and professional development implementation of JKN, ASSRI has been guiding of Indonesian physicians. It is the umbrella private hospitals to provide transparent information organization under which all specialist doctor to the public about the services provided and associations come under (see Table A3). coverage under BPJS. Due to the budgetary constraints facing BPJS – K over the past two IDI works closely with the MoH to coordinate years, ASSRI has shifted focus to assisting private public health policy and best practices, acting hospitals in dealing with financial shortfalls 66 as the gatekeeper for labor policies that affect stemming from delayed payments and also to doctors specifically and health care workers. It encourage constructive dialogue between private also works closely with universities and shapes providers that have so far remained reluctant to medical education guidelines and provides work with BPJS. Since the implementation of INA- guidance and mentorship to junior doctors CBG in November 2018, ASSRI has been working seeking further education and specialty studies. with private providers of specialist services to In recent years, IDI has pushed to improve develop fee structures that are in line with the medical competence with the emergence of requirements of BPJS - K coverage, without adding new technologies and medical devices and holds to financial gaps in the costs that hospitals incur in regular seminars and conferences in conjunction providing these services. with pharmaceutical companies, medical device manufacturers, and health care service providers. PERSI PERSI’s primary function is to assist and guide existing and new private hospitals in accreditation and hospital management, human resource guidance, and training in administration and operations. Since the implementation of JKN in 2014, PERSI has been working closely with KARS to advise hospitals on accreditation procedures and the integration of BPJS - K for qualified hospitals. APPENDIXES Table A3 Specialist provider association groups Association Name PDPI The Indonesian Association of Pulmonologist PDSRI The Indonesian Radiology Association API The Indonesian Association of Pathologists POGI The Indonesian Society of Obstetrics and Gynecology PERHATI - KL The Indonesian Orthoinongological Society PERDOSKI The Indonesian Society of Dermatology & Venereology PAPDI The Indonesian Society of Internal Medicine PERKI The Indonesian Heart Association IDAI The Indonesian Society of Pediatricians IAUI The Indonesian Urological Association KABI The Indonesian Surgeon Association PERDATIN The Indonesian Society of Anesthesiologists PABOI The Indonesian Orthopedic Association PERSPEBSI The Indonesian Association of Neurosurgeons PERDOSSI The Indonesian Neurological Association PERDOPSI The Indonesian Association of Aviation Medicine Specialists 67 PERDOSRI The Indonesian Physical Medicine and Rehabilitation Association PERDOKLA The Association of Marine Doctors PERAPI The Indonesian Association of Plastic Surgeons PKNI The Indonesian Association of Nuclear Medicine PAMKI The Indonesian Society of Clinical Microbiology PDS PARKI The Indonesian Society for Medical Specialists in Clinical Parasitology DFI The Indonesian Association of Forensic Medicine PERDOKI The Indonesian Association of Occupational Medicine PDS PATKLIN The Indonesian Association of Clinical Pathologist PDGKI The Indonesian Association of Clinical Nutrition Doctors PERDAFKI The Indonesian Clinical Pharmacology Association PERSANDI The Indonesian Andrology Association PERDAMI The Indonesian Ophthalmologist Association PDSKJI The Indonesian Psychiatry Association PDSKO The Indonesia Sports Medicine Association PABI The Indonesian General Surgeons Society PERBANI The Indonesian Society of Pediatric Surgeons PORI The Indonesian Association of Radiology Oncologists PARTNERSHIPS FOR A HEALTHIER INDONESIA Unlocking Constraints for Better Private Sector Participation References Afifi, N. 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