Knowledge Brief Global Health, Nutrition and Population Practice Introducing Strategic Purchasing in Costa Rica Laura Di Giorgio, Ana Lucia Rosado Valenzuela, Ashley Sheffel, Micaela Mussini July 2024 KEY MESSAGES: • The Costa Rican Social Security Fund (CCSS) has taken its first steps towards the introduction of strategic purchasing of healthcare services with a pilot that was introduced for the first time as part of the institution’s 2024 budget, which is currently being implemented. With this highly relevant reform, the CCSS begins its transition from a resource allocation model based solely on the historical budget to (i) a capitation model at the first level of care and (ii) the introduction of prospective elements at the hospital level. • The purpose of the review in the resource allocation methodology is to align resources with the health needs of the population and the supply of services, while encouraging the achievement of specific strategic objectives, such as increasing productivity, accessibility, and quality of services. • The designed resource allocation models were the result of the intersection of the latest scientific evidence and the information available in the CCSS information technology (IT) systems. The results of this pilot phase will be monitored and evaluated to inform future adjustments and improvements. The further development of the IT systems will also allow continuous improvement of the strategic purchasing model. • This reform has been driven by the "Program for Results for the Strengthening of Universal Health Insurance in Costa Rica”, approved by the World Bank Executive Board in 2016 and implemented by the CCSS until January 2024. The technical assistance provided by the World Bank in support of CCSS’s efforts, as well as the communication and negotiation with the managers of the pilot phases, have been key facilitators for the proper development and advancement of the models. • The future of strategic purchasing requires a major commitment from the CCSS administrators and managers, as learning from the pilot and continuously adapting to the progressive implementation, including to other regions in the country, will be critical to the overall success of the reform. population. The resource allocation system to date has Introduction not been linked to results, improvement in outcomes nor The Costa Rican Social Security Fund (CCSS) is the largest other performance indicators, i.e., health services have administrator of resources and provider of health not been purchased strategically. After some attempts in services in Costa Rica. (1) For decades, the allocation of the past, for the first time, the CCSS has developed a new resources to its health units has been done through resource allocation model that includes elements of historical budgets, which do not necessarily ensure that strategic purchasing, in line with the general evolution in these resources are aligned with the needs of the the world, and is on the way to implement them. The Página 1 HNPGP Knowledge Brief • models, developed by the CCSS under technical are allocated based on the budget execution of the assistance from several global experts, include (i) budget immediately preceding period and inflationary allocation with prospective elements for hospitals, and adjustment, without considering population and (ii) a capitation model for the first level of care (health epidemiological needs. The advantage of the current areas). resource allocation model is that it is simple and relatively easy to implement. However, it can lead to The development of these resource allocation inefficiencies in the use of economic resources among mechanisms in the CCSS was driven by a Program for the various health units, as well as inequitable Results (PxR)1, a World Bank financial instrument that distribution of resources. (5) promotes the achievement of strategic goals and objectives of programs that seek to improve the use of Consequently, the CCSS has worked to implement cost- general public expenditures or improve their containment mechanisms to ensure that health facilities performance through their own processes and serving populations with greater needs receive more institutions. In Costa Rica, this program was implemented resources.(4) The allocation of resources with between 2016-2024 for the Strengthening of Universal prospective elements promotes the transfer of risk from Health Insurance. Its initial objectives included the funder to the provider in order to achieve pre-agreed modernizing and strengthening the primary health care outcomes and results, with the goal of providing cost- network, improving the quality of services, increasing effective services, optimizing processes, and improving population coverage, and making the network more service quality. (6) capable of prevention, early diagnosis and control of diseases relevant to the local, regional and national The initial cooperation agreements between the World epidemiological profile. It also aimed to improve the Bank and the CCSS identified the need to improve institutional and financial efficiency of the CCSS. (2) institutional capacity and effectiveness for strategic purchasing of health services. In particular, it was This knowledge brief is part of a larger series of considered relevant to strengthen the budget allocation knowledge reports developed by the World Bank that model and introduce tools to migrate to a per capita seeks to describe the key reasons for success, challenges, budget system for primary care and to introduce and key lessons learned in developing prospective prospective elements for hospitals. (2) It was therefore resource allocation models, with the goal of providing a determined that one of the indicators linked to roadmap for other countries interested in implementing disbursement within the PxR would be related to the similar reforms. development of the annual budget by means of prospective tools for the first level of care and for the Background: Development and Pilot hospitals. It was intended that CCSS decision-makers Costa Rica invested 7.9% of GDP in health in 2020 (3), an would be able to analyze the efficiency of the resources increase of more than 1 percentage point since 2000. At allocated and improve the quality of services and health the same time, health care spending has increased.(4) outcomes for patients. In the CCSS, the Financial Between 2016-2020, outpatient and average costs per Management department, specifically the Budget day of hospitalization in the CCSS have nearly doubled Department, was responsible for monitoring compliance (5); as a result, efficiency in the use of economic with this indicator. Thus, a technical team was created to resources has been recognized as essential to a manage and coordinate all the activities and sustainable financial future. communications necessary for the correct design and execution of the project. Historically, the CCSS has allocated an annual budget to the health facilities to cover the inputs necessary to This team requested technical assistance from the World provide services (salaries, materials, equipment, etc.) Bank to develop the new budget allocation models. First, through a historical exercise. Under this model, budgets a team of consultants was assigned to conduct a review 1 The “Program for Results for the Strengthening of Universal Health Insurance in Costa Rica” was a US$ 420 million loan approved by the World Bank Executive Board in 2016. Página 2 HNPGP Knowledge Brief • of the literature and of the international experience on prospective elements for the hospital level of the prospective resource allocation models for primary institution. health care and hospitals. Based on this review, two prospective annual budget models were developed for Capitation model for the first level of care (health care the CCSS. The development of a capitation-based model areas) for primary care and a model with prospective elements for hospitals were considered appropriate based on the This model consists of two parts, a base rate, and a risk- literature review and the institutional readiness of the adjusted model. The base rate is an average amount CCSSS. Both models were calculated for the allocation of allocated to health areas based on the number of people the "effective budget," that is, the portion of the budget registered in each health area. The second component, that is transferred to and managed by the health care the risk adjustment index, allows a portion of resources units. The effective budget can be used for unit operating to be allocated based on specific population expenses (e.g., salaries and their increases, subsidies). characteristics in each health area that are expected to The rest of the budget, the "non-effective" part, are lead to an increase in health spending. The risk resources over which the units have no control or adjustment index considers factors related to access to management, and are used mainly for the purchase of services (transportation network, proportion of drugs and medical and laboratory instruments. (7, 8) population living in rural areas) and the population's need for health services (population under 1 and over 75 The development of both models was carried out during years of age, accident rate, proportion of population with the year 2022 and half of the year 2023 by a team of diabetes). In the future, the CCSS plans to use advanced consultants, who were supported by the budget technical predictive models to more accurately estimate the risk team within the CCSS to provide them with the data and adjustment index of specific population groups. information necessary for the development of the models. Prospective model for hospitals At the same time, and as part of the successful progress The model of prospective elements in the annual budget in the design of the resource allocation models, medium allocation to hospitals was developed considering four and long-term (10 years) projections were made with results-focused priority areas: productivity, accessibility, calculations to close the identified inequity gaps in the quality of care, and efficiency. To improve productivity distribution of resources at the end of this 10-year period. and accessibility, targets related to an increase in the (7) percentage of hospital occupancy, the turnover rate of hospital beds, and the ratio of first-time outpatient visits These two developed models became part of a pilot to the total number of outpatient visits were included. In program for the 2024 budget formulation, for which the terms of quality of care, the goal is to reduce the number Integrated Health Services Delivery Network of Huetar of healthcare-associated infections. Regarding efficiency, Norte was selected. The pilot of the capitation model for the goal is to ensure compliance with budget policy and the first level of care was implemented in the 8 health the full execution of additional resources for special areas of the region. In turn, the prospective model for projects. Each of these areas includes specific indicators hospitals is being piloted in 2 hospitals of the CCSS in the and weightings developed based on the contextual same region. The timing for scaling up to the national analysis of the two pilot hospitals where the tool was level will depend on the lessons learned and the progress initially implemented. In total, the model is composed of made in the first stages of the pilot.(9) 6 indicators that integrate a baseline situation and the expected improvement by the end of the year. (8) Description of innovations in resource FACILITATORS allocation Based on the review of international best practices and The design of this critical reform has been facilitated by the availability of information from the CCSS, it was several factors, such as the technical assistance provided decided to develop a per capita resource allocation by the World Bank, the communication with the pilot model for primary care (health areas) and a model with Página 3 HNPGP Knowledge Brief • management units, and the very existence of the project directors of the CCSS, which would continue up to and within the PxR, among others. throughout the implementation phase. Appointment of a technical team: A technical team was Program socialization with the pilot's management established within the Budget Directorate of the CCSS to units: To improve the reception and acceptance of the oversee the progress and make future adjustments to the reform, the Budget Directorate held socialization design of the prospective resource allocation models. The sessions with the management units. This not only team is composed of personnel from the Budget increased familiarity with the tool, but also made it Directorate, Financial Management, Medical possible to identify opportunities for improvement so Management and Purchasing Directorate. The main role that the tool could be adapted to the real world. For of the team has been to facilitate the work of the external example, factors such as the rurality of the health areas, consultants, including the communication with the demographic factors such as pregnancies and migrant technical bodies, to give access to information and populations, epidemiological factors such as the provide feedback on the progress made by the incidence of malaria were considered, as was the consultants, and to follow up on compliance with the availability, timeliness, and quality of the required indicators established by the World Bank. Their information. knowledge of the specific details of the operation and management of CCSS financing and budget formulation Cross-departmental collaboration: The information has been essential to inform and complement the needed to develop the models came not only from technical expertise of the consultants in the development various CCSS departments, but also from the CCSS Board of the models. of Directors. To bring it together, the Budget Directorate was able to connect the consultants with the various Technical Assistance: The CCSS Budget Directorate areas from which information is needed. They even recognized the need to seek the needed skillset from facilitated meetings with other departments outside of outside the organization to design the new budget the Financial Management Unit. allocation models. With the support of the World Bank, a local consultant was identified to provide the support Health Information System: An important step for the needed. The expert had both local knowledge of the design of such prospective models was to have access to financing system of the health care sector as well as the needed data, which in this case were obtained extensive international experience supporting other through the Single Digital Health Record (EDUS), the countries in similar reforms. In addition, a senior expert computerized system widely implemented in the CCSS. from Spain was also contracted to provide additional World Bank Technical Assistance and Flexibility: As part insights and lessons learned from the reform that took of the implementation support plan, the World Bank place in Catalonia. Such technical assistance ensured that team provided technical advice to CCSS staff, which was the reform was designed taking into account the best recognized by the CCSS as essential to advancing the possible evidence.(9) development of the prospective budget models. On the Prospective Model Workshop: To share the international other hand, it has been recognized that the World Bank's experience and knowledge on prospective payment flexibility in the face of delays caused by the challenges models in the CCSS, an introductory workshop was held that have hindered progress has been very helpful in with the participation of CCSS staff and pilot keeping the project on track. management units, the consultants involved, and World Inclusion of a PxR Objective: The development of Bank officials. During the sessions, thematic content prospective models was one of the indicators promoted related to prospective payments was reviewed, and the by the PxR, in agreement between the CCSS and the consultants presented the models developed until then World Bank, meaning that the achievement of the final to receive feedback from staff and management units. objective and its intermediate milestones corresponded This workshop facilitated the understanding of the to the right to request the disbursement of a sum / an models, dispelled doubts and fears, and established the amount agreed in the loan. This has ensured that the beginning of communication between managers and actions defined are effective in achieving projected goals. Página 4 HNPGP Knowledge Brief • CHALLENGES MET AND SOLUTIONS APPLIED The CCSS has succeeded in designing and piloting While several challenges hindered progress and delayed innovative resource allocation models. In the future, the the Program, these have been gradually resolved. CCSS will need to facilitate their effective integration and ensure a progressive implementation which can be Data Availability: For the CCSS, the ideal prospective thought of as three main phases. In the first phase, the payment model for hospitals would have been based on aim was to implement the first pilot of the models Diagnosis Related Groups (DRGs). Unfortunately, due to developed with two hospitals and eight health areas. To the lack of data availability in the system, and due to the this end, a negotiation of the objectives to be achieved by existence of initiatives under implementation in the the pilot management units was successfully generated institution (e.g., ERP software), this approach had to be and preceded the implementation of the pilot in 2024. An deferred to future phases. It was decided to integrate the evaluation of the exercise and its results will be key to model based on the three areas of productivity with the strengthen the tool and methodology during the vision that in the future it will be possible to integrate the execution of this first phase. The evaluation and its DRGs. There are also variables that are relevant to the quantitative and qualitative metrics will be key to scaling context of the health areas but are not currently collected up positive results at the institutional level. The second (e.g., indigenous and Afro-descendant populations and phase will be the implementation of the models for the access to health services). 2025 budget formulation and its duration will depend on the lessons learned from the first phase. The aim of this Delays in Data Delivery: The models integrate phase will be to increase the number of hospitals and information compiled by various departments and areas health areas in which the models tested and piloted in the of the CCSS. Obtaining the data to build the models was previous phase are applied, and to increase the number a key challenge. However, with the support of the Budget of indicators in the models. Finally, it is hoped that the Directorate’s intervention, it was possible to expedite third phase will produce more sophisticated and access to data. comprehensive models that include patient health risk stratification. Cyberattack on CCSS systems: The cyberattack on the CCSS IT system caused disruptions in the progress of the Due to the heterogeneity in the allocation of resources prospective payment models. The primary impact was a currently received by health units, the ultimate goal will disruption in the collection of information for model be to achieve a standardized base fee allocation. This will development. Fortunately, this was resolved once the be achieved through a progressive adjustment of the cyberattack was resolved. base rate assigned to each unit, either for an increase or decrease, depending on the current situation of the units. COVID-19 pandemic: The pandemic was also a factor that By achieving this standardization in the base fee, only the slowed the progress of the models due to the distortion risk adjustments will vary according to the local context. of service delivery and the subsequent difference in the data used to generate the shadow budgets, so it was Similarly, the objectives to be achieved within the budget decided to use information from 2019 and more recently allocation models will be agreed upon between the CCSS to update it to 2022. and each management unit in each of the phases before they are implemented. This gradual and continuous Technicality and limited knowledge of prospective learning process will allow for the improvement of payment models: CCSS administrative and clinical staff relevant indicators to be included, such as those related had limited experience with prospective payment to access to health services. It will also be important to models. This created doubts and fears about potential consider a solid legal framework so that the achievement implementation barriers. Gradually, through the of goals and the corresponding payment are effectively workshops, socialization, and application of the pilots, applied. this resistance has been mitigated, as the benefits of the Another clear objective of the CCSS is to shift budget reform were well received and agreed upon. allocation from the individual health units to a budget allocation at the “Integrated Health Service Networks” THE ROAD AHEAD AND THE GAPS TO BE CLOSED (RIPSS) level. The aim is to strengthen the RIPSS and their Página 5 HNPGP Knowledge Brief • management with the units belonging to each of their territories. The progressive and gradual nature of the transition to strategic purchasing creates processes that will take decades to complete. The far-reaching success of the day-to-day implementation of these models in the administrative processes of the CCSS and their impact on health outcomes, improved patients’ experience and quality of services, and resource efficiency, will depend on proper communication, execution, and negotiation among the key actors, which has been successful so far. Box 1 summarizes the lessons learned throughout the development and implementation of the reform. Box 1. Lessons Learned • Recognize the technical capacity and experience of the institution and its staff in strategic purchasing is instrumental prior to seeking external expert advice when necessary. • Develop budget allocation models based on the intersection of the best scientific evidence, the availability of information and the counterpart’s institutional maturity. • Create a space for open discussion with unit managers to express their concerns about the revised resource allocation models, and try to identify measures to mitigate them, as this will reduce resistance to future implementation. • Negotiate realistic goals with the management units. • Evaluate the pilot phases with quantitative and qualitative goals makes for better progress in scaling up. • Establish effective communication with pilot managers is important for adequate learning. • Carry out a long-term progressive scaling up – this will be key for successful project implementation. • Plan with future goals that include the integration of new indicators to achieve implementation of the best possible models. Página 6 HNPGP Knowledge Brief • References 1. Ministerio de Salud de Costa Rica, Organización Panamericana de la Salud. El sistema de salud costarricense: ¿cuánto se gasta, qué se consume y quién paga? ; 2022. 2. The World Bank. Program Appraisal Document for a Strengthening Universal Health Insurance in Costa Rica. Program-for-Results. 2016. 3. The World Bank. World Development Indicators database: The World Bank; 2020 [Available from: https://data.worldbank.org/. 4. OECD. OECD Reviews of Health Systems: Costa Rica 20172017. 5. Caja Costarricense de Seguridad Social. Taller de capacitación para la implementación del modelo de asignación de recursos per capita ajustado por riesgo para el primer nivel de atención de salud y un modelo con elementos prospectivos en la asignación de recursos a nivel hospitalario en la CCSS. 2023. 6. Pacheco Jimenez JF, Saénz Delgado LB, Alvarado Prado R. Modelo de asignación de recursos per cápita ajustado por riesgo para el primer nivel de atención de salud y una propuesta que incluya elementos prospectivos en la asignación de recursos a nivel hospitalario de la Caja Costarricense de Seguro Social. Producto 1 - Marco teórico de capitación2022. 7. Pacheco Jiménez JF. Entrevista Programa por Resultados CCSS/BM. In: Rosado Valenzuela AL, editor. 2023. 8. Sáenz LB. Asignación presupuestaria con elementos prospectivos a hospitales de la CCSS. Plan Piloto en el Hospital de San Carlos y el Hospital de los Chiles2023. 9. Gómez Rodríguez S. Entrevista Programa por Resultados CCSS/BM In: Rosado Valenzuela AL, editor. 2023. 10. Cabezas Y. CCSS apuesta por hospitales de día. 2016. The World Bank's Health, Nutrition and Population Knowledge Briefs are a quick reference on key aspects of specific HNP-related topics that summarize new findings and information. They can highlight a problem and key interventions that have proven effective in improving health, or disseminate new knowledge and lessons learned from the regions. For more information on the topic, visit: www.worldbank.org/health Generous financial support for this Knowledge Brief series was made possible by the Access Accelerated Trust Fund Página 7