Findings from Evaluation of NHI Phase 1

Genesis Analytics' evaluation report examines the financial obligations of both direct and indirect National Health Insurance (NHI) grants during the pilot phase. It seeks to align successful initiatives with the financial resources allocated. However, the evaluation revealed numerous challenges, including inadequate capacity (in both human resources and necessary skills) and suboptimal management of various grants. For example, the quality of variance reports did not show significant improvement, highlighting ongoing issues in financial oversight.

Findings from the NHI Pilot Phase

The evaluation of Phase 1 of the NHI pilot project revealed mixed outcomes. Challenges experienced across pilot districts included a lack of strong political will, insufficient human and financial resources, inefficient coordination and communication, and the absence of a comprehensive monitoring system during implementation (Mukwena & Manyisa, 2022).

Case studies conducted at public health facilities during this period underscored the extent of under-resourcing. A major contributing factor to these conditions was the constrained and ringfenced budgets allocated by provincial departments of health for specific programmes. Manyisa (2016) noted that these funds were distributed equally across public hospitals, failing to account for the unique needs of individual facilities. This misalignment meant that hospitals with greater demands or resource deficits received the same allocations as less burdened facilities, exacerbating inequalities in service delivery.

Additionally, the inflexible structure of funding grants, which adhered to rigid criteria, further limited provinces’ ability to address their specific needs. This restriction prevented funds from being redirected to initiatives relevant to individual provinces or districts.

Recommendations for Future Grant Management

To improve the effectiveness and efficiency of NHI funding, several steps are necessary:

• Flexible Funding Models: Future grant allocations should be designed with enough flexibility to accommodate the unique needs of specific provinces and districts. This approach should be guided by a clear framework and expenditure guidelines to ensure accountability.

  
  

• Itemised Spending Analysis: Detailed, itemised spending reports on NHI projects should be required. These reports will enable deeper analysis of cost-effectiveness and the impact of funded initiatives.

• Improved Procurement Processes: Clear and streamlined procurement processes must be established to ensure that provinces can fully utilise the grants provided.

  
  

• Alignment of Objectives: Key objectives and expectations must be clearly communicated at the provincial and district levels to ensure that business plans align with budget allocations and programme goals.

  
  

• Capacity Building: Addressing the persistent lack of capacity in provinces—particularly in terms of human resources and essential skills—is critical. Strengthening capacity will enhance grant management, reporting, and the implementation of initiatives.

1. Inadequate infrastructure improvement due to the underspending of NHI direct grant: The realisation of the NHI hinges on resolving the extremely poor quality of public health facilities, particularly for PHC services. Following an audit by the NDoH in 2011 revealing that “only facility in the country met the required standards of health facility”, the Ideal Clinic Realisation and Maintenance (ICRM) programme was introduced to improve the quality of healthcare. The 10 components of the ICRM (Figure 1) each contain sub-components which detail initiatives for each one. The ICRM has achieved sizable scale and reach, and is considered to have contributed significantly to health system strengthening since its implementation, particularly regarding the improvement of physical structures and the procurement of equipment and medicines. However, it is said to achieved poor outcomes in recent years due to insufficient funding to achieve these standards and inadequate budget planning and management. Additionally, the yearly updates to these standards and their misalignment with the Office of Health Standards Compliance (OHSC) standards have added to the difficult of implementing it. Of the 659 clinics assessed for compliance with the ICRM in 2015/16, 322 met ideal clinics status while 337 did not (Hunter, 2017 as cited in Genesis Analytics, 2019). (Boerma et al., 2014) (Ataguba, Day, & McIntyre, 2014) (Bank, 2014)

To prepare for the PHC facilities to deliver quality healthcare This was a schedule 5 direct conditional grant under the Division of Revenue Act (DoRA) in accordance with the Medium Term Expenditure Framework. A direct conditional grant administered directly to a municipality from a national government department. Municipalities are required to report on the financial and non-financial outcomes of this grant in relation to DoRA and MTEF. DoRA is an annually published legislation that instructs the equitable distribution of nationally raised revenue between the different levels of government while the MTEF is a three year outline of how the grant should be used. The NHI direct conditional grant was administered by the National Department of Health (NdoH) to provincial health departments between 2012 and 2015/16 to be used for the strengthening of pilot districts’ capacity for monitoring and evaluation, improving health infrastructure, strengthening coordination, the integration of selected municipal ward-based outreach teams and to strengthen the process and supply chain management systems at the district level. All provincial departments underspent their budgets by varying degrees over a five year period (Genesis Analytics, 2019).

To address the underspending of the schedule 5 conditional direct grants, the NdoH managed a schedule 6A indirect grant. The initial main functions of this grant were to develop innovative models for contracting health practitioners (mostly general practitioners (GPs)), supporting district clinical specialist terms, strengthening school health services and developing Disease Related Group models (Genesis Analytics, 2019).

2. Lack of M&E: Measuring the success of the pilot districts implementation of Phase 1 of the NHI was made difficult for several reasons. Firstly, the indicators of access and quality of healthcare are complex and difficult to measure – although national and international guidelines are being developed. There were also no baseline measurements of pilot district before the implementation of Phase 1, which made it difficult to assess the degree of any improvements made. Many of the intervention evaluated in Phase 1 of the NHI were being implemented at scale beyond the pilot districts. This meant that there were no control sites to identify the differences in performance between pilot and non-pilot districts. There was also an inconsistent trend in performance indicators year on year. This raises questions of the validity and reliability of these indicators. Additionally, the report argues that there was poor availability and quality of baseline or total population numbers needed to assess routines and outcomes. Although the quality of data improved over the course of Phase 1, the overall poor quality and inconsistency of data mean that resulting indicators, trends and health outcomes data will be unreliable in assessing performance (Genesis Analytics, 2019).

3. Contracting of GPs: PHC facilities have historically not had access to GP and have been led by PHC professional nurses. Although strategies were put in place during NHI phase 1 implementation to increase the presence of GPs in pilot districts, the management of this programme was said to be inadequate, particularly regarding its planning. The NHI viewed GPs as subcontractors meaning that they could not be paid under NDoH guidelines or through the government payroll system. This rewarded GPs to be paid for unverified hours and allowed claims for expenses which would not typically be reimbursed for other staff in the public health sector. This did not convince PHC facilities of the necessity of the increased human resources expenditure to the sustainable scale up of the NHI and raises questions about the material improvements in the quality of services. The significant resources taken up by doctors in the current contracting agreement depleted full time resources from the public health sector. This model may not be the most cost effective mechanism to increase the access to doctors in PHC facilities at this early stage of NHI implementation (Genesis Analytics, 2019).

5. Diagnosis Related Groups: The NHI Fund has proposed for Diagnosis Related Groups (DRGs) based price tariff model as its preferred mechanism to purchase hospital inpatient services and incentivises improved outcomes rather than the number of procedures. This payment model “groups clinically homogenous hospital admissions together to determine the fixed amount paid to healthcare providers for treatments within that DRG” (Jiang & Peng, 2019 as cited in (Doolabh, Dube, & Childs, 2021). More simply, it is a method used to analyse and determine the resources used for a specific primary or secondary medical condition (Struwig et al., 2022). Patients classified into the same DRG are considered as having similar diagnoses, treatments, consumption of resources and length of stay. Patients in these groups are assigned a risk stratification that reflects the cost of treating patients in that class relative to other classes. Through this payment model, reimbursement is based on the diagnosis and not the treatment and requires a “costing model that can determine the unit cost for the specific diagnosis-related group”. This becomes the starting point for healthcare providers to negotiate DRG rates with purchasers and also shifts the financial risk from the purchasers to the providers.

However, the NHI Bill has not outlined how it plans to implement a DRG payment model and is thus susceptible gaining marginal benefits due to the limitations of this model. Doolabh, Dube, & Childs (2021) highlight how a DRG model is limited by allowing hospitals to select lucrative DRGs or avoid DRGs with a high financial risk. Melberg, Beck Olsen and Pedersen (2016) identify that coding practices of diagnoses and procedures could be changed or additional treatment could be provided which would reclassify patients into higher paying DRGs. Struwig et al., (2022) argue that the DRG model still falls short of being value based tariff payment model because it largely only reimburses for inpatient procedures and does not include the complete range of physician, outpatient, rehabilitation, education and other services needed to achieve good outcomes over the entire care cycle. It also specifies a particular type of procedure or care rather than encouraging innovative treatment (Porter & Kaplan, 2014). Lastly, the Competition Commission (2018) points out that the purchaser would still be liable for costs associated with increased volumes of patients who require care.

An alternative DRG reimbursement model was developed by Lüthi and Widmer, P (2017) that adjusts reimbursements to providers to ensure that the risk of all DRGs are all bounded on an equal level. Struwig et al., (2022) study produced interesting results when comparing the DRG tariff payment model with a fee-for-service, per diem and the global fee price tariff model for a laparoscopic appendectomy (Figure 2). These results demonstrate that a particular tariff model has its own strengths and weaknesses and that on its own, it is not sufficiently efficient. It needs to consider the operational details and align the risk transfer to shared incentives for both parties. The global fee price tariff payment model could be considered as a value-based tariff model because it encourages risk sharing between both parties through “a single payment for the entire episode of care and any unnecessary care and waste will be at the health care providers’ risk” (Struwig et al., 2022).

Recommendations

The pilot phase uncovered that a lack of capacity (human resources and necessary skills) negatively impacted the overall management of various grants and particularly low utlisation of allocated funds (Genesis Analytics, 2019). A significant reason for underspending is that there is no established contracting services and capacity (Ngwaru et al., 2019).

Ngwaru et al., (2019) recommend scaling up the financial and institutional capacities of agencies that will be managing the NHI through establishing and improving contracting and purchasing expertise.

Performance monitoring is of particular importance given the findings that strategic purchasing could be hampered by the lack of information, processes and systems to assess provider performance, analyse utilisation, and provide feedback for improvement (ASSAf, 2024). The absence of monitoring and evaluation systems at the start and through Phase of the NHI’s implementation meant that assessing the performance and value of contracted GPs was not possible and lead to a perceived wastage of funds from the NDoH (Genesis Analytics, 2019).

Defining Indicators of Success, which will be used to measure improvement over time, and baseline measurements to ensure that before and after comparisons can be performed. These measures of success should include measures of access to and the quality of health services. These should be measured and reported on regularly to ensure continuous improvement and strengthen accountability (Genesis Analytics, 2019).