ECONOMICS AND FINANCIAL MANAGEMENT

[Pages:30]Making health systems work

WORKING PAPER No. 6

ECONOMICS AND FINANCIAL MANAGEMENT :

WHAT DO DISTRICT MANAGERS NEED TO KNOW ?

Department of Health Policy, Development and Services Evidence and Information for Policy, WHO

MAKING HEALTH SYSTEMS WORK _______________________________________

ABBREVIATIONS

ACT

ANC CEO COGES

DHMT DMOH FP GAVI HC MoF MoH NGO OPD PHC PHRplus

PNC PPP TEHIP WHO

Artemisinin-based combination therapy. A combination of artemisinin or one if its derivatives with (an) anti-malarial(s) of a different class. ante-natal care Chief Executive Officer District Health Management Committee (in some Francophone West African countries) District Health Management Team District Medical Officer of Health family planning Global Alliance for Vaccines and Immunization Health centre Ministry of Finance Ministry of Health nongovernmental organization out-patients department primary health care Partners for Health Reform plus ? a U.S. Agency for International Development (USAID) project in health policy and systems strengthening post-natal care public-private partnerships Tanzania Essential Health Interventions Project World Health Organization

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EXECUTIVE SUMMARY

This paper describes an initial exploration of the question: "Could there be a more coherent global approach to management development activities related to health economics and financial management at the district level?" This is an important question because there is much talk of the need for "management development" ? but in practice, few descriptions of what this actually entails.

The work is in 3 parts. Part 1 develops a list of core topics in the fields of health economics and financial management which district health managers should know about. Part 2 uses this list of topics to analyse related training materials and management tools. Part 3 summarizes the findings of interviews with district health managers in eight countries.

The findings of the 3 parts are then brought together to address the study question. The answer is a tentative "yes" ? there are some general points that can be made about what district health managers need to know in the fields of economics and financial management. No management development tool was found which addressed all these points ? indeed many of the tools concentrated in great detail on one relatively narrow area of economics/financial management, without dealing with the broad picture of the district health economy. "Health economy" here means all resources devoted to health ? from the public and private sectors, as well as from households.

Key issues to consider when thinking about management development activities for districts in the fields of health economics and financial management include:

1. Most district health offices receive funding from several sources. Training should reflect this and explore the advantages and limitations of different funding sources.

2. The fragmented nature of funding and resource allocation makes it difficult for managers to get an overview of the health economy of their district. Management development activities should provide district managers with basic information about the health economy of a typical district in their country.

3. Many district managers are expected to be fund-raisers. Management development activities should therefore include relevant skills such as proposal-writing and setting fee levels.

4. Decentralization is a relevant force for many district health managers. District managers need to be aware of the mandate of district administrations and to know how to interact with powerful local institutions.

5. Some skills may be relatively easy to teach, but may be of limited practical applicability. Examples are comprehensive planning, costing and cost-effectiveness analysis.

6. Not all skills are required in all countries (e.g., contracting). 7. Even in countries without strong donor alignment to government systems, development

agencies can help district managers by harmonizing their financial and planning arrangements. In some countries, harmonized donor resources give the district manager their only opportunity to make local resource allocation decisions.

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1. INTRODUCTION

This paper explores the question: "What should district health managers know about health economics and financial management?" This is part of a wider question being asked by WHO: "Should there be a more coherent global approach to management development activities?" This is an important question because there is much talk of the need for "management development" ? but in practice, few descriptions of what this actually entails. The work is in 3 main parts: ? A list of core topics in health economics and financial management for district managers. ? Comparing this list with a limited number of financial management/health economics tools ?

what issues do the tools cover? ? Interviews with district managers to assess what they know and would like to know about

financial management and economics. Throughout this work, we interpret "district manager" as the head of the district health team ? i.e., the District Medical Officer, District Health Officer or equivalent. The paper ends with conclusions about the extent to which there can be international generalisations about management development for district health managers in the subject areas of economics and financial management. This work was exploratory ? the aim was not to achieve a comprehensive overview of management development tools and district managers' views about health economics and financial management. Rather the idea was to get a feel for whether the idea of a "coherent global approach to management development activities" had any relevance in this area.

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2. CORE TOPICS FOR DISTRICT MANAGERS - ECONOMICS AND FINANCIAL MANAGEMENT

To start the work, a list of core economics/financial management topics was developed by a small "expert group" with economics and accountancy skills. This list is shown in Box 1. The list was developed by discussing the question: "What economic and financial topics do district health managers need to understand?" The list was then used to analyse the management development tools and to develop the questionnaire for interviews with district health managers.

Box 1. Core topics for district managers: economics and financial management

a. People and processes

1. Understand the roles of, and relationships between, various stakeholders in financial management and economics ? local government, line ministry accounting and technical/managerial staff, Ministry of Finance and local communities. (This is related to decentralization).

2. Understand own financial management and economic responsibilities and level of delegated decision-making. 3. Understand formal planning, budgeting and expenditure processes and how they are linked together. 4. Understand how figures in the budget are calculated.

b. Financial management

5. Core financial information ? what documents should the manager be regularly reading, receiving or producing? 6. Specifically, understand statements of income and expenditure. 7. Understand arrangements for release and spending of government budget - salary and non-salary. 8. Capital accounting policy ? accounting for fixed assets, depreciation cost of capital, etc. 9. If dual budgeting, accounting and reporting (i.e., development vs. non-development, recurrent vs. capital) ? how are

they linked? 10. Basic organizational financial controls. 11. Internal and external audit ? what they are; when and why they are done.

c. Health economics

12. General information about economics of district, e.g., per capita health expenditure, public and private treatment costs for a very prevalent condition.

13. Awareness of National Health Accounts. 14. Sources of funds into district and relative size. 15. National health financing policies ? insurance, fees, etc. 16. Specifically, user fees policy and practice. 17. Understand various aid instruments and their role at district level. 18. Use financial information to make decisions on service delivery. 19. How to do basic costing. 20. Decisions on how much to spend on different line items ? drugs, other supplies, transport, maintenance, etc. 21. Cost-effectiveness and its possible uses at district level. Are resources allocated to get the best possible health

outcomes? (Is resource allocation informed by a strategic document or set of goals/objectives?) 22. Measuring and enhancing equity in service provision. 23. Contracting and other financial relationships with the non-governmental sector.

3. ANALYSIS OF TRAINING MATERIALS AND TOOLS IN FINANCIAL MANAGEMENT AND HEALTH ECONOMICS

The next phase of the work was to identify some management development materials related to financial management and health economics and to analyse these according to the list of core topics given in Box 1. "Management development materials" was interpreted as including both training materials and relevant tools (e.g., in cost analysis). The materials were identified through a search of the worldwide web and by asking key contacts about country-specific materials. Some materials had to be excluded from the analysis because they were out of print or unobtainable for other reasons. As stated above, the aim was not to be comprehensive ? rather it was to get an overview on the kind of topics which the materials covered.

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The selected training materials and finance/economics tools were assessed against the list of core topics. The materials assessed were:

? Central Board of Health and Zambia Integrated Health Programme. Financial management course for district and hospital managers. (Tool 1).

? Health Systems Trust and Department of Health, South Africa. Financial management ? an overview and field guide for district management teams. (Tool 2).

? Management Sciences for Health. Cost Revenue (CORE) Analysis Tool (part of The Health Manager's Toolkit) (Tool 3).

? Management Sciences for Health. Financial Management Assessment Tool. (Tool 4).

? MANGO (Management Accounting for NGOs). Practical financial management for NGOs getting the basics right. (Tool 5).

? Ministry of Health, Kenya. Team building meetings for District Medical Officers of Health (DMOHs) and District Accountants. (Tool 6).

? Ministry of Local Government, Uganda. Financial management for non-finance managers in lower local governments. (Tool 7).

? WHO. Analysis of hospital costs: a manual for managers. (Tool 8).

? Tanzania Essential Health Interventions Project (TEHIP). District health accounts tool & Costeffectiveness and district cost information system tool. (Tool 9).

The full analysis of the tools is given in Annexes 1 and 2 (pp. 12-16).

The terms "management strengthening tools" covers a range of activities. The tools assessed here include:

? Materials for training courses (1, 2, 7) ? Manuals (3) ? Costing techniques, based on step by step rules and/or ready-made spreadsheets (4,8,9) ? Meetings with the aim of solving practical problems (6) ? Assessment of financial capacity (5) ? Software to standardize budget and planning information in a user-friendly way (9).

The core topics for district managers in financial management and economics were grouped under three headings:

? People and Processes ? Financial management ? Health economics

With the exception of the costing materials, most tools covered the "People and Processes" issues, though obviously this could be much more precise for country-specific tools. These issues are about the basic organizational context in which financial management and economics operate. Some of the tools take great care to explain the organizational context ? particularly who does what ? in great detail (e.g., Tool 2 from South Africa). This would seem to be an important area ? many of the practical problems identified in the Kenyan meetings (Tool 6) were to do with responsibilities and communication.

Most of the tools covered either financial management or health economics issues. No tool dealt with both comprehensively. Nor did any tool cover all the health economics topics identified as relevant to district managers ? the most comprehensive was TEHIP (Tool 9). In contrast, several of the tools dealt in detail with financial management, though this tended to be the management of finances from one particular source (either government or NGO), rather than finances from a variety of sources. In many aid-dependent countries, district managers often have to manage several streams of financial flow, from a variety of sources. None of the tools dealt in any detail with this situation - no tool targeted at district managers looked at the management of funds holistically (i.e., giving equal weight to all source of funds).

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There is no doubt that managers need to know the basic rules and procedures about financial management. None of the tools seemed to differentiate between the role of the manager and of the accountant/accounts clerk. The main issues here are the level of detail required and whether or not it is worth adapting multi-sectoral financial management strengthening tools for the health sector. Adaptation clearly has its costs, but may bring the advantages of being more interesting, relevant, time-efficient (because irrelevant topics are not covered) and more closely linked to the resource allocation decisions which health managers face.

No tools were found which covered a range of "applied health economics" topics. According to the list of core topics, applied economic concepts which may be relevant to a district manager include cost-effectiveness (and hence costing too); a basic knowledge about what is spent on health locally, by whom, and on what; understanding the incentives associated with funds coming from various sources; health financing (context specific); equity and contracting. The one topic which did receive attention ? costing ? was dealt with in radically different ways. The tools differed widely in the level of detail which they thought relevant.

One tool ? from the TEHIP project ? explicitly concluded that knowing how to do costing studies and cost-effectiveness analyses are not priorities for district managers:

? TEHIP concluded that it was not worth spending a lot of time and effort on costing because detailed work revealed very little variance in costs among facilities or over seasons. Costing was better seen as a periodic exercise to estimate the actual costs of interventions.

? TEHIP also concluded that very little cost-effectiveness analysis was possible at the district level, if only because basic epidemiological data was not available. (The exceptions were ante-natal care and immunizations.) It may well be that what district managers need to know is the latest evidence on cost-effective interventions, rather than how to do their own local cost-effectiveness analyses. Or is it the job of the Ministry of Health Headquarters to be aware of the latest evidence and set guidelines? In various settings, how much discretion do district managers have? Might such knowledge be useful to guide district managers in negotiations with NGOs (or Global Health Initiatives) about interventions, for example? Or is this too ambitious when many district managers lack basic training in public health and financial management?

4. VIEWS OF DISTRICT MANAGERS

Detailed interviews were conducted with eleven district managers in eight countries. These interviews give a rich picture of the realities of district health management in low-income countries. Details of the interviews are recorded in tabular form in Annex 3 (pp. 17-26).

The main themes emerging from the interviews are:

? Many district managers are dealing with multiple funding sources. ? Many district managers are expected to be fund-raisers ? indeed this is often regarded as a

crucial element of their work. ? User fees are an important part of many district health economies. ? Donor funds sometimes provide the only opportunity district managers have to practise sound

financial management and decision-making. ? Planning and budgeting are not rational processes from the viewpoint of many district

managers. ? Decentralization is a significant issue for many district health managers. ? Limited awareness of overall local per capita expenditure on health. ? Contracting was highly relevant to some managers, but not to others.

Many district managers are dealing with multiple funding sources

Table 1 below illustrates the multiple sources of funds received in the districts. To further complicate it, each of the columns in the table may represent multiple bank accounts ? e.g., fees from various health facilities or funds from donors operating unilaterally. This vision of a manager

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as a juggler of multiple funds is rarely expressed ? and hence, rarely tackled in management strengthening activities. Yet it is the reality for all the countries where interviews were held.

Government is clearly an important source of resources and it is vital that district managers understand how to account for government resources. But they need to know the financial management rules for the other funding sources as well ? and to be able to think holistically about the money coming into their district and how it should best be used.

Table 1. Multiple sources of funds

Country A

Government

Fees

() through district council

Country B

Country C Country D Country E Country F

through multiple channels, as complex federal state () through district council

(in some facilities)

Country G

Country H

Insurance

X

X

X

Development agencies generally managed by DHMT, not district council

() work is contracted out centrally through NGOs ? i.e., effectively bipasses district manager

Many district managers are expected to be fund-raisers

Several respondents specifically said that they were expected to raise funds for their district and that this was a part of their role for which they felt ill-prepared. (In practice, several were not actively fulfilling this role, but still felt they were expected to do so.)

One respondent from Anglophone Africa worried that expectations of raising revenue through fees were too high and that the system had lost sight of the importance of health outcomes. He cited examples of districts delaying in, or failing to, label a disease outbreak as an epidemic (which would entitle clients to free services) and incentives for hospitals to maximize revenue rather than health outcomes.

One country was experimenting with many ideas for fund-raising. One manager had been asked to comment on the wisdom of a local authority selling a plot of land or other assets to raise money for building or renovating a health station. Another was raising money from parking, hospital catering and laundry and from providing services to patients outside his own district!

As for the multiple funding sources, this pressure to raise money ? and the skills involved ? are not often talked about or reflected in management strengthening activities. The skills involved are various ? they include understanding fees and how their worst effects can be mitigated through cross-subsidization; dealing with donors and writing proposals; and contracting with insurance companies.

User fees are an important part of many district health economies All eight countries had user fees1 ? in some countries income was managed by the district. In more others, the management was at the facility level. In five of the countries, income from fees was used to buy drugs. Fee income was also used for buying other basic inputs for health services. At a time when there is some international pressure to abolish fees for primary care, it is vital that their importance in district health economies is understood. If fees are abolished, the money they raise has to be replaced. Where local managers had discretion over how income from

1 Since these interviews were conducted, one of the countries has abolished fees for primary care.

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