71. Health Workers: Building and Motivating the Workforce

Health Worker Incentives

The World Health Report 2000 defines incentives for health workers as "all the rewards and punishments that providers face as a consequence of the organizations in which they work, the institutions under which they operate, and the specific interventions they provide" (WHO 2000, p. 61). Health workers face a hierarchy of incentives or disincentives generated by the work they do, the way they are paid, and the organizational and system context in which they work. Incentives are generally designed to accomplish the following:

• to encourage providers to furnish specific services

• to encourage cost containment

• to support staff recruitment and retention

• to enhance the productivity and quality of services

• to allow for effective management.

Responses of providers to incentives depend on context and on the stage of their career. Incentives that induce productivity vary with experience, stage in a career path, and changes in providers' social responsibilities. Ideally, incentive structures should recognize the evolutionary nature of work expectations.

Typically, incentives vary by type of employer: nongovernmental organization, public, or private. Public sector incentives tend to be the weakest because resource constraints and bureaucratic rules on civil servant employment constrain the use of both financial and nonfinancial incentives.

Typology of Incentives

Extrinsic incentives can be individual and organizational, monetary and nonmonetary (table 71.3). Discussions of provider behavior in LMICs have focused mainly on financial incentives, partly because of their low income levels compared with industrial countries. The challenge is to establish an optimal mix of financial and nonfinancial incentives that generate the desired behavior of health workers.

Experience from vertical programs for priority diseases or services—for example, poliomyelitis, malaria, family planning, and sexually transmitted diseases—provide evidence about different incentives. Programs often offered staff members better pay and incentive packages than those other public health workers received (Beith and others 2001). The exact effects of stronger incentives are unknown, but these programs generally succeeded, as evidenced by the eradication of leprosy, the near eradication of poliomyelitis in many countries, and the large drop in average fertility in developing countries in the 1990s.

Successful vertical programs used combinations of incentives, including better salaries, field and transportation allowances, streamlined management, specialized training, better facilities and material resources, and results-oriented management to support improved health worker productivity and program performance. Goals were clearly specified, were understood and shared by the staff, and were often linked to incentives. The choice of vertical structures also reflects the perceived difficulties of using existing health systems, with their excessive bureaucracy, under funding, and lack of capacity to implement integrated disease control.

Vertical programs must eventually be reintegrated into the system. The HIV/AIDS pandemic is a good example of a disease that might require targeted interventions until the capacity of health systems in LMICs improves to a level that allows the disease to be managed like other diseases. The success in integrating vertical programs depends on the parallel development of health system capacity, which depends in part on the alignment of health workers' objectives with policy and with system goals.

Aligning health worker and system objectives is difficult. The aim is to have satisfied health workers who are motivated to work harder (Hicks and Adams 2001). Evidence is limited, but financial and nonfinancial incentives are mutually reinforcing, and changing the culture of the health system to make goals more readily understood and shared can make financial incentives more powerful. Such change in the organization of health care can be politically sensitive because it can give health sector workers advantages over other public employees.

Incentives may have conflicting effects. For example, decentralization might create the autonomy needed for effective management, but without transparent management and career structures and job security, providers might view such a change as a threat (Kyaddondo and White 2003). Getting the balance right requires understanding the socioeconomic and political circumstances and may be helped by using participatory approaches to policy making and implementation.

Context

Context is defined here from an individual or an organizational provider's perspective. It constitutes what Adams and Hicks (2000) refer to as external incentives—that is, methods used by health systems to control the activities of health organizations or funders.

The power of incentives depends on context. Health systems in developing countries have varying cultural and economic histories that shape providers' expectations and responses to incentives. Financial incentives are strong when health workers' incomes are low, as in most developing countries. Nevertheless, examples of strong nonfinancial incentives exist in countries such as Thailand, where family ties and kinship affect health workers' decisions on where to work. Such nonfinancial incentives affect the size of the financial incentives needed to change where people choose to work.

History and experience determine a country's working culture and norms. In developing countries, most health systems are large bureaucracies whose management is driven centrally by guidelines, standards, and reporting systems. Incentives in such systems work against innovation, risk taking, and improved efficiency. A possible approach is to introduce changes that are based on the ideas of so-called new public management. New public management replaces line management with contracts or agreements between funders and policy makers on the one hand and providers on the other. Providers are given more managerial autonomy and are controlled by means of contracts and regulation. This approach can more easily embody new financial incentives, and autonomous providers can develop cultures that are more innovating. Such a radical change in managerial context can, in principle, make other incentives easier to use.

Other dimensions of context are the regulatory framework and its enforcement. Most developing countries have regulations governing the activities of the health sector. These regulations tend to be outdated or poorly enforced (Bloom, Han, and Li 2001). The main reason for regulatory ineffectiveness is low institutional capacity and widespread corruption. The symptoms of regulatory failure are widespread informal activities, dual practice, malpractice and medical negligence, and the presence of unqualified drug sellers (for example, in Bangladesh and Tanzania) and practitioners (as in India) (Bhat 1996; Killingsworth and others 1999; McPake and others 1999). Where the regulatory system is dysfunctional, providers tend to pursue their individual interests, often in private practice, to the detriment of organizational and system performance. Effective incentive systems that are based on performance require regulation and governance structures that minimize the common problems of patronage and corruption (Rasheed 1995).

Health system organization factors include governance and the degree of decentralization. Links exist between working culture and norms and the structural aspects of health system organization. The locus of control and decision making play an important part in health worker behavior. In theory, designing incentive schemes that are responsive to health workers' needs is much easier in a decentralized system. This theory is based on the belief that sub national units are better placed to make effective decisions on funding, regulating, and organizing frontline activities than are centralized units. However, experience in developing countries shows that lack of capacity at sub national levels has constrained decentralization, sometimes leading to unintended effects such as wrong priorities (Bloom, Han, and Li 2001). Any move toward decentralization requires investment in new management skills and capacities.

Incentives in Practice

Many countries have attempted to reform their economies and health sectors to improve general economic and health system performance. For example, Cambodia, the Arab Republic of Egypt, Uganda, and Zambia have attempted civil service reforms (Corkery 2000). These reforms include attempts to reduce the size of the civil service to lower costs and to improve productivity using incentives such as formal employment contracts and performance-based pay and promotion. Such reforms have been largely unsuccessful in developing countries because of the political difficulties in reducing the size of the civil service. Structural and organizational changes are typically unpopular with labor unions, especially if union members perceive them as threatening their well-being. Experience also underscores the difficulties of aligning system and organizational objectives with individual providers' objectives (Martineau and Buchan 2000).

The effect of incentives can be assessed in terms of their objectives (Adams and Hicks 2000). Table 71.4 summarizes incentive packages used in selected countries. The results shown should be interpreted with caution, because of problems of attribution and poor data. Adams and Hicks (2000) argue that economic incentives in payment mechanisms for physicians conform to economic logic, but little is known about the response of other categories of health workers to such incentives.

Experience in Thailand illustrates the labor market model outlined earlier. In general, public doctors prefer to practice in urban areas, where conditions are usually more attractive and opportunities for private practice are better. Thailand pays public doctors who work in rural and remote areas significantly more than those working in urban areas, and this incentive has persuaded some to move (Wibulpolprasert and Pengpaiboon 2003). The government also added nonfinancial incentives, such as changing physicians' employment status from civil servants to contracted public employees, providing housing, and introducing a system of peer review and recognition. These initiatives were coupled with significant environmental changes, including sustained rural development. In most developing countries, providers in rural areas are paid less than those in cities, and it is hard to recruit and retain health workers in rural areas.

China provides another example of how changes in the environment—for example, the introduction of pro-market policies—can change provider behavior, in this case from relying on government salaries alone to the use of "red packages" (Bloom, Han, and Li 2001). These red packages were gifts that were traditionally exchanged as an expression of mutual appreciation, but they have now evolved into informal cash payments from patients to health workers.

Health systems have a spectrum of workers with different skills and expectations, and incentives for one group can have negative effects on others (Adams and Hicks 2000). Policy makers must strike a balance between competing interests of professional groups and system goals. The unionization of labor and the growth of professional associations or councils can give health workers considerable bargaining power.

Solving one problem can create others. This situation often occurs when governments respond to the grievances of the most vocal professional groups, usually doctors, and neglect other groups. This piecemeal approach has caused HR crises, such as strikes and go-slows. Although health workers are normally somewhat motivated to pursue health policy goals, their own interests can conflict with those goals. Providing higher salaries to health workers, by increasing costs, can reduce access to services by some social groups (Bloom, Han, and Li 2001).

Compensation

Provider payment systems transfer resources from payers (governments, insurers, and patients) to providers (Maceira 1998) and can be structured to provide financial incentives. Most studies focus on payment mechanisms for doctors and their effect on productivity, costs, and quality of services (Bitran and Yip 1998). Table 71.5 summarizes common payment mechanisms and the desired incentives. The evidence shows that the operation of payment mechanisms is sensitive to the payment structure and how it is implemented (Berman and others 1997; Bitran and Yip 1998; Chomitz and others 1998).

Payment systems are more successful when built on existing traditions and culture (that is, when they take into account gift systems or, indeed, levels of corruption). It is normally best to use a combination of payment methods. For instance, if there is a shortage of public providers, they might be paid a basic salary for normal working hours and fees for service for after-hours work. This method creates incentives for providers to do extra work and increase throughput, but providers may divert patients to after-hours services, and the method's feasibility depends in part on monitoring and governance standards. The challenge is to find payment combinations that motivate providers to provide desired volume and quality of services while containing costs.

Empirical Evidence on Payment Methods

Evidence of provider payment systems that have successfully aligned system and provider incentives is still limited (Bitran and Yip 1998). Interesting findings come from small-scale experiments such as Cambodia's New Deal (box 71.1). Health workers' salaries were considered by many to be below the minimum required for a decent life, and workload is increasing because of HIV/AIDS.

The Cambodian experiment attempted to align individual health workers' and system goals through performance-based bonus payments and a set of internal regulations. Regulations can alter the working and organizational culture in a way that allows individual-based incentives to work. There were problems in enforcing penalties for violating regulations. Failure to enforce regulations may lead providers to lose confidence in the system. Countries with limited administrative and institutional capacity should use simple payment mechanisms that are enforceable within their capacity constraints (Barnum, Kutzin, and Saxexian 1995). A lesson from the experiment is that the context matters, and any strategy for offering incentives to workers must be embedded in traditions and cultural practices.

In a competitive environment, contracts are a useful tool for aligning health workers' behavior with organizational and system objectives. In the Cambodian example, contracts between the purchaser and district-level facilities—and between district-level facilities and management committees—were an attempt to establish accountability structures that specify targeted activities. More interesting was the attempt to transfer some management risk and responsibilities to individual health workers using subcontracts that permitted management committees to monitor their activities and pay them accordingly, though whether the contracts were well specified is not clear, and the administrative and transaction costs are unknown. The use of contracts requires management and monitoring capacity.

Introducing financial incentives for health workers is costly. Policy makers in governments and development partners need to ensure that adequate funding is available and sustainable. Resources are also needed to improve working environments and system capacities. Both financial incentives and other incentives are important, but services are likely to improve only if financial incentives are strengthened.

Group Incentives

Health workers typically work in teams. This system weakens financial incentives because the efforts of individuals may have little influence on overall performance. Indeed, individual incentives can worsen team cooperation. For example, if promotion is competitive and depends on measures of individual productivity, this approach can be a disadvantage for those who work for system goals in cooperative ways.

Designing effective group incentives is difficult. Paying group bonuses for achieving a given level of output can work only if individual team members feel adequately rewarded for their efforts and if there is no perceived free-rider problem. Most of the limited evidence on group incentives is for developed countries and shows that much depends on the production process and the organization of the teams (Ratto, Propper, and Burgess 2002). Group financial incentives tend to be weak, and using other approaches such as team building, better sharing of information, and improved working conditions is probably better.

Influence of System Capacities and Sustainability Issues on Incentives

The theoretical merits and demerits of different incentives are well understood, but system capacities and financial constraints may limit their applicability. Few developing countries have health systems that are capable of effectively implementing and operating some of the payment systems shown in table 71.5. The overall funding for the health sector may be too low to pay providers more. Also, the skills and expertise needed to design and implement contract- and case-based payment methods may be inadequate, and the country may lack the information technology needed to capture relevant data to support such contract- or case-based payment methods. Most health workers in developing countries are civil servants, and the particular needs of health workers may be lost in a general public service. Some countries are considering delinking health workers from public service commissions and setting up independent health commissions to run the health sector. In Zambia, however, delinking failed because of a lack of capacity at both the national and the local levels to implement the necessary HR changes (Martineau and Buchan 2000). Evidence from Trinidad and Tobago suggests that insufficient government commitment impeded the transfer of staff members from the public service, leading to disillusionment among workers and effective opposition from unions (England 2000).

In countries with thriving private sectors, devising strong incentives for public sector workers is difficult. For instance, in Uganda, the private not-for-profit sector used to have better working conditions and pay than the public sector and consequently had better staffing levels. The government had to increase public sector salaries significantly in the 1990s to attract health workers back. The use of fees for service in the private sector when public health workers are paid a salary is likely to encourage private practice among public workers. Thus, the effects of methods and levels of payments are influenced by what is happening in the private sector.

Optimal Combination of Health Worker Compensation and Incentives

Although the optimal mix of provider compensation depends on context and policy objectives, some general policy guidelines on the design of payment methods to achieve organizational and system goals are available. Linking compensation to performance makes intuitive sense, but care is needed in working out the details. Health workers respond to both financial and nonfinancial incentives, but the extent of the effect varies, and the two can interact.

For new payment systems to work well, health workers must be governed by effective managerial authority. Because new payment systems aim to encourage particular behaviors and hold providers accountable, clear responsibility must be delineated within provider organizations. This delineation may be easier to achieve if the management of providers has some autonomy. Evidence from developing countries that have attempted to introduce managerial autonomy and corporatization of health service institutions, such as public hospitals and medical stores, indicates that delinking health workers from government control is politically sensitive. Nevertheless, such organizational or system changes are desirable if new payment methods are to create the right incentives and achieve the desired changes.

Part of the context for incentive systems is what type of disease control activities are best provided through markets or hierarchies. Traditionally, the public sector has been dominant. The economic arguments for government involvement are well understood, but delivery of services within the framework of government policy objectives can be by private (both for-profit and not-for-profit) providers. Thus, the private sector is increasingly involved in the social marketing of condoms and bednets, franchising, and contracting (Bennett, McPake, and Mills 1997).

From an economic viewpoint the only issues are the cost, quality, and sustainability of such arrangements. Emerging evidence on private sector involvement in health services suggests that the private sector is willing to participate in non-clinical disease control activities if the incentive structure is right. Private not-for-profit providers, such as hospitals and clinics associated with churches, have traditionally complemented government health care activities, especially in poor and peripheral populations (Gilson and others 1997). In recent years, Bangladesh has experimented with contracting nongovernmental organizations to provide primary care services in urban areas. Lessons from this experience are still emerging and indicate that, despite many early mistakes, this form of provision can be innovative and can help make a break from bureaucratic traditions. Such contracting depends on having contracting skills in both parties to the contract. A good understanding of context and incentives is also crucial.

In summary, incentive or payment packages should attempt to link payment with individual or group performance and should be assisted by supportive organizational and system changes if the desired provider behavior is to be achieved. No single best combination of payment methods exists.