Strengthening Performance? Piloting Results-Based Financing in a Central Medical Store

Brian Serumaga's picture
September 16, 2015

The grand debate on the central medical store (CMS) role in developing country public health supply chains is still ongoing. There are generally two sides to this debate:

1. Pro-CMS Model — Supporters argue that it is critical as the organizer of and responsible entity for national-level essential supply chain functions. These functions include but are not limited to:   • Procurement and temporary storage
  • Distribution of public-sector health commodities and supplies to the second level of the supply chain
  • Delivery of health commodities directly to health facilities—in some countries.

CMS-model proponents argue that these important functions are often unattractive to other parties—e.g., the private sector—because they do not offer enough incentive. Delivery of a carton or two of medical supplies to a remote health post a few times a year simply doesn’t provide sufficient financial reward. Therefore, CMS, advocates say, offers real value to the health system by subsidizing distribution and other services for the most vulnerable populations, i.e., clients who would not otherwise be served. Moreover, they argue that because of economies of scale and more stringent controls, a CMS can procure good-quality medicines and medical supplies at a lower cost than private distributors.

Photo: Arne Hoel/ World Bank

2. Con-CMS Model—Detractors point to the historical failures of the CMS model, examples of which are all too common. Despite substantial investment in technical assistance to CMS’ across the globe, they note, many CMSs have failed to execute their basic supply chain functions effectively.

Whether or not the fault lies with the CMS, country governments, development partners, and technical assistance providers often label the CMS as the primary obstacle to supply chain improvement. Opponents argue that in-country public health supply chain operations must be restructured to exclude the CMS or at least reduce its overall footprint and responsibilities. Some, in an effort to stimulate change within the CMS, have positioned independent, private, or nongovernmental entities to offer direct competition.

These alternative models have generally been tried on a temporary basis, and the results have been mixed. In some instances, sidelining the CMS has led to a lack of local technical expertise to take over these supply chain roles once the donor-funded alternative ends.

So what next? Piloting Results-Based Financing in a CMS —In 2012, the USAID Mission in Mozambique launched an innovative experiment with the Central de Medicamentos e Artigos Médicos, or CMAM in Mozambique. CMAM is responsible for procuring, warehousing, and distributing medicines and health supplies for the public-sector supply chain, and receives significant U.S. Government support for both health commodities and technical assistance. In January 2013, USAID entered into a one-year government-to-government agreement that explicitly tied payment of up to $125,000 per quarter to achieving performance targets that improve five indicators related to planning, distribution, and warehouse management.

The RBF scheme design required a series of meetings between CMAM, USAID/Mozambique, and technical experts on RBF and supply chain management. The USAID | DELIVER PROJECT and Health Systems 2020—predecessor to the Health Finance and Governance Project—jointly provided technical assistance in the early design stages. USAID’s agreement with CMAM, a fixed-amount reimbursement agreement (FARA), enabled CMAM to decide how best to use FARA funds to achieve the required targets. At the end of each quarter, CMAM produced reports on these indicators, which a team from USAID then verified. USAID/Mozambique selected indicators in areas where change had previously been difficult to achieve and for which baseline data could be collected. Indicators had to be in areas under CMAM’s control and where measurable targets could be set and potentially achieved during the time period of the agreement (one year).

So what were the results? The results indicate a gradual improvement in all performance indicators included in the RBF scheme. For instance, the number of days from receipt of orders to delivery to provincial clients dropped from 40 days at baseline to about 30 days or fewer by the third quarter. Also, the time for developing a distribution plan was cut in half, from about 27 days at baseline to 15 days or fewer. There were also significant improvements to inventory record accuracy and in “picking and packing” of orders. The full results of Year 1 of this RBF scheme are detailed in this qualitative review which you can access here.

The review also found that the strong performance by CMAM was a result of a number of improvements in the implementation of routine tasks. The performance incentives offered by USAID /Mozambique led to process changes including:   • Double-checking of packing lists
  • Implementation of previously overlooked standard operating procedures (SOPs)
  • Creation of a new unit for monitoring and evaluation
  • Voluntary increases in working hours
  • Enhanced team work.

Also, CMAM elected to use some of the reimbursement payments from the FARA to invest in new equipment (such as the purchase of new computers to improve collaboration with program staff), and to common-area furniture to boost staff morale.

A number of important points need to be made about this trial program. First, it is important to acknowledge the high level of innovation of USAID/Mozambique. To the best of our knowledge, this is the first and so far only RBF scheme specifically targeting performance improvement at a public health central medical store in any developing country. Secondly, we should not miss the strong response of CMAM to the RBF incentive scheme. The availability of financial incentives prompted top and middle management to devise and implement ways to manage several longstanding challenges that the institution was having with both internal and external stakeholders. Key informants spoke of changes in teamwork dynamics, adherence to processes, and use of tools. Staff repeatedly mentioned staying late and coming in on weekends to make sure tasks and reports were completed. Staff also recounted increased collaboration and coordination within and among teams and described more proactivity in seeking data that was not forthcoming; e.g., reminding provinces to send requisitions on time and encouraging the programs to complete reports before deadline.

And what does the CMAM experience mean for the wider CMS debate? Public health supply chains exist in constantly evolving political and sociocultural environments that often affect CMS events. Therefore, any targeted supply chain improvements must be firmly anchored in broader efforts to strengthen the entire health system. The promising results of the CMAM RBF scheme should lead us to investigate whether the capacity-building approach of technical assistance for CMS is flawed:   • Are we addressing the right questions at the CMS?
  • Are we expecting transformational change overnight or incremental improvement over time?

Development partners and technical experts need to revisit current CMS improvement approaches and consider whether they fit into the dynamic supply chain environment. In some instances, it may make sense to abandon the CMS model. However, it is time for a business case for innovations that have been successful, and USAID/Mozambique’s RBF example is an excellent starting point. Which side of the debate do you fall on?

Add comment

This question is for testing whether or not you are a human visitor and to prevent automated spam submissions.