Author: Ryan Rachmad Nugraha, Doctoral Researcher at Center for Population, Family and Health, University of Antwerp
Strategic Purchasing (SP) in healthcare refers to a purchasing system that efficiently addresses ‘what’ to buy, ‘how’ to buy, and ‘from whom’ to buy to achieve the best possible health outcomes. This can include the purchasing of healthcare services, equipment, medicines, healthcare support services, and more. Through strategic purchasing, countries can allocate their resources for healthcare efficiently, particularly when facing constraints. This includes Indonesia, a country with a huge population yet limited healthcare resources.
Indonesia, a country with a rapidly-developing economy and a 270+ million population, faces challenges in ensuring its resources are spent efficiently for healthcare. In 2019, the government spent $120 on health per capita per year, far below its neighbouring countries, such as Singapore ($2.632) and Malaysia ($436) [source]. The limited spending, and therefore resources, puts a strain on healthcare and therefore lags the improvement of health outcomes, such as maternal mortality.
There are huge challenges associated with efficiency when managing the Indonesian health system. Indonesia is home to 33 different provinces, with a total of 17,000 inhabited islands scattered. Some of these areas are very remote and hard to reach. Decentralisation, which is the distribution of central and government authority on financing and other public service delivery, was created to ensure that health purchasing is achieved equitably. However, this decentralisation leaves a significant gap in efficiency for healthcare.
To centralise the purchasing of healthcare, Indonesia launched a national health insurance system In 2014, Indonesia established its single-payer national health insurance called the JKN (Jaminan Kesehatan Nasional). JKN ensures all services are covered for its 200+ million users through collective fund-raising, pooling, and purchasing of services. However, there was a longstanding and projected deficit from JKN between 2014-2019, which was corrected in 2020 when JKN’s financial audit reported a surplus. Nonetheless, the sustainability of JKN remains in question due to a lack of monitoring schemes for its performance, including cost control and quality control.
Strategic purchasing is a tool that can assist Indonesia in simplifying the complex nature of its health system, therefore generating efficiency. Through strategic purchasing, services can be purchased in alignment with Indonesia’s health mission. For example, financing schemes can be rearranged and contracted in such a way as to give more incentives to healthcare providers to do services that yield the most benefit. The alignment of purchasing can also be geared towards a reward system that motivates healthcare agents to provide services efficiently. A specific performance-based payment, for example, can reward hospitals through increased reimbursement once services are 100% delivered or if agreed indicators indicate 100% success.
Strategic purchasing can help stakeholders in managing complex diseases, such as Tuberculosis (TB). There is increased catchment associated with new public health approaches in TB, such as active case finding. However, there is no incentive associated with the intervention to the provider. Through strategic purchasing, incentives can be raised for providers to apply a cost-effective public health approach not only to increase catchment and outcome but also can yield savings in the long term. Funds saved as a result can be efficiently allocated for other health priorities.
Despite the potential benefits, strategic purchasing can be a daunting task to implement. The complexity of the health system might be challenging for stakeholders trying to apply strategic purchasing. Indonesia currently has multiple health purchasers, which creates confusion when it comes to paying for healthcare. The National Health Insurance Agency (BPJS Kesehatan), the mandated healthcare purchaser, does not hold a strategic role in purchasing healthcare. A significant portion of purchasing is also executed by the Ministry of Health (MOH), whose task is to purchase public health services that overlap with ‘individual’ health services. In Indonesia, the allocation of healthcare services is generally directed towards two means:(1) individual health service (per patient, such as outpatient clinical service), and (2) public health service (targeted to the population, such as vaccination). The overlap between the two often causes over- and under-spending. Medicine for some infectious diseases, including HIV, is covered by the MOH through top-down funding, which is prone to stock-out since it relies heavily on central planning. Moreover, some portion of purchasing is also conducted by regional governments (i.e., provincial and district health offices), which often have little capacity to execute strategic purchasing through their regional budget provision.
Strategic purchasing is a worthwhile approach if done right. Through effective evidence-based policymaking, strategic purchasing can inform countries to reorient health systems to meet effective resource allocation. In Indonesia, where efficiency is key to sustainable healthcare delivery, and where resources are scarce, the role of strategic purchasing is pivotal. Through the SEARCH (South-East Asia Regional Collaborative for Health) network, we aim to establish evidence and engage key stakeholders and practitioners in Southeast Asia to enhance the capacity of strategic purchasing for healthcare.