Table 4. Main possible effects of output-based payment on other dimensions of health centre performance.

Incentive	Reasons why the risk exists	Dimensions of performance put at risk	Strategies to limit the risk	Observations from experience in Rwanda
To inflate records for the remunerated activities	Asymmetry of information between the health centre and the purchaser on the reality of the outputs.	Efficiency: if there are ghost patients, paying for them is a waste of resources. Equity among health centre staff: if a health centre gets income from activities it has not produced, it is unfair to other health centres.	(1) Consolidate honesty and probity within the health centre staff (e.g. by establishing transparency, co-management and internal regulation that will empower honest people versus colleagues tempted to cheat). (2) Dissuade cheating by establishing credible sanctions. This relies on: (i) independent verification of registers and patients’ files; (ii) random visits to households; (iii) clear rules on what can be sanctioned; (iv) a high penalty; (v) and enforcement of sanctions.	No fraud has been reported. However, there was a need for patient records to be better recorded in the relevant registers. Rwanda is a tightly administrated country in which sanctions are enforced. This surely is a favourable contextual factor.
To induce unnecessary demand for the remunerated activities	Asymmetry of information on the actual needs and demands of individual users.	Efficiency: if deviation from appropriate care induces an unnecessary cost. Patient safety: if deviation from appropriate care creates new risks to the patient. Patient centeredness: if the provider presses the user to use a service that does not meet her preferences. Financial accessibility: if the induced demand increases costs for patients.	Efficiency: avoid remunerating activities prescribed by the health centre itself (e.g. laboratory exam). Safety: adopt a cautious approach. Do not remunerate acts for which advantages appear lower than possible disadvantages. Patient centeredness: accumulate more knowledge on patient preferences (e.g. surveys). For family planning, some independent follow-up through home visits could be an option. Accessibility: reduce financial burdens on the households. If referrals are remunerated, then the ambulance should be free, or largely subsidized.	Under the performance initiative, it was decided there would not be remuneration for hospitalization at the health centre level for patient safety reasons (despite the fact that the health centre is the favoured choice of households for treating severe malaria). In fact, it is difficult to identify induced unnecessary demand. The lack of gold standards for many services is particularly limiting (e.g. what is ”over-referral”?). Moreover, a deviance from the norm or the mean may have its origin elsewhere (e.g. limited clinical capacity). Training and support are then the relevant responses. Interestingly, the Rwandan experience revealed that induced demand could be beneficial. Since the performance initiative, continuity and integration of services is much better. Health centre staff use antenatal consultation to convince mothers to deliver at the health centre; at the delivery, they remind them of the importance of childhood immunization; and during immunization sessions, they explain to the mothers that contraceptives are the best way to achieve birth spacing.
To deliver the remunerated activities in spite of insufficient capacity	Asymmetry of information on the technical capacity of the health centre.	Patient safety: if the health centre delivers services that are dangerous to the patient’s health because of a poor production process. Effectiveness: if the health centre delivers services that are ineffective because of a poor production process.	(1) Ensure that health centres have the technical capacity to deliver activities that are remunerated. If necessary, require some accreditation process before entry into the scheme. (2) Monitor that capacity is sustained. (3) Develop complementary strategies to consolidate technical capacity.	Activities purchased by the performance initiative were all in the normal package of activities to be delivered by health centres. Yet, analysis of the routine health information system data has shown that health centres without maternity or with very low numbers of deliveries experienced a higher perinatal mortality during the first few months after they entered the scheme.a This could be an indication that technical capacity was not sufficiently present at the outset. In response, the project developed a list of key prerequisites before remunerating deliveries at the health centre level.
To neglect activities that are not remunerated	Asymmetry of information on the exact present and future needs of the covered population. In the production process, some activities are in competition with others for the scarce inputs (e.g. time or effort by the staff).	Coverage of needs: if health centres neglect some population’s needs, as the services addressing them are not remunerated (e.g. because of the difficulty to measure or plan for them).	(1) Remunerate as many activities as possible. (2) Specify in the contract that non-remunerated activities should be continued. (3) Monitor the general production of the health centre through a supervisory body that is not directly accountable to the purchaser. (4) Strengthen a knowledge-based central body in charge of public health orientations.	Sources of incentive are numerous. For example, while hospitalization is not remunerated by the performance initiative, hospitalized patients are charged by the health centres, which could explain why admissions have increased over the period from 2001–2003. Another possible explanation for the increase is that since outpatient consultation is the entry point for many admissions, the increase in the former (partly thanks to the performance initiative) has induced an increase in the latter. In a multitasking set-up, the complementary or substitutive nature of the activities is a key determinant of organizational behaviours.b
To neglect quality attributes (on the basis that only quantity matters) of the activities that are delivered	Asymmetry of information on the exact attributes/characteristics of the delivered services. The production of attributes such as quality consumes some resources; alternatively these resources could be used to increase the output quantity.	Technical quality of care (including patient safety, effectiveness, patient centeredness): if the staff adopt lower standards in production processes to maximize the quantity of outputs (e.g. spend less time with individual patients).	(1) Specify in the contract that payment will be interrupted if it is observed that quality of care is not ensured. (2) Maintain clinical and paramedical supervision, coaching and training. (3) Establish new quality assurance mechanisms. (4) Consider including quality attributes in the contract (see the next column for a listing of the difficulties in doing so).	There has been considerable debate in Rwanda about whether the contracting of quality indicators was a relevant strategy to tackle poor quality of health care. Our reluctant stance on the issue is based on the following arguments: (i) many key attributes of health care are not contractable; (ii) for many attributes, direct observation is the only reliable method of control – however, this approach is very costly and if poor compliance to quality process is really a perverse result of the output-based payment, it will reappear once the controller has left the health centre; (iii) to a large extent, the poor quality of care in Rwanda has its roots elsewhere (e.g. inadequately trained staff) and these problems are probably better tackled through other strategies; (iv) to some extent, the objectives are aligned and many of the problems surrounding quality will be addressed by staff in their effort to increase production (e.g. drug stock management, data administration).

^a Meessen B, Musango L, Kashala J-P. The Performance Initiative [In French]. Kigali: HealthNet International; 2004.
^b Holmstrom B, Milgrom P. Multitask principal-agent analyses: incentive contracts, asset ownership, and job design. J Law Econ Organization 1991;7:24-52.