Understanding the Supply Side:A Conceptual Framework for Describing and Analyzingthe Provision of Health Care ServicesWith an Application to EgyptDr. Peter BermanInternational Health Systems GroupHarvard School of Public HealthJuly, 1999Financial support for this research was provided by USAID through the Data for DecisionMaking Project, U.S. Agency for International Development Cooperative Agreement No. DPE-5991-A-00-1052-00.Understanding the Supply Side 1Table of Contents1. Introduction .......................................................................................................................... 22. Why Develop a Framework for Understanding the Supply Side? ...................................... 4What types of questions could this framework help to answer?................................................ 53. The structures of health care provision: individuals, organizations, and markets ........... 64. A conceptual framework for analyzing the supply side at market and national levels ..... 85. Using the framework to think about theories of provider behavior ..................................106. Understanding the supply side: ambulatory illness treatment in Egypt...........................13Content..................................................................................................................................14Governance...........................................................................................................................16Motivation and incentives for physicians.................................................................................18Pecuniary incentives...........................................................................................................19Non-pecuniary incentives....................................................................................................19Financing: sources and payment methods..............................................................................20Sources of finance for ambulatory illness care ....................................................................20Payment methods...............................................................................................................207. Interventions to improve provider performance: how can a betterunderstanding of the supply side improve reform strategies in Egypt? ..............................21Local control and community roles. ........................................................................................238. Linking Analysis of the Supply Side to the Global Health Reform Agenda ......................25References...............................................................................................................................26Understanding the Supply Side 21. IntroductionHealth care services certainly deserve some of the credit for the impressive gains in health statusexperienced in the developing world in the last few decades. There have been unprecedentedhealth gains attributable to immunization, family planning, and control of many infectiousdiseases. However, despite these gains much of the health care provided in lower incomecountries is perceived to be sub-standard in quality, maldistributed in terms of both types ofservices and beneficiaries, and to impose high cost burdens on individuals and in some casescommunities and nations.The symptoms are widely reported. Government clinics in many countries, even when offeringfree or highly subsidized care, stand empty much of the time. Private practitioners may beunqualified, provide inappropriate treatment, or charge high fees even to the poor.Health care system reform strategies in the low and middle income countries, for example asdiscussed in the World Bank's 1993 World Development Report, have emphasized new methodsfor generating resources for health care and rational approaches to allocating those resources tosecure efficiency and equity. In terms of the former, there has been extensive interest andresearch on users fees and health insurance. In terms of the latter, the focus has been on theprioritizing health problems or interventions, for example via tools like burden of disease and cost-effectiveness analysis, or through programmatic foci like "child survival".There has been a striking lack of attention to the provision of services. That is, the logic of thesereform strategies seems to be that if one can decide what are the best things for the health caresystem to do and raise enough money to pay for them to be done, they will be done successfully.HOW will these priority services, once they are identified and the funds are available, be providedin accessible, acceptable ways with adequate quality and efficiency has been a second orderquestion.To be fair, there has been some attention to making health care delivery work better. Efforts havetended to focus on government provision and have emphasized management approaches, forexample, WHO's "district health systems" initiative or the "drug action program". There has alsobeen rapid adoption of various degrees of decentralization as a means to improving thefunctioning of public services. Recently, there is growing interest in adapting the recentexperiences of the wealthier countries with new provider payment methods, contracting, and"marketization" to the rest of the world. This interest has led to various proposals andexperiments, but to date there is limited evidence concerning the costs and impact of suchinterventions. There has been very little attention to the development of non-governmentservices, to better use of the regulatory power of the state and other organized payers, to the roleof organized providers, and to effecting change from the side of consumer demand.To develop sound strategies for making health care work better, we need to have a solidunderstanding of what currently exists, what factors account for its current performance, whatdrives provider behavior, and what are the feasibility, costs, and benefits of alternativeapproaches. Most of our attention to date has been on the last of these topics: experimenting witha limited set of alternative approaches. This paper attempts to address some of the gaps in the first three topics, which I believe areessential pre-requisites for design of appropriate reform strategies on the supply side. At present,health care system analysts lack an adequate conceptual framework for describing health careprovision in terms of the