EU-HF: Technical details of the proposed capitation model for Vietnam

Proposal / Comments/Recommendations
Policy Goal / To support the achievement of the health policy goals of the MoH in strengthening the primary health care/grassroots level of health care, improve the quality, efficiency and equity
The suggestion is to apply capitation for payment of outpatient services at primary health care level, which, based on international experiences, showed significant results in terms of cost control and strengthening primary health care / The proposed capitation model should not cause the deficits and create disincentives for the providers to refer to the higher hospital levels when the services could be provided at the PHC level
Definition of capitation / Providers are paid a fixed amount in advance to provide a defined set of services (capitation package) for each enrolled individual (insured) for a fixed period of time (quarterly or annually).
Type of capitation model / Weighted capitation model based on utilization patterns/frequency of use among different age groups, which will enable pooling of funds and sharing the risk - the key feature of social health insurance system.
Successfully applied worldwide eg. Italy, Spain, Estonia, Slovenia, Thailand, UK, Moldova, Ukraine, Russian Federation, etc [1] over the last 20 or more years.[2] / The funds are accumulated at provincial level and allocated to the health institutions based on the number of the registered health insurance cards holders per age group. In future the pooling of funds shall be considered at national level to allow cross subsiding of the poorer provinces or provinces with more needs
Methodology and elements of the proposal / Apply only for payment of outpatient services provided to registered HI card holders, which is in line with financial capacity and liability of health insurance fund (VSS)
1. Weighted calculation:
·  proposed age groups are: 0-4, 5-14, 15-24, 25-39, 40-59, 60+
·  age group adjustment coefficients are calculated based on utilization/frequency of use and expenditures of selected services among different age groups / A demo version, just for the purpose of the meeting, was developed based on the data for Khanh Hoa province for 2014 and following coefficients had been defined :
A weighted capitation formula allows for finer adjustment with the incorporation of policy priorities including specific services more used in particular age groups
|Age Group / Co-efficient
0 - 4 / 2,5
5 - 14 / 3
15 - 24 / 1
25 - 39 / 2,5
40 - 59 / 24
60+ / 56
2. Definition of the service package:
·  burden of disease – what are the leading causes of morbidity and mortality in Vietnam
·  frequency of service use
·  capacity of providers at grassroots level to address selected conditions and provided selected services / => 26 conditions following ICD 10 chapters and codes
Other conditions and services are paid (as in the current practice) through fee for service and/or state budget
Eg: The selected 26 conditions approximate to 25% of total outpatient budget and 26% of all outpatient services used by the HI card holders in 2014 in Khanh Hoa province.
3. Costing of the capitation package (services, medicines, etc.)
Based on the existing standard treatment guidelines to define for each condition :
·  examination and treatment procedures/steps
·  services that will be reimbursed by capitation fund (in line with Circular 37)
·  medicines that are on the list of essential drugs for Vietnam (Circular 45 for essential Western medicines); Circular 40 for essential traditional medicines)) / Inclusion of all the elements of the official Standard Treatment Guidelines resulting in increased quality of the service delivered
Total cost = use of services and consultation fees (times) * price (from circular 37) + medicines + consumables+ testing + imaging + other costs (actual expenditure form 79A)
4. Capitation Fund
Calculated based on:
·  actual data on utilization patterns/frequency of use among different age groups (MoH, VSS, GSO HLSS data)
·  total number of registered HI card holders (VSS data)
·  actual costs of the capitation package of services (current prices of services, lab tests, medicines, etc.) / Total Capitation Fund = Cost of capitation package * total number of registered HI card holders
5. Calculating the base rate
i :Age groups, (i=1,..n)
CBR : Capitation base rate
TCF : Total capitation fund
Ni : Total number of HI cards of a specific age group, (i=1,..n)
Xi : Cost adjustment coefficient of a specific age group, (i=1,..n)
Coverage / All health insurance card holders registered with the provider for defined service package for a defined period of time / Other services are payed with fee for service / case base / budget (as in the current practice)
Application / District Hospitals, District Health Centers, Polyclinics and Commune Health Stations
Application of capitation should be compulsory for all health care facilities that are approved for provision of capitation service package. / This could be also applied for provincial and central level if a proper gate keeping mechanism is in place.
With the current legal framework in Vietnam, the payment of capitated outpatient services at provincial and central level would encourage registration of more patients for PHC services at provincial and central level health care facilities. This will limit the amount of resources channeled to the grassroots level and will worsen the problem of already overcrowded hospitals.
The number of beneficiaries to be registered for PHC at provincial and central level should be limited and linked to the operation of Family Medicine Training Units
According to the current legal provisions application of capitation is voluntary
Financial Risks / With health service providers :
Health care providers accept an amount agreed in advance from a payer (VSS) to cover the health service of the registered health insurance card holders.
Incentive for providers to reduce costs (mainly through the use of generic drugs and prevention of ill health) and optimizing health services provision (operational efficiency) / Motivate the health service provider to control the costs -
In case of surplus the funds are left for next year for development/upgrade
Providers can tend to under-provide services, which can be averted with a payment mix (capitation/fee for service/case based) and performance indicators.

[1]. In Ukraine, Uzbekistan and Russian Federation the allocation of financial resources from the state budget to the regions is per capita based rate with age coefficient, distance coefficient and discount for the richer regions (part of the health care expenditures are covered from the regional budgets). In Moldova and Baltic States the allocation to PHC providers is weight capitation through classical Bismarck model of statutory social health insurance (Borowitz et all, Zdravreform Programme 2000 etc ).

[2] Designing and Implementing Health Care Provider Payment Systems, How to manuals John C. Langenbrunner Cheryl Cashin Sheila O’Doughert, World Bank http://siteresources.worldbank.org/HEALTHNUTRITIONANDPOPULATION/Resources/Peer-Reviewed-Publications/ProviderPaymentHowTo.pdf