The Purchasing Function in the Colombian Health System after the Introduction of Universal Health Insurance

Presenter: Maria-Luisa Escobar, World Bank

Abstract

In 1993, Colombia implemented a social health insurance scheme with competing regulated insurers as purchasers of health care services. To purchase care, these insurers adopted different provider payment methods and ways of organizing health care delivery. Initially two types of arrangements between insurers and providers prevailed: capitation for primary care and a pre-negotiated fee-for-service for the rest. Over time insurers learnt that contracts are more than a reimbursement mechanism, but induce behavioral changes, modulate relationships and guide planning and adopted elaborate more “pay for performance” contracting arrangements especially for services with rapidly increasing costs such higher complexity care. New contracting modalities together with hard line negotiations between insurers and providers kept prices stable and led to efficiency gains for purchasers.

At the same time, insurers tried to introduce innovations in the delivery of health care. Lack of modern accounting systems in hospitals in the early nineties made it difficult for providers to set up prices for their services and for insurers to negotiate contracts, particularly with public providers. As a result, many private insurers developed their own facilities and today they provide services under this vertically integrated structure. This was seen by purchasers as a via to increase efficiency by having more control over service provision and by strengthening the negotiating power when it comes to establish prices with non integrated providers.

However, innovations in contracting have been hampered by several government regulations. First, new regulations are currently being discussed to eventually forbid vertical integration of insurers and providers in Colombia. Second, regulation locking-in insurers and public providers to mandatory contracting in the Subsidized Regime (SR) was introduced to “save” public hospitals from financial ruin in the absence of government bailouts. Third, price regulation for all providers is being discussed as a potential future policy.

Lessons. The introduction of purchasing in Colombia under the circumstances of market development of 1993, with deficiencies in information systems, institutional rigidities, and lack of coherent cost accounting for providers, and tight regulations have challenged the development of strategic purchasing in the Colombian health care system. This paper discusses how purchasing was adapted to Colombia’s circumstances and explores its consequences on the provision of care in light of the goals envisioned when purchasing was introduced.