Reassessing the Cost of Health Services in Rwanda

With an increasing demand for services, pressure to achieve the health Millennium Development Goals, and severe resource limitations, governments and donors have come to recognize that a good understanding of the cost of services is essential to effective and efficient use of available resources.

In Rwanda, the USAID-fundedIntegrated Health Systems Strengthening Project (IHSSP)led by Management Sciences for Health (MSH) is assisting the Ministry of Health (MoH) in a major study of the cost of health services which is expected to result in groundbreaking changes in the way the health services are financed.

Almost all Rwandans now have health insurance in one form or another, mainly through "mutuelles," (community-based health insurance) and a significant amount of the funding for health care comes from reimbursements from insurers. However, the administrative systems used for billing insurers are cumbersome and costly.

Hospitals and clinics currently send the insurers an itemized bill for each admission or outpatient visit with a charge for each test, procedure, drug, etc. The lists of charges are long – for example, a district hospital has separate charges for around 350 services and three fee levels for each service (depending on the type of insurance). This itemized billing system is expensive to administer: the hospital has to track all the items provided to prepare the bill and the insurer has to check that these services were performed.

Itemized billing places all the financial risk on the insurer. If the hospital provides more services than should be needed – for example, unnecessary tests – the insurer still has to pay for them. The insurer has no control over its costs and in many cases the mutuelles run out of funds before the end of their plan years – which means delays in reimbursement to the hospitals and clinics – which, in turn, means the hospitals may not have enough resources to treat all the patients.

To address these challenges, the Ministry of Health, with support from MSH, is considering changing the reimbursement method from itemized billing to a case-based system. Case-based reimbursement systems are widely used in developed countries, but are rarely found in developing countries. Under a case-based payment system the hospital and clinic are reimbursed according to the type of case diagnosed and treated. For example, the insurer would reimburse the hospital a single fee for an appendectomy. This will make the billing system much easier to administer from both the provider and insurer viewpoints and transfers some of the financial risk from the insurer to the hospital or clinic. The provider will be motivated to limit the services to those required and less likely to perform unnecessary tests.

When introducing a case-based reimbursement system, it is extremely important to have good estimates of the average cost of diagnosing and treating each type of case. If the cost is under-estimated the reimbursements will leave the hospital short of resources; if the cost is too high the insurer will run out of funds. 

MSH is helping the MoH estimate the cost of each type of case provided at the three main levels of care: government health centers, district hospitals, and referral hospitals. This type of costing requires collecting data from a sample of facilities and working with expert groups to determine standard diagnosis and treatment protocols and resource needs. The analysis of the data to produce the costs is complex and involves the use of specialized spreadsheet tools. For the health centre data analysis, the latest version of MSH's health centre cost modeling tool CORE Plus is being used, which includes a section for community-based services. For the hospital analysis, MSH's HOSPICAL cost-modeling tool is being adapted. MSH is training MOH staff on the use of these tools for future use so they can continue good costing practices independently. 

The use of the results of this work will have a major impact on the Rwandan health system. Health care will be more efficient and effective. Rwanda would be one of the first countries on the continent to move to a case-based financing system.