POLICYINSIGHTS20 OCTOBER 2015

INSTITUTE OF POLICY STUDIES OF SRI LANKA

HEALHEALHEALHEALHEALTH SECTOR REFORMSTH SECTOR REFORMSTH SECTOR REFORMSTH SECTOR REFORMSTH SECTOR REFORMS

With universal healthcare and a robustpublic health network across the country,Sri Lanka has made noteworthyachievements in health outcomes comparedto other developing countries. Sri Lanka ischaracteristic of increased life expectancy,reduced maternal and child mortality anddecreasing levels of communicablediseases. While this success is laudable, thecountry needs to strengthen its existinghealth system (both public and private) inorder to face changes brought on bydemographic and epidemiologicaltransitions.

Due to the decline in overall populationgrowth, the percentage of individuals over60 years in the country is expected to growat an unprecedented rate to reach 24.8%by 2031. Moreover, there is a shift in thedisease burden towards non-communicable

diseases (NCDs) such as heart disease,cancer, asthma and diabetes, mirroring thatof high GDP countries. In fact, the leadingcause of death in Sri Lanka is cardiovascularheart disease. Similarly, due to the increasein per capita income over the years, there isalso greater demand for better treatmentprocedures.

These changes bring a variety of challenges.With regard to healthcare financing, thesystem will need to take into considerationthe higher cost of providing health servicesfor NCDs that require long-terminterventions. As the population ages,demand for healthcare will increase andchange shape. Also, greater globalizationwill make Sri Lanka more vulnerable to healthepidemics. The health sector needs tostrengthen its health care organization,provision and regulation not only to deliverservices effectively and efficiently, but alsoto provide quality care and guarantee patientsatisfaction.

In this context, this Policy Insight highlightsthe SOE 2015 chapter on "Health SectorReforms", which discusses possiblehealthcare reforms to be undertaken in orderto cater to population demands successfully

Health Care FinancingThe changing demographic andepidemiological transitions as well as higherdemand for better treatment proceduresbring with it the need to improve Sri Lanka'shealth financing system. The country'shealth care is currently financed through acombination of tax-financed governmentexpenditure and private payments for care.

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20 OCTOBER 2015 POLICYINSIGHTS

Study Approaches

Public sector funds are channeled througha combination of contributions from theMinistry of Health (MOH), provincial andlocal governments, other ministries andgovernment entities, the President's Fundand the Employee's Trust fund. The majorityof private sector financing sources consistsof out-of-pocket expenditure, insurance,NGOs and private employers' arrangementsfor health expenditure.

It is evident that the private sector hasincreasingly become prominent in healthcare expenditure. Even though Sri Lanka'sdisease pattern is moving towards mirroringthat of high GDP countries, its healthcareexpenditure does not follow suit.

The country's healthcare expenditure islikely to increase in the future speciallybecause of the increase in NCDs andgeriatric care and it is imperative to respondto the increase in demand for moreexpensive treatments.

The critical question is how Sri Lanka canfund an increase in financing. Onealternative is to consider increasing taxeson harmful products such as alcohol andtobacco. A second strategy is to implementa social health insurance system. Theviability of this option, however, isquestionable because a large proportion ofemployment in the country is within theinformal sector, making it difficult to collectpremiums. The country should also have amore proactive stance on donations as athird financing strategy. Currently,donations operate on an ad hoc basis,leaving room for untapped potential to beexplored.

Public Sector Health ReformsFor decades, Sri Lanka has provided freeuniversal healthcare as a national priority,and is one of the few countries to do so.

Health Care Delivery

However, despite the availability of acomprehensive primary healthcare facilitynetwork, a substantial number of patientsbypass these and seek treatment atsecondary and tertiary health careinstitutions. The main reason for this is theerroneous belief that the outpatienttreatment in secondary and tertiaryinstitutions is superior to those in the

periphery. Certain deficiencies in facilitiesand services in the primary healthcareinstitutions is another reason.Overcrowding of secondary and tertiaryhealthcare institutions, a problem which thepublic health system currently faces, isexacerbated when primary health careinstitutions are bypassed, creating anunnecessary burden on higher levelfacilities.

Provision of quality public health servicehas become a priority need, especially inthe context of an increasing tendency toinvest in quality assurance mechanisms bythe private sector. Further, continuousupgrading of the health care delivery systemis needed in order to face emerging healthchallenges (NCDs, accidents and injuries,long-term care, suicides, homicides andother violence) as well as emergencysituations (outbreaks of diseases/viruses)and natural disasters.

The macro-organizational structure of thehealthcare system affects the efficiency andquality of health services. Therefore,restructuring of the macro-organizationalframework to improve efficiency and equityby splitting outpatient and inpatientservices, reclassification of existing healthcare institutions, and reallocation ofresources in order to enhance equalfacilities at outpatient services throughoutthe country are some of therecommendations to enhance the healthcareservice delivery.

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POLICYINSIGHTS20 OCTOBER 2015

Physical and Human ResourceAllocation

An adequate health workforce, which iscommitted and motivated, and has therequired public health and clinicalcompetencies, is seen as a must for theeffective functioning of the health system.Despite an increase in the numbers relatedto human and physical resources thecountry still lags behind global averagesfor most of the indicators related to healthworkforce and infrastructure indicating adearth of resources in the health sector.Focus should also be given to regionaldisparities in the distribution of physicaland human resources.

Public Health Sector Manage-mentand Monitoring

Despite decentralization, the health systemis centrally dominated by the Ministry ofHealth; and since most of the authority lieswith the central government, it causesduplication and inefficient use of publicresources. In order to rectify this situationthe government needs to; clearly define therole and responsibility of the nationalgovernment; and clarify what is expectedof its decentralized units.

Private Sector Health CareReformsDuring the past two decades the privatesector has grown rapidly, with expansionsin hospitals, laboratories and clinics. Over

100 private hospitals, with investments ofover Rs. 50 billion, entered the healthcaresector during 1990 -2013. The demand forprivate sector healthcare has increasedrapidly due to reasons ranging fromimprovements and investments in healthtechnology in the private sector, and poorpublic sector performance.

Provision of Health Services

Sri Lanka's private healthcare sector ispredominantly engaged in providingcurative care services such as laboratorytests, medication, surgeries, and nursingcare. Moreover, private facilities aredisproportionately concentrated in theWestern Province in urban or semi-urbanareas due to its higher income level andpopulation density.

It is always the poorest (in rural areas) thatsuffer most from the limitations (limitedcurative care, drugs shortages, limitedavailability of specialty treatment) of thepublic sector. Even though the private sectoris able to compensate for these limitations,it is evident that the supply of privatefacilities does not necessarily expand reachof health services. To overcome thedrawbacks in each sector independently,public-private partnerships (PPPs) can beconsidered a solution.

A Role for Public-PrivatePartnerships

Public-private partnerships in the healthcaresector in Sri Lanka are minimal. It is counter-

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20 OCTOBER 2015 POLICYINSIGHTS

This policy insight is based on the comprehensive chapter on "Health Sector Reforms" in the 'SriLanka: State of the Economy 2015 Report' (SOE 2015). The State of the Economy Report is theflagship publication of the Institute of Policy Studies of Sri Lanka. The complete report can bepurchased from the publications section of the IPS, located at 100/20, Independence Avenue,Colombo 7. For more information, contact the Publications Unit on 0112143100.

intuitive for the two sectors to operateindependently.

One option for the public - privatecollaboration is for the government tocontract with private providers to deliverhealth services in remote areas. A secondoption is to implement demand-ledfinancing strategies such as vouchers; thegovernment provides a demand sidesubsidy to ensure that private health servicesare more affordable to vulnerable groups. Itis important to note that implementing suchoptions requires an increase in public sectorfinancing.

Incorporating Elements of PatientCentered Care

At present, Sri Lanka's private sector isdoctor-centric. Patient centered carerequires acknowledging and incorporating

patient needs, values andchoices in the service deliverysystem. Regular evaluation ofpatient satisfaction byconducting surveys is a stepin this direction. It will alsosignal to the consumer thattheir considerations are takeninto account and that theprivate sector is committed toensuring value for money forthe services they provide.

Regulation

Private sector regulationreform is of utmostimportance due its current lackof effectiveness. Theregulatory council, PrivateHealth Services RegulatoryCouncil (PHSRC), isindependent of the MOH.Returning the regulatoryfunctions back to the MOH (asis the case in other countrieswith similar backgrounds) is anoption that needs to beconsidered. Alternatively, the

effectiveness of the PHSRC needs to bereinforced by limiting private sectorprovider representation, and training andstrengthening the regulatory capacity ofofficers in charge.

With the demographic andepidemiological transitions , theorganization, delivery and regulationof Sri Lanka's health sector needs tobe strengthened. Greater resourcesneed to be brought to increaseefficiency and effectiveness, andensure consumer satisfaction.Further, greater inter-sectoralcollaboration is needed to faceimminent health challengeseffectively as important influencesthat affect the health of thepopulation are sometimes outsidethe health sector.

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