Performance-based Financing versus “Unconditional” Direct Facility Financing - False Dichotomy?

By Sophie Witter, Maria Paola Bertone, Karin Diaconu, and Olga Bornemisza

A debate about how best to finance essential health care in low- and middle-income settings has been running for decades, with public health systems often failing to provide reliable and adequate funding for primary health care in particular. Since 2000, many have advocated and experimented with performance-based financing as one approach to addressing this problem. More recently, in light of concerns over high transaction costs, mixed results and challenges of sustainability, a less conditional approach, sometimes called direct facility financing, has come into favor. In this commentary, we examine the evidence for the effectiveness of both modalities and argue that they share many features and requirements for effectiveness. In the right context, both can contribute to health system strengthening, and they should be seen as potentially complementary, rather than as rivals.

HEALTH SYSTEMS & REFORM2021, VOL. 7, NO. 1