Results-Based M&E towards Equity and Effectiveness (ME3) for the Health Sector Reform Agenda or the Formula One for Health (F1) Development Objective: The grant aims to assist the Government of the Philippines build up the capacity to implement results-based M and E of the ongoing health system strengthening efforts Link to CAS and/or ESW & Relationship to Bank Operations: The Bank has been supporting the implementation of the health sector reform or the Fourmula One for Health (F1) through a National Program Support loan and various AAA activities supporting different components of the reforms. A key component of the reform is a shift to results-based financing though performance-based budgeting and performance grant agreements. However, the findings of recent Bank missions highlighted the need to further build up the capacity of the DoH to manage performance contracts and monitor results. Relationship to country/recipient's development program, including donor activities: The DoH's health reform agenda has been pursuing the improvement of health outcomes and the attainment of MDG targets through increased public investments in health care delivery, specifically investments that will ensure expanded facility deliveries, immunization rates and treatment rates of tuberculosis, particularly of the poor. DOH planned the increased investments to be driven by universal social health insurance coverage and enhanced insurance benefits, and performance based financing to support local level service delivery and improved performance of public hospitals.  The proposed grant will enhance the DoH's capacity to manage performance based financing to both local government units and public hospitals. It will also help the DoH-attached national health insurer (PhilHealth) leverage its insurance benefits towards improved performance and health outcomes. DoH has come out with an implementation framework for F1 called the Monitoring and Evaluation for Equity and Effectiveness (called the ME3) with AO 16 s of 2008. It further came with a local government unit (LGU)  scorecard (AO 17 s of 2008) which is expected to measure the performance of province-wide health systems in implementing health reforms. The proposed grant will build on improving this current framework by assisting DoH implement these AOs and ensure that the DoH sustain its focus on results rather than inputs. It shall help monitor health governance results by supporting the integration of health procurement and expenditure monitoring in the ME3. The grant will also support the independent verification of the LGU scorecard results. As the DoH will eventually include in its budget the necessary funds to cover the conduct of independent verification, the grant is expected to provide the DoH the information on the necessary budget allocation for financing the independent verification of the F1 provinces and of all provinces.  Brief Description of the Proposed IDF Components/Activities (including Expected Outcome for each Component) Component A- Contract Management This component will include the review of all existing and planned Memorandum of Agreements, service level agreements and performance agreements between the DoH and LGUs/ public hospitals. It will then support the development of a template agreement that will serve as the single governing agreements in lieu of several contracts/agreements. This component shall build the capacity of key central and regional DoH staff to adapt the template agreement to the context of each LGU or public hospital. It will support upgrading negotiation skills of key central and regional DoH staff.  It will assist DoH develop systems in tracking and verifying compliance with agreed conditions/provisions. The expected outcome is a comprehensive contract/agreement between DoH and the LGUs/public hospitals replacing all the different existing and planned MOAs, service level agreements and performance agreements between DoH and LGUs/ public hospitals Component B-  Scorecard Implementation and Enhancement This component will include the all review of existing procurement and financial management (particularly expenditure monitoring) indicators as to their feasibility for inclusion in the LGU scorecard. It shall finance the development of innovative approaches and tools in the independent verification of the LGU and other ME 3-related scorecards including the pilot implementation of these approaches and tools in a select number of F1 provinces. The expected outcome is a set of innovative approaches and tools for the independent verification of the LGU scorecard (now with procurement and expenditure monitoring indicators) and other ME3 related scorecards. Component C- Cost Analysis for the Inclusion of Independent Verification to the DOH budget This component shall finance the cost analysis of the budget implications for the DoH to regularly conduct the independent verification of the LGU scorecard and other ME3-related scorecards. The expected outcome is a cost analysis as described above. health system strengthening efforts by supporting the implementation of two recent Department of Health administrative orders (AO) setting down the M and E policies and directions of the health sector, namely AO 16 s of 2008 which is the national M and E framework and AO 17 s of 2008 which introduces the local government unit (LGU) health scorecard. frameworkand AO 17 s of 2008 which introduces the local government unit (LGU) health scorecard.