Some countries have decided to switch between these three approaches. During the 1990s and early 2000s, countries in Europe and Central Asia (ECA) moved from paying hospitals through budgets to either fee‐for‐service or some form of method based on patient characteristics. As expected, in countries in the first camp, inpatient admissions increased, while in countries in the second camp, average length‐of‐stay (a measure of the volume of care) fell.<sup>28</sup> Reforms along these lines fail to address the key point that all three payment methods have their strengths and weaknesses. Moving from one payment method to another simply means trading one set of strengths and weaknesses for another. A more sophisticated approach has been to search for a blend of one or more of the payment methods in the hope of encouraging providers to deliver only necessary quality services. In health, getting the right formula in blended schemes has proved a challenge – in both developed and developing countries. So too has setting up the necessary additional administrative machinery, making some ask whether the extra benefits are worth the extra cost.<sup>29</sup> In China, where primary health providers have traditionally been paid fee‐for‐service, the concern has been <u>over‐provision of care, especially of drugs and tests which were priced above cost in the</u> government‐set fee schedule.<sup>30</sup> Recently the country has explored alternative payment methods. In one experiment,<sup>31</sup> one group of health centers was left being paid fee‐for‐service while the other group was switched to a mix of capitated global budget and performance‐related payments based on the appropriateness of drug prescribing and patient satisfaction. The blended approach led to less antibiotic use and lower patient out‐of‐pocket expenditures.

An increasingly common hybrid approach in budget and salary systems is to add a pay‐for‐performance element to the payment system. In education, schools and individual teachers might receive additional payments linked to student learning outcomes. In health, facilities and individual health workers might receive additional payments linked to the delivery of specific services (e.g. antenatal visits, the delivery of babies in a health facility, childhood immunization) or to the quality of care (e.g., a specific set of interventions being delivered, and specific checks being done during the antenatal visits).

Many of these are supported by the World Bank and many have been or are being rigorously evaluated. An ongoing Development Research Group study of the experiences to date in the health sector<sup>32</sup> uses meta‐analysis to distill results across these evaluations. Preliminary results point to substantial heterogeneity in impacts across countries and across indicators. Emerging findings suggest relatively large and statistically significant effects of pay‐for‐performance on facility deliveries and on the content of antenatal care visits, but limited or negligible effects on other indicators, including the likelihood of a woman having four or more antenatal care visits, the likelihood of a baby receiving postnatal care and a child being fully immunized. In education, too, the results to date are mixed. Some studies<sup>33,34</sup> have found 28 Moreno‐Serra R, and Wagstaff A. System‐Wide Impacts of Hospital Payment Reforms: Evidence from Central and EasternEurope and Central Asia. _Journal of Health Economics_ 2010; 29(4): 585‐602.

> 29 Maynard A. The Powers and Pitfalls of Payment for Performance. _Health Economics_ 2012; 21(1): 3‐12.

30 Wagstaff A, Lindelow M, Wang S, and Zhang S. Reforming China’s Rural Health System. Washington DC: World Bank; 2009.

31 Yip W, Powell‐Jackson T, Chen W, Hu M, Fe E, Hu M, Jian W, Lu M, Han W, and Hsiao WC. Capitation Combined With Pay‐for‐ Performance Improves Antibiotic Prescribing Practices in Rural China. _Health Affairs_ 2014; 33(3): 502‐10.

32 de Walque D, Friedman J, Neelsen S, and Wagstaff A. Supply‐ & Demand‐Side Financial Incentives in Maternal & Child Health. A Systematic Review & (Mega) Meta‐Analysis. _In progress_ 2019.

33 Cilliers J, Kasirye I, Leaver C, Serneels P, and Zeitlin A. Pay for Locally Monitored Performance? A Welfare Analysis for Teacher Attendance in Ugandan Primary Schools. _Journal of Public Economics_ 2018; 167: 69‐90.

> 34 Muralidharan K, and Sundararaman V. Teacher Performance Pay: Experimental Evidence from India. _Journal of Political  Economy_ 2011; 119(1): 39‐77.

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