The Criticality of Strategic Health Purchasing in Achieving UHC in Nigeria
Updated: May 12
Health purchasing is one of the three health financing functions, with the other two functions being funds mobilization and pooling. It involves allocating or transferring resources (pooled funds) to service providers to deliver healthcare goods and services to the population based on the defined benefit package. The purchaser may be the Federal Ministry of Health (FMoH), an insurance scheme, or an autonomous agency. Evidence shows that public expenditure on health is poor in Nigeria (World Bank, 2023), and healthcare purchasing has been predominantly passive and inefficient [Etiaba et al., 2018]. This has been partly attributed to limited understanding and appreciation for Strategic Health Purchasing (SHP).
SHP is defined as the efficient allocation of pooled funds to healthcare providers to deliver health services on behalf of a population. To achieve the goals of Universal Health Coverage (UHC), the World Health Organization recommends adopting SHP as a tool for improving health system performance and service delivery quality, ensuring fairness in the allocation of funds, expanding access to healthcare services, and increasing health system responsiveness (WHO, 2023). It involves three critical decisions made by a purchaser:
What to buy? – Which services will respond to the needs of the target population, and how will they be defined?
From whom to buy? – Which public and private providers can deliver those services effectively?
How to buy it? – How will providers be paid, at what rates, what are contracting terms, and how will compliance be monitored?
These decisions are at the core of making better decisions on resource allocation, creating better incentives, and holding decision-makers accountable for effective health spending.
For Nigeria to make progress on its commitment to UHC, Government health spending must be more efficient and effective through more strategic health purchasing—a critical policy tool.
Highlights of progress and challenges of SHP in Nigeria within the (what, from whom, and how to buy) WHO Framework
Benefits Specification (What to Buy)
The FMoH defines all the minimum benefits of the available benefit packages—Basic Healthcare Provision Funds (BHCPF), Formal Sector Social Health Insurance Program (FSSHIP), National Health Insurance Scheme (NHIS), and State Health Insurance Schemes (SHIS)—reflecting health priorities. The national drug list provided by the Department of Food and Drugs Services in the FMOH sets standards for purchasing drugs. FSSHIP has an explicit benefit package with gatekeeping and well-defined referral systems, and NHIS has mechanisms in place to determine members’ health needs using quantitative and qualitative requirements assessment (FMoH, 2014; FMoH, 2018). However, the process for reviewing the benefits package and the data or evidence that informs this process are poorly defined (FMoH, 2018). The packages differ in the diseases or patient groups covered, resulting in fragmented and inadequate service coverage. Furthermore, the packages do not specify cost-sharing arrangements or limits, so providers charge user fees for services. Despite the drug list, evidence suggests that some providers still dispense branded drugs, and essential drugs may be out of stock in public hospitals due to poor monitoring and weak or nonexistent enforcement of guidelines (Etiaba et al., 2018; Ezenwaka et al., 2022).
The BHCPF, funded through the 1% government budget, covers the Basic Minimum Package of Health Services (BMPHS) provision and funds PHC operational expenses across Nigeria (National Primary Health Care Development Agency, 2023). However, BHCPF implementation could have been faster and resulted in the expected improvements. Fragmentation of benefit packages across and within schemes contributes to inefficiencies in resource allocation and utilization (Strategic Purchasing Africa Resource Center, 2021)
Contracting Arrangements (From Whom to Buy)
NHIS and SHISs have formal accreditation and contracting arrangements with public and private providers. Meanwhile, BHCPF, the FMOH, and SMOHs use loose agreements with public providers and selective contracting with private providers for some disease control programs (FMoH, 2018; SPARC, 2021). NHIS contracts with public and private providers (through HMOs) that meet specific criteria for different levels of care. The assessment process includes applications and screening, accreditation visits by an NHIS team, two-year provisional accreditation, and two compulsory quality assurance visits within the provisional accreditation period. Full accreditation is given to facilities that meet quality standards, and providers that do not meet personnel and facility requirements are denied a contract (FMoH, 2018). However, there is evidence of geographic (rural-urban) and socioeconomic disparities in the distribution and level of qualified health staff, particularly at public facilities, hamper service coverage, and access (Uzochukwu et al., 2018; Etokidem & Ogaji, 2021).
Provider Payment (How to Buy).
BHCPF, NHIS, and SHISs use output-based payment, while the federal and state government budgets use input-based payment. NHIS determines provider payment methods and rates through actuarial studies based on the benefits package and the NHIS contribution rate (FMoH, 2018). However, these payment mechanisms need to be better harmonized, and NHIS has experienced over-referrals due to capitation and supplier-induced demand due to fee-for-service (SPARC, 2021).
Performance Monitoring: NHIS and HMOs monitor provider performance through quarterly onsite inspections of facilities. A report is sent to the NHIS head office for analysis and decision-making regarding allocating members, quality assurance, and provider payment. Secondary performance assessments are done by HMOs using both qualitative and quantitative methods at the facility level (NHIS, 2021). However, Provider-level and system-level performance monitoring of the federal and state schemes are primarily paper-based and poorly coordinated (NHIS,2021). The quality and accuracy of reporting vary widely, and no formal structures are in place to support decision-making or actions based on performance monitoring. A clear hindrance to effective monitoring is the lack of automated data and information systems for purchasers to track performance systematically (FmoH, 2018).
Opportunities to Improve Health Purchasing
The high degree of fragmentation in government financing for health in Nigeria dramatically limits the power of public purchasers to influence resource allocation, provider incentives, or accountability. The WHO recommends giving purchasing agencies sufficient autonomy and decision-making space backed by legal provisions. (WHO, 2019)
Continuous monitoring and evaluation of the implementation of strategic purchasing functions will require the purchasing institutions in Nigeria to significantly invest in capacity—human resources, technical know-how, and information systems—therefore, a significant increase in public resources allocated to the health sector cannot be over-emphasized.
However, to better use existing resources through less fragmented spending, effective strategic purchasing is required to direct funds to priority populations and services, create better incentives for providers, and improve accountability to reduce the significant leakages in the system.
The National Health Financing Policy (FMoH, 2017) calls for focusing on high-impact, cost-effective interventions, integrating strategic purchasing at the federal and state levels, using strategic purchasing in BHCPF implementation, and establishing outcome-focused provider payment mechanisms and evidence-based decision-making.
In its National Health Insurance Scheme strategic plan 20-30 (NHIS, 2020), Nigeria envisions full implementation of the BHCPF and decentralized social insurance schemes will fast-track the country’s progress toward achieving UHC by reducing financial access barriers to health services for all Nigerians.
Etiaba E, Onwujekwe O, Honda A, Ibe O, Uzochukwu B, Hanson K. (2018). Strategic Purchasing for Universal Health Coverage: Examining the Purchaser-Provider Relationship Within A Social Health Insurance Scheme In Nigeria. BMJ Global Health. 2018;3 (5): e000917. https://doi.org/10.1136/bmjgh-2018-000917
Etokidem, A and Ojaji, D. (2021). The Inverse Care Law: Implications for Universal Health Coverage in Nigerian Rural Communities. International Journal of Medical and Health Development, 26(1), pp.11-16. https://doi.org/10.4103/ijmh.IJMH_38_19
Ezenwaka, U., Gatome-Munyua, A., Nwankwor, C., Olalere, N., Orji, N., Ewelike, U., Uzochukwu, B and Onwujekwe, O. (2022). Strategic Health Purchasing in Nigeria: Investigating Governance and Institutional Capacities within Federal Tax-Funded Health Schemes and the Formal Sector Social Health Insurance Programme, Health Systems & Reform, 8:2, e2074630. https://doi.org/10.1080/23288604.2022.2074630
Federal Ministry of Health (2014). National Health Act. https://nigeriandocuments.blogspot.com/p/national-health-act-2014gazetted.html
Federal Ministry of Health (2017). Nigeria Health Financing Policy and Strategy. https://p4h.world/system/files/2021-10/Nigeria-Health-Financing-Policy-Strategy-21032019.pdf
Federal Ministry of Health (2018). Second National Strategic Health Development Plan 2018–2022: Ensuring healthy lives and promoting the wellbeing of the Nigerian populace at all ages. Abuja (NG): Federal Government of Nigeria; 2018. https://ngfrepository.org.ng:8443/jspui/bitstream/123456789/3283/1/SECOND%20NATIONAL%20STRATEGIC%20HEALTH%20DEVELOPMENT%20PLAN%202018%20%E2%80%93%202022.pdf
National Health Insurance Scheme (2021). Local Service Chapters. https://www.nhis.gov.ng/?media_dl=2827
National Health Insurance Scheme Federal Republic of Nigeria (2020). Strategic Plan 2020– 2030. https://www.nhis.gov.ng/?media_dl=3056
National Primary Health Care Development Agency (2023). About BHCPF. https://nphcda.gov.ng/bhcpf/#:~:text=The%20BHCPF%20serves%20to%20fund,care%20for%20all%2C%20particularly%20the
Strategic Purchasing Africa Resource Center (2021). Strategic Health Purchasing in Nigeria. A Summary of Progress Challenges and Opportunities. https://sparc.africa/wp-content/uploads/2021/10/SPARC_Policy_Brief_NIGERIA_L5.pdf
The World Bank (2023). Current Health Expenditure % of GDP. Current health expenditure (% of GDP) | Data (worldbank.org)
Uzochukwu B, Onwujekwe E, Mbachu C, Okeke C, Molyneux S, and Gilson L. (2018). Accountability Mechanisms for Implementing a Health Financing Option: The Case Of The Basic Health Care Provision Fund (BHCPF) In Nigeria. International Journal of Equity in Health. 2018;17(1):100. https://doi.org/10.1186/s12939-018-0807-z.
World Health Organization (2023). Promoting Strategic Purchasing. https://www.who.int/activities/making-purchasing-more-strategic
World Health Organization. (2019). Governance For Strategic Purchasing: An Analytical Framework to Guide a Country Assessment. Health Financing Guidance. Geneva, World Health Organization; 2019. https://www.who.int/publications/i/item/9789240000025