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Incorporating cost-effective contracting

Policy clarity and definition of the contracting process (in other words, the payment
system and financing mechanism between purchasers and providers) is a key component of
strategic purchasing (Klasa et al., 2018). An ideal contract will have terms and criteria, as well
as measurements of its effectiveness, that are based on evidence, premised on the
availability of a health system’s data on health status, health needs of its populations, and the
efficiency of existing health programmes and service models. Provider payment systems
must align with benefit package design, and due consideration should be given to the
transfer of risk from the purchaser to service providers and communication to both
parties, as well as patients (Nachtnebel et al., 2015). Risk-sharing mechanisms are not
explicit and the Director of Audit pointed out the need to improve risk management.

While there is no clear definition of “good contracting” within Hong Kong’s existing PPP
practice, a number of supply-side and demand-side factors have not been
strategically addressed to promote PPP participation from providers and users. This
contributes to a lower participation of providers than intended. Figure 3.12 summarises how
various supply-side prohibitors such as heavy administrative processes, and demand-side
factors such as unattractive subsidies for patients, contribute to less effective PPPs. In
general, the two primary care PPPs experienced similar barriers to participation, in particular,
unattractive provider incentives and restricted drug coverage for the GOPC-PPP programme
(Wong et al., 2015).

Figure 3.12

Factors that render less effective PPPs in Hong Kong

SUPPLY-SIDED PROHIBITORS DEMAND-SIDED PROHIBITORS

Lack of support
Top-down Design of
decision -making lacks (IT, financial) and the programme
involvement from communication unsynchronised with
the private sector platforms to patients’ behaviour
the private sector

Heavy administrative Lack of referral Unattractive subsidy
process pathway & to patients & the
(registration, integration with possibility of
reimbursement. etc.) the public sector co-payment

Inflexible
contractual terms
hindering care from the
private sector

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