Expenses and national insurance payments at a municipal-level hospital in rural Nepal: implications for strategic purchasing and universal health coverage

Abstract Background: Strategic purchasing mechanisms, including national health insurance, provide opportunities to improve quality and progress towards universal health coverage. Nepal’s health insurance program (HIP), begun in 2016, is a national insurance platform aiming to improve financial risk protection, and efficiency, quality, and access to health services. HIP also further engages private-sector providers through strategic purchasing, potentially improving quality, regulation, and accountability. Bayalpata Hospital is a public-private partnership (PPP) hospital run jointly by the Ministry of Health and Population and Nyaya Health Nepal and is one of the first PPP hospitals enrolled in HIP. We evaluated Bayalpata Hospital costs and HIP guidelines to understand how HIP rates compare to health delivery costs incurred.Methods: We employed a top-down costing methodology to analyze costs for fiscal year 2017-2018. We compared costs to HIP reimbursement rates during the same period, and projected overall coverage for costs assuming full HIP enrollment given the compulsory nature of HIP.Results: Our data suggest HIP, as one payment mechanism in Nepal’s mixed provider payment system, would cover 57% of hospital costs with full enrollment, with variation across services. Among inpatient services, 64% of costs would be covered, including 105% reimbursement for fee-for-service, 87% reimbursement for bundled packages, but only 23% - 40% for certain surgical services. For outpatient services, 59% would be covered, and for emergency services, 32% would be covered. Conclusions: HIP is an important strategic purchasing foundation; however, payments may be insufficient to match provider costs and cover a larger percentage of inpatient-based and fee-for-service delivery than outpatient services. These dynamics may inappropriately incentivize fee-for-service health care utilization, in particular for private-sector providers without access to other public-sector payment mechanisms, while potentially disincentivizing outpatient or community-based approaches to health care, which are less well reimbursed through HIP. HIP policy revisions, and further expansion of mixed provider payment mechanisms, may more effectively incentivize primary health care approaches, while also deepening private-sector engagement. The data and experience of Bayalpata Hospital and HIP offer practical insights for Nepali policymakers and those in similar settings globally employing strategic purchasing to improve progress towards UHC and quality health delivery.