Name of cluster:
Payment Systems Reform
Time of implementation:
2015 - 2020 years

Characteristics of the object



Problems which Resolution Will Be Fostered by Implementation of the Cluster


Financing is one of the core functions in the health system. Success and sustainability of fulfillment of its other functions (management, resourcing and delivery of services) directly hang on its efficient organization. Providing for adequate, timely and rational financing in the system allows improving access of the public to key health services and contributes to incentivizing providers to render health services of due quality while ensuring cost-effectiveness.

Since there is no completion and selective contracting of health services providers by means of the mechanism of strategic purchases through performance-based payment methods and given that the current model is budget-funded financing of providers with budget line-items for both revenue and expenditure, providers are artificially equalized and financial resources are allocated non-proportionally among them: the amounts of financing are dependent not on the volumes, complexity and quality of their performance and real expenses of specific providers associated with delivery of medical care, but on such inputs as the number of medical staff, the number of beds, etc. In addition, because of no clear-cut distribution of service delivery functions between various levels of medical care, there is a great duplication of them between providers of various levels.

The absence of adequate resource use standards and the imperfect mechanism of calculation of real expenses of specific providers associated with delivery of medical care (cost of medical services) result in an undermined financial sustainability of suppliers and a reduced interest of health staff in performing their professional activity up to the requirements of quality standards and professional ethics.

All of this evidences the need for a radical reform in the health financing system. Within its framework, a transfer should be made towards a model of health services-based provider financing under public medical servicing contracts using prospective output-based provider payment methods.

In this cluster of the Project, it is planned to implement in Ukraine, over the course of five years, a new hospital financing system based on the DRG classification of treated inpatient cases. This would foster adequate identification of a place of medical care delivery, increase of the efficiency of use of financial, staff and physical infrastructure resources allocated to hospitals, streamlining of the network of secondary and tertiary care health facilities, improvement of the quality of and access to medical care, transfer to the financing of health services supplies in accordance with the volume, complexity and quality of medical care provided.    


ThefollowingpreliminarystepshavebeentakenforimplementationoftheDRGsystemin Ukraine:


1) On the basis of a draft Strategy on DRG Implementation in Ukraine developed by international experts of the World Bank and specialists of the MOH of Ukraine, the Order No. 605 dated 29 August 2014 “On Approval of an Action Plan on Implementation of the Diagnosis Related Groups System in Ukraine” has approved the Action Plan on Implementation of the Diagnosis Related Groups System in Ukraine.

2) For reasoning the selection of a basic (reference) DRG system stemming from which adaptation will be made for use in the Ukrainian context, a respective subgroup has been established within the MOH of Ukraine’s Working Group on Elaboration of Social Standards and Financial Norms of Budget Support in the Health Sector.

At its meeting of 20 March 2014, through an open vote the said Working Group of the MOH of Ukraine has made a decision recorded in official minutes and identified the Australian system of diagnosis related groups (AR-DRG) as basic (reference) for creation of the Ukrainian DRG system.

3) A list of 100 pilot health facilities for implementation of the DRG system has been approved with the order of the MOH No. 150 dated 17 March 2015 “On Approval of a List of Pilot Health Facilities for Implementation of the Diagnosis Related Groups System”.

4) A diagnosis related groups unit has been set up within the State Institution “Center of Medical Statistics of the Ministry of Health of Ukraine”. Looking forward, the work is underway to establish a DRG center as a separate legal entity.


Goal and Expected Results of Cluster Implementation


The goal of the cluster is to develop and implement a new, performance-based mechanism for financing secondary (specialized) and tertiary (highly specialized) health facilities, which seeks to secure delivery of accessible, quality and cost-effective health services to the public.


Expected Results of Cluster Implementation:


1) shaped new legal and institutional fundamentals for development of a financing system in the health system;

2) ensured rational use of public finance and strengthen financial discipline, an enhanced level of transparency of budget development and execution processes in the health sector, prompt responses to emergence or threat of emergence of the risks of inefficient use of public finance and financial violations; 

3) secured autonomy of public and municipal health facilities with the following provided to with:

the freedom of contracting and possibilities of independent addressing of the issues of prompt re-allocation of funds between various spending areas;

the right to independently manage human resources (planning of the number of staff and its selection, methods for improvement of staff performance and motivation of its professional development);

the right to independently manage material and technical resources and relevant investments (number of beds and intensity of their use, efficiency of use of equipment, premises, etc.);

the independent selection of effectiveness and efficiency indicators for one’s performance and use of these indicators in planning one’s future activities and in staff labor reimbursement;

4) a transfer made from the model of budget-funded financing of public and municipal health facilities based on their upkeeping to the model of health services-based provider financing under public medical servicing contracts using prospective output-based provider payment methods; under these conditions health facilities will get incentives to increase the quality of medical care and the cost-effectiveness of its delivery;

5) secured improvement in flexibility and financial stability of public and municipal health facilities under market conditions due to:

giving them an opportunity to carry out, in addition to their core activity of delivery of government-guaranteed free health services out of public funds, the activity of provision of for-a-fee health services with investment of addition financial resources received therefrom in further advancement of their performance and improvement of staff labor reimbursement, within the legal framework;

giving them a possibility to place free funds on deposit accounts with banks and receiving investment loans under guarantees from the owner (governance body), as necessary for ensuring development of their core activity;

6) the practically implemented “money follows the patient” principle, as associated with a transfer to performance-based payment for health services providers and seeks to meet, to the maximum extent possible, the needs, rights and interests of patients who are consumers of health services;

7) created conditions for development of competition in the environment of health services providers as a tool for improvement of quality and efficiency in the health sector; and

8) an improved overall level of fulfillment of legislative requirements in the part of realizing the constitutional human right for healthcare and medical care.


Tentative Indicators for Evaluation of Results of Cluster Implementation and Achievement of Their Objectives


Clustersuccessfulimplementationindicatorsare expected to reflect achievement of the following specific results:

1) created institutional, regulatory and legal fundamentals, as necessary for development and implementation, technical support and further advancement of the national DRG system;

2) formed adequate knowledge and practical skills of staff who would implement the DRG system in Ukraine;

3) a successfully implemented pilot project on implementation of the DRG system in the pilot health facilities selected by the MOH of Ukraine;

4) the DRG system implemented in all Ukrainian public and municipal health facilities that deliver secondary (specialized) and tertiary (highly specialized) medical care (by the end of implementation of the Project);

5) secondary (specialized) and tertiary (highly specialized) health facilities transferred to DRG-based financing (by the end of implementation of the Project).

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