Health Sector Reform in the Kurdistan Region — Iraq

Financing Reform, Primary Care, and Patient Safety

by C. Ross Anthony, Melinda Moore, Lee H. Hilborne, Andrew W. Mulcahy

This Article

RAND Health Quarterly, 2014; 4(3):2


In 2010, the Kurdistan Regional Government asked the RAND Corporation to help guide reform of the health care system in the Kurdistan Region of Iraq. The overarching goal of reform was to help establish a health system that would provide high–quality services efficiently to everyone to prevent, treat, and manage physical and mental illnesses and injuries. This article summarizes the second phase of RAND's work, when researchers analyzed three distinct but intertwined health policy issue areas: development of financing policy, implementation of early primary care recommendations, and evaluation of quality and patient safety. For health financing, the researchers reviewed the relevant literature, explored the issue in discussions with key stakeholders, developed and assessed various policy options, and developed plans or approaches to overcome barriers and achieve stated policy objectives. In the area of primary care, they developed and helped to implement a new management information system. In the area of quality and patient safety, they reviewed relevant literature, discussed issues and options with health leaders, and recommended an approach toward incremental implementation.

For more information, see RAND RR-490-1-KRG at

Full Text

In 2010, the Kurdistan Regional Government (KRG) asked the RAND Corporation to help guide reform of the health care system in the Kurdistan Region—Iraq (KRI). The overarching goal of reform was to help establish a health system that would provide high quality services efficiently to everyone to prevent, treat, and manage physical and mental illnesses and injuries. In the first phase of its work, RAND focused on (1) primary care, (2) projecting health care demand and utilization, and (3) laying out the principles of health finance reform. This article summarizes the second phase of RAND's work.

Between December 2011 and December 2012, which covered phase II of the project, RAND researchers analyzed three distinct but intertwined health policy issue areas: financing policy development, implementation of early primary care recommendations, and quality and patient safety assessment and recommendations. These were selected by the KRG's Minister of Health and Minister of Planning as areas of particular concern as it continues to improve its health care system. At the request of the ministers, the researchers examined each issue, reviewed the relevant literature, explored the issue in discussions with key stakeholders, developed and assessed various policy options, and developed plans or approaches to overcome barriers and achieve stated policy objectives. In the area of primary care, they developed and helped to implement a new management information system.

Health Care Financing in the Kurdistan Region—Iraq

The way a country finances its health care system is fundamental to the country's ability to meet its national health objectives. The KRG asked RAND to examine the current health care financing system and to develop options and a strategic road map to help guide reform efforts.

A health financing system must address five fundamental questions about care: who is eligible, what services are covered, who pays (funding), how funds are pooled, and how payment is made. In the KRI, the draft KRG Constitution makes it clear that all KRI residents have a right to, or are eligible for, basic health care services provided in the public sector, although exactly what services are covered (the benefits package) has never been defined. Funding for public sector health services comes primarily from the KRG budget, which is funded mostly by a 17-percent allocation from the Iraqi budget, while private sector care is paid for by individuals in cash.

Pooling of funds to spread risk occurs in the KRG budget, which provides budget allocations to providers, such as hospitals and primary health care centers (PHCs), and pays staff salaries. The way in which services are purchased ideally provides incentives to purchase the right amount of the right kind of services; however, presently in the KRI, such incentives are lacking. Physicians are paid a salary by the Ministry of Finance, and facilities receive a budget. There is no relationship between pay and performance; the system does not reward facilities that do a good job or physicians who work longer hours and provide more care in the public sector.

The private sector is estimated to account for 20 to 30 percent of health care spending. A substantial amount of this care is provided by physicians who are paid salaries in the public sector but spend significant amounts of time working in private sector clinics, where pay is higher. This phenomenon is often referred to as dual practice (DP).

Challenges to Implementing Health Financing Reform

To move forward with health financing reform, KRG policymakers will need to overcome some challenges:

  • Resources are insufficient—particularly in the public system—to adequately meet the current demand for health care, and the situation will worsen as the population grows and incomes increase.
  • In the proposed Constitution, it is clear that the KRG believes that health care is a basic public right, and the government is committed to providing a basic level of care to all KRI residents. Because that care has been provided thus far with very minimal out-of-pocket costs to the public, people have come to believe that they are entitled to free care from the public sector, an entitlement that would not be sustainable in the long run.
  • The data needed to make good management decisions, set financing policy, and manage a modern financing system are not currently available in the KRI.
  • The Ministry of Health (MOH) does not presently have the capacity, personnel, or funding required to implement or manage the envisioned health care financing reform.
  • Patient co-payments in the public sector are too low to raise funds or provide incentives for appropriate use.
  • The hospital sector is hampered by the need for renovation and modern equipment because of Saddam-era neglect, and hospital administrators have little control over staffing and minimal budget flexibility. Most hospital administrators are respected doctors with no management training.
  • The health financing system provides no incentives to reward work, performance, or productivity. This is particularly true among doctors whose salaries do not reflect the amount or quality of public sector service they provide.
  • The private sector is rapidly expanding without regulatory guidance or a strategic investment process.

Despite these challenges, this is a good time for the KRG to make key decisions about the future of its health care system. The country has significant resources—both human and mineral—to support its aspirations. The lack of an entrenched system presents an opportunity to develop and implement a strategic health care vision that improves the availability of high quality care and provides it more cost-effectively.

A Two-Phase Approach to Financing Reform

RAND researchers developed a strategic vision and road map to guide health financing reform in the KRI over the next decade. The road map lays out a two-phase approach to achieve the aims of the strategy. The focus for the next five to seven years should be on phase I; whether the KRG decides to move to phase II will depend on many factors that are years in the future.

Phase I, to be fully implemented over the next five to seven years, envisions moving from the present budget-funded system to an efficient and effective Accountable National Health Service (A-NHS). The government would be responsible for funding health care and continue to be responsible for providing services for all citizens except for those who opt voluntarily to use the private sector; however, revenue collection, incentives, and managerial responsibility would differ significantly from the status quo. The resulting system would provide better care, more clearly meet residents' needs, and encourage productivity and incorporate incentives for efficiency and constant quality improvement.

As part of the movement to an A-NHS, the overall package of benefits provided by the public system would be defined and clarified to be comprehensive but also limited by the resources available and the policy choices of policy leaders. A wage tax to help fund a national health insurance pool would be phased in, and incentives would be realigned to encourage efficiency and quality on the part of hospitals and doctors. At the end of phase I, hospitals will be independent cost centers that control their own budgets, and new rules and incentives concerning physicians working in both the public and private sectors will have been put into place. A new agency—either part of the MOH or independent of it—would manage a health insurance fund and collect contributions from the central government and distribute them to service providers. Moving to a well-functioning A-NHS is an ambitious undertaking that will require the focus of the KRG for the foreseeable future.

In phase II, the KRG should consider whether to move to a functioning social health insurance (SHI) system along with an organizational structure to manage the system. Everyone would be expected to obtain insurance coverage. The SHI system would process and pay claims based on a payment model that encouraged efficiency and increased productivity. If the KRG makes the choice to move to an SHI, the insurance fund would pay for services that could be provided in either public or private care facilities.

Prerequisites and Policy Actions for Implementing Financing Reform

RAND researchers identified prerequisites, as well as policy actions, needed in each phase to achieve the established objectives.

In phase I, prerequisites of change include improved data systems, a modernized MOH, improvements in the quality of care in the public sector, issuance of health cards, and establishment of an organizational structure to manage the new system.

Also in phase I, policy actions to be taken include encouraging the growth of private insurance to create needed skills, such as claim processing and payment, setting benefits packages, paying providers, evaluating risk and new technologies, and collecting and using data to guide business practices. A wage tax would be imposed on salaried employees working in government service or for large firms. Employers of foreign workers would be required to pay the full actuarial costs of their insurance. Other policy actions include explicitly defining the package of publicly supplied health benefits to which the government obligates itself, hospital sector reform, and policy changes related to physicians who practice in both the public and private sectors.

Once a fully functioning National Health Service (NHS) has been well established (over five to seven years), the KRG may wish to move to phase II and adopt an SHI system with supplemental private insurance to fund public health care in the KRI.

In phase II, prerequisites and enablers include enhancing the KRG's ability to levy and collect taxes, synchronizing policy with Baghdad, and establishing a new Social Insurance Agency (SIA), which would be responsible for developing payment policies, processing claims, and paying providers for the services they render.

Also in phase II, policy actions include introducing an SHI system, building on the structure to manage the system developed in phase I. In collaboration with the Ministry of Finance (MOF), the new agency would set wage-tax rates and SHI rates; the KRG may choose to subsidize some groups and develop a system to provide care for the poor.

Supplemental private insurance would be allowed and encouraged in both phases to supplement payment for uncovered or partially covered services in the public sector and to help individuals spread their risk should they decide to use the private sector. People would still be required to support the public system fully even if they choose to purchase supplemental insurance. We would not recommend the adoption of a policy that allows for replacement insurance, in which private insurance is allowed to replace purchase of public insurance, because this almost always leads to two-tiered health care and lower quality in the public system.

Addressing the Dual Practice Challenge

The term dual practice refers to the current practice in the KRI, in which physicians, who are paid a salary by the MOF to practice in the public health sector, work only a few hours in the public hospitals or health centers before leaving for their private practices. Physicians are also guaranteed a pension whose sum is not related to the quality or amount of care they provide. After a detailed assessment, RAND researchers concluded that DP in the KRI was inefficient and costly. It robs the public sector of the manpower it needs to fulfill its obligations and is ultimately a significant barrier to overall financing and hospital reform.

This article describes policy options for addressing the challenges associated with DP and examines those options from different perspectives, including effects on the supply of physicians in the public sector, ease of implementing new policies, regulatory complexity, quality of care, efficiency, and equity. After presenting the ramifications of alternative policies, we recommend an approach to begin to address the DP issue immediately—specifically, require physicians to work for three to five years in the public health sector before working in the private sector, link wages to number of hours worked, and reform physician pensions to link payouts to years of service.

In the longer run, when better data systems are operational and hospital reform is complete, quality of care or procedures performed could be incorporated as measures so that a comprehensive pay-for-performance policy could be established.

Primary Care

In the area of primary care, RAND built on its extensive work since 2010 to begin implementing change. Drawing on our earlier research and experience, we defined primary care targets/benchmarks: recommended staffing, equipment, and a suggested list of services that we proposed should be the standard services offered at each type or level of health center. The recommendations for staffing, equipment, and services were vetted among health policy leaders in the KRI before being finalized. The Minister of Health accepted these as the new policy of the MOH, translated the document RAND developed into Kurdish, and disseminated it to the Directors General of all governorates to use as their planning targets.

To support implementation of the policy, we developed a management information system so that the MOH could determine which health centers have the specified staffing and equipment and are providing the expected services. The management information system provides a wide range of information for ongoing planning and management at all levels across the KRI. We developed and pilot-tested the data form, revised it based on testing in Duhok and in-depth discussion with representatives from all general directorates, and began to implement it with the assistance of the Minister of Health and Departments of Health (DOHs) in all governorates. The MOH translated the form into Kurdish and sent it to all DOHs for data collection. As of late November 2012, only Duhok had submitted completed data, but data were pending from the other governorates.

The data enable the KRG to compare the standards of service with the existing situations, thus giving the MOH and DOHs a powerful tool to help manage primary care and guide policy reform.

Quality and Patient Safety

We conducted an initial assessment of patient safety—a vital dimension of overall quality of care—in public hospitals in the KRI. We based our assessment on site visits and discussions with officials, health care managers, and care providers throughout the KRI. We examined patient safety in the context of the landmark framework developed by the U.S. Institute of Medicine.

Initial Findings from the Patient Safety Assessment

An important observation emerging from our assessment was that providers are aware of limitations in their ability to deliver care in the current practice milieu. This realization is key because the most powerful enabler of change is a cadre of professionals who will be responsible for “owning” the future health care delivery system. The RAND team also learned about specific quality improvement initiatives already under way—for example, at the Azadi Teaching Hospital in Duhok—about specific legislation designed to protect patient rights.

However, what was lacking was a consistent, organized plan for improving quality and safety across all health care facilities. Most efforts appeared to depend on the initiatives and desires of specific individuals within isolated hospital systems.

Given the current state of health care delivery in the KRG, an explicit assessment against each of the Institute of Medicine goals was not possible. However, some initial specific efforts are beginning in some domains of quality (e.g., safety). By contrast, DP, as it exists in the region, creates a system that is not equitable for all patients, encourages inefficiencies in the delivery of care, and challenges the combined public and private systems (mostly the public system) when attempting to provide timely care. Because physicians have split loyalties between their public and private practices, the delivery system that exists is more provider-centric than patient-centric.

Our Recommendations for Improving Patient Safety

Given our findings and input from the MOH and Ministry of Planning (MOP), we recommend four concrete activities to guide the KRI's health care providers toward international standards. The first recommendation, which focuses on achieving accreditation for health care facilities, is a phased activity that could begin now, although full implementation would occur over the next five years. The other three recommendations could be implemented over the next year. The recommendations are summarized here.

Recommendation 1: Pursue Internationally Recognized Accreditation for Health Care Facilities in the Kurdistan Region—Iraq

The KRG should develop an accreditation model for health care facilities that is consistent with internationally recognized standards for health care delivery. Accreditation efforts should begin with hospitals, with later expansion to other health care delivery venues. Of the many accreditation models available worldwide, we suggest using the Joint Commission International accreditation model because it is internationally recognized and has been well received throughout the Middle East. Further, because so many hospitals and health systems in the geographic region have already sought accreditation, there are colleagues in neighboring countries who can serve as resources for Kurdistan's health care leaders.

The Joint Commission International defines five major “quality essentials” under which standards and guidelines are classified. Given these, we recommend five specific actions to the MOH for pursuing international accreditation:

  • Establish a leadership and accountability team. Both administrative and clinical leadership are essential, and senior leadership will set the direction for the entire organization.
  • Establish a workforce team to enhance human resource management. Specifically, the region must take responsibility for establishing professional licensure requirements consistent with international standards for education, training, and experience.
  • Establish a safe-environment-of-care team. Requirements for ensuring a safe environment will vary across hospital settings but generally include routine inspection of facilities, guaranteeing availability of safe drinking water and electrical power, and establishing programs to reduce nosocomial infections and use masks, gloves, and other protections as necessary.
  • Establish a team focused on the clinical care of patients. Requirements include a reliable process for correctly identifying patients, obtaining informed consent when appropriate, providing laboratory and diagnostic imaging services, ensuring that services are appropriate to patient needs, and educating patients and families to participate in patient care.
  • Establish a quality and safety team. Elements here include an adverse-event reporting system, special attention to high-risk processes and high-risk patients, and a system in which patients and family can voice concerns with quality of care, in which appropriate clinical practice guidelines and standards are used, and in which it is generally recognized that everyone in an organization is responsible for improving quality.
Recommendation 2: Examine Accredited Hospitals to Learn How They Achieved Success

Many hospitals in the region have attained Joint Commission International accreditation. Visits to facilities could help KRI health care leaders understand how hospitals and countries have achieved accreditation and develop a network of colleagues within the region who can provide support and guidance.

Recommendation 3: Attend a Joint Commission International Practicum Program

In a Joint Commission International practicum program, international and regional health care leaders present a hands-on educational program that solidifies participants' understanding of requirements and strategies for pursuing accreditation. We recommend that the team from Kurdistan include regional government leaders and hospital leadership from two or three hospitals that commit to be the first to work toward accreditation.

Recommendation 4: Establish a Regional Leadership Team

We recommend the establishment of a KRG Quality Health Council led by the MOH and MOP. The council would provide important oversight and would include five teams of experts in the content of each of the five quality essentials defined by the Joint Commission International framework. Each team can establish specific goals for hospitals within the region and identify unifying programs and concepts to help facilities reach those goals. The chair of each team, or a designee, might be appropriate for participation in the practicum (recommendation 3).

Implementing Policies for Pursuing Change

Informed by detailed assessments and stakeholder input, we recommend specific, practical, achievable policy reforms in the areas of health care financing, primary care, and patient safety. The set of initiatives we have recommended is ambitious. However, as was clear in our discussions with both the governmental and provider communities, the desire to improve Kurdistan's health care system is genuine and strong.

If fully adopted, the reforms presented here would have a significant impact on improving health care in the KRI over the next several years. They would also provide powerful incentives that would promote higher quality and greater efficiency in health care for all KRI residents.

The research described in this article was sponsored by the Kurdistan Regional Government and was conducted in RAND Health, a unit of the RAND Corporation.

RAND Health Quarterly is produced by the RAND Corporation. ISSN 2162-8254.