The World Bank Transforming Health Systems for Universal Care (P152394) REPORT NO.: RES32133 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF TRANSFORMING HEALTH SYSTEMS FOR UNIVERSAL CARE APPROVED ON JUNE 15, 2016 TO THE REPUBLIC OF KENYA HEALTH, NUTRITION, AND POPULATION GLOBAL PRACTICE AFRICA REGION Regional Vice President: Hafez M. H. Ghanem Country Director: Carlos Felipe Jaramillo Senior Global Practice Director: Timothy Grant Evans Practice Manager/Manager: Magnus Lindelow Task Team Leader: Jane Chuma, Toni Lee Kuguru The World Bank Transforming Health Systems for Universal Care (P152394) ABBREVIATIONS AND ACRONYMS ANC Antenatal Care BCR Benefit-to-cost Ratio BEmONC Basic Emergency Obstetric and Neonatal Care CBA Cost-benefit Analysis CS Consulting Service DHIS District Health Information System FM Financial Management GFF TF Global Financing Facility Trust Fund GoK Government of Kenya MoH Ministry of Health MTR Midterm Review PAD Project Appraisal Document PDO Project Development Objective PFM Public Financial Management PHC Primary Health Care PHRD TF Policy and Human Resources Development Trust Fund PMT Project Management Team RMNCAH Reproductive, Maternal, Newborn, Child, and Adolescent Health TWG Technical Working Group UHC Universal Health Coverage The World Bank Transforming Health Systems for Universal Care (P152394) BASIC DATA Product Information Project ID Financing Instrument P152394 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 15-Jun-2016 30-Sep-2021 Organizations Borrower Responsible Agency Kenya National Treasury Ministry of Health Project Development Objective (PDO) Original PDO The project development objective is to improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services. Current PDO The project development objective is to improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing Net Effectivene Commitme Disburs Undisburs Ln/Cr/Tf Approval Signing Closing ss nt ed ed 15-Jun- 29-Sep- 30-Sep- IDA-58360 04-Jul-2016 150.00 39.16 106.90 2016 2016 2021 15-Jun- 29-Sep- 30-Sep- TF-A2561 04-Jul-2016 40.00 17.83 22.17 2016 2016 2021 15-Jun- 30-Jun- TF-A2792 04-Jul-2016 04-Jul-2016 1.10 .44 .66 2016 2020 The World Bank Transforming Health Systems for Universal Care (P152394) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Transforming Health Systems for Universal Care (P152394) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. PROJECT STATUS 1. The project, which aims to ‘improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services’, was approved on June 15, 2016, and became effective on September 29, 2016. The project seeks to achieve this project development objective (PDO) by (a) improving access to and demand for quality primary health care (PHC) services at the county level with a focus on reproductive, maternal, newborn, child, and adolescent health (RMNCAH) services (Component 1); (b) strengthening institutional capacity in selected key areas to improve utilization and quality of PHC services (Component 2); and (c) supporting cross-county and intergovernmental collaboration in the recently devolved Kenyan health system (Component 3). The project is placing a strong focus on results by allocating resources to each county based on their improved coverage of essential PHC services that are directly linked to the PDO and other factors, including equity. 2. There were delays of over a year in initiating implementation because of a series of issues mostly not under the direct control of the implementing entities. These issues included (a) lapsed loans in Kenya’s portfolio that prevented any advances to new projects until early February 2017; (b) difficulty in amending the County Allocation of Revenue Act, hindering disbursement of conditional grants to counties in FY2016/17; (c) 11 months of health workers’ strike that ended in October 2017; (d) multiple elections and transitions between August 2017 and December 2017 with the change of the majority of the county government leadership (for example, Governors and County Executive Committee for health and finance); and (e) suboptimal functionality of and limited human resources for the management of the integrated financial management information system. 3. Project implementation is slowly getting back on track. Currently, progress toward achievement of the PDO and the overall implementation progress are both rated Moderately Satisfactory. The PDO indicators that worsened during the protracted health workers’ strike in 2017 have improved and three out of four PDO-level indicators and six out of eight intermediate results indicators were either achieved or surpassed the Year 2 targets and are on track to achieve the end-of-project targets (among those due for measurement in Year 2). All 47 counties continue to prepare integrated annual work plans that incorporate the county budget as well as the conditional grants (from both the national government and development partners, including the funds from the project) and are at various stages of implementing the activities that each county has proposed to address key bottlenecks in providing PHC services. The national entities have also been implementing various activities, including community nurse and midwifery training for 800 students. However, the disbursement rates are below Year 2 targets. The low disbursements are associated with delays in documenting expenditures at the county level, which affects the disbursement rate, as the project uses the statement of expenditure method; delays in internal approvals within the Ministry of Health (MoH); and limited fiduciary capacity to manage the workload. As of June 14, 2019, the project disbursed US$57.4 million, 31 percent of the total financing: US$39.2 million out of US$150.0 million from the IDA credit and US$17.8 million out of US$41.1 million from the Global Financing Facility Trust Fund (GFF TF) and US$0.4 million out of US$1.1 million from the Japan Policy and Human Resources Development Fund (PHRD TF). The World Bank Transforming Health Systems for Universal Care (P152394) B. RATIONALE FOR RESTRUCTURING 4. The rationale for the restructuring is twofold: (a) various implementation challenges requiring a restructuring were identified during the recently concluded mid-term review (MTR, April 2019) and (b) the Government of Kenya (GoK) universal health coverage (UHC) agenda. Each of these is described in more detail below. 5. The MTR review conducted in April 2019 identified various challenges affecting implementation and potential solutions to address them. Key issues identified include the following: (a) Results Framework. Progress toward achieving the PDO is Moderately Satisfactory. The Results Framework will be revised to (i) ensure that it adequately reflects the PDO; (ii) reflect updated baseline values that were revised after project preparation; (iii) replace indicators with suboptimal data quality with more reliable indicators; and (iv) review targets based on the achievement analysis, revised baseline values, and revised indicators. (b) County eligibility criteria and resource allocation formula. The project requires that, from Year 2, counties meet a minimum set of conditions to be eligible for funding. These include the share of the county budget allocation (for Year 2) and expenditure (for Years 3–5) for health (excluding conditional grants for health) needing to be higher than the previous year, but not less than 20 percent. However, several counties are already allocating over 30 percent of their overall budget to health, which in some cases, reflects large development expenditure that cannot be sustained over time. Furthermore, there are limitations in the timeliness and availability of expenditure data across the 47 counties. Recognizing this, a revision of the eligibility criteria is required. In the absence of a public financial management (PFM) condition, timely and complete transfer of health funds from the County Revenue Fund to the Special Purpose Account, which is a ring-fenced account for donor conditional grants, is at risk. Therefore, there is need to formalize a PFM condition which ensures that the Project county allocations are transferred on time and that the full amount of the allocation is transferred. (c) Institutional and implementation arrangements. The functionality of the existing institutional and implementational arrangements is suboptimal. The project sub-Technical Working Group (TWG), which is responsible for facilitating key decisions affecting project implementation at both levels of the Government and coordination among various implementing entities, has only met twice since project effectiveness and has not performed their functions as envisaged in the Project Appraisal Document (PAD). To strengthen the governance requirements, a Steering Committee is proposed. 6. The GoK is committed to achieving UHC by 2022. (a) In his inaugural speech, the President of the Republic of Kenya announced UHC as a key pillar that the Government will deliver during his second term. The current high-level political commitment presents an opportunity for Kenya to fast-track progress toward UHC. (b) To achieve the UHC goal, the GoK requested the World Bank to support UHC implementation in four counties as a first phase of implementing the UHC vision. In a letter dated June 8, The World Bank Transforming Health Systems for Universal Care (P152394) 2018, the GoK requested the World Bank to restructure the project to respond to the changing government priorities and co-finance the implementation of the UHC initiative. In a letter dated November 23, 2018, the government requested the Bank to support the UHC Phase I, which involves provision of free health services through removal of user fees in level 4 and 5 hospitals in four counties and strengthening service delivery in all levels of care (see 6.d). (c) In Phase I of UHC, level 4 and 5 hospitals in participating counties are compensated for revenue lost due to user fees removal and additional resources provided to cater for expected increased utilization of health services. The removal of user fees is expected to increase utilization of health services and reduce the financial hardship among the underserved, thereby complementing the project activities (especially those under Component 1 – Improving Primary Health Care Results) and accelerating achievement of the PDO. (d) A total of KSh 3.9 billion will be allocated to the four counties to support the UHC agenda based on a criterion1 and is allocated as follows:2 (i) 80.91 percent as compensation for basic and specialized services provided, of which 70 percent are drawing rights from the Kenya Medical Supplies Agency (KEMSA), the central drug and equipment procurement agency. (ii) 16.95 percent as health system strengthening investments to be channeled through the counties to support additional staff, training, and investments in the health management information system. (iii) 2.07 percent as additional financing to community health workers program. (iv) 0.08 percent as core public health investments in disease surveillance. (e) Phase I of UHC is being implemented in four counties purposively selected by the GoK to represent varying disease burden and demographic characteristics as follows: (a) Kisumu, a densely populated, high HIV burden county; (b) Nyeri, a county with high levels of noncommunicable diseases; (c) Machakos, a moderate burden of disease county, with high rates of traffic accidents; and (d) Isiolo, a sparsely populated, arid county with a nomadic population. The main characteristics of the four counties are presented in table 1. 1 The amount allocated to each county was based on criteria that take into consideration the equitable share ratio, population size, poverty levels, outpatient and inpatient utilization rates, health facility density, health workforce density, disease burden, and crude mortality rate. 2 The percentage allocation for each category is based on recommendations of the Health Benefits Package Advisory Panel. The World Bank Transforming Health Systems for Universal Care (P152394) Table 1. Characteristics of Phase I UHC Counties Indicator Kisumu Nyeri Machakos Isiolo National Population (2017) 1,158,402 814,394 1,203,041 157,000 47,626,685 Poverty head count (2015/16) (%) 33.9 19.3 23.3 51.9 36.7 HIV prevalence (%) 19.9 3.4 4.5 3.8 5.9 % of county budget allocated to health 27.1 35.3 35.3 23.7 27.0 (FY2017/18) % of households incurring catastrophic health 4.2 7.1 7.2 8.7 6.2 expenditure (2013) Number of level 2 and 3 facilities 191 300 293 47 831 Number of hospitals 23 10 11 3 509 (f) The Government is cognizant of the need for a phased implementation of UHC coupled with robust monitoring and evaluation (M&E) that can provide timely information to optimize scale-up plans. Phase I of UHC will be for 12 months, based on which the GoK plans to roll out UHC nationwide. The phased implementation of UHC will enable the GoK to rapidly test and draw lessons to inform the full scale-up by 2022. Specifically, Phase I will provide lessons on: (i) The ability of the health system in the four counties to respond and adapt to increased demand of health services and the adequacy of the financing model (supply-side factors); (ii) The extent to which providing free health care services enables improved utilization of health care services and financial risk protection (by reducing levels of out-of-pocket payments) (demand-side factors); and (iii) The institutional and implementation capacity and factors that hinder successful rollout of the UHC program. Particular attention will be given to the role of PFM in service delivery and its implications for efficiency and effectiveness of public health systems. (g) The M&E for Phase I of UHC will focus on its operationalization/implementation. While a rigorous impact evaluation of UHC Phase I will not be feasible given the nature of the implementation arrangements, continuous process evaluation focusing on demand- and supply-side factors, and institutional capacity to implement UHC initiative will be an integral part of the M&E. The planned evaluation will take two forms: (i) A household survey to investigate changes in health service utilization and expenditures. The recently completed 2018 household health expenditure and utilization survey (KHHEUS 2018), a nationally and county representative survey, will provide baseline data on utilization and expenditure patterns in the four counties. To track changes in health expenditure and utilization over Phase I, a household survey will be implemented jointly with the Kenya National Bureau of Statistics. (ii) Process evaluation will be undertaken to document the implementation experience. Two rounds of process evaluations will be conducted to: review the functionality (what is working, what is not working, how and why) of the governance, implementation The World Bank Transforming Health Systems for Universal Care (P152394) arrangements and processes - including fund flow and service delivery arrangements - and how these influence the outcome of the Phase I of UHC; document the experiences and opinions of different stakeholders in the implementation, with a focus on service delivery, financial management, provision of supplies among others; identify solutions to address implementation bottlenecks and document the enablers which can be leveraged for successful scale up. (iii) Facility exit interviews will be conducted to document service users’ firsthand experiences interacting with the health system under UHC. (iv) Routine analysis and reporting on service utilization data and health commodities and medical supplies. Kenya uses the District Health Information System 2 (DHIS2) to collect routine service utilization data. Additionally, the KEMSA operates a logistics information system of the supplies delivered to health facilities. These data will be analyzed to identify trends in utilization levels, supplies distribution patterns, revenue and expenditure. II. DESCRIPTION OF PROPOSED CHANGES 7. The Level 2 restructuring proposes the following changes to the project: (a) modification of the components’ scope and cost to accommodate the GoK’s UHC initiative, (b) reallocation of the project financing between disbursement categories, (c) amendment to the project’s Results Framework, (d) adjustment of the institutional and implementation arrangements, and (e) modification of risk ratings. 8. Modification of counties’ eligibility criteria. To strengthen the funding flow arrangements to the counties and address concerns raised regarding sustainability of annual budgetary increases to the health sector and timely availability of expenditure data, the following changes are required: (a) formalize the PFM condition where a county’s annual allocation will be adjusted based on timely and full disbursement of funds from the County Revenue Fund to the Special Purpose Account, (b) for Years 3–5, eligibility of the county allocation will be based on budget data rather than expenditure data, and (c) counties that are already allocating equal to or more than 30 percent of total county budget to health will not be required to increase allocation in subsequent years. To effect these changes, the MoH will revise the intergovernmental participatory agreement, which guides the collaboration between the counties and the MoH on project implementation. 9. Modification of the components’ scope and cost to accommodate UHC Phase I. Component 2 (Strengthening Institutional Capacity) aims to strengthen institutional capacity to better deliver quality PHC services at the county level. In particular, Subcomponent 2.3 ‘Supporting Health Financing Reforms towards UHC’ plans to strengthen the MoH's capacity to lead health financing reforms toward UHC by (a) disseminating the health financing policy/strategy, (b) conducting analytical work to inform the implementation of health financing reforms, and (c) building capacity of the UHC leadership at the national and county levels. The original project design included scope for GoK to design and pilot different health financing mechanisms (of which removal of use fees is one), assess their feasibility in the Kenyan context and in so doing identify the most appropriate design mechanism for UHC scale-up. Operational research to evaluate the impact of health financing pilots was an integral part of Component 2.3. However, while the potential areas for pilot and operational research identified during project The World Bank Transforming Health Systems for Universal Care (P152394) preparation to inform the scale-up of health financing reforms for UHC are well aligned with the current UHC agenda, the project planned to finance small operational research only. Therefore, resources allocated to this subcomponent are not adequate to meet the Government’s request to support Phase I of UHC. Out of the estimated total cost of up to US$39 million, the GoK will finance US$25 million from domestic resources and the World Bank will co-finance US$14 million. The World Bank resources will go toward procuring medicines, diagnostics, medical supplies and other commodities required to provide services. Procurement will be conducted by the KEMSA3 on behalf of the MoH for onward distribution to the four counties. KEMSA is already procuring family planning commodities under the Project. The MoH will prepare a work plan on how these funds will be spent and will share it with the World Bank for approval. In a discussion with the GoK, it was agreed to reallocate US$14 million from Subcomponent 3.1 ‘Cross-county and Intergovernmental Collaboration’ to Subcomponent 2.3 to support the UHC agenda. Subcomponent 3.1 aims to promote cross-county initiatives and intergovernmental collaboration to address common demand- and supply-side barriers to improve delivery and use of quality PHC. The remaining US$2 million for Subcomponent 3.1 will continue financing the proposals from counties and national entities to improve the delivery and use of quality PHC, but with a limited scope for one round. Table 2. Project Cost by Component (US$, millions) Current Proposed Total Project Components Project GFF PHRD Project GFF PHRD IDA GoK IDA cost Cost TF TF Cost TF TF 1. Improving Primary Health 150.0 150.0 115.0 35.0 — 150.0 - 115.0 35.0 — Care Results 2. Strengthening 54.1 15.1 9.0 5.0 1.1 29.1 25.0 23.0 5.0 1.1 Institutional Capacity 3. Cross- 12.0 county/Intergovernmental 26.0 26.0 — — 12.0 — 12.0 — — Collaboration and Project Management Total project costs 216.1 191.1 150.0 40.0 1.1 191.1 25.0 150.0 40.0 1.1 10. Reallocation of the project financing between disbursement categories. The change in cost of the project components would also result in the reallocation of the project financing4 between disbursement categories, as shown in table 3. Table 3. Project Financing by Disbursement Category (US$, millions) Current Proposed Disbursement Category GFF PHRD GFF PHRD Financing IDA Financing IDA TF TF TF TF 1A. Performance Grants under Part 130.0 105.0 25.0 — 130.0 105.0 25.0 — A1 of the Project. 3 KEMSA is a government parastatal under the MoH and the procuring agency for essential medicines and medical supplies for the public sector 4 Other than government financing The World Bank Transforming Health Systems for Universal Care (P152394) Current Proposed Disbursement Category GFF PHRD GFF PHRD Financing IDA Financing IDA TF TF TF TF 1B. Performance Grants under Part 1.2 1.2 — — 1.2 1.2 — — B2 of the Project 2A. Goods, consulting services , non-consulting services, training, 32.8 17.8 15.0 — 32.8 17.8 15.0 — operating costs under Parts A2; B1 other than (b)(i) and of the Project 2B. Goods, consulting services, non-consulting services, training, 1.1 — — 1.1 1.1 — — 1.1 and operating costs under B1(b)(i) of the Project 2C. Goods under Part B1(c) (iv) of the Project 14.0 14.0 3. Goods, works, consulting services, non-consulting services, 26.0 26.0 — — 12.0 12.0 — — training, and operating costs under Part C of the Project Total financing 191.1 150.0 40.0 1.1 191.1 150.0 40.0 1.1 11. Amendment of the project’s Results Framework. The changes to the Results Framework are discussed in detail in table 4. Indicators shown in italics are those affected by the revisions (changes in the indicator, its definition, categorization, baseline or target values, or dropped). Table 4. Changes to Results Framework PDO Indicators at Project Indicator Post MTR/Indicator Rationale Appraisal (PAD) Definition Post MTR PDO-level indicators (utilization) This is an internationally recognized proxy for completion of the vaccination series and Children younger than 1 New indicator. Children the ability of the health system to reach year who were fully immunized with the third dose of children multiple times with an essential immunized (Percentage) pentavalent (Percentage) service and it is less prone to measurement issues. Targets were revised (increased) based on project achievement by December 2018. Pregnant women attending at least four ANC visits Note: There are concerns about double (Percentage) counting women because of the inability of the DHIS to track women over time. Births attended by skilled Revised targets (increased) based on Project health personnel achievement by the MTR. (Percentage) The World Bank Transforming Health Systems for Universal Care (P152394) PDO Indicators at Project Indicator Post MTR/Indicator Rationale Appraisal (PAD) Definition Post MTR Baseline value and targets were revised based on update data and Project achievement by MTR. Women between the age of 15–49 years currently using To note: the methodology to calculate this a modern FP method indicator is being revised due to challenges (Percentage) with double counting women. The values for this indicator may change in the next 6– 12 months. PDO-level indicators (quality) Revised indicator definition to specify that Definition: Public health facilities Inspected facilities meeting public health facilities and correct the score (L2–L4) inspected which achieve at safety standards to be 60 percent or more (instead of 61). least 60 or more percent using the (Percentage) JHIC. New data source: DHIS2. This indicator was upgraded from an intermediate result indicator to PDO-level indicator for quality of care as it reflects the completeness/quality of ANC visits (clinical Pregnant women attending quality), and/or the availability of iron folic ANC supplemented with IFA acid at facilities (structural quality). (Percentage) The targets from year 3 to end target were revised based on Project achievement by the MTR. Intermediate indicators Component 1: Improved primary health care results. Indicator is dropped due to data quality Health facilities offering issues including self-reported data without Basic Emergency Obstetric verification if the BEmONC functions being and Neonatal Care Dropped actually present, denominator (# facilities) (BEmONC) Services not regularly updated, and unclear (Percentage) definition of facilities supposed to offer BEmONC services. The indicator and its description were People who have received Definition. Number of children revised according to the new guidelines for essential health, nutrition, receiving any vaccine between age the corporate indicators. This change had and population services 0 and 59 months and number of already been made through an interim ISR (Number) deliveries attended by skilled (ISR 06). Moreover, we added intermediate [Corporate Indicator] personnel (Cumulative number) targets. Component 2: Strengthened institutional capacity. The World Bank Transforming Health Systems for Universal Care (P152394) PDO Indicators at Project Indicator Post MTR/Indicator Rationale Appraisal (PAD) Definition Post MTR The definition was revised to specify that the project will track inspections in public Definition. Public health facilities health facilities. The indicator was Facilities inspected for (L2–L4) inspected for safety maintained but targets were revised from safety standards standards (Number). percentage to number to address data quality issues related to the list of facilities not being routinely updated. ‘Health facilities’ was removed because New indicator. Reports submitted level 2 and 3 facilities do not submit reports. to the DHIS in a timely manner Facilities submitting Form 713 was removed because the data (Number) complete DHIS data in a from form 713 were moved to the reporting Definition. Average percentage of timely manner tool M0H 711. The baseline value and forms 710 and 711 submitted to (Percentage) targets were revised according to the new the DHIS by the 15th of the definition and based on Project following month. achievement by MTR. Based on the Children’s Code, article 157, in New indicator. Births registered Kenya declarations of birth must be done within 6 months of occurrence within 6 months to the civil registrar of the (Percentage) place of birth and 8 months for births Registration of births occurring outside the municipality (Percentage) Definition. Births registered at perimeter or in a foreign country. Therefore, registration office within 6 months this indicator reflects both the number and of occurrence. timeliness of registration. Timeliness was specified in the Results Framework. The indicator now includes UHC-related RMNCAH-related research. The end target for this indicator is operations research New indicator. RMNCAH- and reduced from 3 to 2 because initially completed to inform UHC-related research completed identified research questions have already policy/strategy (Cumulative to inform policy/strategy. been investigated by partners. Furthermore, Number) it was specified that the target is cumulative. A benefits package developed, costed, and No change. disseminated (Number) Lessons learned from UHC Results from the process evaluation of UHC Phase I documented and New phase I should be documented and disseminated disseminated to inform the scale up. Component 3: Cross-county/intergovernmental collaboration and project management. The indicator was defined to measure the Functional community number of functional community units using health units (Number) three criteria according to the national The World Bank Transforming Health Systems for Universal Care (P152394) PDO Indicators at Project Indicator Post MTR/Indicator Rationale Appraisal (PAD) Definition Post MTR Definition. Average number of guidelines (see PAD). However, there are no community units that report data to measure all three criteria. To through the DHIS. address this flaw, the functionality of the community unit is measured using the number of reports submitted using data from the DHIS (new data source). Baseline and target values were revised accordingly. Grievances registered related to the delivery of No changes. project benefits that are addressed (Percentage) Implementing entities Definition. Implementing entities The description of this indicator was revised submitting the annual submitting the annual FM and to define ‘on time’ according to the Financial Management technical report no later than 45 Financial Agreement. Also, the targets were (FM) and technical report days after the end of each revised to maintain achieved results by on time (Percentage) calendar quarter. MTR. Note: DHIS = District Health Information System; ANC = Antenatal Care; FP = Family Planning. 12. Adjustment of the institutional and implementation arrangements. To strengthen the institutional and implementation arrangements, the project sub-TWG will be replaced by a project Steering Committee. The Steering Committee will provide overall oversight for the project and will be co- chaired by the Principal Secretary, MoH and the Chief Executive Officer, Council of Governors. They will meet quarterly to review implementation progress, facilitate key decisions that affect project implementation at both levels of governments, and provide guidance on management of implementation bottlenecks. The technical functions5 which were the responsibility of the sub-TWG will be taken up by the Project Management Team (PMT), supported by subject matter experts from the MoH. Technical assistance will be provided to the PMT as needed. To facilitate the implementation of UHC Phase I, institutional and implementation arrangements will be adjusted to include the entities responsible for implementation, management, and oversight of UHC Phase I within the existing government structure. Figure 1 shows the revised institutional and implementation arrangements. 5The sub-TWG was responsible for (a) validating the technical soundness of annual work plans and/or monitoring their implementation status, (b) verifying the county’s performance; (c) making a final selection of the proposals to support cross- county and intergovernmental collaboration and monitor implementation; and (d) reviewing states’ quarterly progress reports. The World Bank Transforming Health Systems for Universal Care (P152394) Figure 1. Revised Institutional and Implementation Arrangements a Intergovermental Forum Stewardship and oversight for Health Project SC Coordination and project managmenet (including PMT financial/technical reporting) Implementation and 47 county MoH (Quality, M&E, KMTC, CRD monitoring governments FH, DoUHC) Note: SC = Steering Committee; PMT = Project Management Team; M&E = Monitoring and Evaluation; FH = Family Health; DoUHC = Department of UHC; KMTC = Kenya Medical Training College; CRD = Civil Registration Department. a. Any changes to the existing institutional and implementation arrangements are noted in bold. 13. Modification of risk ratings. While the ‘overall’ risk of the project continues to be rated Substantial, ‘sector strategies and policies’ is now rated ‘Substantial’ instead of ‘Moderate’ due to an intrinsic risk of implementing an ambitious initiative (UHC). The project will mitigate these risks by building the capacity of the national and county governments to lead the reform process and identify the best UHC model for Kenya. The rating for social safeguards has changed from ‘moderate’ to ‘substantial’ largely due to delays in rolling out safeguard instruments to the county level and limited sensitization of vulnerable and marginalized groups on the project services. However, this change reflects the status of the overall project implementation and is not specific to this restructuring. III. APPRAISAL SUMMARY A. TECHNICAL ANALYSIS 14. Universal health coverage, defined as ensuring all people receive quality health services when needed (promotive, preventive, curative, and rehabilitative) without being exposed to financial hardship, is a target for Sustainable Development Goal 3. UHC also potentially contributes toward the achievement of other key Sustainable Development Goals, including poverty reduction, reduced gender inequality, inclusive economic growth, and reduced inequalities. 15. The benefits of UHC are clear. High out-of-pocket payments are estimated to push about 1 million Kenyans into poverty each year, while close to 15 percent do not seek needed services because of affordability barriers. User charges are associated with reduced adherence to treatment, particularly for chronic conditions, resulting in advancement of disease, hospitalization, and more expensive treatments. In addition, many other indirect costs are incurred because of illness, which affect households’ economic The World Bank Transforming Health Systems for Universal Care (P152394) development. Evidence from countries that have made progress toward UHC shows that removing financial barriers, accompanied by improvements in quality of care through strengthening infrastructure and human resources, as well as ensuring availability of medicines and diagnostic equipment, have resulted in significant improvements in utilization of services and decline in levels of out-of-pocket payments among the poor. Moreover, removal of user fees is associated with improved health outcomes, particularly among lower-income groups and children living in lower-and-middle-income-countries. By removing user fees in public health facilities in the four counties, UHC Phase I could improve access and reduce disparities in access to health care services between the rich and the poor. However, removal of user fees alone will not necessarily translate into UHC, unless Kenya puts in place adequate measures to address increased demand for services, including, but not limited to, additional human resources requirements, commodities and other inputs, and financial resources to compensate facilities for revenue gaps. Also important is the need to strengthen political commitment for reform and continuous engagement of all stakeholders on policy change. B. ECONOMIC and FINANCIAL ANALYSIS 16. UHC brings significant health and economic benefits. UHC means that all people receive quality health services without suffering financial hardship. Under UHC people have access to a full range of preventive, curative, rehabilitative, and palliative health services that improve health outcomes and reduce mortality, especially for the poorer. Lower mortality rates and longer life expectancy translate into a larger and more productive workforce, thus contributing to the country’s economic development. UHC also ensures that people who receive health services do not suffer from financial hardships, that is, they do not fall into or remain trapped in poverty due to high out-of-pocket expenditures. Lower incidence of impoverishing health spending means that households have more resources to make investments from which the country may benefit. 17. The revised cost-benefit analysis (CBA) shows that the project remains an economically sound investment and supporting UHC Phase I further increases its return on investment. The present value of the project’s benefit increases from US$954.2 million to US$1,112.5 million, while the net present benefit rises from US$779.2 million to US$937.6 million and the benefit-to-cost ratio (BCR) also increases from 5.46:1 to 6.36:1, meaning a return of US$6.36 for US$1 invested. The sensitivity analysis shows that the project would remain an economically viable investment even assuming a discount rate of 6 percent (BCR 3.72:1) or assuming that UHC will reduce adult mortality only by half (BCR 5.89:1). If the social value of a life saved is taken into account, as in the CBA conducted at project appraisal (in the amount of 50 percent of annual GDP per capita), the BCR increases to 6.83:1. 18. The results presented show that the project, with the proposed restructuring, is a sound economic investment. The key assumptions used at project appraisal were maintained when updating the CBA (see table 5.1 in the PAD) and the following new assumptions were used to incorporate the impact of financing UHC Phase I in the four counties (table 6). Given the uncertainties around UHC Phase I, the CBA focuses on 12 months of health coverage. For this reason, it is assumed that adults benefit from UHC Phase I only in year 3, and for this year benefits to mothers are included in this group (hence removed from the category “Maternal health benefits” to avoid double counting). The revised CBA results are shown in table 7. The World Bank Transforming Health Systems for Universal Care (P152394) Table 6. Selected New (Health and Economic) Assumptions for Revised CBA Assumptions Average reduction in adult mortality (per 1,000) per 10% increase in public health spending 1.45 Average adult mortality (per 1,000) 152 Households covered through UHC Phase I (%) 80 Budget execution rate (%) 75 Benefits associated with World Bank investment (%) 36 Table 7. Revised CBA Year 1 Year 2 Year 3 Year 4 Year 5 Total Child health benefits Number of under-five deaths averted 920 945 976 1,003 1,036 4,881 Number of productive life years saved 32,209 33,089 34,171 35,104 36,252 170,824 Present value of productive years gained (US$, millions) 175.5 180.3 186.2 191.3 197.6 930.9 Maternal health benefits Number of maternal deaths averted 58 60 63 65 246 Number of productive life years saved 2,031 2,084 2,219 2,277 8,611 Present value of productive years gained (US$, millions) 4.4 4.5 4.8 4.9 18.6 Adult health benefits from UHC Number of adult deaths averted 2,483 Number of productive life years saved 86,891 Present value of productive years gained (US$, millions) 163.0 Total health benefits 179.9 184.8 349.2 196.1 202.5 1,112.5 (US$, millions) 19. This CBA only focuses on the economic costs of saving lives and assumes that resources redirected from Component 3 will not affect the expected benefits for children and mothers in other project years. In addition to reducing mortality, UHC is also expected to reduce morbidity and, thus, further increase the country’s economic growth. Moreover, removing user fees in public hospitals and strengthening primary-level facilities will significantly increase equity, which is a key objective of UHC, but whose benefits are hard to monetize. 20. The rationale for using public funds to support UHC Phase I is justified; however, questions arise about the long-term financial sustainability. Evidence shows that (a) countries that have made significant progress toward UHC spend a significant share of public resources on health and (b) removing user fees does not translate to UHC, unless significant resources are provided to fill the revenue gap and meet the excess demand. Although the total project envelope remains unchanged because resources for Phase I are being reprogramed from Component 3, questions arise about the long-term financial sustainability of providing free health services in the public sector. The GoK has committed to increase public spending on health to facilitate progress to UHC by allocating US$25 million for UHC Phase I; however, at this point, the level of increase after Phase I is unclear. 21. The total envelope for UHC Phase I of US$39 million would reflect a small increase of 0.3 percentage points in annual national government spending on health as a percentage of total national government spending; from 2.8 percent to 3.1 percent based on data from FY2016/17. However, this amount would be significantly higher if the user fees removal approach was scaled up to the entire country. If the four counties were to meet the costs associated with user fees removal beyond Phase I, it The World Bank Transforming Health Systems for Universal Care (P152394) would reflect an increase in their recurrent expenditure of 39 percent to 75 percent, depending on each county’s recurrent budget, and thus may not be financially sustainable, unless the national government allocates more resources to health, through conditional grants to counties. 22. The financial sustainability of the UHC initiative will be further studied and discussed with the GoK along with the findings from the UHC operational research and potentially additional analytic work, as relevant. The GoK will monitor direct and indirect (e.g. due to increased demand for health services) expenses related to UHC Phase I and consider various options to fund the initiative long-term. The World Bank Transforming Health Systems for Universal Care (P152394) I. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Components and Cost ✔ Reallocation between Disbursement Categories ✔ Overall Risk Rating ✔ Institutional Arrangements ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank Transforming Health Systems for Universal Care (P152394) OPS_DETAILEDCHANGES_COMPONENTS_TABLE COMPONENTS Current Current Proposed Proposed Cost Action Component Name Component Name Cost (US$M) (US$M) Improving Primary Health Care Improving Primary Health Care 150.00 150.00 Results Results Strengthening Institutional Strengthening Institutional 15.10 Revised 29.10 Capacity Capacity Cross-county and Cross-county and Intergovernmental Intergovernmental Collaboration, 26.00 Revised 12.00 Collaboration, and Project and Project Management Management TOTAL 191.10 191.10 OPS_DETAILEDCHANGES_REALLOCATION _TABLE REALLOCATION BETWEEN DISBURSEMENT CATEGORIES Financing % Current Allocation Actuals + Committed Proposed Allocation (Type Total) Current Proposed IDA-58360-001 | Currency: XDR iLap Category Sequence No: 1A Current Expenditure Category: Performance Grants, part A1 74,130,000.00 7,102,471.16 74,130,000.00 81.00 81.00 iLap Category Sequence No: 1B Current Expenditure Category: Performance Grants, part B2 850,000.00 0.00 850,000.00 100.00 100.00 iLap Category Sequence No: 2A Current Expenditure Category: GDS,NCS,CS,TRG,OC,A2,B1 excpt B1bi 12,570,000.00 6,260,183.06 12,570,000.00 54.00 54.00 iLap Category Sequence No: 2B Current Expenditure Category: GDS,NCS,CS,TRG,OC,B1bi 0.00 0.00 0.00 0.10 0 iLap Category Sequence No: 3 Current Expenditure Category: GDS,WKS,NCS,CS,TRG,OC part C The World Bank Transforming Health Systems for Universal Care (P152394) 18,350,000.00 932,455.55 8,470,000.00 100.00 100.00 iLap Category Sequence No: 2C Current Expenditure Category: Goods under Part B1(c) (iv) of the Project 0.00 0.00 9,880,000.00 100 Total 105,900,000.00 14,295,109.77 105,900,000.00 TF-A2561-001 | Currency: USD iLap Category Sequence No: 1A Current Expenditure Category: Performance Grants, part A1 25,000,000.00 2,483,256.50 25,000,000.00 19.00 19.00 iLap Category Sequence No: 1B Current Expenditure Category: Performance Grants, part B2 0.00 0.00 0.00 19.00 0 iLap Category Sequence No: 2A Current Expenditure Category: GDS,NCS,CS,TRG,OC,A2,B1 excpt B1bi 15,000,000.00 7,730,905.37 15,000,000.00 46.00 46.00 iLap Category Sequence No: 2B Current Expenditure Category: GDS,NCS,CS,TRG,OC,B1bi 0.00 0.00 0.00 46.00 0 iLap Category Sequence No: 3 Current Expenditure Category: GDS,WKS,NCS,CS,TRG,OC part C 0.00 0.00 0.00 0.10 0 Total 40,000,000.00 10,214,161.87 40,000,000.00 TF-A2792-001 | Currency: USD iLap Category Sequence No: 2B Current Expenditure Category: Gds,NonCS,CS,Trg,OC PtsB1(b)i 1,100,000.00 239,061.71 1,100,000.00 100.00 100.00 The World Bank Transforming Health Systems for Universal Care (P152394) Total 1,100,000.00 239,061.71 1,100,000.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  High  High Macroeconomic  Moderate  Moderate Sector Strategies and Policies  Moderate  Substantial Technical Design of Project or Program  Substantial  Substantial Institutional Capacity for Implementation and  High  High Sustainability Fiduciary  Substantial  Substantial Environment and Social  Low  Moderate Stakeholders  Substantial  High Other Overall  Substantial  Substantial . The World Bank Transforming Health Systems for Universal Care (P152394) . Results framework COUNTRY: Kenya Transforming Health Systems for Universal Care Project Development Objectives(s) The project development objective is to improve utilization and quality of primary health care services with a focus on reproductive, maternal, newborn, child, and adolescent health services. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 Improved utilization and quality of primary health care services (Action: This Objective has been Revised) Children immunized with the third dose of Pentavalent 79.50 80.00 81.00 82.00 83.00 84.00 (Percentage) Rationale: Action: This indicator has been This is an internationally recognized proxy for completion of the vaccination series and the ability of the health system to reach children multiple times with Revised an essential service and it is less prone to measurement issues. Pregnant women attending at least four ANC visits 39.70 41.00 42.00 50.00 51.00 52.00 (Percentage) Rationale: Action: This indicator has been Revised baseline value to add decimal number and revised targets(increased) based on Project achievement by the time of the MTR. Revised Births attended by skilled 57.00 57.00 59.00 66.00 67.00 67.00 health personnel (Percentage) The World Bank Transforming Health Systems for Universal Care (P152394) RESULT_FRAME_TBL_PDO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 Rationale: Action: This indicator has been Revised targets (increased) based on Project achievement by the MTR. Revised Women between the ages of 15-49 years currently using a 47.80 48.00 49.00 50.00 51.00 52.00 modern FP method (Percentage) Rationale: Action: This indicator has been The baseline value and targets were revised based on updated data. Revised Inspected facilities meeting 0.00 0.00 0.00 25.00 40.00 50.00 safety standards (Percentage) Rationale: Action: This indicator has been  Definition of the indicator specifies public health facilities and correct the score to be 60 percent or more (instead of 61) Revised  Data source was updated (now DHIS2) Pregnant women attending ANC supplemented with IFA 31.00 31.00 34.00 69.00 71.00 73.00 (Percentage) Rationale: This indicator was upgraded from intermediate result indicator to PDO-level indicator (measuring quality of care) as it reflects the completeness/quality of ANC visits (clinical quality) and/or the availability of iron-folic acid at facilities (structural quality). Action: This indicator is New The targets for year 3 to end target were revised based on the progress achieved by the MTR (66% by December 2018). The World Bank Transforming Health Systems for Universal Care (P152394) PDO Table SPACE Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 Component 1: Improved primary health care results Health facilities providing 39.00 40.00 45.00 50.00 55.00 60.00 BEmOC (Percentage) Rationale: Action: This indicator has been Indicator was dropped due to data quality issues including: self-reported data without verification if the BEmONC functions are actually present, Marked for Deletion denominator (# facilities) not regularly updated, unclear definition of facilities supposed to offer BEmONC services. Pregnant women attending ANC supplemented with IFA 31.00 32.00 34.00 36.00 38.00 40.00 (Percentage) Rationale: Action: This indicator has been This indicator was upgraded from intermediate indicator to PDO-level indicator as it reflects the completeness/quality of ANC visits (clinical quality) and/or Marked for Deletion the availability of iron-folic acid at facilities (structural quality). People who have received essential health, nutrition, and 0.00 1,860,000.00 3,800,000.00 5,800,000.00 7,900,000.00 10,060,000.00 population (HNP) services (CRI, Number) Rationale: Action: This indicator has been Added intermediate targets Revised Number of children 0.00 5,400,000.00 immunized (CRI, Number) The World Bank Transforming Health Systems for Universal Care (P152394) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 Action: This indicator has been Revised Number of deliveries attended by skilled health 0.00 4,660,000.00 personnel (CRI, Number) Component 2: Strengthened institutional capacity Facilities inspected for safety 0.00 0.00 0.00 800.00 1,400.00 1,635.00 standards (Number) Rationale: The definition was revised to specify that the Project will track inspections in public health facilities. Action: This indicator has been The indicator was maintained but targets revised from percentage to number to address data quality issues related to the list of facilities not being routinely Revised updated. Reports submitted to DHIS in a 88.80 88.80 90.00 94.00 98.00 98.00 timely manner. (Percentage) Rationale:  “Health facilities” was removed because level II and III facilities do not submit reports themselves. Action: This indicator has been  Form 713 was removed because the data from form 713 were moved to the reporting tool MOH 711. Revised  The baseline value and targets were revised according to the new definition and the Project achievements at the time of the MTR (December 2018) Births registered within 6 months of occurrence 65.90 65.00 70.00 74.00 78.00 80.00 (Percentage) Action: This indicator has been Rationale: Revised The World Bank Transforming Health Systems for Universal Care (P152394) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4  Based on the Children’s Code, article 157, in Kenya declarations of birth must be done within 6 months to the civil registrar of the place of birth and 8 months for births occurring outside the municipality perimeter or in a foreign country. Therefore, this indicator reflects both the number and timeliness of registration. Timeliness was specified in the RF.  The baseline value was revised based on updated data. RMNCAH related operations research completed to inform 0.00 0.00 0.00 1.00 2.00 2.00 policy/strategy (Number) Rationale: Action: This indicator has been The end target for this indicator is reduced from 3 to 2 because initially identified research question have already been investigated by partners. Revised It was further specified that the indicator is expressed in cumulative number. A benefit package developed, costed, and disseminated 0.00 0.00 0.00 1.00 1.00 1.00 (Number) Lessons learned from UHC Phase I documented and No Yes disseminated (Yes/No) Rationale: Action: This indicator is New Results from the process evaluation of UHC phase I should be documented and disseminated to inform the scale up. Component 3: Cross-county/intergovernmental collaboration and project management Functional community units 302.00 1,500.00 3,000.00 4,531.00 4,931.00 5,331.00 (Number) Action: This indicator has been Rationale: Revised The World Bank Transforming Health Systems for Universal Care (P152394) RESULT_FRAME_TBL_IO Indicator Name DLI Baseline Intermediate Targets End Target 1 2 3 4 The indicator was defined to measure the number of functional CU using three criteria as per national guidelines (see PAD). However, there is no data to measure all three criteria. To address this flaw, the functionality of CU is measured using the number of reports submitted using data from DHIS. Baseline and targets values were revised accordingly. Grievances registered related to delivery of project benefits 0.00 15.00 30.00 45.00 60.00 80.00 that are addressed (Percentage) Implementing entities submitting the annual FM and 0.00 15.00 30.00 95.00 95.00 95.00 technical report on time (Percentage) Rationale: Action: This indicator has been  The description of this indicator was revised to define “on time” as per financial agreement. Revised  Also, the targets were revised to maintain achieved results. IO Table SPACE The World Bank Transforming Health Systems for Universal Care (P152394)