Performance Based Financing (PBF) is a reform approach in the health sector but equally in other sectors such as education and administration. While PBF is mostly utilized in low- and lower-middle-income countries, the concept of ‘Performance Systems’ is also applied in high-income countries. The term PBF was first used in Rwanda in 2005 and has become a term with a formal definition consisting of a number of best practices and instruments. Typically, the application of PBF requires change and therefore needs a process of advocacy, informing stakeholders, coaching and training at all levels of the (health) system.
At first glance, the formal definition of PBF may puzzle the reader due to its complexity. However, the definition immediately shows that PBF is more than a contractual mechanism between providers and the contract development and verification agency. PBF aims at wide reforms and PBF is, in fact, a new (health) reform approach.
PBF advocates that the first objective of providers should be to deliver all components of health or educational packages of good quality. The second objective is to do this in the most efficient manner. Once quality and efficiency are in place governments are more likely to maintain its financing. Only then, as a third objective, equity and financial access for the vulnerable can be assured by creating effective third payer mechanisms. If taken from this angle there is therefore little place for generalised imposed free care that offers free services irrespective of the income or universal insurance if financial resources are not enough.