Decentralized facility financing versus performance-based payments in primary health care: a large-scale randomized controlled trial in Nigeria

BACKGROUND: Health system financing presents a challenge in many developing countries. We assessed two reform packages, performance-based financing (PBF) and direct facility financing (DFF), against each other and business-as-usual for maternal and child healthcare (MCH) provision in Nigeria. METHODS: We sampled 571 facilities (269 in PBF; 302 in DFF) in 52 districts randomly assigned to PBF or DFF, and 215 facilities in 25 observable-matched control districts. PBF facilities received $2 ($1 for operating grants plus $1 for bonuses) for every $1 received by DFF facilities (operating grants alone). Both received autonomy, supervision, and enhanced community engagement, isolating the impact of additional performance-linked facility and health worker payments. Facilities and households with recent pregnancies in facility catchments were surveyed at baseline (2014) and endline (2017). Outcomes were Penta3 immunization, institutional deliveries, modern contraceptive prevalence rate (mCPR), four-plus antenatal care (ANC) visits, insecticide-treated mosquito net (ITN) use by under-fives, and directly observed quality of care (QOC). We estimated difference-in-differences with state fixed effects and clustered standard errors. RESULTS: PBF increased institutional deliveries by 10% points over DFF and 7% over business-as-usual (p<0.01). PBF and DFF were more effective than business-as-usual for Penta3 (p<0.05 and p<0.01, respectively); PBF also for mCPR (p<0.05). Twenty-one of 26 QOC indicators improved in both PBF and DFF relative to business-as-usual (p<0.05). However, except for deliveries, PBF was as or less effective than DFF: Penta3 immunization and ITN use were each 6% less than DFF (p<0.1 for both) and QOC gains were also comparable. Utilization gains come from the middle of the rural wealth distribution (p<0.05). CONCLUSIONS: Our findings show that both PBF and DFF represent significant improvements over business-as-usual for service provision and quality of care. However, except for institutional delivery, PBF and DFF do not differ from each other despite PBF disbursing $2 for every dollar disbursed by DFF. These findings highlight the importance of direct facility financing and decentralization in improving PHC and suggest potential complementarities between the two approaches in strengthening MCH service delivery. TRIAL REGISTRATION: ClinicalTrials.gov NCT03890653; May 8, 2017. Retrospectively registered. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1186/s12916-021-02092-4.