A pay-for-performance system for civil service doctors: The Indonesian experiment

In 1980 the Government of Indonesia proposed the introduction of a pay-for-performance system, the Functional Position System (FPS), for certain occupational categories of civil servants to provide a career development path and stimulate productivity (Government of Indonesia. Government Ordinance No. 3, 1980 Concerning Appointment to Civil Service Rank. Jakarta, 1980). The FPS, a bold pay concept in the civil service, links pay to skills and performance. In 1987, instructions were issued for doctors to be included in the system (Government of Indonesia. Credit Scores for Doctors. Circular Issued by the Ministry of Health and the Agency for Administration of the Civil Service No. 614/MENKES/E/VIII/1987 and No. 16/SE/1987). In this paper we evaluate how well the system—which in principle could be applicable to both developed and developing economies—can meet its stated objectives for Indonesian doctors working in the community, and for Indonesian health policy objectives as stated in the countryʹs last five-year development plan “Repelita V” (Government of Indonesia. The Fifth Five-year Development Plan (Repelita V) 1989–1994. Jakarta, Indonesia, 1989). The FPS is particularly innovative in the Indonesian environment where wages are low and comparatively uniform, reflecting a philosophy of ‘shared poverty’, and vary primarily by seniority. The FPS has, however, several conceptual and practical shortcomings. The design of the reward system disregards effort or time inputs, as well as other inputs needed per unit of reward. Consequently, the FPS can not be used as an effective incentive system promoting professional excellence and health policy objectives. Practically, the system hardly provides an effective alternative for career development among community physicians. Nor does the system provide enough resources to induce physicians to spend more effort in their civil service activity and less effort in private practice. An improved FPS taking these and other comparatively more technical shortcomings into account has promise as a viable substitute or a supplement to wage, capitation and fee-for-service systems to compensate physicians in both developed and developing economies (Chernichovsky D. The Emerging Financial Mechanism of Health Systems: Capitation and its Organizational Consequences. Ben-Gurion University, Israel; Chernichovsky D. Physiciansʹ Pay—A Synthetic Approach. Ben-Gurion University, Israel, 1994).