Knowledge–practice gap in healthcare payments: the role of policy capacity

Abstract Fee-for-service remains a popular mode of paying for healthcare despite widespread knowledge of its ill effects. This has resulted in a gap between policy knowledge (understood as consensus among experts) and policy practice (actual policy measures to implement the consensus) in healthcare. The existing literature attributes such gaps to a range of factors, including the stakeholders’ different interests, incentives, ideas, and values. Our focus on this debate is through the lens of policy capacity, specifically the ability of public actors to utilize policy knowledge and inform policy practice. We show that the observed knowledge–practice gap is rooted in the complexity of healthcare payment reforms. While actors agree on the problematic condition, there is a deep disagreement on what to do about it. Agreeing on and adopting alternate payment arrangements are challenging because reformers need to anticipate and respond to the future while accommodating the interests of the current providers who benefit from the status quo. In such instances, the capacity of public actors to devise reforms and overcome resistance to them is critical. We argue that the knowledge–practice gap in healthcare payments exists because of deficiencies in the analytical abilities of governments to devise workable alternate arrangements and shortcomings in their political capacity to overcome the resistance to proposed reforms. Put differently, we argue that no amount of evidence or consensus among stakeholders is sufficient when the analytical and political capacities to act on the evidence are lacking. The arguments are illustrated with reference to payment reforms in South Korea and Thailand.