Performance-based funding provides clear incentives to achieve results and has been used by organizations such as the Global Fund to Fight AIDS, Tuberculosis and Malaria (the Global Fund) [3,4]. However, there are concerns that performance-based funding may penalize poorer countries and may not be flexible enough to contribute to health systems generally. Such concerns provoke two important questions: How are programs performing in countries at different levels of development, health systems strength, and disease burden? And what are the wider challenges of implementing performance-based funding to use health finances effectively, strengthen health systems, and achieve the Millennium Development Goals (MDGs)?

Supporting Information File S1 provides an extensive analysis of the results of 370 active grants to fight AIDS, TB, and malaria in 130 countries by programmatic service delivered, region, type of recipient, and country characteristics. Supporting Information File S2 gives a table of key data on grants reviewed with their ratings, principal recipient characteristics, disease component, and financial information. The analysis shown in File S1 assesses whether performance-based funding penalized poorer countries or those with weaker health systems. The results show the rapid scale-up of services to people in need, doubling each year, with financed programs providing 1.1 million people with HIV treatment, 2.8 million people with TB treatment, and 30 million people with insecticide-treated bednets (ITNs) to protect families from malaria.

Most importantly,75% of country programs reached their targets and were able to make the money work to deliver AIDS, TB, or malaria services. Of the remaining country programs, 21% had inadequate results but displayed the potential to accelerate implementation and achieve targets in the future, and 4% showed unacceptable results. Sub-Saharan Africa did not show substantially worse performance than other regions. The poorest third of countries performed no worse, indicating that performance-based funding works if targets are set and owned by the countries and set according to the country situation.

The Global Fund uses performance-based funding to disburse all funds, which are released incrementally based on demonstrated results against targets, and fund recipients must provide an explanation of deviations, what has worked, and what can be improved. Explicit performance ratings are made for each grant and used as a basis for decisions, including: (1) stopping grants (which has occurred in Nigeria, South Africa, Senegal, and Pakistan); (2) reducing funding (the Kenya malaria program had US$5.8 million reduced commensurate with delays of one year); or (3) accelerating funding (the Ethiopia malaria grant had its year 4 budget accelerated into year 3 to double the number of ITNs distributed to families [Box 1]). Funds are geared to the speed and efficiency of implementation, not to a fixed calendar. If grant implementation is slower than planned, funds not used can be reallocated to other grants, and technical assistance needs can be addressed. If implementation is faster, funds can be accelerated.

Figure 1 shows that 75% of programs demonstrated satisfactory to excellent performance, 21% inadequate performance, and 4% unacceptable performance. The most difficult investment decisions were in the 21% of programs performing inadequately, due to the difficult trade-offs between poor performance against current targets and demonstrated potential to accelerate implementation. Taken together, the 215 programs evaluated for their first 18-month phase of implementation achieved 94% of their programmatic targets (Figure 2). Some of the programs fell below their individual targets, but well-performing programs allowed the Global Fund to achieve its results overall. Such well-performing programs allow the Global Fund to absorb a certain level of risk (for example, in poor performance of early investments in Nigeria, Uganda, and Kenya) and still achieve positive results overall. There were areas of weakness—for example, delays in the early stages of malaria interventions occurred because a few large grants in Ethiopia, Kenya, and Tanzania were not used quickly enough to distribute ITNs. But the example in Box 1 shows that a grant that is slow to get started can catch up rapidly once initial problems are solved and investments in capacity are made. The analysis also found that prevention of mother-to-child HIV transmission was underperforming more generally across many grants, and gender issues urgently need to be addressed to ensure that women are reached with what is essentially an affordable “vaccine” to prevent the infection of children. Despite many challenges, the majority of country programs can make the money work.

A major question is whether funding for specific diseases like AIDS, TB, and malaria (“vertical financing”) has positive or negative effects on more general or “horizontal” health systems. The Global Fund provides “diagonal financing,” with a sharp focus on achieving disease goals while allowing finance to more broadly strengthen the supporting health sector. As health programs keep scaling up, the major gap in health systems strengthening is increasingly obvious. Such strengthening requires dedicated finances and increasing flexibility in disease-specific financing to fill key gaps in capacity. Due to the flexibility of Global Fund financing in supporting services and systems, countries with weaker health systems or human resources for health did not perform significantly worse (25% and 26% poor-performing compared to 25% for all grants). Global Fund finance can be delivered “vertically” to AIDS, TB, and malaria control programs or “horizontally” through pooled or sector-wide approach funding (for example in Ghana or Mozambique). Many effective programs have used Global Funds “diagonally” to effectively finance AIDS, TB, and malaria services, while building the necessary supporting systems, including human resources.