RESEARCH BRIEF Understanding Private Sector Involvement in Health Systems
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It is increasingly apparent that governments cannot fully meet the health needs of their people through reliance on public (government) resources alone. In many countries, less than half of the population has access to public health services.1 The private sector provides an alternative and complementary means of expanding health services, products and infrastructure. However, the private sector is not a panacea. Both public and private sectors have roles to play in addressing the complex and unique challenges faced by developing countries to develop and maintain effective health systems. The private sector is a broad category that encompasses a wide range of actors. Comprised of “all providers who exist outside the public sector, whether their aim is philanthropic or commercial, and whose aim is to treat illness or prevent disease,” the private sector includes organizations that provide health services, corporations, individual health providers, professional associations, national and international nongovernmental organizations and charitable entities.2 The private sector can be further defined to include those who contribute to health systems, includ-
ing retailers, private financing agents, and civil society organizations.3 However, many organizations, providers, and commercial companies are not exclusively “public” or “private.” Private sector actors may work with governments to promote public interests, while being entirely or largely independent of the government and its oversight.3 Doctors and nurses employed by the public sector may supplement their income as private providers and may even refer government patients to private facilities.2 The dynamic interaction of these actors indicates the need for more refined, nuanced terms to describe actors working within the private health sector.
The aim of this brief is to provide an overview of the private sector and the role that it plays in health systems. The ideas presented here are intended to spark discussion on the strengths and weakness of the private sector, and on publicprivate sector collaboration. Finally, we hope to underscore the need to reconceptualize the “private health sector,” taking into account its diverse activities and variety of actors.
Key Actors in the Private Sector
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Nongovernmental organizations (NGOs): NGOs are largely or entirely independent of the government and are present at community, national, and international levels.4, 5 Most NGOs are nonprofit, deliver clinical or social services or engage in advocacy and watchdog activities. They often focus on meeting the needs of marginalized groups.1
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Faith-based organizations (FBOs): FBOs are organizations affiliated with religious institutions or founded by religious leaders and missionaries. Similar to NGOs, FBOs are typically nonprofit and vary in scale and scope.
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Private health providers: Private providers are a diverse set of individuals and organizations, including physicians, nurses, paramedics, midwives, traditional healers, skilled birth attendants, pharmacists, drug sellers, unlicensed practitioners, professional associations, hospitals, and clinics.4 They deliver services directly to patients and link consumers and the commercial sector.6
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Commercial sector: The commercial sector includes companies engaged in marketing, manufacturing, distribution, and sales. This for-profit subset of the private sector supplies health care products and their supporting infrastructure.6 Businesses may be motivated to provide health services for their employees and families – either through a sense of moral obligation or to prevent disease and disability among workers and families.7
Figure 1. Private Health Expenditures as a Percent of Total Health Expenditure By Region8 50
Private Expenditure on Health (%)
45
40
35
30
25
20
15
10
5
0
Africa
W. Pacific
E. Mediterranean
Americas
Europe
S.E. Asia
Figure 2. Public and Private Health Expenditures in Select African Countries, Total and Percent8 Zambia Uganda Senegal Rwanda Mali Kenya Ghana Cote d' Ivoire Cameroon Botswana 0
100
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300
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500
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Health expenditures, in millions (US$) Public expenditures on health Private expenditures on health, excluding out-of-pocket expenditures Total out-of-pocket expenditures Zambia Uganda Senegal Rwanda Mali Kenya
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Ghana Cote d' Ivoire Cameroon Botswana 0%
2
20%
40%
60%
80%
100%
900
Percentage of Total Health Expenditures
Public Health Services and the Private Sector
Private health expenditures include both spending by private sector actors and out-of-pocket spending by households.8 The proportion of health expenditures from private sources varies by country and region. For example, private expenditures on health are highest in Africa (49 percent of health expenditures), compared with the Western Pacific, which spends an average of 30 percent (see Fig. 1).8 In Africa, Guinea has the highest proportion of private expenditure on health at 83 percent of total health care spending and Angola has the lowest at nearly 16 percent; sub-Saharan Africa averages 60 percent private expenditures. Other countries with a high percentage of private health expenditures are the Democratic Republic of Congo and Cambodia – all report that private health expenditures comprise more than 80 percent of total health expenditures.
The transition from traditional public sector health care provision and financing to private sector or public-private models has been facilitated by several factors, including convenience, perceived quality, affordability, confidentiality and lack of alternatives.12 The broad range of services offered by the private sector varies by location, population and income level. For example, in some rural or remote areas, access to publicly provided services may be limited, resulting in greater reliance on private sector services, particularly those provided by non-formal providers (e.g., traditional healers and midwives).2 Private physicians, nurses and other healthcare providers frequently deliver both primary and curative care to meet local needs.1
Household contributions to private health expenditures include out-of-pocket spending and user fees. Outof-pocket spending for health care services accounts for about 60 percent of total private health expenditures in developing countries.9 Countries with similar total health expenditures may differ in public, outof-pocket, and other private health expenditures. For example, Botswana, Cameroon and Kenya have total health expenditures in the range of US$750-825 million, however Botswana’s public expenditure is US$596 million compared to US$224 million in Cameroon and US$383 million in Kenya (see Figure 2). Out-ofpocket expenditures are US$46 million in Botswana, US$545 million in Cameroon, and US$351 million in Kenya. User fees are a subset of out-of-pocket expenditures and a financial burden for the poorest people. Surveys conducted in 38 developing countries showed that private sector provision of diarrhea treatment ranged from a low of 34 percent to a high of 96 percent of children in the lowest income quintile.10 Similarly, for acute respiratory infection, it ranges from a low of 37 percent to a high of 99 percent of poor children.10
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In sub-Saharan Africa, the majority of malaria episodes are initially treated by private providers, primarily through the purchase of drugs from peddlers and shops.2
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In South Africa, approximately 30 percent of people without medical insurance choose to pay for services at private sector facilities – one-fifth of these people are in the lowest income quintile.11
In many cases, different actors in the private sector work together. For example, pharmaceutical companies may appeal to private practitioners to prescribe new drugs.6 Private hospitals and clinics may work with private practitioners to provide services, or businesses may contract private practitioners to educate their workforce about disease. These linkages within the private sector can help to streamline services and goods.
Government and the Private Sector The government plays an important role in regulating and energizing the private sector. Regulatory mandates are necessary to monitor and maintain the quality of private sector services, but overregulation may stifle private sector growth. Regulation is necessary in licensing health care providers, pharmacies, laboratories and pharmaceuticals.19 Standard drug regulations and a common regulatory framework implemented by the government may also make it easier for private sector companies to register drugs and other health products.20 Legal restrictions on the marketing, distribution or prescription of health care products, such as contraceptives, may also prevent private sector manufacture and distribution. For example, many countries in West Africa ban specific types of advertising for contraceptives and do not permit physicians to fill contraceptive prescriptions.20
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The private sector is involved in both disease-specific programs and health systems.13 In the case of disease-specific programs, a corporation may implement programs to educate their workers about a specific disease or private practitioners may be trained to diagnose and treat a specific illness. In the case of health systems, the private sector may provide overall support to health infrastructure through service distribution or manufacturing.
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Examples of Private Sector Involvement in the Health Sector Population Services International15 Social marketing employs population-specific marketing techniques to achieve public health objectives, by providing public health goods at subsidized prices, making products available to people who cannot afford them, or people who are reluctant to buy them at a higher price. Population Services International (PSI) is a leading nonprofit social marketing organization headquartered in Washington, DC that works with actors in the private sector to promote products, services, and healthy behavior in developing countries. Founded in 1970, PSI has programs in more than 60 developing countries, focusing on malaria, reproductive health, water and sanitation, child survival, and HIV/AIDS. PSI’s activities range from using social marketing to distribute safe water products, pre-packaged malaria therapy, clean delivery kits, and nutritional supplements . PSI uses educational and behavior change campaigns to prevent HIV and improve reproductive health knowledge. In 2007, PSI estimated that their products and services prevented 19 million episodes of malaria, 3.8 million cases of diarrhea, and 156,000 HIV infections. The Lilly MDR-TB Partnership16 Eli Lilly, the tenth largest pharmaceutical company in the world, founded the Lilly MDR-TB Partnership in 2003 to fight multiple drug resistant tuberculosis (MDR-TB). The Partnership is composed of 18 private and public partners primarily working in the countries most at risk for MDR-TB, including China, India, South Africa and Russia. By sharing drug-manufacturing techology and providing financial assistance to pharmaceutical companies in these regions, the Partnership assists developing countries in manufacturing inexpensive, safe, and effective TB drugs. Lily also provides capreomycin and cycloserine (TB drugs) at concessionary prices to the WHO’s Directly Observed Treatment Program (DOTS). The Partnership supports drug research and development; in conjunction with the Infectious Disease Research Institute and the National Institute of Allergy and Infectious Disease, Lilly established a nonprofit early phase drug discovery initiative to develop medication for extensively drug resistant tuberculosis (XDR-TB). The Lilly MDR-TB Partnership promotes health education and training, community support, and patient advocacy. Activities range from producing training materials about diagnosis and treatment to health care professionals to creating compliance programs for patients recieving treatment.The Partnership is active in approximately 60 countries, and has pledged $135 million in cash, medicines and technology through 2011.16 De Beers Community HIV/AIDS Partnership Programme17, 18
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De Beers Consolidated Mines (DBCM) implements several HIV/AIDS initiatives in South Africa, including the De Bees Community Partnership Programme (DBCHAPP). Launched in 2006, DBCHAPP engages local communities in HIV prevention, treatment and care activites by working with NGOs and other community-based organizations (CBOs) already active in the region. De Beers collaborates with several partners, including NGOs, FBOs, ministries of health, academic research centers, and foundations, to implement these and other programs. Approximately 70 percent of these programs are located in DBCM’s mining areas. In 2007, DBCHAPP provided aproximately $900,000 to 23 different projects in sub-Saharan Africa.
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In addition to DBCHAPP, De Beers provides free antiretroviral treatment (ART) to all HIV-infected employees and their partners in South Africa, Botswana, Namibia and Tanzania. As of December 2007, 1298 employees in Botswana, 529 employees in South Africa, and 247 employees in Namibia were enrolled in the company’s ART program. The company also offers voluntary counseling and testing to their employees at on-site medical centers, as well as health care facilities in other locations.17, 18
Table 1. Health Services Provided by the Private Sector 3ULYDWH 6HFWRU $FWRU
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The government can also provide financial incentives for private sector growth. Government and donor subsidies can encourage the private sector to provide specific services, particularly for impoverished populations.19 Although some national tax policies and tariffs may limit private sector activities, tax breaks and monetary incentives for the purchase and distribution of essential medicines can also foster private sector growth.19
Advantages of Engaging the Private Sector
Larger corporations in the private sector have extensive experience in management, distribution and marketing. As a result, these private sector actors can provide
Many patients prefer private sector services, reporting that these practitioners are courteous and provide more convenient services and flexible payment options.22 Especially in rural areas, these services are often more geographically accessible and community appropriate than government services.14 Clients also report that private sector hospitals and clinics ensure privacy and are more expedient and efficient.11 Because they are responsive to consumer demand, private sector services are often cheaper than public sector services. For example, in Sierra Leone, the price of privately purchased drugs was nearly a third of the price of drugs provided at public sector facilities.2
Disadvantages of the Private Sector Motives to provide services and care in the private sector vary. For example, some private sector actors are for-profit entities while others are motivated by
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An increase in private sector health services may help to alleviate demand for public services and specifically target populations most in need. In countries where public sector spending is concentrated among wealthier populations, an influx of private sector resources can allow governments to redirect public services to the people most in need. By creating incentives for the wealthy to access private sector services, public services are more available to meet the needs of the poor.12 Alternatively, incentives can enable private sector sources to deliver specific or targeted services, such as bed nets or immunizations, to the poor or those in rural communities.
public services to hard-to-reach populations. Private sector infrastructure and networks are well-suited to providing services, sometimes on a large scale, and can increase service coverage, even in remote areas.12, 21 Doctors and nurses may benefit from higer wages in the private sector, as well as increased access to professional development opportunities.12
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public interest.11 Corporations may also be driven by a desire for efficiency and worker productivity.7
service cheaper and expand coverage, but it requires appropriately structured and enforced contracts.14
Stronger regulations and restrictions on the public sector may not apply to the private sector.2 Therefore, private sector services may be inconsistent and uncoordinated, with adverse implications for disease transmission.2 The use of multiple providers is common, with the selection of provider influenced by financial and other household factors.12 This disjointed and sometimes contradictory care may result in untreated illness, lack of follow-up care, and the development of chronic health conditions or drug-resistant disease.2
Partnering between the public and private sectors takes many forms. The public sector may contract with different private sector actors to produce and distribute health-related products, or to provide training for public sector doctors and nurses. The public sector may also offer subsidies to the private sector. A small body of research suggests that vouchers have positive impacts by increasing the use of products and services, but further research is needed.2, 14 There is virtually no evidence about the efficacy of franchising and co-investment.14
Since private sector hospitals and clinics are not mandated by law to provide comprehensive care to all populations, the responsibility to provide treatment and care differs from public sector facilities. Although private sector providers may be motivated to provide the best care possible to their patients, the lack of legal or moral obligation to provide comprehensive and sustained care may lead to inadequate care or an interruption of health services.
In India, a large proportion of care is provided by private sector sources. In one study of 200 HIV positive people, 90 percent had not adhered to treatment protocols; 50 percent had stopped treatment because of guidance from traditional healers and 80 percent of doses taken were incorrect.23
Highly qualified private practitioners often prefer to work in more affluent areas where salaries are higher.22 This may result in a dearth of highly qualified practitioners in poor and rural areas.22 Some private sector providers may compromise quality of services to make a profit, supplying cheaper, less effective drugs or services to their clients for a higher price.2 These practices may result in the development of drug resistance or an increased risk of chronic illness.23 At a household level, the continued use of private sector services is a financial burden to many clients; households may sacrifice money for other essential activities to seek medical assistance from private practitioners.2 In most developing countries, a large proportion of the population uses private sector services.1 The most impoverished often go to informal providers and pay out-of-pocket for services and treatment – a pattern more pronounced in rural or remote areas.1 For example, in Vietnam, about 3.5 percent of the population was pushed into poverty from private health expenditures in both 1993 and 1998.9
Linking the Public and Private Sector
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A public-private partnership is “any joint program or
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project involving public and private collaboration to provide health services and products.”4 This collaboration can assist the government by providing additional financial, human and management resources to scale-up coverage.5 Research on this type of partnership indicates mixed results, e.g., contracting out may make
Partnerships exist internationally and domestically and can include a range of private sector actors to adequately address complex health sector needs.3 Given that members have different governance structures, financial resources, culture and areas of expertise, successful partnerships must establish and adhere to a common understanding of roles and responsibilities in order to integrate successfully, which can prove difficult.3 Given the multitude of private sector services, governments and donors may have difficulties selecting the most appropriate private sector actors for partnership.19
Case Study: Contracting in Cambodia24 The Asian Development Bank funded ongoing research starting in 1998 to evaluate two models of contracting for health services – contracting-in, and contractingout – that were compared with the existing system (control). In the contracting-in model, the government covered operating costs and contractors provided management to public sector health care workers. In the contracting-out model, contractors had complete management control, directly employed staff and were entirely responsible for the delivery of services. In Cambodia, districts were selected randomly to be included in the study, each with a population of 100,000-200,000 people. Four of these districts were control districts, three were contracted-in and two were contracted-out. All selected districts had poor
health services and few functional health care facilities at the beginning of the study. The results of the study showed that both contracted-in and contracted out districts provided greater health care coverage than the control districts (see Table 2). The study found that contracting-out provided the cheapest health care services, at US$22.70 per capita, compared to contracted-in services (US$21.40) and control (US$26.90). In addition, people living in control districts found seeking services to be more time consuming than people in the contracted-out districts. In both the contracted-out and the contracted-in districts, lower socioeconomic groups reported an increase in accessing health services, largely because of the reduction in the cost of services.
Attitudes Related to the Private Sector There is a growing body of evidence that suggests that the private sector can make valuable contributions to the health sector, though how to incorporate the private sector is unclear. One potential obstacle to engaging the private sector is the lack of common definitions as to which enterprise actually comprises the private sector and disagreements over what roles the private sector should play. A second obstacle is that negative attitudes toward the private sector may inhibit collaboration between the public and private sectors, and between for-profit and not-for-profit entities. Attitudes toward the private sector are shaped by the actor’s perceived motive for involvement in health systems work. These perceived differences in purposes, interests and values may influence use and interpretation of the term “private sector�.3 If “private sector� is interpreted as large transnational corporations and for-profit hospitals, clinics or providers, there may be a more negative reac-
tion than if an interpretation includes “informal� sector or independent providers - such as traditional healers, village midwives and community health workers. While, in general, for-profit providers are perceived as driven by economic gain with little interest in providing affordable services to the poorest people, not-for-profit providers are perceived as motivated by public interests, with a greater commitment to health equity.25 As a result, nongovernmental and faith-based organizations are sometimes categorized as civil society organizations. This third sector includes organizations that pursue social goals and are independent of the state and the market.3 There is general concern that private-sector involvement in health systems might create inequity and compromise the public sector’s ability to provide services for the poorest people.25 The perception that the private sector is more concerned with its own financial profit rather than patients’ needs is strengthened when private-sector clinics and hospitals are only available to people that can afford the care.11 In some places, private practitioners are believed to provide care of questionable quality, especially with regard to diagnosis and treatment; in other places, many people think that the private sector provides better-quality, more efficient health services than the public sector.11 While there are differing views on the roles and level of involvement of the private sector, there is general agreement that government services are overburdened and underfunded. Collaboration with the private sector can relieve pressure on public-sector facilities and improve the quality of health care. It may be that the private sector could induce the public sector to improve their quality of care and upgrade incentive structures.25 The goal is to find the balance between public and private that works for the country by maximizing the strengths and minimizing the weaknesses of actors from both sectors.
Table 2. Percent Change in Health Care Service Coverage from 1998 to 200224 ,QGLFDWRU
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References 1
Human Development Network. 2003. Private participation in health services. Washington, DC: The World Bank. 2 Mills A, Brugha R, Hanson K, McPake B. 2002. What can be done about the private health sector in low-income countries? Bulletin of the World Health Organization, 80(4):325- 30. 3 Reich MR, editor. Public-private partnerships for public health. Cambridge, MA: Harvard Center for Population and Development Studies, 2002. 4 Private Sector Partnerships-One. Private sector health glossary. (Accessed November 11, 2008), Available from: http://www.psp-one. com/section/ resource/glossary. 5 Partnerships-One PS. 2005. State of the private health sector wall chart. PSP-One & USAID. 6 Slater S, Saade C. 1996. Mobilizing the commercial sector for public health objectives. Basic Support for Institutionalizing Child Survival (BASICS), UNICEF. 7 WHO. Integrating the role of the private sector in scale-up of HIV/ AIDS testing and counselling to accelerate treatment access and improve prevention. (Accessed November 11, 2008), Available from: http://www. who. int/3by5/en/concept_paper.pdf. 8 World Health Organization. 2006. World Health Report 2006: Working Together for Health. Geneva: WHO. Available from: http:// www.who. int/whr/2006/en/. 9 Gottret P, Schieber G. 2006. Health Financing Revisited: A Practitioner’s Guide. Washington, DC: The World Bank. 10 Bustreo F, Harding A, Axelsson H. 2003. Can developing countries achieve adequate improvements in child health outcomes without engaging the private sector? Bulletin of the World Health Organization 81(12):886-95. 11 Palmer N, Mills A, Wadee H, Gilson L, Schneider H. 2003. A new face for private providers in developing countries: what implications for public health? Bulletin of the World Health Organization 81(4):292-7. 12 USAID. 2006. Increasing the role of the private health sector. Issue Briefs. USAID. Available from: http://www.usaid.gov/our_work/global_ health/pop/techareas/ repositioning/briefs/role_private_health.pdf.
13 Hozumi D. 2008. The role of the private sector in health systems. PATH. 14 WHO. 2005. Working with the non-state sector to achieve public health goals. 15 Population Services International (PSI). (Accessed January 12, 2009). Available from: www.psi.org. 16 Eli Lilly. The Lily MDR-TB Partnership. (Accessed January 12, 2009). Available from: www.lillymdr-tb.com. 17 De Beers. Living Up To Diamonds. (Accessed January 12, 2008), Available from: www.debeersgroup.com 18 Goldwyer, Neal. 2007. Dimond miner rated second in CSI stakes. Mining Weekly, South Africa. Global Business Coalition for AIDS, TB and Malaria. 19 Waters H, Hatt L, Axelsson H. 2002. Working with the private sector for child health. Washington, DC: The International Bank for Reconstruction and Development/The World Bank. 20 Dowling P. 2005. West Africa reproductive health commodity security: encouraging greater private sector participation. Alexandria: John Snow, Inc, DELIVER, USAID. 21 Nelson K. 2002. Stimulating research in the most neglected diseases. The Lancet 359:1042. 22 Malmborg R, Mann G, Thomson R, Squire S. 2006. Can publicprivate collaboration promote tuberculosis case detection among the poor and vulnerable? Bulletin of the World Health Organization 84:752-8. 23 Brugha R. 2003. Antiretroviral treatment in developing countries: the peril of neglecting private providers. BMJ 326:1382-4. 24 Bhushan I, Keller S, Schwartz B. 2002. Achieving the twin objectived of efficiency and equity: contracting health services in Cambodia. Manila: Asian Development Bank. 25 Walley J, Lawn JE, Tinker A, Francisco Ad, Chopra M, Rudan I, et al. 2008. Primary health care: making Alma-Ata a reality. Lancet 372:1001-7.
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This brief was prepared with support by the Rockafeller Foundation. It was written by Rachel Hampton and Susan Higman.