Richard Smith: Private health care – essential for improving care in the developing world

Richard SmithPeople in Bangladesh get 80% of their healthcare from the private sector. Across Sub-Saharan Africa it’s 60%, and the proportion is increasing. The poorer people are the more likely they are to receive private care, and the middle classes consume more publicly funded care than the poor. In these circumstances it’s inevitable that those wanting to improve the health care of the world’s poorest people must work with the private sector – and yet many donors have been reluctant to do so. They are sometimes accused of pushing “a failed model,” the idea of a wholly public system that even Britain abandoned some time ago. A conference held last week at Wilton Park, which was started by Winston Churchill, explored how public private partnerships can strengthen health systems.
Much of the private care that the poor receive in developing countries is, of course, of low quality. It is often provided by unqualified practitioners and is undermined by corruption, but there are – a McKinsey study in Africa showed – “islands of excellence.” The challenge for those struggling to improve health systems in the developing world is to build on the excellent and raise the standard of the rest not to leave it all to the public sector–because government provided health care is also commonly poor, throughout Africa public health systems are derelict, and governments cannot fund, provide, and regulate care. Help is needed urgently.
Across the world governments and peoples are nervous about private sector involvement in health care because they think it means inequity and the diversion of scarce resources to investors through profits. Yet no health system in the world is entirely funded and provided by the public sector, and most of the inputs to those systems (drugs, beds, food, computers, and even water) come from private providers. The time has come to experiment and replace ideology with pragmatism, and that’s what is beginning to happen.
One of the best examples of innovation comes from Lesotho, where the main hospital, the Queen Elizabeth II Hospital, is in a poor state and short of hot water, trained staff, supplies including drugs, and functioning equipment. The government – with the Ministry of Finance leading – proposed that the government should tender for a private company to design, build, partially finance, and fully operate a new hospital, including providing clinical services. There was naturally resistance to the proposal, but the cabinet, parliament, and the doctors have been convinced by a plan that expects the new hospital and feeder clinics to treat five times as many patients a day, offer more specialties, and give doctors much better conditions for roughly the same spend as now. Plus nobody could produce a better alternative. It is “management” that will make the difference, and, although doctors the world over tend to be scornful of managers, the difference between a well managed and a poorly managed hospital is huge.
This difference is well illustrated with experience with the “Alzira model” in Spain. The government in Valencia has entered into public private partnerships to build and run four hospitals together with primary care. The government pays an amount per head for each of the population in a 15 year contract, and the company must build, equip, and run the services for the whole population. Patients are free to go to other facilities and hospitals if they don’t like the services, and the company must pay for their treatment if they do go elsewhere. The company’s accounts are available to the government, and its profits are limited to 7.5%.
The longest established hospital has achieved higher quality than other hospitals but at a cost that is 20% cheaper. The hospital has been named “Best Spanish large hospital” three times, and 95% of patients are happy to come back to the hospital. Again it’s “management” that has achieved these benefits. Firstly, the system has redesigned clinical care – increasing the use of day surgery, getting specialists to see patients in primary care, and working hard to link primary and secondary care. Secondly, the hospital has concentrated hard on how it manages people – attracting the best professionals, ensuring that they feel part of the system, and incentivising them to raise quality and reduce costs. Finally, there has been huge investment in information technology, including providing an electronic record for all patients, allowing doctors to order tests, drugs, and the like, and giving decision support to professionals.
Britain, prompted by Margaret Thatcher, was the first to promote public private partnerships in health care with the private finance initiative (PFI), but it can’t claim to be as successful as the Spanish experience. PFI indisputably delivered large, new hospitals to an NHS that needed them badly, but there are anxieties about the costs and the inflexibility of the scheme. A bolder scheme that included not just the buildings but also the running of the hospital might have been much more successful – because the buildings account for only about a sixth of annual costs with limited room for efficiency savings, whereas delivering clinical care is more than half of costs with substantial room for efficiency savings.
We don’t yet have convincing evidence that public private partnerships in health care can raise quality and reduce costs – apart perhaps from in primary care. But that’s largely because we still have few examples of such partnerships. There’s every reason to think that boldness and risk taking can pay off, which is why more and more governments in Africa and other developing countries are exploring public private partnerships – particularly those that include running clinical services.

Competing interest. These days Richard Smith codirects a programme on behalf of Ovations and the National Heart Lung and Blood Institute to create centres in the developing world to counter chronic disease. He is paid by Ovations, which is part of the UnitedHealth Group, a for profit health and wellbeing company.

  • Excellent analysis,

    The major problem in many African countries in addition to the resistance of the concept is “management” and “strategic thinking” in the health sector. In Nigeria, where I am from, there is a proliferation of private health care facilities at all levels with no regulation, no accountability and no governance. When I went to one of the states in the South East to do a research project for my MPH thesis, the State government did not have a list of the private clinics under its jurisdiction!

    Many other sectors in Africa, particularly in Nigeria are undergoing phenomenal growth…being driven by profit. No problems with that… as it grow the entire economy. Health is deprived of any such driver…and therefore deprived of much needed strategic thinking as demonstrated by Richard here. Ask most of our ministers what they plan to do for health…they will want to “build” hospitals. Building should be left to the Ministries of Works and Housing to deliver!…a suggestion they will not be happy with.

    Yes…the private sector has a huge role to play…but only if there is the strategic leadership by governments to drive and regulate this.

  • Tatiana

    I want to say some words about situation with private medical care in Russian Federation. Public care can`t provide hight qualified medical service, but most people (even if they can pay for the private medical help) prefer to go to the public care clinics. And it`s happens becouse of their psychology – they think, that when doctors get good money for they job – it`s amoral. I think, that goverment can`t solve this problem in the nearest future. It`s very difficult for the people, who more than 70 years didn`t know what is the word “property” means, realized that private medical care has a rights to exist.

  • Cybertiger

    Vaccines will clearly make a killing for big profit companies in the third world. In the future, the starving will simply die from starvation – and not from measles or the human papilloma virus or other such chronic vaccinatable disease. I understand that vaccines present a huge business opportunity for western wellbeing companies.

  • Kumar Satya

    Dr Smith’s article was very insightful and informative.
    The problem of poor quality and distribution of healthcare in developing countries is separate from the global epidemic of poor efficiency of physicians in “managing “ an organizations/system and resistance to any non-medical influence in improving such efficiency. Countries that have improved delivery and quality of healthcare have done so by applying principles unheard of in the pure medical field – for instance from the manufacturing sector, corporate sector and so on. In developing countries the lack of leadership from the government representatives in shaping health care is probably the biggest reason for the sorry state of things. As mentioned in one of the comments – “building hospitals” is the best the leaders can come up with, for populist reasons; never giving a thought to the already existing private hospitals and such facilities as a resource to be tapped. Never mind the fact the most people in developing countries are already using the same private facilities for a multitude of reasons- one of them being that any meaningful delivery of healthcare may actually be happening in the private sector in that area and the government setup may be completely defunct!
    The industry and its indirect consumers – the physicians have a reputation of working rather sloppily if left unregulated: we have learnt that very well in the preceding decades and only health systems with reasonable regulations are the ones that have done well. In developing countries, with weak leaders and poor representation of people, such a regulation is often lacking.
    But this lacuna cannot be used as a crutch as problems don’t wait for leadership to improve. In addition to shaping health policy to integrate public private partnership, regulation has to be tightened to ensure corruption does not entirely devour the resources in such an arrangement. Any private health enterprise with such a phenomenal catchment population can easily go wayward if left unregulated. Industry operates on a singular motive of financial gain – its obligation to public good in this case has to be enforced by stringent regulation.
    Since the existing use of private health care is probably due to desperation and not choice, the existing quality of care they receive is unacceptable. In a haste to get more numbers under the umbrella, quality should never play second fiddle to quantity and this has to be immutably built into any such system. In a country like India, citing its big “population” as a reason for poor performance of systems (like the health system) is accepted as a universal truth. It is considered an insurmountable barrier, whereas the problem truly has been of poor logistics and shoddy management.
    This begs the question of resource allocation. Essential, primary care and preventive services should provide higher reimbursements to providers and there should be a legal obligation to provide such a care.
    Medical education is an extremely underutilized tool viz-a-vis health systems/delivery/efficiency practices, especially in developing countries. Undergraduate education is probably the most powerful place for priming physicians for such a partnership model with promising long term compliance (“catch them young”). The lay public , which would also be the users of the health system need to be involved in this discussion and debates need to be opened by “opinion makers”. Creating awareness at this level and increasing the ground support for such a health system is essential that this proposal does not die a premature death due to petty partisan interest at the level of the legislature.
    For too long, ministers, policy makers and physicians have neglected their responsibility of providing good medical care to all the people in developing countries. It is high time we started re evaluating our responsibilities and strategies.

  • Government hospitals in India could benefit from this kind of partnership to enhance their acceptability to the public as also their standards of care.

    Today even in the best educated State in India the percentage of people using the Government hospitals is a paltry 2.8%.

    I have forwarded Richard’s proposal to one of the exemplary State Governments for their approval.

  • I cannot comment on Richard’s analysis of the situation in Africa on the basis of any first hand experience. From the examples elsewhere, that sound much more familiar, I suspect that much of the benefit that can be seen in private sector healthcare initiatives is not to do with private capital or profit-making.

    I would suggest that the advantage lies in their small scale and independent governance rather than the fact that they are privately funded. You can see this in any business – small operations can be much more easily “customer-focussed”, are flexible and can address themselves to problem-solving rather than following rigid procedures.

    This approach can be applied in the public sector – in Ireland we have seen it when the State decided to sell “inefficient, over-unionised” state monoploies. These companies were turned around and modernised (and made profitable) while still in state ownership and then sold (rather than the other way round) – the state airline (Aer Lingus) and the state telecommunications company – Eircom. Indeed, when Eircom moved into the private sector, the focus moved from customer service to asset stripping and Ireland moved simultaneously down the broadband penetration league table and up the broadband cost tables.

    Healthcare can be provided in an efficient or cost effective way by independent organisations that are of small scale and responsive – these can be “private” rather than operated by the state without being for profit.

    Can we change the paradigm and look at the healthcare market from the perspective of profit (vs not for profit) rather than public (vs private) and we are more likely to see the where the real opportunities lie?

  • Dear Dr. Smith,

    Greetings from Cadila Healthcare Limited, Ahmedabad, Gujarat.

    Prof. B. M. Hegde, Retd. Vice Chancellor, Manipal University, Mangalore, Karnataka, India, provide us the information about Public Private Partnership and you in the field of Government Hospitals. We want to know the successful model of PPP in India or in the world, any body or the society doing this kind of work in the form of charity. Please provide us the information and any contact so we can know better.

    Thanking you,

    With Warm Regards,

    Dr. V. N. Shah
    Vice President, Health Care Projects
    on behalf of Shri Pankajbhai Patel,CMD,Zydus Group
    Cadila Healthcare Limited
    ‘Zydus Tower’ Opp. Iskon Temple, Satellite Cross Roads, Ahmedabad: 380 015, Guajrat, India
    Tel: +91-79-26868527 (Direct)

  • James Green

    Can somebody confirm this 80% figure. My feeling in the depths of my mind is that Richard Smith has confused private-for-profit outfits as he describes, with Private-not-for-profit,i.e – NGO sector.

    BRAC have been incredible in providing a Primary Healthcare initiative for Bangladesh, but this is different than encouraging the ‘for-profit’ sector.

  • Gerakdine Lindley

    I should be more persuaded of the value of Dr. Smith’s opinion if he represented a not for profit organization

  • April Harding

    To James Green –
    the 80% figure from Bangladesh includes both the non-profit and for-profit segments of the private sector. You are of course correct in noting that the non-profit sector is very large in health services delivery in Bangla.

    Dr. Shah –
    You may find a very good write up of a successful hospital PPP program from Sao Paulo, Brazil in a forthcoming World Bank publication “In Search of Excellence: Raising Hospital Performance in Brazil, by Gerard La Forgia.

    In the book, the author synthesizes the results of 3 evaluations of the PPP program – all of which were very positive. The PPP model used in Sao Paulo was the the gov’t built the facilities and then ran a competitive tender to award a long term operating contract to non-profit hospital companies.

    As it happens, the author is moving to New Delhi this summer to manage the World Bank’s health projects there. So perhaps you will be able to get more information directly from him.
    The launch for the book is the last week of May and you should be able to get it from the WB bookstore.

  • narconon07

    how many people here have left the US? im guessing not many after reading the comments. We are the joke of the world when it comes to health care. They can't figure out why we dont have universal health care. There are no lines or death panels in thier countries.

    Alexa Rae Narconon Specialist