1) The document discusses approaches to managing private sector engagement in healthcare systems to achieve universal health coverage. It explores different types of private sector involvement and strategies governments can use like regulation, encouragement, and strategic purchasing. 2) Key challenges with private sector involvement include risks to equity and quality if not properly managed or regulated. The role of the private sector depends on the characteristics of individual country contexts and health systems. 3) Effective strategies aim to steer private sector efforts towards priorities like increasing access, quality, and affordability while leaving no one behind. Governments must ensure public resources are used to benefit population health as a whole.

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Session 7:
What can be the role of private sector service
delivery?
World Bank Health Systems Flagship Course:
Building Health Systems for the Future
December 3-7, 2023
Cairo
Alaa Hamed

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Outline
Part I
• Alignment of Private Sector Engagement With the Goals of
Universal Health Coverage
Part II
• Understanding private provision in the health systems of low-
income and middle-income countries
Part III
• Managing the public–private mix to achieve universal
health coverage

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Part I: Alignment of Private Sector
Engagement With the Goals of
Universal Health Coverage

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What is the private sector
• The “private sector” refers to the totality of privately owned
institutions and individuals providing health care, including
private insurers.
• In LMICs, large, poorly documented, very heterogeneous; in
some largely serves better-off people; in others, many poor
rely on private provision.
• Operate for profit, many non-profit organizations also exist.
The Lancet, Universal Health Coverage: markets, profit, and the public good, 2016

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The private sector’s role in health care is growing
Offers solutions to problems
• health fiscal space constraints
• increases in disease burden
(noncommunicable diseases)
• demographic shifts including
ageing
• population displacement
• political and economic instability
Offers access to
• greater service capacity
• more managerial expertise
• higher quality of services
• technology and innovation
• investment and funding

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Private sector engagement involves risks
For-Profit Providers, usually, not
properly managed or regulated,
could threaten UHC objectives of
equity and quality
• Abuse of market power
(market skimming, monopolistic
behavior, predatory pricing),
• Unresolved conflicts of interest,
regulatory capture
Not-for-Profit Providers, many
aligns well with UHC
• How to harness the efforts of
the not-for-profit private sector
• Incomplete information about
the not-for-profit providers, lack
governance tools to help align
the activities of these providers
with national systems and
priorities
WHO. The private sector and universal health coverage, April 2019

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A public policy vacuum exists regarding role of the private sector for
UHC
• The private sector could pursue own objectives, may or may
not be closely aligned to UHC.
• Lack an explicit government policy position on role of the
private sector, nor plans to implement public policy on
private sector.
• No consensus among domestic stakeholders, including
health systems users and civil society groups, about the role
the private sector should play in health
WHO. The private sector and universal health coverage, April 2019

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The approach to managing, engaging the private sector as part of
efforts to achieve UHC.
• First, formulate domestic health goals, priorities; formulate public policies
about role of private sector for UHC.
• Second,
• Align work of private sector with the goal of achieving UHC.
• Choice and implementation of public-private UHC policies to be informed
by understanding the different private sector actors that operate in a
country.
• Engage in multistakeholder dialogues to establish policy on the private
sector and UHC.
• Third, implement a mix of legal and financial regulatory tools to manage the
private sector and steer efforts towards achieving UHC.
WHO. The private sector and universal health coverage, April 2019

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1. Incorporate UHC principles, including to leave
no one behind, into our business
2. Deliver innovations that respond to the needs
of all people including underserved populations,
and make these safe, affordable, accessible and
sustainable
3. Help strengthen the health workforce,
responding to local context, priorities and needs
4. Contribute to efforts to raise the finance
available for UHC
5. Champion and engage in multi-stakeholder
policy dialogues that advance UHC

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Part II: Understanding private
provision in the health systems of
low-income and middle-income
countries

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The Lancet, Universal Health Coverage: markets, profit, and the public good, 2016

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The private sector can only be understood and effectively
regulated by understanding the mixed health systems of
which it forms part.
• Identify and ensure appropriate roles for private
providers and for health markets.
• Better understand characteristics and key patterns
of the private sector within the health system.

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Metrics for understanding private
sectors in mixed health systems
• The private share in total health
expenditure (Demand)
• The private share in primary
and secondary care episodes
(Supply)
• The extent of reliance of the
public sector on private fee
payment (Commercialization)

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Five types of private sector in mixed systems
• A dominant private sector (India and Nigeria), high private spending,
high share of supply, high public fees
• A non-commercialized public sector and complementary private sector
(Sri Lanka and Thailand), moderate to low private spending, moderate
share of supply, very low or no public fees
• A private sector at the top of a stratified system (Argentina and South
Africa), high private spending (insurance), substantial supply, low public
fees
• A highly commercialized public sector (China), high spending, small
share of supply, high public fees
• A stratified private sector shaped by low incomes and public sector
characteristics (Tanzania, Ghana, Malawi, and Nepal), high but declining
spending, substantial share of supply, varying reliance on public fees

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Key Features of Private Sector in Mixed Health Systems
• When private sector dominates, the poor struggle to access fee-for-
service care, generally of low quality
• An insurance-funded private sector at the top of a stratified system
reinforces inequality, might display cost escalation
• A dominant, highly commercialized public sector constrains private
provision while excluding the poor
• A reasonably competent, highly accessible public sector can generate
a complementary, reasonable-quality private sector, can reduce both
exclusion and reliance by the poor on low-quality private providers

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Performance of the private healthcare sector: Quality
• Service quality is better in the private sector than in the
public sector.
• By contrast, technical quality seems to be inferior to public
sector, although public sector services could also be of a
low standard.
• Where a strong public sector and a complementary and
better-regulated private sector are present, quality of
private practitioners was close to that of public
practitioners.

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Performance of the private healthcare sector: Equity
• Most private services are funded directly out-of-pocket, the
wealthy more likely use private providers.
• Gaps in public provision results in the poor people using private
providers; usually of low quality, delivered by unqualified
providers, however accessible.
• The convenience, accessibility and affordability of small private
providers compared with public alternatives make them
attractive to patients.
• Lack of effective regulation exposes the poor to inadequately
qualified practitioners providing low-quality care.

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Performance of the private healthcare sector: Efficiency
• Private treatment results in high service costs, use of potentially
unnecessary and expensive procedures, potential inefficiency.
• No clear benchmarks of quality, largely at mercy of private
prescribing.
• Delays in diagnosis due to lack of linkage between sectors, further
contributing to higher prices for users.
• Absence of referral linkage between sectors and within sectors,
repeated diagnostic investigations, information not passed
between providers, high costs and low efficiency.

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Implications for universal health coverage
• Requires health systems that maximize health
outcomes, equitably and progressively
distributes good quality, financially and
geographically accessible services delivered
efficiently, low levels of out-of-pocket
expenditure.
• Need to understand factors influencing the
overall performance of a health system, how
these factors interact.
• Changing the performance of the private
sector will need interventions that target the
sector as a whole, not individual providers.

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Key Messages
1. The private sector in health is strongly influenced by, and
also influences, the public sector
2. A reasonably competent, highly accessible public sector
can generate a complementary, reasonable-quality private
sector
3. The crucial policy question about the private sector is not
its performance in isolation, or relative to the public sector,
but the extent to which it supports or detracts from
progress towards universal health coverage.
4. Deriving population benefit from the private health-care
sector will require interventions that target the sector as a
whole, rather than individual providers alone.

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Part III: Managing the public–
private mix to achieve universal
health coverage

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Four Approaches for engaging
with private providers to
address market failures:
• Prohibition of private
practice;
• Constraint of its operation
through regulation;
• Encouragement and subsidy
of private sector delivery for
specific services;
• Purchase of services from
the private sector
Approaches for Private Sector Engagement

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Approaches for Private Sector Engagement - Prohibit
• A formal ban on some or all forms of private practice, requires social
support, sufficient regulatory and enforcement capacity, or both.
Difficult in low income countries.
• Bans on practice by unlicensed providers, never eliminated,
practice undercover
• Successful bans are rare in LMICs; documented in strongly
controlled socialist economies, reversed as economies open.

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Approaches for Private Sector Engagement - Constraint
Statutory constraints in health care
• Controls on quality of facilities, human resources, medicines, equipment, through
licensing facilities, registering health workers, products.
• Counter monopoly power of providers
Self-regulation by professional organization
• Assess performance, provide public information about provider quality
• Accreditation
Consumer-based regulation
• Consumers sue providers for adverse experiences and outcomes

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Approaches for Private Sector Engagement - Encourage
Positive incentives to increase access or improve quality
• Training to private providers, encourage use of standard
treatment guidelines
• Social marketing of commodities, create demand for
products of high public health value
• Social franchising, for more complex services, link private
providers in a network under a common brand
• Targeted tax incentives to encourage investments or reduce
end-user prices, offering subsidies to potential clients

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Approaches for Private Sector Engagement - Purchase
• Contract for narrowly defined services
• Leverage private funds for initial infrastructure investments to
expand capacity faster than government funds alone allow.
• Fill a specialized need through private expertise, allow more
rapid expansion of service provision.
• Contract for primary-care provision in a defined geographical
area, common in fragile and post-conflict states
• Indirectly purchase services by providing vouchers to users

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Four stylized private provider types on the basis of the three
dimensions
• Objectives (for-profit or non-profit),
• Size of organization
• Quality (proxied by qualified or
unqualified front-line staffing)
• Low quality,
underqualified sector
• Not-for-profit providers
• Formally registered small-
to-medium private
practices
• Emerging corporate
commercial hospital
sector

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Key Characteristics
• Low-quality, underqualified providers. A publicly financed health
service can crowd out the low quality element of the private sector
• Non-profit providers. Some subsidized to increase access to
providers of reasonable quality, some enrich their owners at public
expense
• Formally registered, small-to-medium private practices. Strategic
purchasing offers potential for governments to exert influence over
both what is provided, under what contractual terms.
• Corporate, commercial providers. Unrealistic to achieve UHC,
divert resources from more accessible, cost-effective primary care.

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Role of Government
• Stewardship to ensure public resources serve public interest. Public
stewardship matters, not ownership of provider organizations.
• Regulation to ensure availability of a core health system, publicly
subsidized, reasonably effective, accessible to most population, has a
crucial role in management of rest of the system.
• Effective Strategic Purchasing to ensure efficiency, adequate quality,
fair distribution of services whether through public or private
providers.

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• Provision of a package of publicly financed, universally
accessible, basic or essential health services.
• Provision of additional services, beyond basic, less
cost-effective to offer additional accessibility,
additional amenity, could be through supplementary or
complementary insurance
Role of Private Sector

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Key Messages
• Aim of government policies is to encourage a public–
private mix that ensures widespread availability of
good quality, affordable care, health system meets
the needs of the population as a whole.
• Governments’ role is to ensure public resources used
for the public’s benefit.

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Reading Materials

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