In any country, the healthcare system is comprised
of both the public and private sector.
The private sector is a large and diverse group that is
increasingly being recognized as a significant part of
developing country health systems.
Why Involve the Private Sector?
The major challenge for developing countries is how to
improve healthcare for all their people, especially the
The most common approach focuses almost
exclusively on the public health sector:
Building the capacity of public facilities
Training and recruiting staff
Expanding subsidized public services to the poor
High quality, well-funded public services are essential.
High quality, well-funded public
services are essential
A public sector-only approach fails to harness all the
resources available in the health sector.
While not seeking to detract from the government's
role in providing healthcare, it is important to dispel
myths and misconceptions, and reasons why
ministries of health should work with the private
health sector to achieve health goals.
Private health sector in action
Visiting the public hospital would cost a whole day in
lost pay to the factory's workforce.
In Gujarat, India, a private obstetrician /gynaecologist
delivers new baby. She does not have to pay for care
because the state government has created a voucher
program that pays a set fee to private doctors who join
the program and serve poor patients. Is this an
example of the private health sector in action?
Who is the Commercial Sector in
Health? Most of the people never goes to the doctor. When he
or his family get malaria, they walk to the local drug
shop, get medicine, and treat their illness at home.
If they get sicker, they call in a traditional healer. Is
this an example of the private health sector in action?
The Health Sector
The private sector in health is also called
the "non-state sector" and is typically
defined as comprising "all providers
who exist outside of the public sector,
whether their aim is philanthropic or
commercial, and whose aim is to treat
illness or prevent disease“.
Private Health Sector
The private health sector is a large and diverse group that
covers a wide range of health sector entities, including:
Private practitioners, clinics, hospitals, and laboratories
and diagnostic facilities
Non-profit non-governmental organizations (NGOs) and
faith-based organizations (FBOs)
Shopkeepers and traditional healers
Pharmacies and pharmaceutical wholesalers, distributors,
Private companies not engaged in health who provide
health care services to their employees and communities
Did You Know?
In any country, the healthcare system comprises public
and private sectors. The public sector, which in many
developing countries is the largest healthcare provider,
includes the Ministry of Health and its network of
healthcare staff and infrastructure.
Who are the principal private sector players in your
own country? Can you name examples of NGOs, FBOs,
and for-profit providers in your country?
Overview of the For-Profit Private
The for-profit private sector comprises a wide range of
actors, some of which are in the informal health sector.
The two primary health activities in which the private
entities engage are:
Direct provision of private health services
Provision of health products through private channels
Private Sector Providers
Private healthcare is delivered in both
the formal and informal health sectors.
Even the poor pay for health services in
the private sector
The private sector share of healthcare
markets varies from region to region
and within regions, based on political,
historical, and economic factors.
The formal sectorThe formal sector includes a wide range of trained and licensed private
healthcare providers such as:
Paramedical staff, including clinical officers and
Private pharmacists and drug sellers also play a critical
role in developing countries, as they are often the first-
line providers in the formal health sector that serve
remote population groups.
The dynamic private health sector also includes a wide
range of support services such as private laboratories
and other diagnostic services
Informal Sector Private Providers
The informal health sector comprises:
Traditional birth attendants
Market drug sellers
In India, care and treatment of sexually transmitted
infections, including HIV/AIDS, is provided not only
by physicians, but also by registered medical
practitioners and other qualified homeopathic and
Private providersPrivate providers, whether formal or
informal, deliver their services in a
variety of locations:
Single room in the provider's home
Privately owned hospital that offers a
broad array of health services
(International Finance Corporation Report,
Private Provision of Health
The pharmaceutical industry boasted global sales of
US$643 billion in 2006. (IMS, 2007)
The pharmaceutical industry (both internationally and
locally) plays a key role in the manufacture and
distribution of health products.
In the private sector, product distribution is more
complicated and involves more marketing and detailing
than in the public sector.
International pharmaceutical companies, also known as
research and development (R&D) companies or "Big
Pharma," manufacture many of the healthcare products
used in both the public and private sectors.
These R&D companies often deal directly with private
healthcare providers, either through their own company
representatives located in-country or through a local
distributor, to satisfy existing demand and to create new
There are also a growing and significant number of
pharmaceutical manufacturers in developing countries
that produce generic versions of "R&D" or "priority"
medicines (such as those used for the treatment of
HIV/AIDS and malaria).
International standards for generic
Because of the importance of ensuring
the quality, consistency, and
authenticity of generic and otherwise
new medications, the World Health
Organization (WHO) and other
multilateral organizations have joined
together to create standards for their
manufacturing and distribution.
China, India, and Brazil are the powerhouses of
local pharmaceutical manufacturers, and supply
many parts of Africa and Asia with generic and
low-priced pharmaceutical products.
Retailers in Health Sector
Retailers are an important segment of the private health
sector because they are often the de facto health advisors in
many communities that are difficult to reach.
Retail outlets sell medicine and other health-related products
and include such places as:
Over-the-counter drug shops
Medicine and chemist shops
Supermarkets and corner groceries
Market stalls and kiosks
Unregulated Sector presents many
The poor quality of some drug products, whether
distributed in the formal or informal health sector, is
creating health problems such as increased drug
resistance in the treatment of malaria and HIV/AIDS.
There is also an informal sector for health products,
particularly for drugs. This unregulated sector presents
many health challenges.
Private Services to Sell Healthcare
ProductsMany private sector companies support product
distribution and sales of healthcare products through
private channels including:
Market research firms
Public relation companies
Health communications campaigns can increase sales of
pharmaceutical products and encourage healthy
Why ministries of health work with
the private sector.
In most countries, people already use the private sector
or pay for government health services. Individuals
paying out-of-pocket for both public and private
health services make up the majority of healthcare
The percentages of public and private expenditures
vary widely, but consumers in all countries spend a
substantial amount of personal resources in the
private health sector.
“Despite all the
evidence showing the
significant amount of
money being spent by
services from the
private sector, most
governments and aid
on public delivery of
A study in Kenya found that
poor family planning clients
receive a variety of benefits by
choosing private sector facilities
over public sector facilities.
Benefits include a much greater
proximity of services and better
quality of interpersonal care.
When the cost of transportation
and wages lost was factored in,
the private sector facilities were
in fact cheaper than those in the
(Agha and Keating, 2008)
With the right market incentives (
i.e., governments' policies and
actions) the private for-profit
health sector can become
sustainable enterprises that also
serve the poor.
As part of the health system, the
for-profit sector can also help
governments achieve priority
The base of the
are the 4 billion
people in the
world living on
less than US$2
The Private Sector Can Improve the
Quality of the Health Sector
Why individuals choose private
providers rather than public ones.Many consumers perceive that the quality of care they receive at
private sector facilities is high. Key factors driving the
perception of private sector facilities include:
There is much debate about the quality of private sector
services. Many of the patient-perceived benefits do not
necessarily translate into higher standards of care or better
Although these concerns about private sector quality of care are
legitimate, publicly provided care also falls short of
Clearly there is room to improve quality in both sectors.
The private sector can deliver, often at a lower
cost, priority services and products that are not
available through the ministry of health.
For example, by contracting out to the private
sector, the public sector can extend its reach to
underserved populations at a lower cost.
To deliver key services for distribution of health
products, social marketing and other private
sector partnerships can ensure wider and more
reliable availability to urgently needed health
Working with the Private Sector
can Strengthen Resources
The private health sector employs a large proportion of
medical personnel all over the world.
The public sector can greatly increase the number of
trained professionals working in the country by simply
including private providers in its training programs.
Private providers have their own infrastructure and
clientele, where they can apply their new knowledge
The public sector can also create more flexible
regulations, thereby allowing more private providers to
set up practice
Strategies to strengthen quality in
the Health Sector
Improving the quality of private health services is
often a priority for governments and donors.
Creating an effective regulatory framework
Working through professional associations
Voluntary certification and quality improvement
Quality healthcare has many different dimensions,
including provider technical competence, efficiency,
effectiveness, safety, access to services, physical
infrastructure, and strong communication skills.
A successful quality improvement process should result
Increased provider compliance with evidence-based
protocols and guidelines
Reduced number of medical errors
Improved patient satisfaction
Efficient use of healthcare resources
Improved health status of the population.
Governments and donors have
legitimate concerns about the
quality of services in the private
health sector, due to:
Diverse and fragmented nature
Informal private providers
Counterfeit unregulated drugs
Government in its role as a health
steward can improve quality in the
private health sector and protect
consumers by updating laws and
procedures. This can create a "level
playing field" in which all
healthcare providers (public,
private, NGO) abide by the same
rules and standards of quality.
Major legal and Regulatory Areas
Quality that governments can address include:
Qualifications for medical practice
Scope of practice for different professions
Criteria to establish private practices
Regulations are only as effective as the systems that are
available to monitor and enforce them. Strengthening
regulatory agencies and political commitment to
sufficiently fund these institutions are also important
components of quality improvement. (Ravenholt, 2006)
Factors that Affect Private
Provider Quality Policy and program interventions can encourage and
inhibit quality in the private sector.
Governments interested in improving private sector quality
need to leverage factors that motivate, and mitigate those
that inhibit, private providers.
Countries that have successfully improved quality in the
private health sector have consistently included a wide
range of key health sector actors outside the MOH.
Involving these multiple stakeholders in policy
considerations provides the MOH a wide range of
perspectives on factors that motivate the private
sector.(Brugha and Zwi 1998)
In addition to provider training and skill
development, innovative approaches to change
provider behaviour include:
Job aids (e.g. worksheets, checklists, decision tables)
Studies in India show that training private
medical practitioners can address some of these
quality barriers by improving private providers‘
An Effective Strategy to Improve
Quality of Care
Clinical guidelines, based on WHO, International
Planned Parenthood Federation, and US Centers for
Disease Control and Prevention (CDC) standards
and revised by a committee of leading physicians from
Training of private physicians
Ongoing development of an assessment tool (Quality
Orientation for physicians on steps in the certification
Quality of CareProfessional health associations offer:
Organizational umbrella and structure
Credibility to influence professional standards and
scopes of practice
Ability to provide input into pre-service education and
Advocacy for their patients and profession.
To Improve QualityMost professional associations in developing countries need capacity
building and organizational strengthening to be effective in working
with the private sector to improve quality.
Such support can include:
Peer support and supervision programs
Institutional growth and sustainability
Many US- and European-based professional organizations are
establishing partnerships with "sister" organizations in developing
countries to transfer skills, help build systems, and share experiences.
Identify critical stakeholder members
Explore different associations’ interests and potential
Agree on the policy focus
Determine how the partners will work together
Identify actions to work on together as group
Supportive supervision has the following advantages
for the private health sector:
Promotes quality by improving communication
Focuses on problem-solving
Provides leadership and support to empower health providers
to monitor and improve their own performance
For supportive supervision to work well in the private
sector, there must be:
Group or network of identified private providers
Entity or organization to coordinate and provide the
Challenges with this approach include:
Costs associated with providing supportive supervision
Scheduling difficulties for busy providers.
Public-private partnerships (PPPs) in
health involve government and
the private sector working
to achieve common goals,
share risks and rewards,
leverage each partner's
comparative advantage, and
use each partner's resources
effectively (O'Hanlon, 2008).
Some of the most common forms
of PPPs for health service delivery
· Contracting out
· Health insurance
· Risk pooling
Public-private partnerships Improve health outcomes among target populations
such as poor and rural groups
Remove barriers to healthcare (access, economic,
Reduce government spending (eliminating large up-
front investments of scarce public funds)
Improve efficiency (due to private partners'
Leverage technical or management expertise
Spur technology transfer (Nikolic and Maikisch, 2006)
ContractingTo increase access to health services and improve
performance of the health system, driven by the
Need to rapidly scale up coverage or range of services
Frustrations regarding the availability, quality, and
efficiency of centralized publicly provided services
Shortages of public healthcare personnel
Client preference for private care.
Contracting to Increase Access to
Primary Health Services
There are two main types of contracting:
Contracting-out, or a "service delivery contract." In a
service delivery contract, the contract specifies that
the contracted entity will both manage and supply the
production infrastructure such as personnel,
equipment, and drugs.
Contracting-in. The government contracts a private
sector entity to manage existing government services
in a specific area (a "management contract") or to
provide some other support service with existing staff,
logistics arrangements, and infrastructure.
Benefits of Contracting-out
Benefits of contracting-out include the following:
Taps the private sector's greater flexibility to improve
services and strengthens the focus on measurable results
Provides for competition among private providers,
which increases the efficiency and effectiveness of
health service delivery (Loevinsohn and Harding, 2004)
Builds the capacity of NGOs that often deliver these health
services, in areas such as clinical services, nutrition and
immunization programs, and consumer education