This presentation was provided in February 2024 during a health economics course organized by the Egypt Health Authority. The presentation is divided into three parts. The first part focuses on alignment of the private sector engagement with the goals of universal health coverage. The second focuses on presenting what strategic purchasing means and its difference from passive purchasing and how contracting is one of the strategic purchasing functions. The third focuses on contracting the private sector for universal health coverage providing a definition for contracting and presenting the key types of contracting: Entry contracts, Services contracts and Concessions.

1. Contracting the Private Sector
for Universal Health Coverage
Dr. Alaa Hamed
February 2024

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

4. 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

5. 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

6. 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

7. Message I: Private Sector Engagement Needs to be Aligned
With the Goals of Universal Health Coverage
• 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

8. Message II: Understand Private Provision in Egypt’s health
system
• 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
The Lancet, Universal Health Coverage: markets, profit, and the public good, 2016

9. 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
Message III: Manage the public–private mix to
achieve universal health coverage
The Lancet, Universal Health Coverage: markets, profit, and the public good, 2016

10. Message IV: Define the Role of Government and the
Private Sector
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.
The Lancet, Universal Health Coverage: markets, profit, and the public good, 2016
Role of Private Sector
• 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

11. Part III: Strategic Purchasing for
Universal Health Coverage

12. Resource allocation
Resource mobilization
Risk pooling
Provider payment
Purchasing
The World Bank. Health Systems Flagship Course. 2023

13. What is health purchasing?
The allocation of pooled funds on behalf of the
population to the providers of health services.
Strategic purchasing means making decisions about how to
allocate pooled funds to providers—which services, from which
providers, and how to pay—based on priorities, objectives, and
information.
What makes health purchasing strategic?
The World Bank. Health Systems Flagship Course. 2023

14. Passive vs. strategic purchasing
Multiple payment
streams… each with
its own requirements
Salaries
Drugs and supplies
Local government funds
Vertical program funds
Performance-based financing
OOP
Multiple payment
streams… each with
its own requirements
Health insurance fund payments
Noisy signals about which
populations to serve, which services
to provide, and quality
Inefficiency and poor quality
✓Limited flexibility to use funds to
respond to patient needs
✓Accountable for $ more than
outcomes
✓Risk aversion– providers may be
penalized for using funds in
innovative ways
✓Under-execution of budgets
Inefficiency and poor quality
The World Bank. Health Systems Flagship Course. 2023

15. From passive to strategic purchasing
Passive Strategic
✓ Price and quality maker
✓ Clear benefits package and service delivery
standards (matched to payment)
✓ Selective contracting based on quality
✓ Output-based payment systems that create
deliberate incentives
✓ Monitoring and accountability
✓ Provider autonomy to respond to incentives
✓ Management of overall expenditures in the
system
• Price and quality taker
• Limited information used to allocate
funds and pay providers (e.g. resource
allocation using historical budgets)
• Unclear benefits or service packages
• Little/no selectivity of providers
• Little/no quality monitoring
• Open-ended payment; poor budget
management
The World Bank. Health Systems Flagship Course. 2023

16. Purchasing Functions
The World Bank. Health Systems Flagship Course. 2023

17. Part III: Private Contracting for
Universal Health Coverage

18. What is Contracting?
• A legal agreement between a public authority and private sector
entity,
• to deliver an agreed set of tasks, services
• in a given location
• or for a specified population
• over a defined period of time
• Public authorities can
• purchase health services to increase a country’s capacity
• regulate private sector entities, determine quality and price of services
provided.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

19. Risks Associated with Contracting
• Contracts not comprehensive enough, gaps in service delivery
• Delays in payments
• Reduction in equity, quality and sustainability of services
• Awarding contracts to the ‘wrong’ providers
• Poorly drafted, unenforceable
• Corruption and theft
• Ineffective contract monitoring, dispute resolution mechanisms
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

20. The contracting process
• Define the contract to clearly spell out contract timeframe, scope and
service areas, type of contract.
• Plan the procurement, determine if private sector has capacity to
provide needed services.
• Execute procurement in a way to ensure transparency, good
governance to foster trust and compliance.
• Monitor performance, adapt and improve the system as the contract
is carried out, develop strong capacity to assess strategic needs of
investments and contracted services, cost efficiency, value for money,
long-term financial stability of national budgets.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

21. Type of Contracts
• Decisions are needed about:
• service area(s) to be targeted through the contract
• type of contract to be used
• There main types of contracts are used to deliver health services:
entry contracts, service contracts, and concessions.
• Distinguished by three main features:
• how contractual partners are selected
• how service volumes and performance standards are defined
• how services are paid for
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

22. Entry contracts
• Agreements where contractor deliver a specified range of services to
a specified group of beneficiaries, such as for those enrolled in a
social/ national health insurance scheme or voucher program.
• Specifies the terms the contractor must meet to become, and remain,
eligible for reimbursement under the relevant scheme or program.
This is subject to two performance pressure:
• Meet specified quality standards under accreditation and/or
empanelment
• Incentive to attract service users, who have choice over where to
receive the services covered under the relevant scheme, thereby
receive reimbursement.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

23. Entry contracts
• Focus on prices the contractor can charge for its services to authority
and users, outputs to be delivered, clinical and reporting standards to
be observed, and arrangements for external monitoring.
• Primarily used in countries in which the state of public-private
relationships have reached a mature stage, usually because they are
embedded in social/national health insurance structures
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

24. Service contracts
• Agreements in which authority specifies services to be provided, to
an identified group of people (or catchment area), for a specified
period of time, at an agreed cost to the authority and/ or service
users.
• Unlike entry contracts, service contracts normally operate on an
exclusive basis whereby service users have to go to a specific provider
– i.e., “users follow the money”, and do not allow for user choice over
which facility to receive the service from.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

25. Service contracts
• The volume of outputs to be provided by the contractor (and paid for
by the authority/users) can be determined by either:
• Consumer demand. Payment is volume-based, determined by
level of use of the services, need to constrain total service
provision placing downward pressure on supplier-induced
demand.
• Terms of Contract. Payment is availability-based, fixed, according
to extent services are available to users, define level of availability,
ensure private providers do not prioritize service delivery to those
who can pay directly or via private health insurance, more
lucrative revenue streams compared to government rates.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

26. Service contracts
• Clinical quality of services, and how it will be measured to be defined in
the contract, provides powerful incentive for the contractor to perform
well with regard to service volumes and the quality of output.
• There is no element of ‘patient choice’ in contracts of this type, the
contract itself, and the arrangements for monitoring it, are the only sources
of performance pressure on the contractor.
• Service contracts require carefully specified outputs, quality standards,
performance indicators, and means of verifying that these are being met.
• Can be long and detailed, costly and complex to procure and monitor, vary
depending on the type of service, requires dedicated human and financial
resources to perform these contracting activities effectively.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

27. Concession contracts
• Agreements in which authorization given to a specific contractor to
deliver a defined set of services to an identified group of users, for a
specified period of time.
• Concessions are different, payment made by service users directly,
not by government, no public funds are provided.
• Amount of payment can be regulated, in many cases is informal, may
give contractors significant ‘price-setting’ power.
• Not well-placed to lower financial barriers to health care access.
Focus is on increasing availability of services that were previously
absent, or insufficient.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

28. Concession contracts
• Negotiation with bidders will tend to focus on:
• Size of fee, authority seek to minimize to reduce financial impact
on targeted population
• The volume of output, authority seek to optimize in line with the
identified requirements of the response
• The quality of output, authority ensure is compliant with national
clinical and reporting standards
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

31. What to contract for
• Services areas in which there are often existing private health sector capacity, and
are therefore potential candidates for contracting
• Key questions to answer in relation to ‘what to buy’ are:
• What range and volume of essential health services are needed?
• Who are the intended service beneficiaries/ users, and where are they
located?
• How will a contract complement the public sector’s role in this service area/
locality?
• Do we have sufficient data to address the questions above? If not, how will
such data be sourced and analyzed?
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

32. A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

33. A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

34. The appropriate type of contract depends on
the core objectives set for it.
• If the objective is to address an absence or inadequacy of a specific
set of appropriate quality services – e.g., a lack of COVID-19 testing
and/ or treatment services, in general or in a given locality - then a
concession contract may be appropriate.
• If policymakers wish to ensure that financial barriers to testing or
treatment do not lead to underutilization of critical services, then an
entry contract or service contract may address the requirement.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

35. Mitigating Risks
• Decisions related to selecting the ‘right’ contracting approach and
targeting the ‘right’ service area(s) include the following:
• Determine the legal basis for contracting with the private sector
• Select the appropriate contracting mechanism
• Establish the basis under which the contract will pay for services
• Estimate how much the contract will cost and assess affordability
• Take limitations of technical and financial capacity into account.
A Guide to Contracting For Health Services During the Covid 19 Pandemic. WHO/IFC

36. Thank you