For-profit health care: Eliminate, tolerate or stimulate?

A woman from Kassab camp for internally displaced persons in Kutum, North Darfur waits to receive medicine from a nurse. How do we ensure people in developing countries are able to access sufficient health care products and services? Photo by: Albert González Farran / UNAMID / CC BY-NC-ND

Search online for the role of for-profit organizations in health care and you’ll find millions of results, including an abundance of studies, conferences and discussions among providers, advocates and various other actors. It’s an important debate about a complex issue — one that remains largely unresolved in countries around the globe.

Where does that leave a policymaker in the developing world, where access to quality health products and services at affordable prices is far from universal, and where public resources and capacities are limited? Policy choices range from eliminating the involvement of the private sector in health care to stimulating it as a contributor to universal coverage.

The “eliminate” option should quickly be ruled out. Even at a strategic or philosophic level, the fact is that almost no country has a pure public sector model; per World Bank data, even in Cuba, private expenditure represents 4 percent of the total spending on health, compared to a worldwide average of 40 percent and a contribution as high as 70-80 percent in some poorer countries.

Millions of sick people are currently served by for-profit health care, often because public facilities do not have the necessary staff, equipment, supplies or medication. To divert public resources to crack down on the for-profit health sector would reduce rather than increase coverage.

Some developing countries are in a passive “tolerate” mode. The official policy may be that free care should be available to all, but if government is unable to provide that, for-profit companies will seek to fill the gap. Although this is an easy approach, it’s a mistake because by ignoring both the role for-profits can play in providing care as well as some of the powerful principles and techniques that are the strengths of commercial enterprises, the country is missing a major opportunity to increase access to quality, affordable care.

In my view, a better solution is to embrace and stimulate for-profit health care in two ways: first, by recognizing its role and then acting to improve its reach and performance. Secondly, by understanding corporate strengths and adapting them for the public health care system.

Recognizing and then improving the reach and performance of for-profit health care starts with public-private dialogue. A country that is serious about it could convene a planning session of decision-makers from the government and the for profit health sector. The goal would be to craft five quickly actionable ideas that improve access, quality and affordability for vulnerable populations. The actions would vary by country, but could include:

1. Regulation

Define that narrow set of critical few standards that are required to protect the population, and that are within the capacity of the authorities to enforce. Then consider all others for elimination or at least streamlining — because in many cases, they impede operations. Make enforcement both more effective and more equitable, applied in the same manner to all actors in the health system. Where government systems are weak, consider self-regulation.

2. Insurance

If there is a public system, ensure that it allows utilization of for-profit providers. Where  private insurance programs exist, including HMO-type approaches or cooperatives, determine what is required to improve effectiveness and reach, including strong promotion and possible consolidation into a broad network. Seek means to extend access to the most vulnerable populations, such as vouchers or other subsidy techniques.

3. Continuing medical education

The public and private sectors should work together to address this critical ongoing need. The financial and business environment should ensure that the government recognizes and appropriate balances the tradeoff between its need for tax revenues and its ability to promote access by favorable import, business and income tax treatment of health care. Identify and resolve other business environment issues that prevent a rapid expansion of affordable products and services offered by for-profit health providers.

Additional ideas could involve sourcing, approval and pricing of new medications, participation in nationwide data and surveillance systems, outsourcing of selected services, or formal investment partnerships for certain facilities.

The second way to embrace for-profit health care — by adapting the powerful principles and techniques that are the strengths of commercial enterprises to public sector health programming — is perhaps less amenable to a “just do it” approach. But it’s worth considering.

One key private sector principle is the knowledge that people respond to incentives. A business owner, including a one-person, self-employed entrepreneur, is motivated to satisfy customers, drive sales and keep costs low by the profit that will result. An employee of that business owner — whether the CEO of a Fortune 500 company or the cashier in a local pharmacy — can be similarly motivated by a well-designed accountability and rewards system.

Now consider the staff of a public health system, such as the nurse responsible for patient record keeping or for maintaining sufficient stock of medicines and supplies. A private sector human resources system would determine when the nurse comes to work and does his or her job, providing rewards in the form of salary and benefits when he or she delivers and accountability if not.

The system would include robust internal communications and alignment, so the nurse understands the overall strategy and objectives of the organization and its importance for the population — and how these translate to his or her own key personal role and objectives. When he or she far exceeds expectations, the system should consider additional rewards, including promotions to jobs where full potential will be realized. I believe that some of the public health investments currently made in buildings or vehicles or computer systems would be better spent on basic human resources administration.

Beyond incentives and HR management, a second powerful private sector concept is building for sustainability. No serious business enterprise would be funded and launched without a solid plan showing that it will generate enough cash flow to cover three things: ongoing daily costs, occasional replacement of worn-out or obsolete equipment and infrastructure and a return on the capital provided by investors. An organization funded by patient social capital, or by public resources, might get a pass on the third element, but the other two are non-negotiable.

If a government has a steady stream of tax revenues sufficient to fund a facility, then this is a non-issue. But if not, rather than relying on unstable and currently dwindling foreign aid, it may be necessary to consider a structure which generates at least some revenue.

There is debate about when and how much fees impede access, but intuitively these could create barriers to access for the poorest populations, and there is some data supporting that. So there is a downside — which could be managed with vouchers or other subsidy schemes. But the upside is more facilities, personnel and medicines in the system. And revenue collection at public facilities is happening, unofficially in many places, anyway. Would it not be better to structure it so it can be managed and perhaps reduced over time as government resources grow?

One final key business process that can increase access and quality is franchising — not the part about advertising delicious burgers but rather the development, rollout and monitoring of best practice business processes. This could involve activities like how staff is recruited, trained and scheduled, how health facilities are cleaned and disinfected, how medication stock levels are maintained, or how family counseling or cervical cancer screens are conducted.

There are numerous successful health social franchises serving vulnerable populations around the world today, and governments can include their clinics in these networks.  

Franchised business processes could also be applied to other public health programming, for instance the recruitment, training and management of community health workers. Could they become franchised microentrepreneurs offering a basic selection of pharmaceuticals?

For-profit health care is not a panacea. Like any system, it has its advantages and disadvantages — and it must be regulated to prevent abuse. But realities on the ground and the power of the private sector warrant an intensified focus on engagement.

Want to learn more? Check out the Healthy Means campaign site and tweet us using #HealthyMeans.

Healthy Means is an online conversation hosted by Devex in partnership with Concern Worldwide, Gavi, GlaxoSmithKline, International Federation of Pharmaceutical Manufacturers & Associations, International Federation of Red Cross and Red Crescent Societies, Johnson & Johnson and the United Nations Population Fund to showcase new ideas and ways we can work together to expand health care and live better lives.

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About the author

  • Marty finnegan speaking

    Martin Finnegan

    Marty Finnegan is a consultant focused on building and strengthening social enterprises, and on local capacity development. After a successful career with Texaco and Chevron in fuels and convenience store sales and marketing, franchising, supply chain, storage and transport across 75 countries, he served as Haiti Country Representative for Population Services International from February 2012 to August 2014.