Aligning the Public and Private Sector for an Inclusive Market
By: Sachi Jain, Daniel Cotlear, and Sayaka Koseki
Introduction
The United States Agency for International Development’s (USAID’s) drive toward self-reliance highlights the need for multisectoral actions to increase domestic investment in health service delivery from both the public and private sectors. It’s time the gatekeepers of health systems — donors and governments — carve a more substantial role for the private sector and create a more mature and inclusive healthcare market that delivers for its clients. Most multisectoral actions aimed at achieving health goals focus on reaching outside of health expertise to work with other public sectors. However, by collaborating within the health sector, multisectoral actions can better leverage existing private health sector knowledge and positioning to solve stubborn problems and create new opportunities.
Such multisectoral actions include programs and policies that embed private sector engagement approaches into deliberate and innovative cross-sector actions. The private sector can work to grow its unique role while contributing to overall health goals by focusing on two key opportunities: leveraging existing private sector expertise through new government collaborations to create business opportunities and expanding the private sector reach of health services to increase presence and market demand. In the medium and long term, increased capital investment in the private sector can help sustain these opportunities, bring innovation, and speed up market growth.
Through enabling policies, inclusive regulatory environments, cross-sector partnerships, and de-risked innovation, private sector entities — including private for-profits, nongovernmental organizations, and commercial entities — can successfully collaborate and integrate with public health systems, thus contributing to positive long-term health outcomes and sustained growth.
Leveraging existing private sector services
Private providers offer proximity and flexibility to patients, characteristics which enhance healthcare access. Most private providers are located closer than public providers to client’s home or work and often provide longer hours and shorter wait times. Clients often perceive private providers as offering higher quality services. However, private providers are concentrated in urban areas, compete against cheaper — or free public services, and are often seen with mistrust by the public sector. A multisectoral action that engages the private sector through strong communication mechanisms and government stewardship can work against these barriers and lead the way to greater data sharing, increased provision of services, and increased transparency — all of which can counter public-sector mistrust.
In Guyana, for example, the National AIDS Council and the Ministry for Indigenous Affairs established a social contracting mechanism under which HIV services typically provided by the government can be delivered by private sector civil society organizations. These organizations have been pre-qualified through an open and transparent contracting process, a process which serves as an inclusive social contracting model and encourages more private sector participation. This collaboration, supported by the USAID-funded Health Policy Plus (HP+) project, illustrates how the strength of the private sector can be harnessed to improve access to services.
The public sector can also improve access to services by leveraging existing private sector networks to expand or improve the efficiency of public health services. For example, to improve commodity distribution in Kenya, Palladium used a total market approach to integrate the Kenyan government’s family planning program and contraception distribution with the private sector provider network. Similarly, HP+ Kenya is piloting a model of antiretroviral distribution through private pharmacies.
Private sector experience is not limited to the provision of services. The public sector can leverage private infrastructure and personnel to increase supportive services and help meet difficult national mandates. In Indonesia, district governments created a public-private partnership with a private human resource training facility, Summit Healthcare, to help meet a national training mandate. The district provided equipment and paid Summit Healthcare for its assistance in providing three Ministry of Health-accredited courses to primary, secondary, and tertiary providers, thus aligning public and private incentives to increase meet national health goals.
Increasing private provision
Government stewardship initiatives are an effective and proven way to make private sector engagement standard across the health sector. However, improving access is not the only path to public-private collaboration. In addition to leveraging existing resources, the government can increase private provision of services by creating new resources and paying for equipment and service expansion. In Liberia, the Ministry of Health created a public-private partnership to structure and operate Jahmale Medical Solutions to offer unique and state of the art laboratory and imaging services. This public-private partnership demonstrates the strength of private sector provision and service innovation through public financing. However, leveraging private sector resources and innovation through temporary partnerships is only a short-term way to break down cross-sectoral silos.
Creating markets and increasing capital in the private sector
For medium-term results, governments can act as a purchaser of private sector services and create a market that allows private providers to continuously profit. This market will create meaningful competition and can incentivize quality improvement, efficiency improvement, and scale-up of services. This market-shaping role as a purchaser is not limited to the Ministry of Health; it can also include social health insurance agencies. Such agencies can act as an ultimate purchaser for either specialized or general services, including lab diagnostics, maternal and newborn services, or HIV services. Social health insurance agencies have taken on this role in Asia and Latin America, where countries have well-developed social health insurance systems, and in low-income countries, such as Kenya.
Indonesia’s social health insurance program, Jaminan Kesehatan Nasional, has helped grow the private sector and increase the private provision of services, particularly through private hospitals. The number of private hospitals in the urban Java island in Indonesia has grown about 15%. Profitable hospitals are now able to add services with higher complexity. Social health insurance can increase the demand for private sector services while helping providers finance recurrent expenditures. A social health insurance finance pool also can provide an avenue for the public sector to standardize private sector service quality and gather market data on health services and products. In the long-run, cross-sectoral collaboration can thrive once there is an environment where private sector stakeholders can easily use capital — public, private, or a blend of both — to invest and create new products and services that catalyze health outcomes forward.
Palladium’s Bamboo Capital provides blended capital investments to emerging health technology companies through its HEAL fund. Partnering with the Stop TB Partnership, the HEAL fund works to de-risk innovation for medical technology companies so they can scale new digital health solutions focused on improving access to health care and nascent markets. Bamboo Capital works to combine private sector financing with public sector expertise in health access models. Mobilizing capital for the private sector is an important consideration when looking at long-term mechanisms; without it, the private sector will have difficulty being consistently engaged.
Aligning interests across sectors
Social contracting and public-private partnerships are immediate multisectoral and private sector engagement mechanisms that can be used to fund health and related services. However, having the government as an ultimate buyer through social health insurance purchasing of private services is a more sustainable mechanism. Beyond these ways of engaging the private sector, having the government or private entities provide working capital to the health market can motivate the private sector to invest in increased services or innovative technologies. Both approaches contribute to overall system health goals and outcomes.
Because the government cannot create the whole finance pool, donors can help through traditional donor aid as well as through blended finance. Associated policy, government stewardship, and market-shaping interventions is foundational to the success and scale of these processes and can continue through projects like HP+. Government stewardship and public-private dialogue must continue to ensure finance mechanisms operate successfully and sustainably, and that public-private interests remain aligned in support of improved health outcomes.
Sachi Jain is a Health Policy Analyst at Palladium; Daniel Cotlear is a Technical Director, Health Systems at Palladium; and Sayaka Koseki is a Technical Advisor, Private Health Sector and Alternative Financing at Palladium.
