"Make or buy" decisions in the production of health care goods and services: new insights from institutional economics and organizational theory

A central theme of recent health care reforms has been a redefinition of the roles of the state and private providers. With a view to helping governments to arrive at more rational "make or buy" decisions on health care goods and services, we propose a conceptual framework in which a combination of institutional economics and organizational theory is used to examine the core production activities in the health sector. Empirical evidence from actual production modalities is also taken into consideration. We conclude that most inputs for the health sector, with the exception of human resources and knowledge, can be efficiently produced by and bought from the private sector. In the health services of low-income countries most dispersed production forms, e.g. ambulatory care, are already provided by the private sector (non-profit and for-profit). These valuable resources are often ignored by the public sector. The problems of measurability and contestability associated with expensive, complex and concentrated production forms such as hospital care require a stronger regulatory environment and skilled contracting mechanisms before governments can rely on obtaining these services from the private sector. Subsidiary activities within the production process can often be unbundled and outsourced.     

From cooperation to competition in national health systems--and back?: impact on professional ethics and quality of care

Ethical behaviour in health workers is the jewel in the crown of health services. Health system policies need to nurture a professional service ethic. The primary health care policy envisioned a national health system led by the public sector and based on a philosophy of cooperation. A common theme of 'health sector reform' in OECD countries, introduced in the context of neoliberalism, has been the use of 'managed competition' to increase efficiency. Some countries that flirted with health system competition have returned to cooperation. Market relationships tend to be oppositional and to stimulate self-seeking behaviour. Health system relationships should encourage patient and community centred behaviour. The World Bank and bilateral donors have exported health sector reform theories from the north to the south, involving privatization and marketization policies. This is despite the lack of evidence on their desirability or feasibility of implementing them. Private health care has increased in many developing countries, more as a result of economic crisis and liberalization than specific health sector reforms. Much of this private practice is unlicensed and unregulated, and informal privatization has had a damaging effect on health worker ethics. The lead policy should be reconstruction of the public health system, involving decentralization, democratization and improved management. Commonsense contracting of an existing private sector is different from a policy of proactive privatization and marketization. Underlying the two approaches is whether health care should be viewed as a human right best served by socialized provision or a private good requiring governments only to correct market failures and ensure basic care for the poor. It is a matter of politics, not economics.     

The privatization of health care in three Latin American social security systems

Most Latin American social security institutes are direct providers of medical care services to their beneficiaries. As many of the institutes have developed serious financial problems over the course of the last decade and a half, they have come under increasing attack for (a) exacerbating inequalities in access to and use of health care, (b) further heightening the geographic overconcentration of services, (c) focusing a disproportionate amount of resources on high technology, curative care to the near total exclusion of primary health care, and (d) being administratively top heavy and, more generally, inefficient. In the past few years, many Latin American countries have begun searching for methods to ameliorate these problems. This paper analyzes three recent efforts, all of which involve some degree of privatization: (1) El Salvador's partial privatization of specialty physician outpatient consultations, (2) Peru's minor surgery and its decentralized ambulatory care programme, and (3) Nicaragua's "administrative services only' approach wherein social security beneficiaries choose to join a certified public or private provider organization for one year, and, on behalf of the individual, social security pays the organization a fixed, annual, per capita fee to provide all health care for the enrollee. The paper also identifies political and technical considerations, as well as health care market characteristics that have shaped these efforts and that condition their likelihood of success, including: the size, composition, level of capacity utilization, degree of organization and geographic distribution of private sector resources; relative prices in the private vis-a-vis the public sector; and the size and nature of the private health insurance market. Other Latin American countries would do well to examine these factors and characteristics before embarking on efforts to reform their own social security health care delivery systems.     

Privatization of health services in less developed countries: an empirical response to the proposals of the World Bank and Wharton School.

Academics and World Bank officials argue that, by reducing out-of-pocket expenditures, expanded private insurance may improve access to needed health services in less developed countries. In this empirical response, the authors examine this recommendation through observations from their research on privatization of health services in the United States, Argentina, Chile, and Mexico. Privatization, either through conversion of public sector to private sector insurance or by expansion of private insurance through enhanced participation by corporate entrepreneurs, generally has not succeeded in improving access to health services for vulnerable groups. Although the impact of privatization has differed among the Latin American countries studied, expansion of private insurance often has generated additional co-payments, which have increased rather than decreased out-of-pocket expenditures, thereby worsening access to needed services. Privatization usually has improved conditions for private corporations and has led to higher administrative costs. To address the devastating problems of access to services worldwide, we must find ways to enhance the delivery of public sector services and must move beyond conventional wisdom about market-based policies such as privatization.     

The consequences of health service privatisation for equality and equity in health care in South Africa

The trend towards the privatisation of health services in South Africa reflects a growing use of private sources of finance and the growing proportion of privately owned fee-for-service providers and facilities. Fee-for-service methods of reimbursement aggravate the geographical maldistribution of personnel and facilities, and the competition for scarce personnel resources aggravates the difference in the quality of the public and private services. Thus the growth in demand for these types of providers may be expected to increase inequality of access in these two respects. The potential expansion of medical scheme coverage is shown to be limited to well under 50% of the population, leaving the majority of the population without access to private sector health care. Even for members of the medical schemes, benefits are linked to income, thus clashing with the principle of equal care for equal need. The public funds needed to overcome financial obstacles to access to private providers could be more efficiently deployed by financing publicly owned and controlled health services directly. Taxation also offers the most equitable method of financing health services. Finally, attention is drawn to the dilemma resulting from the strengthening of the private health sector; while in the short term this can offer better care to more people on a racially non-discriminatory basis, in the long term, health care for the population as a whole may become more unequal and for those dependent on the public sector it may even deteriorate.     

Comparative quality of private and public health services in rural Vietnam

BACKGROUND: Private health care services were officially recognized in Vietnam in 1989, and for the last 15 years have competed with the public health system in providing primary curative care and pharmaceutical sales to rural populations. However, the quality of these private and public health care services has not been evaluated and compared. METHODS: A community-based survey was conducted in 30 of the 160 communes in Hung Yen, which were selected by probability proportional to population size (PPS) sampling. All commune health centres (CHCs) and private health care providers in the selected communes were surveyed on human resources, services provided, availability of medical equipment and pharmaceuticals, knowledge and clinical performance for acute and chronic problems. Patient satisfaction and cost of care associated with recent illness were measured using a random household survey covering 30 households from each of the selected communes. RESULTS: There were 11.5 private providers per 10,000 population, compared with 6.7 public providers per 10,000. A quarter of private providers were employees of the public health sector. Less than 20% of the private providers had registered their practice with the government system. Eleven per cent (26/234) had no professional qualifications. Fifty-eight per cent (135/234) provided treatment as well as selling medications. Public sector infrastructure was superior to that of the private providers. The quality of services provided by public providers was poor but significantly better than that of private providers. Patient satisfaction and costs of care were similar between the two groups. CONCLUSIONS: Private providers are successfully competing with the public health centre system in rural areas but not because they provide cheaper or better services. The quality of private health care services is not controlled and is significantly poorer than public services. Current practice in both systems falls below the national standard, especially for the management of chronic health problems. The low quality of health care services at a community level may help explain the previously observed phenomena of high levels of self-medicating, low utilization of commune health centres and over-utilization of tertiary health care facilities.     

What can be done about the private health sector in low-income countries?

A very large private health sector exists in low-income countries. It consists of a great variety of providers and is used by a wide cross-section of the population. There are substantial concerns about the quality of care given, especially at the more informal end of the range of providers. This is particularly true for diseases of public health importance such as tuberculosis, malaria, and sexually transmitted infections. How can the activities of the private sector in these countries be influenced so that they help to meet national health objectives? Although the evidence base is not good, there is a fair amount of information on the types of intervention that are most successful in directly influencing the behaviour of providers and on what might be the necessary conditions for success. There is much less evidence, however, of effective approaches to interventions on the demand side and policies that involve strengthening the purchasing and regulatory roles of governments.     

Accountability in social service contracting: the state action doctrine and beyond

The privatization of government services in the United States is not a new phenomenon. The growth of privatization has meant a greater role for private enterprise in the public sector. However, the privatization of social services leads inexorably to questions about where the responsibility for protecting citizen rights lies. Furthermore, as a greater number of public services are contracted out to private service providers, accountability may be redefined or de-emphasized. This study focuses on the current state of privatization and the constitutional accountability of private social service providers. It also suggests alternative methods to ensure accountability to service recipients and the public in the contracting process.     

Public health care under pressure in sub-Saharan Africa

Taking as point of departure the need for a strong public health care sector in developing countries the article firstly outlines how in sub-Saharan Africa enhanced scarcity has characterized the content and quality of health care in the public sector. This has eroded the trust among the public in the government as provider of health care and guardian of public health. Secondly, it describes how workers in the public health domain have dealt with the implications of scarcity by etching out a "puvate" zone in health care provision and how these informal activities need to be interpreted as "muddling through". It also points out what are reactions of clients to a decline in public health care provision. Thirdly, it discusses the changing relation between the state as provider of health care and private sector health care provision at a time of emerging public-private partnerships. The article emphasizes the need for strong health services at basic health centre level. It is at that level that the state has to address problems of scarcity and regain public trust. It also is at that level where major long-term health policies like the imminent large-scale delivery of antiretrovirals (3by5) have to be accomplished.     

Evaluation of immunization knowledge, practices, and service-delivery in the private sector in Cambodia

A study of private-sector immunization services was undertaken to assess scope of practice and quality of care and to identify opportunities for the development of models of collaboration between the public and the private health sector. A questionnaire survey was conducted with health providers at 127 private facilities; clinical practices were directly observed; and a policy forum was held for government representatives, private healthcare providers, and international partners. In terms of prevalence of private-sector provision of immunization services, 93% of the private inpatient clinics surveyed provided immunization services. The private sector demonstrated a lack of quality of care and management in terms of health workers' knowledge of immunization schedules, waste and vaccine management practices, and exchange of health information with the public sector. Policy and operational guidelines are required for private-sector immunization practices that address critical subject areas, such as setting of standards, capacity-building, public-sector monitoring, and exchange of health information between the public and the private sector. Such public/private collaborations will keep pace with the trends towards the development of private-sector provision of health services in developing countries.     

Vouchers for primary healthcare services in an ageing world? The perspectives of elderly voucher recipients in Hong Kong

Considering the ageing population in economically advanced regions across the world, measures are necessary to enhance the health of the older population as well as contain public healthcare spending. Hong Kong implements the Elderly Health Care Voucher Scheme (EHCVS), providing older people aged 65 or above an annual subsidy of visiting private healthcare service providers for chronic disease prevention and management. The services also aim at reallocating demand from the public to private sector as well as improve quality of services. This qualitative study explored the experiences of EHCVS recipients (n = 55, aged 61–94) with eight focus group interviews in Hong Kong in the year 2016. Convenience sampling was used. Research questions were: (1) Why do older people choose not to use EHCVS for preventive as well as disease management services among older people in Hong Kong? (2) What are the barriers to reallocating demand from the public to private sector? (3) In what ways did EHCVS improve the quality of primary care services for older people? Using a deductive and inductive approach, eight qualitative themes were identified. Findings suggested that the non‐targeted services and inadequate knowledge on EHCVS deterred older people from using the vouchers for disease management and prevention. The relatively expensive private services, lack of trust in the private sector, low public clinic fees and good services quality of the public sector, together with inadequate private practitioners in the healthcare market were barriers that hinder demand reallocation. Nevertheless, the quality of primary care services had been improved after the implementation of EHCVS with shortened wait times and opportunities to discuss health‐related issues with private practitioners. Findings were discussed with practice, policy and research implications.     

Private health care in Nigeria: walking the tightrope.

The persistently low quality and inadequacy of health services provided in public facilities has made the private sector an unavoidable choice for consumers of health care in Nigeria. Ineffective state regulation, however, has meant little control over the clinical activities of private sector providers while the price of medical services has, in recent years, grown faster than the average rate of inflation. Reforms that are targeted at reorganizing the private sector, with a view to enhancing efficiency in the supply of services, are urgently required if costs are to be contained and consumers assured of good value for money.     

Efficiency and quality in the public and private sectors in Senegal

It is often argued that the private sector is more efficient than the public sector in the production of health services, and that government reliance on private provision would help improve the efficiency and equity of public spending in health. A review of the literature, however, shows that there is little evidence to support these statements. A study of government and non-governmental facilities was undertaken in Senegal, taking into account case mix, input prices, and quality of care, to examine relative efficiency in the delivery of health services. The study revealed that private providers are highly heterogeneous, although they tend to offer better quality services. A specific and important group of providers--Catholic health posts--were shown to be significantly more efficient than public and other private facilities in the provision of curative and preventive ambulatory services at high levels of output. Policies to expand the role of the private sector need to take into account variations in types of providers, as well as evidence of both high and low quality among them. In terms of public sector efficiency, findings from the study affirm others that indicate drug policy reform to be one of the most important policy interventions that can simultaneously improve efficiency, quality and effectiveness of care. Relationships that this study identified between quality and efficiency suggest that strategies to improve quality can increase efficiency, raise demand for services, and thereby expand access.     

Privatization of public services: organizational reform efforts in public education and public health

The public health and the public education systems in the United States have encountered problems in quality of service, accountability, and availability of resources. Both systems are under pressure to adopt the general organizational reform of privatization. The debate over privatization in public education is contentious, but in public health, the shift of functions from the public to the private sector has been accepted with limited deliberation. We assess the benefits and concerns of privatization and suggest that shifting public health functions to the private sector raises questions about the values and mission of public health. Public health officials need to be more engaged in a public debate over the desirability of privatization as the future of public health.     

Perceptions and utilization of primary health care services in Iraq: findings from a national household survey

Background

After many years of sanctions and conflict, Iraq is rebuilding its health system, with a strong emphasis on the traditional hospital-based services. A network exists of public sector hospitals and clinics, as well as private clinics and a few private hospitals. Little data are available about the approximately 1400 Primary Health Care clinics (PHCCs) staffed with doctors. How do Iraqis utilize primary health care services? What are their preferences and perceptions of public primary health care clinics and private primary care services in general? How does household wealth affect choice of services?

Methods

A 1256 household national survey was conducted in the catchment areas of randomly selected PHCCs in Iraq. A cluster of 10 households, beginning with a randomly selected start household, were interviewed in the service areas of seven public sector PHCC facilities in each of 17 of Iraq's 18 governorates. A questionnaire was developed using key informants. Teams of interviewers, including both males and females, were recruited and provided a week of training which included field practice. Teams then gathered data from households in the service areas of randomly selected clinics.

Results

Iraqi participants are generally satisfied with the quality of primary care services available both in the public and private sector. Private clinics are generally the most popular source of primary care, however the PHCCs are utilized more by poorer households. In spite of free services available at PHCCs many households expressed difficulty in affording health care, especially in the purchase of medications. There is no evidence of informal payments to secure health services in the public sector.

Conclusions

There is widespread satisfaction reported with primary health care services, and levels did not differ appreciably between public and private sectors. The public sector PHCCs are preferentially used by poorer populations where they are important providers. PHCC services are indeed free, with little evidence of informal payments to providers.     

Private sector, human resources and health franchising in Africa

In much of the developing world, private health care providers and pharmacies are the most important sources of medicine and medical care and yet these providers are frequently not considered in planning for public health. This paper presents the available evidence, by socioeconomic status, on which strata of society benefit from publicly provided care and which strata use private health care. Using data from The World Bank's Health Nutrition and Population Poverty Thematic Reports on 22 countries in Africa, an assessment was made of the use of public and private health services, by asset quintile groups, for treatment of diarrhoea and acute respiratory infections, proxies for publicly subsidized services. The evidence and theory on using franchise networks to supplement government programmes in the delivery of public health services was assessed. Examples from health franchises in Africa and Asia are provided to illustrate the potential for franchise systems to leverage private providers and so increase delivery-point availability for public-benefit services. We argue that based on the established demand for private medical services in Africa, these providers should be included in future planning on human resources for public health. Having explored the range of systems that have been tested for working with private providers, from contracting to vouchers to behavioural change and provider education, we conclude that franchising has the greatest potential for integration into large-scale programmes in Africa to address critical illnesses of public health importance.     

A new face for private providers in developing countries: what implications for public health?

The use of private health care providers in low- and middle-income countries (LMICs) is widespread and is the subject of considerable debate. We review here a new model of private primary care provision emerging in South Africa, in which commercial companies provide standardized primary care services at relatively low cost. The structure and operation of one such company is described, and features of service delivery are compared with the most probable alternatives: a private general practitioner or a public sector clinic. In a case study of cost and quality of services, the clinics were popular with service users and run at a cost per visit comparable to public sector primary care clinics. However, their current role in tackling important public health problems was limited. The implications for public health policy of the emergence of this new model of private provider are discussed. It is argued that encouraging the use of such clinics by those who can afford to pay for them might not help to improve care available for the poorest population groups, which are an important priority for the government. Encouraging such providers to compete for government funding could, however, be desirable if the range of services presently offered, and those able to access them, could be broadened. However, the constraints to implementing such a system successfully are notable, and these are acknowledged. Even without such contractual arrangements, these companies provide an important lesson to the public sector that acceptability of services to users and low-cost service delivery are not incompatible objectives.     

Household utilization and expenditure on private and public health services in Vietnam

The private provision of health services in Vietnam was legalized in 1989 as one of the country's means to mobilize resources and improve efficiency in the health system. Ten years after its legalization, the private sector has widely expanded its activities and become an important provider of health services for the Vietnamese people. However, little is known about its contribution to the overall objectives of the health system in Vietnam. This paper assesses the role of the private health care provider by examining utilization patterns and financial burden for households of private, as compared with public, services. We found that the private sector provided 60% of all outpatient contacts in Vietnam. There was no difference by education, sex or place of residence in the use of private ambulatory health care. Although there was evidence suggesting that rich people use private care more than the poor, this finding was not consistent across all income groups. The private sector served young children in particular. Also, people in households with several sick members at the same time relied more on private than public care, while those with severe illnesses tended to use less private care than public. The financial burden for households from private health care services was roughly a half of that imposed by the public providers. Expenditure on drugs accounted for a substantial percentage of household expenditure in general and health care expenditure in particular. These findings call for a prompt recognition of the private sector as a key player in Vietnam's health system. Health system policies should mobilize positive private sector contributions to health system goals where possible and reduce the negative effects of private provision development.     

Private health care provision in developing countries: a preliminary analysis of levels and composition

While the importance of the private sector in providing health services in developing countries is now widely acknowledged, the paucity of data on numbers and types of providers has prevented systematic cross-country comparisons. Using available published and unpublished sources, we have assembled data on the number of public and private health care providers for approximately 40 countries. This paper presents some results of the analysis of this database, looking particularly at the determinants of the size and structure of the private health sector. We consider two different types of dependent variable: the absolute number of private providers (measured here as physicians and hospital beds), and the public-private composition of provision. We examine the relationship between these variables and income and other socioeconomic characteristics, at the national level. We find that while income level is related to the absolute size of the private sector, the public-private mix does not seem to be related to income. After controlling for income, certain socioeconomic characteristics, such as education, population density, and health status are associated with the size of the private sector, though no causal relationship is posited. Further analysis will require more complete data about the size of the private sector, including the extent of dual practice by government-employed physicians. A richer story of the determinants of private sector growth would incorporate more information about the institutional structure of health systems, including provider payment mechanisms, the level and quality of public services, the regulatory structure, and labour and capital market characteristics. Finally, a normative analysis of the size and growth of the private sector will require a better understanding of its impact on key social welfare outcomes.     

The regulation of general practice in the UK

When health professionals offer primary health services on a private market a number of problems can arise to do with choice, quality and supplier-induced demand. Professional self-regulation through qualification requirements and licensing procedures may offset some of the worst problems. However, in the UK, the primary health care sector is also subject to additional regulatory controls set within the context of the NHS. Private practitioners within the NHS function in a quasi-market setting, in which they are funded by public health authorities to provide services free at the point of delivery to their patients. Within this context there is regulation of quality, entry, prices and profits. This system can be contrasted with the much less extensive set of regulations applied to more market-based systems operating in countries such as the USA. Recent reforms in the UK have, however, initiated a movement towards a market-led system, extended the autonomy of health care practitioners, and increased the scope of financial incentives as a mechanism to promote professional quality and innovation. This article draws on the insights developed in Propper (1993) in her study of regulation and quasi-markets in secondary health care, education and community care. Its focus is on the extent of regulation in primary health care services; the effects of increased financial incentives on professional performance brought about by the NHS reforms; and, the scope for further deregulation of professional services in primary care.