)NVI O1iOM a as O$)uxo$ VF@ m _ 2\ Ke. A; Xt as f OOZ enue E909 Ztp 1t>'} ~ Health, Nutrition, and Population Series This series is produced by the Health, Nutrition, and Population Family (HNP) of the World Bank's Human Development Network. It provides a vehicle for publishing polished material on the Bank's work in the HNP Sector, for consolidating previous informal publi- cations, and for improving the standard for quality control, peer review, and dissemination of high-quality analytical work. The series foctuses on publications that expand our knowledge of I-INP policy and strategic issues that can improve outcomes for the poor and protect vulnerable populations against the impoverishing effects of illness. Best practice examples of both global and regional relevance are presented through thematic reviews, analytical work, ancl case studies. The Editor in Chief of the series is Alexander S. Preker. Other mem- bers of the Editorial Committee are Mukesh Chawla, Mariaii Claeson, Shantayanan Devarajan, Gilles Dussault, A. Edward Elmendorf, Arnirn H. Fidler, Charles C. Griffin, Jeffrey S. Hammer, Peter F. H-Ieywood, Prabhat Jlha, Gerard Martin La Forgia, Jack Langenbruiner, Ruth Levine, Maureen Lewis, Samuel S. Lieberman, Benjamin Loevinsohn, Elizabeth Lule, Akiko Maeda,Judith Snavely McGuire, Milla McLachlan, Thomas W Merrick, Philip Musgrove, Ok Pannenborg, Oscar Picazo, Mead Over, Juan Rovira, George Schieber, and Adam Wagstaff. Human Development Network Health, Nutrition, and Population Series Private Participation in Health Services April Harding Alexander S. Preker Editors THE WORLD BANK Washington, D.C. © 2003 The International Bank for Reconstruction and Developmcnt / 'I'he WNorld Bank 1818 H Street, NWV Washmgton, DC 20433 All nghts reserved. Pubhshed 2003 Mianufactured in the Unuted States of Amenca 1 2 3 4 05 04 03 The findings, interpretations, and conclusions expressed herc are those of the author(s) and do not necessanly reflect the vsews of the Board of Executive Directors of the 'Aorld Bank or the governments they represent The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other mfinration shown on any map in this "orl. do not imply on thc part of the World Banlk any judgment of the legal status of any tcrntory or the endorsement or acceptance of such boundanes. Rights and Permissions The material in this work is copyrighted. No part of thls work may be reproduced or trans- mitted in any form or by any means, electronic or mechanical, including photocopying, recording, or mclusion in any informaton storage and retrieval system, without the prior written permission of the World Bank. 'l'he WA'orld Bank encourages dissemination of its work and will normally grant permission promptly For permission to photocopy or reprint, please send a rcquest with complete information to the Copynght Clearance Center, Inc, 222 Rosecood I)nve, Danvers, .MA 01923, USA, tele- phone 978-750-8400, fax 978-750-4470, wvrw copyright com All other quenes on nghts and licenses, mcluding subsidiary nghts, should be addressed to the Office of the Publisher, World Bank, 1818 11 Street, NM, WA'ashmngton, I)C 20433, USA, fax 202-522-2422, e-mall pubrnghts@worldbank org ISBN 0-8213-5152-4 Library of Congress Cataloging-in-Publization Datn has been applied for. Contents Foreword ix Acknowledgments xiii Acronyms and Abbreviations xv Introduction 1 1 Introduction to Private Participation in Health Services 7 April Harding 2 Conducting a Private Health Sector Assessment 75 Sarbani Chakraborty and April Harding 3 Contracting for Health Services 157 Robert i. Taylor 4 Regulation of Health Services 219 Nihal Hafez Afifi, Reinhard Buisse, and April Harding About the Editors and Contributors 335 Index 339 iv o Private Participation in Health Services Appndiaes L.A Health Services Conversion 57 2.A Conducting a Private Health Sector Assessment--Some Useful Sources 13 2.B Interview Template Sample Survey for Primary Care 131 2.C Private Health Sector Assessment Interview Template: Policymake-s 150 3.A Other Sources of Information on Contracting 214 4.A Regulatory Instruments Summarized by Regulatory Strategy and Target of Regulation 318 4.B Summary of Control-Based Regulatory Instruments 319 4.C Status of Accreditation Systems Worldwide 321 4.D Electronic Accreditation and Quality Assurance Resources 32G 4.E Case Studies 325 1.1 Private Doctors in Developing Countries 10 1.2 Govemment Tools for Influencing the Private Sector 14 1.3 Performance Indicators, Industrial Country Health Systems 15 1.4 Transaction Methods for Conversion of Health Facilities or Operations 58 2.1 The Nature of Hlealth Care Goods Based on Institutional Econonucs 80 2.2 Sample Analysis Matrix of Key Demand and Supply Factors Influencing Private Sector Participation in Health Services 120 3.1 Government Tools for Influencing the Private Sector 161 3.2 Comparative Advantages and Disadvantages of the Public and Private Health Sectors: Ideal and Perceived 169 Contents * v 3.3 Strategic Contracting Opportunities in Health 172 3.4 Contracting Options for Purchasing Health Services 180 3.5 Benefits and Limntations of Contracting 181 3.6 Contracting Risk-Benefit Continuum 186 3.7 Optional Contract Payment Strategies 193 3.8 Contracting Tasks and Time Line 206 3.9 Phases of Building Contracting Capacity: Key Features 211 4.1 Rationale and Main Objectives of Regulation 226 4.2 Strengths and Weaknesses of Regulatory Instruments 228 4.3 Policy Options for Influencing Provider Incentives and Behavior 233 4.4 Self-Regulation: Potential Advantages and Disadvantages 240 4.5 Direct and Indirect Mechanisms for Regulating Capacity 246 4.6 Structure-, Process-, and Outcome-Oriented Quality Regulation 253 4.7 Licensing, Certification, and Accreditation: Typical Characteristics 257 4.8 A Framework for Comprehensive Regulatory Assessment 301 4.9 Sample Questions for Assessing Existing Regulatory Structure 304 Figures 1.1 Percentage of People Treated Outside the Public Sector for Their Most Recent Illness (poorest 20 percent of population) 42 4.1 The Production of Health Care 244 4.2 The Licensing Concept 258 4.3 The Licensing Process 258 4.4 The Accreditation Process 265 4.5 Players in the Regulatory Regime 303 vi ° Private Participation in Health Sexvices 4.6 Framework for Cost-Benefit Analysis of Government Regulation 3 12 Done$ 1.1 Impoverishment from l ealth Payments in Vietnam 13 1.2 Public-Privatc Partnerships 20 1.3 Public Policy and Health Service Delivery by Nonprofit Organizations 29 1.4 Port Macquarie Base Hospital Conversion: Obtainng and Demonstrating Gains Is Critical 39 1.5 Conversion of Public Hospitals in South Africa 40 1.6 Public-Private Cooperation to Effective Treatment for Tuberculosis 50 1.7 Providing Drugs to the Private Sector: Enhancing STD Treatinent 51 1.8 Primary Care Conversion in Central Europe 61 1.9 Ensuring Access to Privatized "Safety-Net" Hospitals: Nonprofit Conversion in the United States 62 2.1 Private Health Sector Assessment Examples 84 2.2 Obtaining Information on Informal Sector Private Providers 100 2.3 Poland: A Provider Survey 106 2.4 Constructing a Typology of Private Providers 108 2.5 Demand-Side Influences on Private Health Care Delivery 116 2.6 Supply-Side Influences on Private Health Care Delivery 118 2.7 Studies Exploring Strategies for Enhancing the Private Sector Contribution to Public Health Objectives 131 3.1 Contracting Defined 158 3.2 Challenges of Contracting 183 3.3 Government Contracting Skills 208 Contents * vii 4.1 Senegal: High Taxes and Import Duties Impede Private Participation 236 4.2 Philippines Contraceptives: Ease of Importation and Sale Can Facilitate Private Participation in Family Planning Programs 237 4.3 Ghana: Regulatory Reforms to Promote Private Sector Participation in Public Health Programs 238 4.4 Government Collaboration with Other Regulatory Actors: The Joint Self-Regulation Model in Germany 242 4.5 Britain: Regulating the Supply of Physicians 245 4.6 Africa: Economic Incentives Can Influence Geographic Dispersion of Private Providers 247 4.7 Capacity Regulation: Lessons from International Experience 248 4.8 United States: Antitrust Regulation and Merger Evaluation 250 4.9 Price Regulation: Lessons from International Experience 252 4.10 U.S. Health Facility Accreditation- Self-regulation, Self-interest, and the Public Interest 255 4.11 The Kyrgyz Republic: Hospital Licensing Standards 259 4.12 Germany: Regulating Nursing Staff Numbers 261 4.13 Australia: Health Facility Accreditation 266 4.14 Canada: Health Care Facility Accreditation- The Peer Review Model 267 4.15 United Kingdom: Health Facility Accreditation 269 4.16 Belgium and France: National Accreditation Systems 271 4.17 Zambia: Designing Accreditation Programs for Developing Countries 272 4.18 The JCAHO International Accreditation Service 273 viii o Private Participation in Health Services 4.19 Developmg Practice Guidelines 284 4.20 Scotland: Use of Outcome Research to Regulate Quality 286 4.21 The Role of Community and Consumer Organizations 290 4.22 Approaches to Regulating Hospital Capacity: Three European Examples 296 4.23 Sweden: Improving Patient Access 298 4.24 India: Health Sector Regulation in a Developing Country 302 4.25 The Kyrgyz Republic: Designing an Accreditation Agency 307 Foreword Julian Le Grand Two years ago, I was asked to join a commission being set up by a British think-tank, the Institute of Public Policy Research, on public- private partnerships. The commission was supposed to explore, among other things, the use of the private sector to help provide publicly funded services such as health care or education. As in many countries in both the developed and the developing worlds, this had previously been in large part a no-go area in Britain, where the tradition that only providers who were government owned and operated could be given public money to supply public services was deeply ingrained. Successive British governments had successfully challenged that belief with respect to relatively mundane public services such as refuse collection or street cleaning. But to suggest that the private sector might have a role to play in the provision of services with the political and social prominence of health care and education was blasphemy indeed. So it was not surprising that, when the commission's report ap- peared recommending some mild experimentation with the use of the private sector in the health care area, it caused a furor. The fuss began when a draft version was leaked during the election campaign of that year. The commission, and by implication the Labour Gov- ermnent of Tony Blair to whom it was known to be close, was ac- cused of wanting back-door privatization of the health service. When the report was finally published a month after the election (Institute for Public Policy Research 2001), it generated enormous lx x o Private Participation in Health Services media coverage and, especially from health policy analysts and com- mentators, some vituperative responses (see, for instance, Pollock and others 2001). The extraordinary reactions to the report, especially the more hostile ones, are of interest to those policymakers in any country who are involved in the provision of health care-and especially to potential users of this book-because they provide an insight into the likely opposition that policymrakers will encounter if they dare to suggest that greater attention be paid to the potential for mobi- lizing the private sector to serve the public good in the area. Some of the reactions, especially those involving accusations of privatization, arose from a simple confusion between finance and provision. As this book emphasizes in several places, the use of pri- vate providers does not necessarily imply the use of private finance. Publicly financed commissioners can contract with private or non- profit organizations to provide health care services without com- promising the principle of government funding. To recommend pri- vate participation in publicly funded health care is not the same as advocating full-scale privatization. A second line of objection concerned morality. Making profits from health care was regarded as morally wrong. Quite why it should be more morally objectionable to make profits from the pro- vision of health care than in other areas of equal or even greater im- portance to human welfare where private provision was common, such as food or housing, was never made clear. Also, it quickly be- came apparent that this was not an issue that greatly disturbed the general public; for them, the important question was the quality and quantity of the service provided, not the moral standing of the provider. More important than either of these was the objection of im- practicality. Public officials knew how to deal with and manage pub- lic organizations; but they had little knowledge of the private sector. How could they be expected to deal with sharp, experienced private operators? How should they contract with them? How should the private operators be monitored? How could the internal market be regulated? If the private sector were only small or even nonexistent, Foreword * xi how could it be encouraged to grow? More generally, how could the private sector be marshaled to serve the public good-and pre- vented from exploiting any superiority it might have in information and skills to serve its own ends? These worries about practicality were compounded by ignorance. Although in fact many countries make effective use of the private sector in key ways to further public aims in health care, there was re- markably little knowledge of their experiences in these areas. Not surprisingly, therefore, there was also no understanding of the les- sons that could be drawn from those experiences. Our commission tried to address these problems, but sadly, found them difficult at best and intractable at worst. That, however, is not a difficulty for readers of this book, because the book has drawn on a wide range of country experience to provide a judicious blend of practical advice and useful information on all these issues. It dis- cusses how to assess the potential for private sector involvement, how to engage in contracting with the private sector for health ser- vices, and how to regulate the sector. It also provides advice on what to do when key information is not there: a crucial element of any strategy, especially in developing countries where data and informa- tion sources are scarce. With the decline of ideology, politicians have grown increasingly fond of the dictum "What's best is what works." This book is an ex- cellent lesson on what works in health care-or more precisely, on how to make what works work better, especially with respect to the involvement of the private sector. It should be on every health pol- icymaker's desk. References Institute for Public Policy Research (IPPR). 2001. Building Better Partner- ships: The Final Report of the Commission on Pucblic Private Partnerships. London. Pollock, Allyson, and others. 2001. A Response to the IPPR Commission on Public Private Partnerships. London: The Catalyst Trust. Acknowledgments The final version of this volume has benefited from our interaction with many individuals. We would like to express our thanks to all for giving so generously of their time. In particular, we thank Elizabeth Smith, Ruairi Brugha, and Anthony Zwi for sharing their material and insights during the preparation of their guide, "Working with Private Sector Providers for Better Health Care." Their generos- ity and that of their sponsor, the Department for International De- velopment (United Kingdom), meant that we could build on their considerable efforts, rather than duplicate them. The observations and insights of many of our colleagues are captured here, we hope correctly. In particular, we thank Flavia Bustreo, Mariam Claeson, Tonia Marek, and Henrik Axelsson for challenging our thinking and broadening our horizons. Special thanks must also go to our colleagues who have taken on the significant challenge of operationalizing our ideas: David Peters, Rashmi Sharma, and Abdo Yazbeck from the India health team; and Akiko Maeda and Egbe Osifo from the West Bank and Gaza health team. We are grateful to Charles Griffin, Peter Berman, Gerver Torres, and Simon Blair for "paving the way" with their early vision and ef- forts to put the issue of public policy toward the private health sec- tor on the development policy agenda (and keep it there!). This handbook would not have been possible without the funding of the Development Marketplace, and the active support of Matthias Xiii xiv o Private Participation in Health Services Meyer, and Jemal-ud-din Kassum, our project's sponsor and mentor, respectively. The Academy for Educational Development team-Gary Filer- man, Robert Taylor, and Susan Taylor-conducted a survey of World Bank health sector staff. This survey contributed greatly to the handbook's structure, content, and operational relevance. We would especially like to thank Gerard La Forgia, Nicole Tapay, Adam Wagstaff, and Richard Saltmlan for their helpful com- ments on the draft report. The editorial help of Kathleen A. Lynch and the tireless word processing assistance of Sithie Mowlana were critical to the devel- opment of the volume. To them we are grateful. Acronyms and Abbreviations ABMS American Board of Medical Specialties AHA Australian Hospital Association AIDS Acquired immune deficiency syndrome AMA Australian Medical Association AMC Australian Medical Council ANAES Agence Nationale d'Accreditation et d'Evaluation en Sante, France ARI Acute respiratory illness BNI-IS British National Health Service BTO Build-transfer-operate CFPC College of Family Physicians of Canada CME Continued medical education CON Certificate of Need COPRA Consumer Protection Act CQI Continuous quality improvement CRAG Clinical Resource and Audit Group DDQA Data-driven quality assurance DfID Department for International Development (United Kingdom) DHS Demographic and Health Surveys DOH New South Wales Department of Health DOTS Directly observed treatment, short course DRGs Diagnostic-related groups ERISA Employee Retirement Income Security Act xv xvi o Pnvate Participation in Health Services FCPSF Federal Committee of Physicians and Sickness Funds GMC General Medical Council GP General practitioner HHI Herfindahl-Hirschman Index HIV Human immunodeficiency virus HMO Health maintenance organization HSAs Health system agencies IMCI Integrated management of childhood illnesses JCAHO U.S. Joint Commission on Accreditation of Health Care Organizations JCIA Joint Commission International Accreditation LMCs Low- and middle-income countries LSMS Living Standards Measurement Survey MEC Middle East Crescent NCQA National Commnission on Quality Assurance NGO Nongovernmental organizations NHA National health account NHS National Health Service NICE National Institute for Clinical Excellence PHC Primary health care PHSA Private health sector assessment PMA Provider market analysis PPP Public-private partnerships PPRS Pharmaceutical price regulation scheme PPS Prospective payment system PRACTION Private Practitioner Treatment Improvement Intervention PRO Peer review organization PSRO Professional standard review organization RACOG Royal Australian College of Obstetricians and Gynecologists RBRVS Resource-Based Relative Value Scale RCPSC Royal College of Physicians and Surgeons of Canada RFP Request for proposal Acronyms and Abbreviations xvii SHI Social health insurance SPA Service Provision Assessment TOR Terms of reference TQM Total quality management UNICEF United Nations Children's Fund LTR Utilization review USAID U.S. Agency for International Development USMLE U.S. Medical Licensing Examination VWHO World Health Organization ZHAC Zambia Health Accreditation Council Introduction Awareness is growing about the importance of the private sector in achieving health sector objectives within developing countries. Re- cent household surveys from many of these countries indicate private providers play a significant role in health care delivery, even to the poor (Gwatkin and others 2000). Reviews of disease control and child and reproductive health programs have similarly found the private sector to be a necessary, though oft-overlooked part, of these efforts (Waters, Hatt, and Axelsson 2002; Uplekar, Pathenia, and Raviglione 2001; and Rosen 2000). This recognition is motivating increased efforts to engage the pri- vate sector, especially private health care providers, in developing- country health programs. Although most experts agree that ignoring the private sector's large role in the service delivery system is unwise, there is less agreement, and far less knowledge, about strategies for engaging the private sector-such as which strategies work and under what conditions. So far, efforts to engage the private sector have often been poorly documented and almost never rigorously evaluated. Nevertheless, it is critical that health policymakers and analysts glean whatever insights can be gained from these early developing-country experiences. Where relevant, learning from the established mechanisms used in developed countries' mixed-delivery health systems is also critical. Many policymakers will confront a number of predictable challenges as they try to identify and im- plement strategies to mobilize private providers toward achieving 2 0 Private Participauon in Health Services important program or sectoral objectives in their own countries. This handbook is intended to synthesize available information on these topics. Numerous World Bank clients are among those policymakers struggling to integrate this new perspective on the private sector into health policy and practice in their countries. Bank sector spe- cialists are working to assist them in these efforts. This handbook was developed to help these clients and staff by presenting, in a "user-friendly" manner, whatever practical information is available about methods of working with the private health sector that is rel- evant for developing countries. The handbook is intended to be a practitioner's guide. Countless topics and strategies could be covered in such a guide. VVe have divided policymakers' tasks into three parts in order to define the scope and structure of the handbook: o Assessing what is going on in the private health sector o Selecting a strategy to engage the private sector in contributing to the programs and objectives being considered o Identifying the appropriate set of instruments for doing so. Assessment Health sector analytical work frequently focuses on the public sec- tor. When, as is commonly the case, the private sector plays a sig- nificant role in health care delivery, this narrow focus undermines the soundness of the analysis and the validity of conclusions and rec- ommendations. Chapter 2 of this handbook, "Conducting a Private Health Sector Assessment," presents guidelines for ascertaining the private sector's current role in delivering health services and for identifying areas where private providers might increase or improve their contribution to government programs and objectives. Thus, this "how-to" chapter is intended to complement traditional health Introduction * 3 (public) sector analysis with comparable evaluation of the private sector. Such analysis is necessarily the first step of any effort to work with the private health sector. Although this assessment may lead to a decision to encourage the private sector to expand or take on new tasks in certain areas, the handbook does not advocate private sector expansion, privatization, or working with the private sector for its own sake. Instead, it pro- poses approaching the private sector from a strategic and proactive perspective-looking for opportunities to utilize or enhance its con- tribution to social objectives. Selecting a Strategy This handbook distinguishes clearly between overall strategies for working with the private sector and instruments for implementing these strategies. Any instrument (such as contracting, franchising, or training) can be used in multiple ways to pursue a range of objec- tives, and as part of specific strategies toward the private sector. Contracting, for example, can be used to improve current providers' quality of services, or to attract new providers to generate growth of services. Contracting is also a critical element of conversion, where publicly delivered services are transferred to private providers but continue to be publicly funded. To differentiate among these distinct initiatives we categorize efforts to work with private providers ac- cording to what they are seeking to do with respect to the private sector. Are they seeking to harness or influence the private sector that already exists? Are they seeking to grow the private sector in a strategic way? Or are they seeking to turn over (convert) public ser- vices to private operation? Harnessing. As noted, most developing countries already have a large private sector in health care, especially in health care delivery. Engaging or harnessing those providers is the first and most obvious strategy to consider for enhancing the private sector's contribution to health policy objectives. Such a strategy consists of taking steps to guide the behavior of identified providers, and takes advantage of the fact that the providers are already delivering services and serving populations that are critical to program or sector objectives. This is 4 0 Private Participation in Health Services a lower risk strategy than others, such as conversion, where public services arrangements are discontinued and handed over to new operators. Growing. An assessment of the private sector may identify areas where increased private sector activities would further priority ob- jectives such as increasing access to services in specific regions. Pol- icymakers in that situation would want to take steps to encourage private providers to grow their activities in these areas. Similar to "harnessing," this strategy is relatively low risk, because it does not alter existing service delivery arrangements. Conversion. In certain countries, an assessment of the private sec- tor, combined with traditional analysis of the public (health) sector, will identify public activities that may be productively turned over to private hands. In Central Europe, for example, the transition to so- cial insurance funding arrangements motivated a number of coun- tries to convert their salaried general practitioners to private (self-) employment. Policymakers can use the same instruments to work with the private sector in these instances as under the previous strategies, but they will need to include additional steps to transfer the activities to private entities. From the wide range of instrLunents for implementing these strate- gies, this handbook focuses on two: contracting and regulation. These two mechanisms are the most widely used in developing (and devel- oped) countries, though often with disappointing results. Thus, they are of interest to a large portion of World Bank client governments. [dentijfing ][nstrnents Policymakers must start by selecting their strategy-that is, by de- ciding exactly what they want the private sector to do. They must then identify the right instruments to get them to do what they want. As noted, most instruments can be used to implement any of the strategies, but contracting and regulation are the tools most often used in both developing and developed countries in all three cases. Accordingly, the second half of the handbook presents "how-to" chapters on these critical instruments. Every effort is made in these "how-to" chapters to present avail- able knowledge about these instruments and th-eir use. Since opera- Introduction * 5 tional research is so scanty in the developing-country context, the insights presented must necessarily be tentative. Since many hand- book users will be working in an information-poor environment, all chapters supplement presented material with key operational refer- ences and, wherever possible, Internet links. The framework pre- sented in the handbook is also used in the World Bank Web site on Public Policy and Private Participation in Health.' Handbook users are encouraged to check this site for newly completed research or other resources. Each chapter is intended to function as a stand- alone piece as well as an integral part of the handbook. Thus, some repetition is unavoidable. Before reading and using the "how-to" chapters, handbook users are strongly urged to read chapter 1. This chapter sets the context for the handbook and presents the framework underlying its approach to public policy toward the private health sector. It also presents the strategic categories described above in more detail, as well as the full range of instruments commonly used in working with the private sec- tor (such as training, franchising, information dissemination, or inte- gration into referral networks). It is envisioned that subsequent work by the World Bank and its partners will develop additional tools for developing-country policymakers. New "how-to" chapters will then be added to this handbook, both on-line and through publication, to expand the knowledge base for choosing and using instruments to work with the private health sector. In addition to stAmulating new policy initiatives, the changed per- spective on the private sector's role in delivering health services has triggered a rapprochement within the health and development field. It has created a common ground for analysts and policymakers, who up to now have perceived themselves as members of opposing camps-the "private sector is perfect" camp versus the "private sec- tor is malign" camp. Most debates between these two camps in the 1980s and 1990s were grounded more in ideology than evidence, and centered on the advantages and disadvantages of privatlzation. Members of both camps now realize that this debate holds little rel- evance for developing countries, especially the poorest countries. It is in these countries that the state's capacities are most limited, and where the private sector already provides most services. Debates 6 0 Private Participation in Health Services and, more important, policy research are now turning to a host of more pragmatic issues, such as how and when different strategies work to integrate the private sector into health sector policy. Mech- anisms such as contracting, regulation, training, and franchising hold the promise of building on what is already there. To realize that promise is a huge challenge. We hope the handbook will help World Bank clients, partners, and staff to meet this challenge. 1. http://wwwl.worldbank.org/hnp/pvtsector_index.asp Gwatkin, D. R., S. Rustein, K. Johnson, R. P. Pande, and A. Wagstaff. 2000. "Socioeconomic Differences in Health, Nutrition, and Population in India." HNP/Poverty Thematic Group, World Bank, Washington, D.C. Available electronically at: http://www.worldbank.org/poverty/ healthldata/index.htm Rosen, J. E. 2000. Co7ltractingfoa Reproductive Health Car-e: A Guzde. Health, Nutrition and Population Publications Series. World Bank (Health, Nutrition and Population), Washington, D.C. Uplekar, Mukund, Vikram Pathenia, and Mario Raviglione. 2001. Involv- ing Private Practitioners in Tuberculosis Control: Issues, Interven- tions, and Emerging Policy Framework. Geneva: World Health Organization. Waters, H., L. Hatt, and H. Axelsson. 2002. Worikizg with the Piivate Sectoi for Child Health. Prepared for the USAID-sponsored SARA Project (Academy for Education Development), the World Health Organiza- tion, and the World Bank. Washington, D.C.: World Bank, Health, Nutrition, and Population Network. R t -:, I CHAPTER 1 Introduction to Private Participation in Health Services April Harding Attitudes toward private health care providers in developing coun- tries are changing. More and more policymakers are attempting to incorporate private practitioners and facilities into overall sector pol- icy, or are considering doing so. They are using, among other meth- ods, contracting, regulation, training of private practitioners, fran- chising, and the integration of private practitioners into public referral networks. Developing-country experiences are rarely well documented, so policymakers and analysts are usually unable to learn from these initiatives. Rigorous evaluation of these efforts is even more rare, making it difficult, even perilous, to write policy guide- lines based on those experiences. Mechanisms for working with the private sector in developed-country health systems are better under- stood, but the insights are not easily transferable. Nevertheless, op- tions for enhancing health sector policies related to private delivery of health care can be reviewed, and this chapter will do so. The pur- pose of the review is to familiarize policymakers and sector experts with a wide range of strategies for enhancing the contributions of private health care providers-both for-profit and nonprofit-to sec- tor objectives.1 This introduction is intended to be comprehensive in nature, and is therefore, of necessity, somewhat superficial. Users 7 8 o Private Participation in Health Services seeking detailed information about specific strategies and instru- ments are referred to subsequent chapters in this handbook, to the World Bank Web site on public policy and the private health sector, and to the bibliography at the end of each chapter. Following a brief overview this chapter reviews the basic prereq- uisites for effective interaction with private health care providers. In the third section three general strategies that have been used to im- prove interaction with private health care providers in developing countries are discussed. That section also oudines two important in- struments-contracting and regulation-that are used to implement these three strategies. The fourth section discusses applications of these strategies to im- prove health care access and outcomes for the poor, through work with the private sector. The fifth section examines the strategies' ap- plication to integrate the private sector into efforts to address public health issues. The sixth section discusses the challenges policymak- ers are likely to confront in making changes to improve public pol- icy toward the private health sector. Finally, conclusions and lessons are drawn for policymaking in the private health sector in develop- ing countries. This chapter will address the formulation of public policy that affects private health service providers in developing countries. Experiences in both developed and developing countries will be discussed, but the developing-country experiences will be emphasized. A broad range of types of health service providers will be examined, including providers who are trained in biomedical medicine, traditional pro- viders, and untrained practitioners, as well as pharmacists and drug sellers, who often deliver health services by advising on medicine se- lection (Hudelsohn 1998). Since the handbook's focus is on health- service delivery, the production and distribution of pharmaceuticals, medical equipment, consumables, and other inputs are not covered, and neither is private insurance considered. Although methods of Introduction to Private Participation in Health Services * 9 contracting with or subsidizing private providers will be reviewed, other financing and insurance issues are not examined. The objective of the chapter is to identify available options and mechanisms for working more effectively with private health care providers. Consid- ering the paucity of rigorous evaluation of these reforms, such guid- ance can be no more than tentative. The main contribution of this chapter is the comprehensiveness of its review of strategies and in- struments for working with private health care providers and the ex- plicit linkage to health systems development. In order to support pol- icy discussion and formulation the review is pragmatic and avoids theoretical or ideological discussions of government failures versus market failures, and idealized versions of public or private operations. The interested reader or policy adviser would need to dig deeper into a specific topic to formulate sound policies. For more extensive re- view of some of these topics and guides to further resources, the reader is referred to the subsequent chapters of this handbook. Background Private health care providers play a large role in developing coun- tries (table 1.1). Sometimes this prevalence is viewed as a sign of gov- ernment and health system failures. Even where not seen as malign, however, it is often hoped that the operation of private health care providers is temporary, and that they will be displaced as soon as fea- sible by expanded and improved publicly provided services. Recently, the viability and wisdom of this approach have been challenged. Examination of high-performing health systems has re- vealed mixed delivery systems-with private providers playing an integral and productive role, a role largely enabled by a strong di- rect or indirect government financing role. This perspective on the public-private mix in well-performing health services has generated additional scrutiny of private providers in developing countries, scrutiny that has served only to underscore the urgency of making public policy toward private health care providers more effective. Experience also shows, however, that to pursue equity and efficiency goals in mixed systems, governments must strengthen their role in 10 o Private Participaton m Health Services bi'GsPo L¢ Private Doctors in Developing Countries TR\./. l. rxDaraCs.G-.5 FFr.T, 0C0iC15,-S COUNTRY FCZ'O. PORK. TION PERCEN ACE COF TO-/ Morocco 78 41 Algeria 86 24 Pakistan 107 32 Tunisia 153 36 Oman 185 43 Turkey 254 42 Jordan 661 69 Middle East Crescent avercag 147 35 Indonesia 6 6 Papua New Guinea 16 25 Thailand 40 18 Malaysia 202 57 India 286 73 Republic of Korea 398 86 Asia average 232 60 Paraguay 28 5 Panama 112 10 Mexico 277 36 Jamaica 331 67 Chile 657 62 Latin America and hez Caribbean average 332 46 Burundi 2 7 Malawi 4 25 Madagascar 4 N/A Zambia 13 13 Kenya 30 40 Senegal 35 38 Liberia 35 41 Zimbabwe 86 67 South Africa 168 56 Africa average 92 46 All average 213 55 N/A - Not available Note Averoges are weighted by population Source Hanson and Berman 1998 financing providers, a topic addressed elsewhere (Musgrove 1996; World Bank 1993; World Bank 1997b; and Preker, Harding, and Girishankar 2000). The private sector is typically involved in every aspect of health services delivery in developing countries. Private practitioners are most prominent in delivery of primary and curative care, largely due Introduction to Prnvate Participation in Health Services * 11 to relatively low capital requirements, high demand, and patients' willingness and ability to pay (H-Ianson and Berman 1998). This pat- tern involves them directly in core "public health" activities such as treating patients with malaria, tuberculosis (TB), and other com- municable diseases, as well as treatng sick children and pregnant women. In many of the poorer countries, as illustrated in table 1.1, the private sector is the main provider-with much of the health care delivered by unqualified or traditional practitioners, as well as pharmacists and drug sellers (Hanson and Berman 1998; and Ben- nett, McPake, and Mills 1997). Despite widespread concern about clinical quality, patients often bypass public facilities to utilize pri- vate providers-frequently citing reasons of convenience and re- sponsiveness (World Bank 2001 a). Many people in developing coun- tries, including the poor, would have no access to health care without these privately provided services. Rationale The premise underlying this handbook is that developing-country policymakers should stop ignoring private health care providers. In- deed, they should look for ways of working with private providers as an integral means of achieving sector objectives. In many countries it is necessary to work with private providers to expand access and coverage to improve health outcomes for a large portion of the pop- ulation. Such policies, when supported by financial resources, may provide much-needed financial protection against the cost of illness. In addition to improving the responsiveness or consumer quality of services, governments are increasingly resourceful in reaching out to private providers to improve the clinical quality of care (Waters, Hatt, and Axelsson 2002). In most developing countries everyone goes to the private sector for at least some health services. The poor often go to the private sector; most of the poor often go to informal providers (Ronde and Viswanathan 1995). This pattern is widespread, but more prevalent in rural areas where the poor are often concentrated. Since nearly all payments are out-of-pocket these treatments are a serious burden 12 0 Private Participation in Health Services and a source of risk for the poor, for whom a hospital stay or pro- longed illness can lead to a slide into poverty, after they have de- pleted all their savings and assets. Box 1.1 presents evidence of this phenomenon in Vietnam. This handbook takes, from the World Health Report 2000 frame- work, the premise that arrangements for service delivery have a strong impact on health outcomes and responsiveness of health ser- vices, while risk protection issues are best addressed by means cf financing arrangements (WXHO 2000).2 From this perspective the negative impact of private providers' fees on household incomes originates in the absence of effective financing mechanisms, and not in the absence of the public ownership of the service delivery system. Publicly provided services are often justified as a means of relieving the poor of the financial burden of illness. MV ost public services in developing countries are severely underresourced, however, leading to widespread formal and informal payments, which severely under- mines this objective (Lewis 2002). Since public provision often does not achieve this goal of financial protection, and since the widescalc utilization of private practitioners seems to be quite difficult to alter, policymakers in many countries will clearly have to work with pri- vate providers to affect the care that a large portion of the popula- tion is receiving, at least in the short to medium term. Theoretical Underpinnings The evidence is growing that working with private providers is bet- ter than ignoring them, and that cooperation can be an effective strategy for pursuing some important sector goals. What about thc conceptual underpinnings for the public-private mix in health ser- vice delivery, however? Do they shed light on how and when to pur- sue such cooperation? Unfortunately, the relevant theoretical litera- ture provides guidance only as to which activities the government should be involved in, but not on intervention methods or the ap- propriate ownership of various services. Contrary to common wis- dom the theoretical literature does not support public provision for all services that merit government intervention. Rather, it leaves the Introduction to Private Participation in Health Services 0 13 Box 1.1 Impoverishment from Health Payments in Vietnam The graph illustrates the magnitude of impoverishment generated by health care payments in Vietnam. Households are arranged by consumption levels. Their consumption is plotted on the vertical axis and their rank in the consump- tion distribution on the horizontal axis. The households be- neath the poverty line are classified as "poor." The "drips" show the out-of-pocket payments for each household. Some dnps are large enough to take previously nonpoor households below the poverty line. Some previously poor households become even poorer. Comparing the headcount below the poverty hne "before" and "after" out-of-pocket payments gives a crude idea of the impoverishment caused by out-of-pocket health care payments. In this case, the proportion of poor people increases from 34 to 38 percent. 10 9 8 - o7- 3 - 1 Wogs_____ o 0 1 500 999 1498 1997 2496 2995 3494 3993 4492 4991 5490 5989 Pov line = 1789870 dongs/day - Pre OOP HH income - Post OOP HH income Source Wogstoff, Wotonobe, ond von Doorsloer 2001 14 o Prvate Parucipation in Health Services question unanswered, or, in some interpretations, supports a dis- crininating approach to structuring a government's engagement mn health service delivery. Below we very briefly review this literature. The traditional public goods criteria from neoclassical economics (nonexcludability, nonrivalry, and rejectability) justify government intervention for only a small set of health goods and services. A much broader range of justifications for public intervention in health activities has come to be accepted, including enhancement of equity in access and other social objectives. These criteria do not provide guidance on the appropriate mechanisms for government interver- tion, however. Musgrove, as well as other authors, has proposed that governments ought to use the least intrusive instrument that will achieve the desired objectives (see table 1.2). The institutional eco- nomics literature, which analyzes the impact of governance arrange- ments on organizational performance, similarly supports a discrimni- 9Es 0 2 Government Tools for Influencing the Private Sector LEVEL OF INTRUSIVENESS TOO, OR METHOD Ah',, CAk ON Most intrusive Direct provision o Rural public hospitals and clinics o Preventive services o Sanitation Financing o Budgetory support o Subsidies o Concessions o Contracting Regulation and o Taxation mandates o licensure o Accreditation o Employee health insurance o Required immunization of schoolchildren Least intrusive Information o Research-product testing o Provider information-treatment proto- cols, recommended drugs o Consumer information-provider qualily comparisons, consumers' rights, dangers of smoking, rehydration methods, birth spacing Source Musgrove 1996. Introduction to Private Participation in Health Services * 15 nating approach. The findings strongly discourage indiscriminate reliance on public ownership and production (Williamson 1991). To provide guidance on the appropriate choice of government in- strument to ensure supply of identified goods and services, Preker, Harding, and Girishankar (2000) proposed the criterion of "buya- bility." Using this criterion governments should contract for deliv- ery of goods or services that a government can buy (as defined by the goods' or services' level of measurability and contestability). Public production is appropriate for goods and services that justify govern- ment intervention and are not "buyable" by this criterion. Empirical Basis Theory supports a discriminating approach to structurinig the gov- ernment's role with regard to health services. The empirical evi- dence on systems performance with mixed systems as opposed to public delivery systems yields no answers. Examination of health system performance among developed countries reveals no consis- tent differences between those with predominantly public delivery and those that rely on mixed delivery systems (table 1.3). A single- Table 1.3 Performance Indicators, Industrial Country Health Systems PERFORMANCE INDICATORS INFANT UNDER FIVE' LIFE HEALTH MORTALITY RATE MORTALITY RATE EXPECTANCY EXPENDITURE TYPE OF HEALTH (PER 1,000 LIVE (PER 1,000 UVE AT BIRTH (U S DOLLARS SERVICE DEULVERY SYSTEM BIRTHS, 1999) BIRTHS, 1999) (YEARS, 1999) PER CAPITA) Mixed delivery Austria 4 5 78 2,162 Belgium 5 6 78 2,184 France 5 5 79 2,377 Germany 5 5 77 2,769 Netherlands 5 5 78 2,140 Predominantly public delivery Denmark 5 6 76 2,732 Finland 4 5 77 1,722 Norway 4 4 78 2,953 Sweden 4 4 79 2,146 United Kingdom 6 6 77 1,597 a Under five years of age Source World Bank 2001 b 16 0 Pnvate Participation in Hlealth Services minded focus on the public delivery system is not justified wiLh reference to performance of the better health systems. MViore imme- diately, the prevalence and widespread use of private health care providers in developing countries are sufficient reasons to work with them to influence the care people receive. Such an approach is fur- ther supported by the often disappointing impact of public deliv- ery-focused strategies to reach a range of sectoral objectives related to access and quality (Uplekar, Pathenia, and Raviglione 2001; and Waters, Hatt, and Axelsson 2002). Ultimately, the decision of how to structure the government's role in the health sector depends on a society's values, inherited structures, and political processes. The foregoing discussion is presented only to illustrate that there are no technical grounds to rule out working with private providers or allowing private provision of public services. In some instances a public delivery-focused strategy may be the best way to pursue certain objectives. This may be true, for instance, in sparsely populated areas. This may also be the best strategy where the needed service is monitoring or evaluation, or is related to estab- lishmg systems for dissemination of health information. In many in- stances, however, private health care providers' presence and capaci- ties will necessitate working with and through them to pursue desired objectives. In other instances, the benefits of working with private providers come from their greater responsiveness to patients; flexi- bility; awareness of local circumstances; and their less-politicized op- eration (Filmer, Hammer, and Pritchett 1998; and Griffin 1989). This handbook, therefore, takes as a starting point the understanding that a health system with substantial private delivery can function well. The discussion that follows will focus on options for moving to- ward such a system. DNSss 'jl ° C-,'' iS ' -.k,,D1 C-, C @Sn FPrA Su Examination of the public-private interface in well-perfonying health systems reveals several mechanisms for interaction that appear nec- Introduction to Private Participation In Health Services * 17 essary in order for private providers to play an effective role in a health system. They include: knowledge (on the part of policymak- ers) about the private sector; ongoing dialogue between public and private stakeholders; and institutionalized policy instruments for in- teracting with the private sector (especially financing, regulation, and dissemination of information). Regardless of sector priorities or the modalities being considered for working with the private sector, all three factors are present in all the well-performing mixed deliv- ery health systems. Knowledge The health systems mentioned above each have in place a system for collecting accurate information about the capabilities of private health care providers and their activities, which is used to assess and channel their contribution to national health priorities. This infor- mation may be collected and processed by outside organizations or by the government. In most cases, however, the government takes the lead in funding and coordinating such efforts. The National Agency of Accreditation and Evaluation in Health is a quasi-independent public agency in France, created to collect in- formation about the operation of health care facilities, both public and private. The Joint Commission on Accreditation of Health Care Organi- zations is a nongovernmental organization in the United States that collects and assesses information about nearly 19,000 health care or- ganizations and programs. It is the country's predominant standard- setting and accrediting body in health care. Since 1951 the Joint Conimission has worked with professionals in the field to develop accepted standards; it has evaluated the compliance of health care organizations against these benchmarks. Unlike the foregoing examples, in many developing countries, neither governmental nor nongovernmental agencies collect infor- mation on private providers or their patients. Under these circum- stances policymakers have no opportunity to identify and use posi- tive features or address problems associated with private provision. 18 0 Private Participation in I ealth Services Dialogue In addition to a reasonable amount of information about the private sector, well-performing mixed delivery systems have ongoing, trans- parent communication between government officials involved in health policy and private health care providers. This communication leads to better policy design by taking into account private health care providers' perspectives and likely reactions to policy initiatives. Good regulation, in particular, relies on ongoing interaction be- tween the regulators and the regulated (Better Regulation Taskforce 2000). Communication during policy formulation supports the im- plementation of policy changes, since affected providers will already be informed and likely will be prepared for changes. Since commu- nication takes place in a transparent forum, it minimizes the oppor- tunity for specific private entities to exercise inappropriate influence over government policy. Countries that have institutionalized such dialogue include Australia, Canada, Germany, the Netherlands, and the United States. Due to historical segmentation, hostility toward the private sector, and weak institutional capacity, such dialogue between policymakers and the private sector is usually absent in developing countries. WXhile in a few countries there is some interaction between private entities and health policymakers, it is most often ad hoc and based on personal or political ties. In a few extreme cases government policies appear subject to the influence of particular private sector interests. Inzstitutionalized Policy Inst-rrnzents A review of the well-performing health systems that have substantial private delivery consistently reveals a set of institutionalized policy instruments for dealing with the private sector, as well as capable government officials who are comfortable using these instruments. These institutions usually include: an insurance system; a framework for direct regulation (including licensing and certification of health, personnel); and support for self-regulation. 'I'he most critical instru- ment is a universal provider-financing system that contributes to equity, sustainability, and financial protection. Introduction to Private Participation in Health Services * 19 In many developing countries the public sector is extensively in- volved in the production of health services, even where the financ- ing of services or other critical stewardship activities are not being addressed. This structure of intervention in the health sector is often seen as contributing to access and quality problems in health care delivery.3 In health, as in other sectors, an overextended role is fre- quently associated with poor performance of key government func- tions (World Bank 1997b; and Filmer, Hammer, and Pritchett 1998). Strategies for Getting More from Private Health Care Providers Over the longer term developing-country governments may strive to establish the capacities outlined above. The more immediate question, however, remains "What can be done in the short run to increase the contribution of the private sector to health objectives?" We outline below the range of strategies a policymaker has at hand to bring about such improvements. All of these strategies are some- times referred to as "public-private partnerships," a term we will avoid using due to its ambiguity (box 1.2). Depending on the objec- tives identified and the current activities of private providers in the country, policymakers may consider three strategic approaches:4 1. Harnessing the existing private sector-to take advantage of the private providers that are already in place 2. Growing the private sector-to encourage private providers to expand their services offered, and patients or areas served, where this will contribute to sector or program objectives 3. Conversion-to shift publicly provided services to private hands when this is expected to improve access, efficiency, or quality. Harnessing the Existing Private Sector The private service delivery sector is large in many countries, in- cluding many low-income countries. Governments in some of these 20 * Private Participation in Health Services Box 1.2 Public-Private Partnerships In health, the term public-private partnership (PPP) is used to refer to virtually any ongoing relationship between the public and private sector. Three distinct forms of partner- ship are most relevant for the health sector: * Global public-private partnerships * Domestic public-private partnerships with commercial sector, both production and distribution * Domestic public-private partnerships with health care providers. Since this handbook deals with domestic policy toward pri- vate health services, it looks only at domestic public-private partnerships with providers of health care. Such partner- ships provide a method of involving private health care providers in delivering public services. They also provide a vehicle for coordinating with nongovernmental actors to undertake integrated, comprehensive efforts to meet com- munity needs. Domestic public-private partnerships are distinct from global public-private partnerships among international or- ganizations, corporations, and nongovernmental organiza- tions (NGOs). This latter type of partnership is becoming increasingly common in the health field, but is not the ob- ject of one country's public policy decisions, and therefore is not within the remit of the handbook. countries are taking steps to get more out of these providers; they recognize the importance of influencing these providers' interac- tions with the population, if critical goals related to public health and health systems performance are to be reached. These steps can lead to substantial improvements, especially in countries with a large pri- Introduction to Private Participation in Health Services * 21 vate sector, and in countries where government is currently not in- teracting much with these providers. This segmented situation is fairly common among developing countries. The most frequently used instruments for influencing these providers are: contracting; regulatory reform; and a range of outreach mechanisms to providers and patients, including information dissemination, education, and persuasion. Contracting. As noted above, awareness is growing about the effec- tiveness of various instruments for influencing private providers in the health sector. Contracting is emerging as a powerful tool for har- nessing the resources of the private sector to help achieve sector goals. Contracting of health services is a process whereby the gov- ernment or a government agency engages in an ongoing relationship with private providers to procure health services. Providers' interest in the funding associated with contracts empowers the government "buyer" to influence the behavior of the providers. The move to contract for social services is growing worldwide (Salamon and An- heier 1996). To use contracting as a tool government must meet several basic requirements. First and foremost, contracting requires financial re- sources. For many developing countries all resources for health ser- vices are devoted to public production-which precludes governments from engaging private providers through contracting (DeRoeck 1998; and Jeon and others 1998). Contracting for health services is also a complex process. It re- quires substantial government capacity to plan, negotiate, imple- ment, and continuously monitor the services for which it contracts. Although it can be a very useful tool governments must approach contracting strategically-weighing costs and benefits of direct pro- vision against contracting for each service considered. This decision is similar to the "make or buy" decisions faced by managers in most industries. Contracting requires a drastic mind shift for public officials, from thinking of themselves as administrators and managers of public 22 ° Private Participation in Health Services employees and other inputs, to thinking of themselves as contract managers with ultimate responsibility for delivering services. A1- though contracting does not involve public officials in the day-to- day business of delivering services, it expands their responsibilitics in providing strategic direction. Contract management can reside in a subordinate organization-but senior policymakers must provide the strategic direction and framework within which contracting takes place. Contracting is the means by which private providers are involved in continental Europe's social health insurance systems, for example. In this case, quasi-independent state agencies contract with health care providers. The prototypical example of contracted health services is clinical services, either at the primary or tertiary level. The range of services that may be contracted for in health is much broader, however-and often nonclinical services are easier to contract for than clinical. Ex- amples of nonclinical services that are relatively easy to contract for include: educational services to teach health workers; public health outreach efforts (such as conducting an antismoking campaign); and auxiliary services in health facilities (such as cleaning or catering), and delivery of nutritional supplements. Ir addition, governments may contract for regional coverage of a range of services rather than specific services. Governments in both developed and developing countries are exploring these contracting options, as well as many more. Thus, a wide range of services is supplied under contract, and there are also many contractual options for engaging the services. The most common mechanism is contracting out-where the gov- ernment purchases a service from an outside source that provides the service using its own work force and resources. However, govern- ments can also hire outside managers to come in and manage an in- ternal work force or service-which is referred to as contracting in. Less formal subsidy arrangements may be established, often withn nonprofit providers. In this case, the government gives financial sup port in exchange for the alteration or expansion of service provision in targeted areas. In some cases governments have developed a valu- Introduction to Private Participation in Health Services * 23 able "brand" for an important health good or service, and allocated a franchise to some service providers. The franchise contract in- cludes the right to use the "brand" name or symbol (which increases demand for their services) in exchange for agreeing to operate in a prescribed manner, usually in terms of service quality, services of- fered, or patients served. Contracting looks very different to the service provider than it does to the government. Contract management must take differ- ences in those perspectives into account. In particular, the contract arrangements must be sufficiently attractive to appeal to competent health care providers. In addition, ongoing communication among all parties (contracting agency, service providers, community) is crit- ical to establishing the level of trust that is required to make con- tracting successful. Absent such consideration, no contract or mon- itoring arrangements can ensure appropriate service delivery. Even nonprofit organizations must sustain their operations, and hence usually require contractual pricing to cover average costs. Payment methods and price-setting mechanisms directly deter- nune incentives for providers. Appropriate choices in this area are a key policy issue. The options and their advantages and disadvantages are discussed in chapter 3 of this handbook. Setting up effective arrangements to monitor contracted services is as important as the payment and pricing mechanism. These two must also complement each other. Capitated payment arrangements, for instance, lead to cost savings but can motivate skimping on quality- which makes it doubly important to monitor quality under capitated contracts (Savedoff and Slack 2000). Fee-for-service arrangements, on the other hand, offer incentives for overservicing-enhancing the need to monitor volumes and appropriateness of services. The length or term of the contract is very important. Policymak- ers must choose the contract's length, balancing their desire for pre- dictability and constraint of expenditure against the disadvantage of inflexibility or "lock-in" that occurs with regard to service delivery over the term of the contract. Policymakers with longer term con- tracts may find themselves in the position of buying services they no 24 o Private Pamcipation in IHealth Senrvces longer want, or that are delivered in an outmoded fashion, due to contract terms being outstripped by innovation in service delivery. Market structure must also be taken into account. In contracting, the impact on competition must be kept in mind. Enough providers should remain in the market to establish and maintain competitive pressures. Regulatory reform. Another strategy for enhancing the contribution of existing private providers is to improve health services regulation. Regulation is often considered primarily a means of improving qual- ity of care, but it is used to pursue a much broader set of objectives. For example, regulation is used to reduce inequality and disparities in quality or access (geographic or economic) to health care. Regu- lation is also used to improve technical and allocative efficiency and to reduce waste and corruption. Finally, regulations are often used to hold down costs, thus contributing to the financial sustainability of the health system. The function of health services regulation is to protect the public by countering market failures, bringing efficiencies to areas in which the market has been impeded, or by correcting the market's empha- sis on a single dimension, such as cost. Some regulations have an economuc focus, aiming to address provider monopolies, combat scarcity of certain necessary services (such as primary care), or curb wasteful service utilization in insurance arrangements. Other, more socially oriented, regulations aim to improve equity and access through geographic redistribution and antidiscrimination statutes; or protect the public by controlling the quality of health services. Because the objectives are varied, so too are the targets of regula- tion. Regulations may be established targeting various phases of the health care production process (input, process, output, and out- come). Traditionally, regulation focuses on the first two stages, the quality of input factors of production (human resources, consum- ables, pharmaceuticals, capital stock, and equipment) and the quality of the installed infrastructure or process for producing services. More sophisticated regulation targets the third stage, the production of actual services, and ultimately the impact on outcomes (outcome- Introduction to Private Participation in Health Services * 25 targeted regulation). This complex form of regulation is not com- mon in developing countries. Most health sector regulation is tar- geted at health service prices, quantity and distribution, and quality.5 A wide range of instruments is available for regulating health care services. The three general categories are (a) regulation through control, (b) incentives, and (c) market structuring. The most famil- iar type of regulation consists of legal restrictions or controls that re- quire providers to conform to legislative requirements. If they do not abide by these laws they are liable to punishment. Types of reg- ulation that are usually accomplished by means of control include: * Price regulation; * Capacity regulation (for example, volume and distribution of services); * Regulation of market entry and levels of service; * Regulation of entitlements; * Regulation of antitrust and market structure; * Regulation of quality of care; * Health facility licensing; * Heath facility accreditation; * Health personnel credentialing; * Utilization reviews and medical audits; and * Outcomes research, practice guidelines, and clinical protocols. A more complex form of regulation offers providers incentives- either financial or nonfinancial-to change their behavior, thereby leading to improvements in the target variable (such as price or qual- ity). An even more sophisticated form of regulation implements changes to market structure that cause the market to generate pres- sures to encourage providers to undertake the desired behaviors. Regulation is more than laws and directives. Effectiveness of health care regulation is directly related to the way the processes and 26 o Private Participanon in Health Services institutions are structured. Therefore, any efforts to enhance the reg- ulatory framework require analysis of existing regulatory arrange- ments and often require their alteration. Reviewing the structural options used in other countries can provide some guidance, although these insights must be tailored to the local context. Government officials and agencies can undertake many regula- tory actions. However, in developed-country systems many agents and organizations support and complement the governments' role. The most important regulatory agents outside government are self- regulatory organizations and professional associations. Increasingly, however, community and consumer organizations are playing a more influential role. A government seeking to enhance the effectiveness of the regulatory framework will need to ensure that the various or- ganizations performing regulatory functions work in a coordinated manner. Once it has been established that the government will perform a regulatory function, many important design issues still must be con- sidered. These issues include: o Scope of operations; o Organizational form: regulatory agency versus a commission; o Governance: intragovernmental versus a separate agency; o Degree of regulatory discretion; o Administrative procedures and judicial review; o Accountability and regulatory oversight; o Agency staffing; o Terms of reference; and o Agency funding. If another body is to perform a regulatory function the govern- ment will likely need to coordinate, collaborate, delegate, or other- wise support their performance. Introduction to Private Participation in Health Services * 27 Moving toward an effective regulatoryframework. To improve the func- tioning of health regulation a number of issues must be addressed. Policymakers need to select a balanced package of sticks (controls) and carrots (incentives). Identifying the policies to be implemented will need to take into account the government's limited capacity- and therefore to encourage and guide regulatory forces provided by professional organizations and other NGOs, as well as community and patients' organizations. In many areas these groups, sometimes with strategic support or review by government, have more motiva- tion and capacity to regulate important health care activities and ob- jectives. Throughout the process government must have an overview of all the influences on the behavior of health service providers, so that they can use their own resources efficiently, and also to ensure that their own efforts do not undermine systemic integration and cohesiveness. Despite all the technical criteria outlined, regulatuon is an inher- ently political and cultural process. Efforts to improve regulation must necessarily build on knowledge related to stakeholders' per- spectives, and acceptable and appropriate standards for the country context. Although many critical health service issues require regula- tion, regulation itself is a costly undertaking. In addition, regulation may bring about unintended and negative consequences (such as creating unnecessary barriers to entry, raising operating costs, or re- ducing competition). Design of regulatory reforms must therefore take into account both the benefits and costs of existing regulations and the impact of new ones under consideration. In some cases, re- moving ineffective or counterproductive regulations is an important part of regulatory reform. Perhaps more than any other regulated sector, with the exception of telecommunications, health care is a fast-changing activity. Imio- vations in diagnostics and treatments are multiplying. It is therefore critical that regulation in general, and the government's regulatory role in particular, is an ongoing and adaptive process. Outreach mechanisms to providers and patients. The third set of instru- ments for influencing the private providers' behavior consists of a 28 o Private Participation in Health Services wide range of outreach mechanisms that governrments can use to in- directly influence providers and patients. These are discussed below in order of intensity of effort. 0 Infornationz dissemination. Making information available to patients and the population can be a powerful mechanism for empowering them to demand appropriate care. Both governmental organi- zations and NGOs can play such a role. In the Netherlands, for example, patients' organizations play a strong role in educating patients about specific diseases and treatment options. These or- ganizations have increased patient participation in treatment deci- sions, have increased the prevalence of information on provider products (including quality and price), and have enhanced com- munication between patients and providers (Sommers 1999). The Uruguayan Cystic Fibrosis Foundation has been instrumental in improving the treatment of that disease. For nongovernmental patients' organizations to develop and flourish many of the issues related to the enabling environment for nonprofits come into play, just as it does with service delivery (box 1.3). Regardless of who initiates the information dissemination, various mechanisms have been successfully used, including commnunity leaders, peers, user groups, public providers, and mass media (Smith, Brugha, and Zwi 2001). Inforrnation dissemination can be used for many different purposes, as outlined below. o Expand demand amonzg identified grOups. Behavioral change com- munication can be used to expand demand and hence utiliza- tion by target populations (the poor, sex workers, and mothers). o Raise awarenzess of service quality anzd conszuer rights. This mech- anism is commonly used in developed countries to pressure providers into increasing the quality of care they deliver. Such efforts include developing physician profiles to help patients select their practitioner, establishing and disseminating "pa- tients' rights" charters, increasing patient representation on government oversight and regulatory bodies, and establishing relations with physician or hospital associations. Due to the complex nature of health care, even in developed countries, these efforts have a greater impact on consumer quality6 (that is, Introduction to Private Participation in Health Services o 29 Box 1.3 Public Policy and Health Service Delivery by Nonprofit Organizations Throughout this chapter the discussion of public policy that is directed toward the private sector refers to both for- profit and nonprofit organizations involved in health ser- vice delivery. However, there are several policy issues unique to the involvement of nonprofit organizations in the deliv- ery of health services. Nonprofit organizations that deliver social services are usually deemed to merit special assistance from the government, most frequently in terms of tax ex- emptions and tax deductions for donations to their opera- tions. Furthermore, some countries exempt social service nonprofits from import tariffs for health-related equipment and medicines. While many countries strive to support the operation of socially beneficial nonprofit organizations, others, by omission or commission, have not created a sup- portive environment. Thus, in addition to being affected by the general state of the economy and enabling enviromnent for businesses, nonprofit organizations are affected by both regulatory and fiscal aspects of the nonprofit enabling envi- ronment. The following factors are important for the oper- ation of health service nonprofit organizations: o Legal environment. The legal environment should be sup- portive, including being free of state intrusion and inap- propriate interference. Clear criteria for qualification as a nonprofit organization, while not allowing abuse of the nonprofits, should be in place. Regulation must respect their autonomy as independent bodies. o Fiscalfactors. The tax framework should provide exemp- tions from income and profits taxes for nonprofit orga- nizations, although this need not extend to business or economic activities. Other tax benefits may be appropri- ate-exemptions from customs duties, and value-added (Box contenuej on the following page) 30 - Private Participation in Health Services Box 1.3 (continued) taxes on imports; or individual tax deductions for dona- tions of time or funds. * Other factors. Access to government training schemes; or provision of medical supplies at reduced or no cost may be appropriate. The legal and fiscal issues are beyond the scope of health sector policy. However, if nonprofit providers are to play a vital role in service delivery, health officials may need to contribute to a process that improves their environment. Why nonprofit health care providers are imnportdnt. Non- profit organizations often provide a means to reach the poor and other target populations in order to provide ser- vices to them. This comparative advantage often comes from nonprofits' historical patterns of development, their close- ness to communities, and their ability to harness volunteer activity. Why problems may occur. NGOs are often politically con- tentious. They sometimes play a role in exposing the narrow interests of particular ruling parties, or may be otherwise aligned with opposition political interests. This political as- pect of NGO activities may add to a negative stance on the part of the government toward NGOs (and hence con- straining policies), including NGOs that provide valuable social services. However, the interests of nonprofit organizations whose main activity is service delivery most often align closely with those of the government in the health sector. AR too often, even when govermments are actively devel- oping policy toward the private sector, they leave out con- sideration of issues specific to nonprofit organizations. Source: World Bank 1997a. Introduction to Private Participation in Health Services * 31 the now medical aspects of quality) than on clinical quality. Pa- tients' organizations usually play a substantial role in directly raising such awareness, while government efforts are frequently channeled through mass media. A few developing-country gov- ernments (such as India) have initiated efforts in this area re- cently. Patients' organizations have begun to be active in a num- ber of developing countries (including Argentina, Bangladesh, Brazil, Bulgaria, Chile, Croatia, the Czech Republic, Ecuador, El Salvador, Estonia, Hungary, India, Indonesia, Lithuania, Mexico, Nigeria, Poland, Romania, the Russian Federation, the Slovak Republic, Slovenia, South Africa, Tunisia, Uruguay, and Zimbabwe). The majority of these organizations focus their advocacy on a single, usually chronic, disease, such as multiple sclerosis, cystic fibrosis, or diabetes. An increasing number, how- ever, have a broader mandate, aspiring to improve access to health care, or pharmaceuticals, and to improve treatment, often through formal "patient's rights" charters.7 Publish infornation for user-s on maximu7n permitted prices. Infor- mation publishing is most often used with regard to pharma- ceuticals. Governments require prices to be listed in pharmacies, published in pricing guides and in the media, and printed on the packaging. There is some evidence that widespread price publi- cation does lead users to put pressure on providers and retailers to contain prices.8 Cambodia, the Philippines, and Colombia have successful consumer information strategies on maximum permitted prices (Smith, Brugha, and Zwi 2001, p. 56). Education. Instead of, or in addition to, disseminating information, more intense educative efforts may be necessary in order to alter the practices of private health care providers and the demand for their services. * Expand or alter demand by educating users. For priority services or population groups, focused education campaigns can be instru- mental in expanding or altering their demand for goods and services. Examples include education efforts targeted to sex workers in order to encourage them to demand treatment of 32 o Private Participation in Health Services sexually transmitted diseases (STDs); or to mothers in slum areas, to expand their demand for appropriate treatment for key childhood illnesses. 0 Increase demandfor services through community education. Another way of increasing the use of priority services is by implement- ing community education efforts, structured to enhance de- mand for identified goods or services. Such programs have been successfully used to expand demand for vaccination, malaria treatment, nutrition supplements, and treatment for key child- hood illnesses. o Training support to providers. Such training may take the form of regular programs such as continuing medical education for allopathic providers, or may focus on providers who are not trained in biomedical medicine-depending on where the tar- geted diseases or populations are treated and which providers are "reachable" (Marsh 1999, p. 42; and Hudelsohn 1998). Zn Kenya, for example, shopkeepers were trained in the proper use of drugs to treat childhood fevers. A study showed a substantial improvement in the behavior of the use of these drugs, because of shopkeepers' oral advice and printed information distributed in the shops.9 Persuasion. Evidence indicates that it is often necessary for knowl- edge to be reinforced, since knowledge alone is frequently not suf- ficient to change provider or prescriber behavior (Soumerai, McLaughlin, and Avorn 1989). A number of the more successfbld training efforts include interventions to motivate the providers to "stay on track." 0 "Detailing." Detailing consists of face-to-face interaction and guidance through personal encounters with practitioners. Phar- maceutical companies use this method very effectively to influ- ence prescription practices throughout the world. More recently, governments have utilized this method to improve physician behavior in targeted areas. Such efforts have proven effective Introduction to Private Participation in Health Services * 33 in changing physician behavior in treating common childhood illnesses in Kenya and Indonesia (Eawfik forthcoming). Negotiation. Negotiation may be viewed as an intensive form of persuasion. An example of this method is Private Practitioner Treatment Improvement Intervention (PRACTION). PRAC- TION is a systematic initiative that starts with assessing current private practitioner behavior. Subsequently an agreement or in- formal contract for modified behaviors is negotiated with the practitioner. Such efforts have been implemented successfully in India, Indonesia, and Pakistan (Northrup 1997). * Public financing. Besides paying for goods or services directly and through contracting arrangements, governments can use public funds in other ways to influence the behavior of private health care providers. This form of interaction with private providers is most common with regard to nonprofit organizations. * Financial suibsidies. One means of influencing behavior is to pro- vide financial subsidies to certain organizations that perform activities or deliver products important for achieving social ob- jectives. The earmarked grant is the most common form of fi- nancial support for private providers, especially with regard to preventative services. The state government of Tamil Nadu (India) pays part of the cost of family planning services provided by private hospitals (DeRoeck 1998). * Bed grants. Another common mechanism for providing finan- cial support to private providers that are serving public objec- tives is bed grants, a government payment based on the num- ber of beds allotted to serving indigent patients. For example, the government of Tanzania provides a payment per approved bed to NGO hospitals designated as district hospitals (Gilson, Dave, and Mohammed 1994). Governments also occasionally opt to provide financial subsidies to private facilities in ex- change for establishing an exemption mechanism for poor pa- tients (McPake and Banda 1994). 34 o Private Participation in Health Services • Seed fundinzg. Another type of financial support used is seed funding for the start-up of services or activities. Support from the government of India to Parivar Seva Sanstha, an NGO spe- cializing in reproductive health care, for example, covered 75 percent of the costs of opening a new clinic. o Tax subsidies o0- exemiptions. In some cases, financial subsidies are provided mdirectly through tax subsidies or exemptions. For example, in Nepal nonprofit organizations receive tax exemp- tions for health commodities and services on the recommen- dation of a national NGO umbrella gToup (DeRoeck 1998). Church NGOs in Malawi that buy drugs from the govern- ment's central medical store at preferential prices receive an in- direct subsidy (Gilson, Dave, and Mohammed 1994). o In-kinid support. Alternatively, in-kind support may be supplied to the providers. Many NGOs and an occasional for-profit practitioner receive this type of support. In several African countries governments either second staff to mission facilities, as in Uganda, or pay the mission facility's staff salaries, as in Ghana and Malawi (Gilson, Dave, and Mohammed 1994). The ministry of public health in Bolivia subsidizes staff salaries in PROSALUD clinics located in rural areas (DeRoeck 1998). In- kind support may also include other inputs such as medical sup- plies, or even facilities: the government of Guatemala provides Rxiin Tnamet (a local NGO) with medical supplies for its pre- ventive health outreach services (DeRoeck 1998). In Ghana the government provides buildings, equipment, and drugs for NGQ hospitals (Gilson, Dave, and Mohammed 1994). o Critical supplies free or at a discount. Some governments use these same methods to influence private practitioners (for-profit en- tities) by supplying critical supplies free or at a discount (in- cluding vaccines or nutritional supplements), while allowing the practitioner to charge a fee and make a profit to expand de- livery of important goods and services. This type of interven- tion has been successfully used in Malaysia. Introduction to Private Participation in Health Services * 35 Vouchers. The government may, alternatively, expand demand for priority services by subsidizing their purchase through means of vouchers. In this case vouchers may be given to a tar- geted population to expand their utilization of a priority ser- vice. In Nicaragua, for instance, vouchers for STD treatment were distributed to sex workers who were able to redeem them at a range of public and private providers. The scheme was suc- cessful in reaching poorer groups, and the overall incidence of gonorrhea has declined (Sandiford, Gorter, and Salvetto 2002). Growing the Private Sector Although working better with existing private providers is often use- ful for improving system and service performance, certain situations call for another strategy. Many programs requiring new or expanded health care provision can be implemented by working with private providers. In some instances these providers are particularly well placed to undertake such activities-they may already be present in a targeted district, or may be heavily utilized by a targeted popula- tion. When this is the case governments can use a number of tools to encourage or "incentivize" the appropriate providers to undertake the delivery of additional services. We refer to these efforts as strate- gically "growing" the private sector. The tools governments may use to promote such activities overlap considerably with those they can use to influence the private sector in their current activities de- scribed in the preceding section. Hence, the difference is in what the programs are aiming to get private providers to do, not in the tools they use to influence them. Contracting and subsidies. The most direct means of supporting the expansion of private provision in identified activities or regions is through ongoing purchasing of (or contracting for) their goods or services. For example, the Guatemalan government contracted with existing NGO service providers in order to expand services in areas inhabited by indigenous peoples, following a long civil war, during which time public facilities had ceased to operate in these areas. 36 0 Private Participation in Health Services Alternatively, services or goods may be financed on the demand side, through endowing users with a reimbursable claim to targeted services by means of vouchers. Governments use a range of addi- tional financial mechanisms to encourage the expansion of the pri- vate sector-mechanisms such as tax exemptions, or subsidized or targeted credit. In Pakistan, for example, the government offers tax exemptions to practitioners setting up in rural areas. In some coun- tries the government will allocate land to encourage the construc- tion of a health care facilitv in an underserved area. Regulatory reform. Governments may also use indirect means to encourage targeted expansion of private provision. For example, they may take steps to reduce unnecessary constraints that increase the cost of operation by reducing or abolishing import restrictions. "Sometimes governments create monopolies unnecessarily and deny entrepreneurs (and other providers) the opportunity to compete fairly with established service providers by erecting entry barriers, blocking credit and access to foreign exchange, taxing dividends and profits inequitably, imposing unfair import duties, and establishing bureaucratic hurdles" (Kessides 1993). Although this quote refers mainly to utilities, it is equally valid for health infrastructure and services. Hence, removal of such barriers can be an important tool that can be used to "grow" the private sector. Enabling environment. Regulation is undoubtedly necessary to pre- vent opportunism and protect patients. However, often there are un- necessary constraints on providers-some of which are specific to the health sector, while others are present in the overall enabling en- vironment. In developing countries there are often burdensome and unnecessary costs to register an organization as well as problems ob- taining access to critical inputs, including human resources, phar- maceuticals, other consumables, and essential public services (such as a predictable supply of electricity and access to clean water). These issues can deter private operators from expanding their health care services. Introduction to Private Participation in Health Services * 37 Nonprofit organizations face yet another set of issues related to the enabling environment. In many developing countries the legal framework supporting nonprofit operation is weak, unfavorable, or nonexistent. Often there is no support for contributions or other forms of philanthropy. In particular, many developing countries lack a clear and supportive regulatory framework regarding the tax- exempt status of nonprofit organizations or donations to them (Si- mon 1995; and box 1.3). Some governments impose needlessly cumbersome and time- consuming demands on NGOs by demanding detailed financial accounting and planning of activities (De Jong 1991). Removing these requirements can promote the expansion of privately delivered services. Governments can also encourage expansion of private health care delivery through behavioral change communication programs that expand demand for key goods and services the private sector deliv- ers. The range of goods and services for which this approach is being utilized has expanded from population and reproductive health goods and services to include bednets, oral rehydration salts, fortified foods, and the like. Conversion Throughout the world a trend has emerged of turning over opera- tion of public services to private hands-momentum has gained as experience has built up, and positive results have been achieved (Savas 2000; Domberger 1999; and Donahue 1989). Based on the consistently positive results from conversion of other social and pub- lic services, governments are expanding such efforts to publicly run health services (GAO 1998; Melia 1997; Zuckerman and de Kadt 1997; and Lyon 2000). Various reasons are put forth for this move toward conversion. If a government appears to be overextended, conversion can be part of a strategy aimed at focusing on its "core competencies." Alternatively, or in addition, governments may feel that the private sector will run the service or services more effi- 38 0 Prnvate Participation in Health Services ciently, or improve quality in the service, or both.'0 Governments have also recently become interested in developing "public-private partnerships" to attract private funds for expanding facilities and services-which may entail the transfer to private hands of some services, of the operation as a whole, or even of the facilities (boxes 1.4 and 1.5). These types of reforms have been taking place in Aus- tralia, Chile, Germany, Sweden, Thailand, the United Kingdom, as well as in South Africa. From the fiscal perspective many govern- ments are motivated to consider conversion to better manage the risk associated with different health-related expenditure streams (Blair 1998). Conversion in the health sector is much more complex than con- version of other public services, because government must establish an ongoing relationship with the provider to ensure services are de- livered appropriately. In addition, monopoly power can emerge in some health care markets, especially in acute care services. These conditions make it necessary to address several issues simultaneously when conversion of health care services is undertaken. If the provider is to continue to deliver public services the trans- action itself will have to be directly tied to ensuing service contracts. These transactions, along with the service contracts, must be viewed together to ensure adequate performance by the provider. Sensible service contracts entail sophisticated funding arrangements for thc service providers. If funding of public delivery is currently based on inputs, or even on blocks of services, substantial changes will have to be implemented to enable the conversion to proceed. Whether or not it is applied systemwide, contracting with private health carc providers requires "active purchasing" (Preker, Jakab, Baeza, and Langenbrunner 2000). The case of Port lVacquarie Base Hospitpal illustrates the difficulties of undertaking hospital conversion when the funding arrangements do not support sensible service contracts (box 1.5). When public providers deliver services critical issues such as qual- ity, cost containment, and efficiency can be addressed administra- tively. When services are turned over to private operators, how- ever, in addition to tightening the service contracts, the regulatory Introduction to Private Participation in Health Services 0 39 Box 1.4 Port Macquarie Base Hospital Conversion: Obtaining and Demonstrating Gains Is Critical In Australia in the late 1980s the New South Wales De- partment of Health (DOH) needed to expand the range and quantity of hospital services in the Macleay-Hastings Dis- trict. After extensive review the DOH decided to proceed with a build-own-operate arrangement with the private sec- tor. The tender was completed in 1991, and the contract signed with the Hospital Corporation of Australia in 1992. The hospital began operations in November 1994. It is widely accepted that the quality of and access to hospital services in the region have improved since privatization, yet many people stilU take a dim view of the project. The biggest problems can be traced to the service contracts, specifically to the hospital's fimding arrangements. The funding system did not generate enough information about the cost of ser- vices to allow the DOH to set sensible prices for the new hospital's services. The service agreements therefore ended up reimbursing the hospital at a high rate, in addition to a lump sum availability charge. After a number of reviews, conclusions as to how "bad" a deal the DOH is getting are still wide-ranging, but the conversion, on the whole, is not judged a success. The funding and fee-setting arrangements are neither sufficient to ensure good value for the DOH, nor sufficient to verify the gains of private participation. Source: New South Wales Auditor-General 1996. framework for service delivery will likely need to be enhanced, to en- sure that social objectives continue to be met. Thus, conversion often requires strengthening of the regulatory framework and im- plementing bodies, to complement the changes in the service deliv- ery arrangements. 40 * Private Participation in Health Services Box 1.5 Conversion of Public Hospitals in South Africa South Africa has extensive experience of funding hospital services delivered by both for-profit and nonprofit facilities. In 1995 17 percent of all hospital beds were operated by private organizations. Broomberg, Masobe, Mills (1997)' evaluated three conversions. Two were build-own-operate transactions-privately constructed and operated district hospitals, supplying acute, district-level hospital services under 10-year service contracts. In a third hospital the gov- ernment contracted for private management for what was still a publicly owned facility. The authors matched these hospitals against similar public facilities and compared their performance. The privately operated (or managed) hospi- tals demonstrated higher productive efficiency, largely tied to lower staff costs and more efficient deployment of staff resources. The authors conclude that conversion "appears to hold the potential to generate substantial efficiency gains, both through the securing of services of comparable or higher quality at lower cost, and through the ability of the contractors to fill temporary or permanent gaps in govern- ment capacity." Weak contract implementation and man- agement appear to have deprived the government of gains. For more on this topic, see chapter 3 of this handbook. Source: Broomberg, Masobe, and Mills 1997. The market environment in which the converted providers will operate must also be taken into account. As noted above, hospital markets are often subject to geographic monopolies, which must be taken into account in both the transaction and service contracts. To obtain the full benefit of conversion concerted efforts are frequently needed to promote competition in this market.11 Introduction to Private Participation in Health Services * 41 Any needed changes in the regulatory and purchasing framework as well as the market environment must be considered, planned, and simultaneously implemented with the transaction to ensure that conversion brings about desired results. See appendix 1.A for fur- ther discussion of health services conversion reforms. This com- plexity makes health service conversion a complex and challenging reform. Private Health Care Providers and the Poor Despite the financial burden numerous recent surveys reveal that the poor in many countries receive many of their health services from the private sector (figure 1.1). Private health care providers are now seen as central to strategies to improve the health of the poor because of this recognition. Figure 1.1 presents the proportion of the poorest 20 percent of the population, in a number of developing countries, that sought treatment for recent illness in the private sector. Improving Service Quality for the Poor Not only are the poor using private providers, they most often uti- lize informal, unqualified, and poorly skilled practitioners or phar- macists. Since most attempts to alter these utilization patterns have failed, in some countries policymakers are exploring methods to improve the quality of care these providers offer as the most direct in- strument to improve health care for the poor (Chakraborty, D'Souza, and Northrup 2000). A major challenge to this approach is that private providers in gen- eral are harder to influence than providers in public clinics. In addi- tion, the providers used by the poor are often even more difficult to reach, because they tend to be in the informal sector, and less well- organized than formal, registered doctors. Perhaps the principal obstacle to working with these providers to improve the care the poor are receiving is the unwillingness on the part of government 42 o Private Participation in Ilealth Services igDuv Mo Percentage of People Treated Outside the Public Sector for Their Most Recent Illness (poorest 20 percent of population) Percent 100.- g0 80 70 60 50- 40 30 -- 20 | g iarrea nARI Officials to engage them. Professional associations are also ofecn strongly opposed to engaging these providers. Nevertheless, a few governments are undertaking to engage the providers used by the poor. The instruments they use are discussed below. Purchasinzg. In order to improve the quality of services poor patients receive, governments can contract, or otherwise finance, key services, using their financial leverage to enhance quality standards. Services might be purchased directly for identified, poor patients. Otherwise, Introduction to Private Participation in Health Services * 43 governments may focus their contracting and funds on diseases that disproportionately affect the poor, or on services of critical impor- tance to the poor, such as maternal and child health services. An- other alternative, utilized by the Guatemalan government among others, is to contract for services in regions where poor inhabitants are concentrated (Nieves, La Forgia, and Ribera 2000). Regulation. To improve the services received by poor patients gov- ernments may work to extend and enhance quality regulations to providers used by the poor (informal providers or providers located in rural areas or slums). Alternatively, they may create or enhance enforcement of regulations targeted at services that are particularly important to the poor. Information, education, and persuasion. Outreach efforts to enhance the services provided by private health care providers are becoming increasingly common. Such efforts can be targeted to services that the poor use frequently; providers they frequent; regions they in- habit; or they can target poor patients directly (where feasible and cost effective). Mandates. Mandates are effective only when there is either enforce- ment capability or provider compliance incentives. Enforcement re- quires a relatively high level of monitoring capacity, which is rare in developing-country governments, especially for informal and tradi- tional practitioners. Incentives are most often provided through fi- nancing mechanisms, as discussed above. Expanding Services to the Poor Dissatisfaction with the extent of outreach to poor clients through publicly run services has led some governments to experiment with methods to expand services, by enabling poor patients to expand uti- lization of private providers. Governments wishing to expand services in this way must first identify the providers that serve the poor, or that could do so due to location, orientation, or service profile. The in- 44 ° Private Participation in Health Services struments most commonly used to encourage providers to expan(d services rendered to the poor include the following. Purchasing. The most powerfiul instrument for expanding privately delivered services to poor patients is payment for these services with public funds. These funds may be allocated to providers or to users. Providers can be fimded for services to the poor by means of con- tracting or other less specific subsidies (such as input or in-kind sub- sidies). Service delivery to poor users can also be generated through vouchers issued to patients for use at private clinics, with govern- ment or other payers reimbursing providers for these claims. As with all forms of transfers to the needy, effective targeting is an issue. As a means of targeting some governments have focused on contracting with NGOs whose patients were already drawn mainly from poor populations (Nieves, La Forgia, and Ribera 2000). This is especially useful where individual targeting is not possible or is not cost-effective. An alternative form of targeting is for the government to contract for services that are especially important to the poor (such as maternal and child health services12) or for treatment of diseases particularly prevalent among the poor (such as TB and malaria). TIhe Reproductive and Child Health program in India uses three methods to expand access to the poor: contracting with NG Os located in poor areas, who were better at reaching the poor; setting targets related to reaching poor populations; and focusing on services of particular im- portance to poor populations (Rosen 2000). To expand services governments may give direct subsidies to pro- viders (especially NGOs) that predominantly serve the poor, or op- erate in areas inhabited by the poor. Vouchers have also been used to reduce the cost of a good or service at the point of service-with subsequent redemptions using public funds. They are most com- monly used to reduce the price for poor people of targeted goods, such as bednets. Occasionally vouchers are used to reduce or elimi- nate a fee for services, however. An example is the voucher program for STD treatment established for poor sex workers in Nicaragua (Sandiford, Gorter, Salvetto 2002). Regulation. A commonly used regulation intended to enhance access to services for the poor is to make registration as a nonprofit, with Introduction to Private Participation in Health Services * 45 attendant benefits, contingent on an organization's devoting a pro- portion of its services to poor populations. Expanding commun7zity financing. To increase access for the poor to insurance, or reduce the payment at point of service, governments can pay part or all of the contribution for poor members in commu- nity financing schemes. Alternatively, they can subsidize the scheme directly following set criteria regarding socioeconomic status of membership. For schemes whose members are predominantly poor, governments are exploring options to ensure the availability of rein- surance-to enhance these schemes' sustainability. Mandates. Another method for expanding services available to the poor is through promulgation and enforcement of mandates; an ex- ample might be, for instance, requiring doctors or other medical staff to serve in poor areas as a prerequisite to receiving their license. Another example, for hospitals, might be for the government to re- quire a certain number or proportion of beds to be used to serve the poor. Caution must be used in this regard, because these efforts often lead to monitoring problems and hence empty "poor" beds. Private Health Care Provision and Public Health Public health services are oriented to directly benefit the public, ei- ther as individuals, communities, or larger populations. These ser- vices are often public goods, as is the case for most oversight func- tions, or they may have significant positive externalities. 3 Examples include: * Population or community-based services, such as water chlorina- tion and salt iodization * Individual preventive health services, such as immunizations * Individual or community health promotion activities, including nutrition education (such as messages on breast-feeding and weaning practices); hygiene education; education to foster aware- 46 Prnvate Participation in Hlealth Services ness of symptoms and treatments for better home management (such as oral rehydration therapy for family members with diar- rhea); and education about safe sexual behavior, or against smok- ing or tobacco, drug, and alcohol abuse o Special campaigns of public priority, using multiple approaches against specific diseases or risk factors with high externalities, such as acquired immune deficiency syndrome (AIDS), TB, malaria, or substance abuse. The private sector is commonly excluded from national public health programs-sometimes simply from habit, occasionally from fear that involving private providers, some of whom are unqualified, could be seen as formal recognition and encouragement for those who are unqualified to continue their substandard practices. Never- theless, in many instances, these private providers are integral zo addressing public health concerns (Pathenia 1998; Tawfik forth- coming; and Uplekar, Pathenia, and Raviglione 2001). For instance, private practitioners are now acknowledged to be an important source of treatment for diarrhea, acute respiratory illness (ARI), and malaria-which together account for over one-half of childhood mortality in developing countries (Waters, iatt, and Axelsson 2002). In many countries private providers treat a large proportion of TB symptomatics, especially in Southeast Asia and the Western Pacific where the disease burden is highest (Uplekar, Pathenia, and Rav- iglione 2001). Private drug retailers are usually the first and often the only point of contact with the health system for a wide variety of conditions of public health concern, including maternal and child health (Kafle and others 1996). Private provision essentially raises two major issues with regard to public health: insufficient attention to and delivery of promotive and preventive services; and poor qual- ity of diagnostic and curative services. Expanding Pr'Dovision of Preventive [ealthb Cg-e Sei-vices Many people in developing countries visit private health care pro- viders for their everyday health needs. Unfortunately, these inter- Introduction to Private Participation in I-Health Services * 47 actions often omit critical promotive and preventive care. Individ- uals undervalue these activities (such as vaccinations and health ed- ucation) relative to curative care-with the result that providers, too, underemphasize them. Private providers are usually excluded from public health programs, exacerbating this tendency to under- emphasize critical promotive and preventive care. Recently some governments have been taking steps to include private providers in implementation of public health efforts to expand utilization of preventive health care services (World Bank 2001a). This under- taking is challenging. However, private providers are often inter- ested in participating in these efforts, feeling that it may enhance their attractiveness to patients (such as for immunizations or nutri- tion supplements). Care must be taken, however, to match the task with the providers. Hudelsohn proposes several criteria: * The provider must be well placed to undertake the task. * The provider must be capable. * The provider must be willing. * It must be feasible to train the provider to undertake the task. * It must be acceptable to users that the provider performs the task. * Government and government officials must be willing to work with the private sector and adequate resources must be devoted to the tasks (Hudelsohn 1998). As is clear from this list of criteria, a thorough knowledge of the local health system and private providers' tasks within it is critical to the success of such efforts. This kind of understanding hinges on ef- fective communication with private providers, which is rare in de- veloping countries. Once the prevention-related tasks that are the focus of an initia- tive, and the providers with which the government will work, are identified, instruments for working with private providers take sev- eral forms. 48 o Private Participation in Health Services Outreach to providers. Some private practitioners can be motivated to expand delivery of promotive or preventive care by simply pro- viding them with relevant information (such as information on the importance of hand washing, and other hygienic practices). Some practitioners can be influenced by their inclusion in government- sponsored training programs. In many cases, however, information dissemination and education are not enough. Often, increases in knowledge do not translate into improvements in practice (Soumerai, McLaughlin, and Avorn 1989). Efforts to change the in- centives of providers are therefore extremely important. Examples of such efforts are described below. o Outreach to patientts. Behavioral change communication can be used to increase demand for products and services with a public health benefit (such as vaccinations and nutrition supplements). Patient-education materials can be made available for distribution in private clinics. Social marketing-type methods have been usea in many cases to make participation in public health programs profitable for private providers. o Direct paynment or reduced prices for public health goods and ser-vices. Many providers are willing to change their behavior in minor, al- though possibly significant ways. If the added service activity is too costly or time consuming to deliver, however, the governments will need to allocate funds to cover the additional costs to the provider, if the changes are to be sustained. Governments can pay for, or otherwise subsidize the delivery of, promotive-preventive services (contracting). In a recent review of developing-country programs seeking to involve the private sector in achieving child health objectives, approximately 63 percent utilized contracting, while 51 percent used grants (Axelsson 2002). Again, the ability te contract depends on the measurability of the good or service de- livered. Nutrition counseling and supplements, for example, have proven relatively easy to deliver through contracting, as has STD treatment (Marek, Diallo, Ndiaye, and Rakostosalama 1999). Introduction to Private Participation in Health Services * 49 * Indirect subsidies and sutpply of c7ritical in7putts. Government can sup- ply priority inputs to practitioners to encourage them to deliver related services (such as free or discounted vaccines, or STD treat- ment packs). * Suzbsidizing inclusion in insutrance packages. Governments can subsi- dize the inclusion in insurance packages of goods and services deemed to address high public health priorities (such as population and reproductive health-related goods and services, or vaccines). * Mandating inclusion in insurance packages. Governments can require inclusion of certain goods and services in insurance packages in order for an insurer to be licensed, or to provide insurance to publicly insured patients. Examples include reproductive health- related goods and services. Improving the Quality of Curative Treatments Private providers and their patients focus heavily on delivery of cur- ative care. Care is frequently of low quality, however, an issue that concerns not just individuals but society at large. Effective curative treatments are critical to the achievement of many public health prior- ities, including effective diagnosis and treatment of childhood illness, malaria diagnosis and treatment, TB diagnosis and treatment, popula- tion and reproductive health, and maternal health interventions. Mechanisms for guiding these interventions include the following. Direct subsidies and con7tracting. Because some services are more eas- ily measured, and thus more amenable to contracting, than others, governments will more easily be able to contract for and monitor their delivery (box 1.6). TB treatment, for example, has proven "contractable," because the impact of treatment can be readily veri- fied (Pathenia 1998). Outreacb to providers. Several outreach methods to improve pro- viders' treatment in critical areas have been tried, with varying de- 50 * Private Participation in Health Services Box 1.6 Public-Private Cooperation to Effective Treatmnent for Tuberculosis I Private doctors in Hyderabad, India, were given access to a respected local health institution (Mahavir Hospital) that treats TB patients, and were allowed to supervise their pa- tients' treatment. In the hospital their patients received ef- fective and affordable treatment for TB. This expanded the access to effective TB treatment for poor people in slum areas. It also reduced the development of drug-resistant strains of TB and reduced the number of infections. grees of success.14 While the circulation of information is a low-cost outreach method, it is also less intensive. These less-intensive out- reach efforts seem to have less impact on treatment than direct con- tact with providers. With increasing frequency, more-intensive meth- ods are being tried in developing countries. In the area of child health the World Health Organization has developed a guide for investigat- ing retail practice and for designing interventions to improve retail dispensing of pharmaceuticals by discouraging the sale of antidiar- rheal drugs and antimicrobials, and by encouraging the use of oral re- hydration salts in the treatment of diarrhea (WHO 1993). Trials of this guide in Kenya and Indonesia have demonstrated the positive impact of this approach (Ross-Degnan and others 1993). In Nepal a course was developed to improve the practices of unlicensed drug sellers, where successful completion endowed participants with certi- fication and registration as drug "professionalists." Improvements in prescribing practices were identified (Kafle and others 1992). In Uganda prepackaged drugs to treat STDs were provided to doctors (box 1.7). A more intensive outreach method involving negotiation has been developed under the title PRACTION (see above p. 33). PRACTION is a program that starts by assessing current private practitioner practices, and then negotiates with them an informal Introduction to Private Participation in Health Services o 51 Box 1.7 Providing Drugs to the Private Sector: Enhancing STD Treatment Under the "Clear 7" program in Uganda private practi- tioners, clinics, and pharmacists were provided with pre- packaged, subsidized drugs for distribution to men with urethral discharge. Drug shops enhanced their reputation by selling effective and affordable treatment. The packag- ilng expanded access to a complete and effective course of treatment for men with STDs, and reduced development of drug-resistant strains of the disease. Source: Ochwo 2000. contract in order to modify behaviors. It has been implemented suc- cessfully in India, Kenya, and Pakistan with respect to treatment of childhood illnesses (Northrup 1997). Outreach to patients. Behavioral change communication had been used successfully to improve patient receptivity to appropriate treat- ment (such as oral rehydration therapy as a substitute for antibiotics to treat diarrhea), or to encourage appropriate health-seeking be- havior (such as for TB or malaria treatment). Access to public referral network. Private doctors usually do not have access to public or NGO treatment centers. One way of improving the quality of public health-related curative care is to give private doctors access to these centers. In some countries identification and treatment of communicable diseases have been improved through such efforts. Referral rights must be combined with education re- lated to appropriate referral. Indirect subsidies and supply of critical inputs. In some instances govern- ments have been successful in improving service quality by supplying 52 * Private Participation in Health Services related inputs. Treatment of diarrheal disease in children has been im- proved by providing oral rehydration salts. STD treatment has been improved by providing appropriately "bundled" pharmaceuticals. Implementation of Public Policies toward Private Providers linplementation of health sector reforms is extremely challenging, and more often than not goes awry. Useful analysis for developing an implementation plan for general health reforms can be structured in several ways (Reich 1996; and Walt 1998). Here we will talk about the unique set of challenges likely to come up when a government attempts to improve and increase its interaction with private health care providers. These issues are likely to arise regardless of strategy or instruments. Lack offamiliarity with private sector A historical pattern of segmen- tation between the public and private sectors is comrnon, and there- fore actors on both sides usually lack knowledge of and familiarity with one another. While most governments can call upon basic data regarding the capacities and activities of public facilities and practi- tioners, similar data regarding private health care providers are rarely available to policymakers. Lack offorum for dialogue and collaboration. The existence and func- tioning of an ongoing consultative mechanism between the private and public sector have proven crucial for successful implementation of efforts to work with the private sector (Stone 1998). In develop- ing countries' health sectors, however, there is often no forum for di- alogue between the public sector (especially policymakers) and pri- vate providers. In many countries the private sector is not well organized, so only a small number of representative organizations are able to serve as a counterpart in consultations with the govern- ment. This lack of organization is even more problematic with in- formal and unqualified practitioners-who are especially important to the poorer segments of the population. Introduction to Private Participation in Health Services * 53 Ideology and mmndset. Efforts to establish policies and mechanisms to work with private health care providers often encounter signifi- cant challenges associated with government officials' and health sector staff's deeply engrained mindset of mistrust toward the pri- vate sector. Because of obvious problems with clinical quality and other associated market failures, negative attitudes toward the pri- vate sector, particularly the for-profit sector, must be dealt with if policies to constructively engage the private sector are to move ahead. Special problems often arise when actions are being contemplated to increase interaction with practitioners who are not trained in bio- medical medicine, or who are unqualified-because this will often be seen as a threat to the interests of the staff trained in biomedical medicine that dominate publicly operated health care operations. Puiblic employees. In addition to problems associated with ideology or mindset of public officials and health staff the members of the oper- ations staff will usually feel threatened when private sector collabo- ration or conversion is being contemplated. Their concern is often well founded in the sense that, at least in part, these reforms are often directed toward enhancing productivity or flexibility in public sector operations, and may even constitute a threat to the staff's con- tinued employment. Any efforts to enhance collaboration with the private sector must explicitly address these stakeholders' views and political strengths.15 As with all health reforms, these reforms will often be threatened if they are opposed by medical professionals, who have a great deal of credibility and access to the public, and who are adept at portraying any reform that they oppose as undermining the "public interest." Private sector skepticismn. Due to a historical pattern of segmentation between the public and private sectors in health, private providers may not mitially respond to government initiatives. Lack of capacity for public officials to take on ne7v roles. Both in terms of the new structure envisioned and in terms of managing the reforms, 54 0 Pnvate Participation in Health Services government officials will find it extremely challenging to operate in new ways and to take on new roles. Hence, any reform to increase interaction with the private sector must include efforts to develop the capacity of government officials to take on new roles. Government staff members are usually accustomed to dealing with organizations and staff in a subordinate relationship, and there- fore have a tendency to approach policymaking in centralized and top-down fashion-that is, they tend to be "heavy handed." They may miss out in collecting key information about the private sector and its strengths and weaknesses, and may add to suspicions about the government's intentions (Green and Matthias 1997). Impact on public sector Any initiative to work with the private sector must take into account the likely impact on the public sector. Utili- zation may go down at public facilities. Expanding private sector ac- tivity may encourage staff to move out of public sector work. Gov- ernments will need to deal proactively with such possibilities, in order to ensure that they do not further reduce public sector capacity. Outreach methods. A review of efforts to improve the operation of private providers indicates a tendency to overreach, trying to bring practitioner behavior up to standard on a number of fronts. These unfocused efforts tend to be relatively ineffective. Efforts are more successful when focused on a narrow range of activities (Chakraborty, D'Souza, and Northrup 2000). Evidence to date also underscores that successful outreach efforts should not be too time-consuming- since private practitioners value their time highly and will not be willing to incur the income loss associated with long training pro- grams. This observation highlights a more general point-that all ef- forts to work with private providers must take into account their con- straints and incentives, and their need to earn their keep and their interest in making a profit. cofldusuoond dznd WrFg «he l : Working with private providers costs money, both in terms of direct payments and in terms of ensuring adequate staffing resources to Introduction to Private Participation m Health Services * 55 manage relations with them. Many governments undertake work with private providers only under conditions of extreme fiscal pres- sure, thereby undermining the impact of these efforts. While work- ing with private providers may result in some efficiency gains and cost savings, sometimes it may be more costly to work with hetero- geneous, disintegrated, private practitioners. If people go to private practitioners for treatment, it may be necessary for the government to work with them in order to achieve certain objectives. In developing countries it may be easier to work with private providers on public health-related activities (such as vaccination, treatment of STDs, or delivery of nutrition supplements) than on clinical activities-since both the service and the outcome can be more readily observed and measured in the former case. Efforts to work with private practitioners are best thought of as systemic reforms-rather than "stand alone" reforms. These changes must be based on a clear strategy for what the private and public sec- tors will be doing in the medium term, in order to ensure any needed complementary reforms are forthcoming. Undertaking improvements in public policy toward private health care providers in developing countries requires new and expanded analysis-to assess the private sector's current role and to evaluate the effectiveness of instruments for working with them. Dialogue with the private sector is critical, both to identify opportunities and to implement new policies. Comparing strategies. Attempting to harness the private sector or to grow the private sector in a targeted way are relatively low-risk strategies. Both strategies require reallocating resources toward new efforts (such as contracting, regulation, information dissemination, or tax breaks). In both cases structural changes are incremental- leaving in place most arrangements for service delivery and seeking only to change private providers' behavior on the margin. The po- tential downside from failed efforts, therefore, consists mainly in not achieving such changes-leaving the status quo in force. Conversion is a riskier strategy, since existing service-delivery ar- rangements are interrupted as operations are transferred to private hands. If efforts go awry quality and even access to certain services 56 o Private Participation in Health Sernces may suffer. Such efforts are most risky when key elements of the en- abling framework are missing (such as public funding and contract- ing, or health service regulation). The way for-ward. The evidence on the effectiveness of instruments for working with the private sector is relatively sparse, but the evi- dence on the folly of ignoring private health care providers is not. It is clear that the way forward in virtually all developing countries must include enhanced interaction with private providers. Although recognition of this fact is widespread, most attempts to operational- ize such interaction are random and ad hoc-an occasional contract for cleaning a public hospital, the odd delivery of vaccines to a pri- vate clinic. These efforts are often undermined by the lack of infor- mation about the private sector, and hence are undertaken in a rela- tive vacuum. Development of public policy toward private health care pro- viders, just like sector policy in general, should be done comprehen- sively and strategically. This will require government policymakers to greatly increase their knowledge of and interaction with the pr-,- vate sector. The private sector is, after all, their partner in protect- ing the health of the population. Although it is wise to move forward cautiously in implementing new strategies, in terms of enhancing information gathering and in- teraction with the private sector, the approach should be anything but cautious. In most developing countries such an information- gathering exercise will reveal the extent to which the private sector is central to many critical health sector objectives. The subsequent chapters of this handbook can help policymakers move forward from this point. Chapter 2 provides guidance on how to assess the private health sector in a developing-country context. Chapters 3 and 4 review the basic principles and processes on con- tracting for and regulation of health services, respectively. Several other instruments for working with the private sector are discussed in chapter 4 (such as training and franchising). It is anticipated that the World Bank will publish stand-alone pieces on several of the more important instruments at a later date. Introduction to Private Participation in Health Services * 57 Appendix 1.A Health Services Conversion Transactions. The transaction is the mechanism used to turn over publicly operated services, facilities, or public employees to private employment, management, or ownership. In health services com- mon transactions can be categorized as follows. Tran7saction categori-es * Conversion of existing facility or operations. When a government decides to turn over public facilities or activities to private op- erators it may use a range of options (Table 1.4). It may sell out- right, or lease the facility to an investor or nonprofit orga- nization. Alternatively, more incremental methods may bring in a private party to operate the facility under a management con- tract, which allows the government closer control over the op- erations and can be structured to offer stronger or weaker in- centives for profitability. Facility staff may remain in public employment (box 1.5). Another alternative to bring efficiency gains while maintaining public sector management is to compel facility managers to contract out (and establish competition) for auxillary services (such as laundry, food, or billing services). Sometimes primary care operations are transferred to pri- vate hands by converting publicly employed doctors to self- employed status, under contract to the government payer or social insurance organization. This form of conversion is com- mon in Central Europe, where many countries have moved from a vertically integrated Semashko (Soviet) model to a social insurance system with mixed delivery (box 1.8). * Existing facility that reqzizr-es capital investmnent for expansion or r ehabilitation. If the government is to attract private funds to support significant expansion or rehabilitation of health fa- cilities, investors need a reasonable amount of control over the facility and predictable access to revenue streams for a de- fined period. Commonly, the government payer defines the bulk of the market-and hence, this type of transaction hinges VabDa IIA3 Transaction Methods for Conversion of Health Facilities or Operations TYPE OF TRANSACTION DEFINfTION EXAMPLES (COUNTRIES, STATES) Conversion of existing Sale Private firm buys facility, operates Australia, Germany, Sweden facility/operations under a service contract (Stockholm) Lease Government leases a facility to Australian states a private organization, which operates it under a service contract Management contract Private firm is contracted to main- S Africa, Malawi, Kenya, many tain and operate a government- countries in Latin America and the owned facility; government pays Caribbean, Saudi Arabia, firm a management fee Australia, Mongolia, United States Outsourcing of Publicly owned facilities establish Everywhere auxiliary services contract with privote service providers to deliver auxiliary services (such as laundry, food services, billing, collection). Service/operation Publicly employed primary care Croatia, Macedonia, Slovenia, Conversion-individual doctors are converted to self- Poland, Hungary, Estonia, Brazil, contracting-primary care employment and contracted by Czech Republic, Slovakia, Sweden state/insurance organization for services Service/operation District government contracts with S Africa conversion-individual district surgeons contracting-surgeons Service/operation Sao Paulo conversion-integrated care Existing facility-requiring Lease-build-operate Private firm leases facility from capital investment for government, operates it under a expansion or rehabilitation concession, expands and/or rehabilitates it. Wrap-around addition Private firm expands a government- owned facility, owns only the expansion, operates entire facility Construction of new Build-transfer-operate Private firm finances and builds Australia, United Kingdom facility or capacity new facility, transfers to public ownership, then operates (20-40 yrs) Build-operate-transfer Same as above (build-transfer- Australia, United Kingdom operate), but facility is transferred after 20 to 40 yrs Co-location Private firm develops an additional Australia, United States unit adjacent to or within a government facility, owns only the expansion. (Table continues on the following page) TYPE OF TRANSACTION D;INITION EXAMPLES (COJNTRIES, STATES) New operations to be Contracting for services in Government initiates contracting for Guatemala, Cambodia, Haiti undertaken new areas health services in areas not initially served by public facilities. Conversion to nonprofit Conversion to new Creation of and transfer of facility status nonprofit to nonprofit organization cD Sale or transfer to Transfer to existing nonprofit U S, Venezuela nonprofit organization organization Facility ceases public Sale to private service Facility is sold to be operated in Georgia (Former Soviet Republic), services provider delivering privately funded services Czech Republic (acute, long-term care, specialty care) Sale-nonhealth facility Facility is sold to be used for non-health-related activities Introduction to Private Participation in Health Services 61 Box 1.8 Primary Care Conversion in Central Europe Most Central European countries have abandoned their centrally planned "Semashko" type health systems and started to develop the institLtional arrangements of a "so- cial insurance" or "Bismarckian" system (Preker, Jakab, and Schneider 2002). The newly created social insurance agen- cies are increasingly tying reimbursement to outputs. This change has made it possible to establish contracts with pri- vate providers. Hence, in several countries-including Croatia, Estonia, Poland, Germany (eastem part), Hungary, and Slovenia- social insurance contracting has allowed primary care con- version to proceed without threatening people's access to medical care. Soutrce: Wasem 1997; Kruuda 2001. on the service contracting arrangements (box 1.9). Examples of such transactions include lease-build-operate and wrap-around arrangements. 1 6 Construction of 7new facility or capacity. To benefit from private sector advantages in building a new facility or adding capacity in an existing one, governments use a range of transactions. 1. Under a build-transfer-operate contract the facility is pri- vately built and the public sector takes ownership upon completion. In other cases, the private sector builds, and then operates, the facility for a period of time-then at the end of the period the facility is transferred to public ownership, a build-operate-transfer contract. 2. To complement existing publicly run health services, some health policymakers have undertaken co-location arrange- 62 * Private Participation in Health Services Box 1.9 Ensuring Access to Privatized "Safety-Net' Hospitals: Nonprofit Conversion in the United States Many U.S. community hospitals have been privatized in the past 15 years. Conversion of these facilities has been espe- cially complicated due to some unique aspects of the U.S. system. Unlike other developed countries, the United States lacks universal health insurance coverage, and an estimated 40 million Americans are uninsured. The large network of community-owned hospitals has traditionally functioned as a safety net for uninsured individuals. Therefore, it was believed that access for these people was threatened by conversion of these facilities, assuming they would begin to concentrate on the "bottom line." Communities sought to deal with the issue through different mechanisms. Some set up or expanded funding channels to reimburse providers for uncompensated care. Others sought to maintain access via channeling patients to other facilities. Some communities chose to restrict the pool of potential operators to nonprofit organizations-believing that their commitment to serving underprivileged patients would alleviate any access prob- lems. Evaluation has led to a generally positive conclusion about the impact of these reforms-with no clear distinc- tions according to the method of ensuring access. Source: ESRI 1999. ments (Bloom 2000). This transaction entails the estab- lishment of a privately owned health operation on or near the campus of a public facility (usually a hospital). The co- located facility may be held by an investor-owned (for- profit) or nonprofit entity. It may provide comprehensive or selected services. It may be physically located on prem- Introduction to Private Participation in Health Services * 63 ises leased from the public hospital, or it may occupy a floor, or a separate pavilion, in the public facility. Co-loca- tion refers strictly to the physical proximity of the two fa- cilities, not to any particular form of ownership or con- tractual relationship. In Australia, where wide coverage of private insurance expands the demand for private hospital services, this type of arrangement is becoming common. * New operations to be undertaken. In some situations health poli- cymakers may decide to expand operation of publicly funded services into new areas or product lines by contracting for these services with private providers. While some conversion may be involved, this strategy is essentially the same as "growing" the private sector, as discussed above (p. 35). * Conzversion to nonprofit statzus. Occasionally, policymakers will de- termine a preference for service delivery by nonprofit organiza- tions-and hence will transfer public facilities or services to ei- ther existing or a new nonprofit provider organization. * Facility ceases public services. When a government identifies ex- cess capacity in the public system it may decide to undertake true divestiture, putting into private hands not just ownership but also responsibilities for providing and funding services. Such a transfer can be done with or without conditions on the subsequent use of the facility-or that it continues as a health facility or not. Such conversion is undertaken in accordance with health service planning analysis-to ensure that there is, in fact, excess capacity, and to identify where publicly supported services may cease without harm to the nearby population. This type of di- vestiture is sometimes used inappropriately to reduce govern- ment responsibilities for critical services, in essence constitut- ing budget-driven downsizing rather than changes to improve the health system's functioning. Technically, this type of transaction is much simpler-since the conversion is in essence a straightforward transaction-with 64 0 Private Participation in Health Services none of the complications related to ensuring the continued de- livery of important services. One aspect of these conversions can be much more difficult-labor relations. In all the transactions discussed above, the government's purchasing plans give it - great deal of leverage to smooth any labor adjustments the con- version may entail. If the government is no longer buying ser- vices from the facility, treatment of the converted facility's staff will be left completely to the new operator's discretion. The conversion method selected will depend on the objectives sought, the level of profitability of the existing facility or operations, availability of interested providers or management companies, speci- ficity or "buyability" of services, infrastructure and up-front capital requirements, and the risk each party can and will take on. Transaction issues. In addition to determ-ining what the objective is for the conversion and which type of transaction is appropriate, there are additional transaction-related issues that must be dealt with. • Permissible buyers and investors. Government must decide who is permitted to participate in conversion of health care services. !t must develop criteria to ensure that capable, financially sound op- erators of health services are involved. It must also decide whether to permit all participants, regardless of their legal form, or to re- strict participation to certain categories (nonprofit only versus open, domestic bidders only versus open). ° Unbundling of "nonbuyable" services. Services for which the govern- ment will remain responsible may have to be separated from those the converted organization will deliver. For instance, it may make more sense to separate medical education and research from health care delivery services, as these are significantly more diffi- cult to contract for. Contracting-financing arrantgements. Just as governments can use con- tracting to involve existing private providers in ensuring service de- livery objectives are met, they can also use contracting to ensure a Introduction to Private Participation in Health Services * 65 converted provider continues to deliver services to publicly funded patients. Since most conversions take place to improve quality and availability of public services, rather than to end those services, changes in the mechanisms to allocate funds to the providers are an integral part of conversion reforms. Reforms that convert health care facilities are umique, to the de- gree that the transaction must be directly linked to the new con- tracting arrangements. This is true because the new operator will in- evitably rely on the government payer for a substantial portion of revenue-so that the provisions for determining the volume of ser- vices to be purchased as well as the price-setting mechanism will di- rectly influence the operation's profitability and sustainability. The service contract is thus as important as the structure of the transac- tion for the prospective private operator. In designing the service contract government must seek to "get a good deal," but also must take into account the sustainability of the operation. For the operations of the converted facility to be sustain- able the funding arrangements must ensure that everything is paid for or otherwise provided for in the transaction contract or regula- tory framework. For example, if certain services are currently being cross-subsidized, incremental funding will likely be required to en- sure their continued availability-since facilities operating in a com- petitive market usually cannot sustain cross-subsidization (patients who are net subsidizers will shift to using facilities where they can avoid such subsidization and pay lower prices). Payments must at least cover costs. (NGOs may be able to deliver certain services at a discount, but eventually they, too, must ensure operational viability; at most, contributions to nonprofits will support capital costs, not operating costs.) To attract responsible operators to participate in the conversion the funding arrangements must be understood and believable. That means the government's service and expenditure commitments must be sustainable in its current fiscal environment. Otherwise, a re- sponsible operator will not be interested, fearing unpredictable rev- enue shortfalls. If the government or relevant agency is known to be an unreliable payer, as is often the case in developing countries, con- 66 0 Private Participation in Hlealth Services version will require some sort of guarantee for the revenues associ - ated with the service contract. Regulationz. When conversion takes place regulation of health ser- vices and facilities must often be expanded. After conversion the government will likely purchase many services, which witl give them influence by means of their contracting and monitoring processes. However, some critical services may not be contracted for, and so their availability may have to be otherwise ensured (such as through requirements to continue to operate money-losing core services such as emergency services and trauma units, burn units, or neonatal in- tensive care units). In countries where the private sector does not op- erate these services, this may entail substantial enhancement of reg- ulations and enforcement capacity, especially with regard to service quality, access, and cost contaimnent. Market structure. Many government-run facilities are geographic monopolies. While under direct government control exploitative monopoly behavior is constrained. After conversion, monopoly power could well be used to the detriment of the patients and the government payers. Therefore, in selecting and designing transac- tions, government must plan to reduce highly concentrated market power, where possible. In many cases, however, prospective in- vestors have demanded long "exclusive" service contract agreements (up to 20 years), often endowing the operator with a geographic mo- nopoly. More recent conversions have sought to reduce the length of this commitment. Where monopoly power is created, or main- tained, governments have had to take steps to create at least compe-- tition "for the market," or contestability.17 1. Throughout this paper we use the term nonprofit organization and nongovernmental organization (NGO) interchangeably to refer to formal Introduction to Private Participation in Health Services * 67 organizations that have corporate objectives concerned with health service aims concerning groups outside the organization, and that do not make a profit and are outside the direct control of government. 2. Equity in access problems are better addressed through financing mechanisms such as subsidies, or insurance coverage for the poor, than through construction and operation of public clinics. For more detail see chapter 5, "Who Pays for Health Systems," in VvHO 2000. 3. WHO 2000, chapter 4. 4. All three of these strategies are sometimes referred to as "public- private partnerships." As a result, thls term is too vague to be useful in dis- cussing policy options. See box 1.2, page 20, for further discussion. 5. Much regulation of health services is done indirecdy via regulation of health insurance. However, this paper covers only direct regulation of health services. 6. Consmuner quality refers to meeting patients' expectations and wishes about how they are treated. 7. The International Alliance of Patients' Organizations is a good re- source for information on these initiatives (http://www.iapo-pts.org.uk/). 8. Janani, personal communication from K. Gopalakrishnan 2000, quoted in Smith and others 2001, p. 56. 9. Marsh, quoted in Smith and others 2001. 10. These results are more directly tied to competition than conversion- although conversion may be mstrumental in establishing competition. 11. There are, however, many instances of service delivery conversion, even in the presence of monopoly power. In these cases, alternative mech- anisms are used to ensure efficient operation (such as benchmarking or other performance assessment, or concessions). 12. Poor people often experience high under-five mortality partly due to poor access to health services (Gwatkin and others 2000). 13. An externality exists when the use of a good or service by one actor affects other actors. An example of a positive externality is immumnzation, whereas an example of a negative externality is pollution. 68 o Private Participation in Health Services 14. See Hudelsohn 1998 for a concise review of nine experiences with governments using outreach to private practitioners to improve maternal and child health services. 15. A political mapping exercise should be considered to design a strat- egy to manage implementation that will address potential opposition (Reich 1996). 16. A wrap-around transaction takes place when a private firm expands a government-owned facility, owning only the expansion but operating the entire facility. 17. Contestability may be established by tendering the right to be the service provider every 10 years, for example, or via management contracts. Axelsson, H. 2002. "Private Sector Participation in Child Health: Learning from World Bank projects, 1993-2002." Unpublished manuscript. Bennett, S., B. McPake, and A. Mills. 1997. Pi-vate Health Providers in De- veloping Countries: Servinig the Public Initerest? Zed Books: London. Better Regulation Taskforce. 2000. U.K. Cabinet Office. http//wwwN. cabinet-office .gov.uk/regulationtaskforce.htm Blair, S. 1998. Presentation on Private Partzcipatimo in Hospitals, made at the World Bank Private Sector Development Forum, May 1998, Balti- more, Md. Bloom, A. 2000. "Case Study: Planning a Public-Private Hospital Co- location in Queensland." Unpublished manuscript. Broomberg, J., P. Masobe, and A. Mills. 1997. "To Purchase or Provide? The Relative Efficiency of Contracting Out versus Direct Public Pro- vision of lhospital Services in South Africa." In S. Bennett, B. Mc- Pake, and A. Mills, eds., Private Health Providers in Developtilg Counl- tries, chapter 13. London: Zed Books. Chakraborty, S., A. D'Souza, and R. Northrup. 2000. "Improving Private Practitioner Care of Sick Children Testing New Approaches in Rural Bihar." Health Policy and Planning 15 (4): 400-07. Introduction to Private Participation in Health Services * 69 De Jong, J. 1991. "Nongovernmental Organizations and Health Delivery in Sub-Saharan Africa." Population and HLuman Resources Depart- ment, World Bank, Washington, D.C. DeRoeck, D. 1998. Making Health-Sector Nongovernmental Orgamzations More Sustainable: A Review of NGO and Donor Efforts. Special Ini- natives Report 14. Bethesda, Md.: Abt Associates, Inc., Partnerships for Health Reform Project. http://www.phrproject.com/publicat/si/ sirl4ab.htrn Domberger, S. 1999. The Contracting Organization. A Strategic Guide to Out- sourcing. New York: Oxford University Press. Donahue, J. D. 1989. The Privatization Decision: Public Ends, Private Means. New York: Basic Books. ESRI (Economic and Social Research Institute). 1999. Privatization of Public Hospitals. Prepared for the Henry J. Kaiser Family Foundation. Pub- lished on-line at: http //www.kff.org/content/archive/1450/private_r. pdf Filmer, D., J. Hammer, and L. Pritchett. 1998. Health Policy in Poor Coun- tries Weak Links. Policy Research Working Paper #1874. Washing- ton, D.C.: World Bank. GAO (General Accounting Office). 1998. Social Services Privatization. Re- port GAO/HEHS-98-6. Washington, D.C. Gilson, L., P. Dave, and S. Mohammed. 1994. "The Potential of Health Sector Nongovernmental Organizations: Policy Options." Health Pol- icy and Planning 9 (1): 14-24. Green, A., and A. Matthias. 1997. Nongover-nmental Organizations and Health in Developing Countries. London: Macmillan Press UK. Griffin, C. C. 1989. Strengtheniniig Health Services in Developing Counttnes through the Private Secto7- Discussion Paper Number 4. International Finance Corporation, Washington, D.C. Gwatkin, D. R., S. Rustein, K. Johnson, R. P. Pande, and A. Wagstaff. 2000. "Socioeconomic Differences in Health, Nutrition, and Population in India." HNP/Poverty Thematic Group, World Bank, Washington, D.C. Available electronically at: http://www.worldbank.org/poverty/ healthWdata/index.htm 70 o Private Participation in Health Services Hanson, K., and P. Berman. 1998. "Private Health Care Provision in De- veloping Countries: A Preliminary Analysis of Levels and Composi- tions." Health Polcy and Planning 13 (3): 195-211. Hudelsohn, P. 1998. Possible Roles for Nongoveirnm7lenital Health Providers 7n IMCI. Prepared for the World Health Organization, Department of Child and Adolescent Health, Geneva. Unpublished. Jeon, A., S. Kleefield, W Leonardson, J. Norris, and C. Brintnall. 1998. "Health Reform in the Municipality of Sao Paulo, Brazil: Public Finance and Private Provision." Harvard Medical International. Unpublished. Kafle K. K., R. P. Gartoulla, Y. M. Pradhan, A. D. Shresta, S. B. Karkcc, and J. B. Quick. 1992. "Drug Retailer Training: Experiences from Nepal." Social Science and Mvledicine 35 (8): 1015-25. Kafle, K. K., J. Madden, A. Shrestha, S. Karkee, P. L. Das, Y. Pradhan, and J. Quick. 1996. "Can Licensed Drug Scllers Contribute to Safe Motherhood? A Survey of the Treatmnent of Pregnancy-Related Ane- mia in Nepal." Social Science and Medicine 42 (11): 1577-88. Kessides, C. 1993. "Institutional Options for the Provision of Infrastruc- ture." Discussion Paper 212. World Bank, Washington, D.C. Kruuda, R. 2001. "An Analysis of the Privatization of Primary Care Ser- vices in Estonia and Croatia." Unpublished Masters Thesis, MPHI, Boston Umversity. Lewis, M. 2002. "Inforrnal Health Payments in Eastern Europe and Cen- tral Asia." In E. Mossalios and A. Maresso, eds., Fundin7g Health Care: Options in Europe. Buckingham, U.K: Open University Press. Lyon, K. 2000. "And They Said It Couldn't Be Done." In Bloom, A., ed., 2000, Health Reformni in Australia and New Zealand. South Australia: Oxford University Press, Chapter 15. Marek, T., I. Diallo, B. Ndiaye, and J. Rakostosalama. 1999. "Successful Contracting of Prevention Services: Fighting Malnutrition in Sene- gal and Madagascar." Health Policy and Planninjg Dec. 14 (4): 382-9. Marsh, V 1999. Quoted in Smith, E., R. Brugha, and A. Zwi. 2001. Work- ing with Pnvate Sector Providers for Better Health Care: An Introdiuctoiy Guide. London: Department for International Development (United Kingdom). Page 42. Introduction to Private Participation in Health Services * 71 McPake, B., and E. Banda. 1994. "Contracting Out of Health Services in Developing Countries." Health Polhcy and Planninzg 9 (1): 25-30. Melia, R. 1997. "Public Profits from Private Contracts. A Case Study in Human Services. Pioneer Institute White Paper. Boston: Pioneer Institute. Musgrove, P. 1996. "Public and Private Roles in Health: Theory and Fi- nancing Patterns." Human Development Department, World Bank, Washington, D.C. New South Wales Auditor-General. 1996. NSW Auditor-General's Report for 1996. Vol. 1, Appendix 4 (Infrastructure Projects-Port Macquarie Base Hospital). Sydney: NSW Government. Nieves, I., G. La Forgia, and J. Ribera. 2000. "Guatemala: Large-Scale Government Contracting of NGO's to Extend Basic Health Services to Poor Populations in Guatemala." LCSHD Department, World Bank, Washington, D.C. Unpublished manuscript. Northrup, R. S. 1997. "The Private Sector: Critical Partners in Improving Child Health and Survival." BASICS. BASICS Quarterly Technical Newsletter 4: 1-9. Ochwo, M. 2000. Clear-7: Prepackaged Treatment Kit for Urethritis Presen- tation at "Making the Most of the Private Sector." A Workshop Or- ganized on behalf of the Department for International Development (Urnted Kmgdom), May 11-12, London. Pathenia, V 1998. "The Role of the Private Health Sector in Tuberculosis Control and Feasible Intervention Options." Health, Nutrition and Population Unit; and East Asia and Pacific Region, World Bank, Washington, D.C. Preker, A. S., A. Harding, and N. Girishankar. 2000. "The Economics of Private Participation in Health Care: New Insights from Institutional Economics." In A. Ron and X. Scheil-Adlung, eds., Recent Health Pol- icy Innovations in Social Secuirity. Geneva: International Social Security Association. Preker, A. S., M. Jakab, and M. Schneider. Forthcoming. "Health Financ- ing Reform in Central and Eastern Europe and the Former Soviet Union." In E. Mossalios and A. Maresso, eds., Funding Health Care: Options in Europe. Buckingham, U.K.: Open University Press. 72 o Private Participation in Health Services Preker, A. S., M. Jakab, C. Baeza, and J. Langenbrunner. 2000. "RAP Con- cept Note: Resource Allocation and Purchasing Arrangements that Benefit the Poor and Excluded Groups." World Bank, Washington, D.C. Available on-line at: http://wbln00l8.worldbank.org/IIDNet/ HDdocs.nsf Reich, M. R. 1996. "Applied Political Analysis for Health Policy Reform." Current Issues in Public Health 2 186-91. . 2000. "Commentary: Public-Private Partnerships for Public Health." Nature Medicine 6 (6): 617-20. Ronde, J. E., and H. Viswanathan. 1995. The Rural Private Practitioner New Delhi: Oxford University Press. Rosen, J. E. 2000. Contractingfor Reproductive Health Care: A Guitde. Health, Nutrition and Population Publications Series. World Bank, Wash- ington, D.C. Ross-Degnan, D., S. Soumerai,J. Bates, P. Goel,J. Makhulo, and J. Sutoto. 1993. "Improving Diarrhea Treatment Practices in Kenya and in- donesia." Presented at the Asian Conference on Clinical Pharmacol- ogy and Therapeutics, Yogyakarta, October 31-November 4. Un- published. Quoted in Kafle, K. K,J. Madden, A. Shrestha, S. Karkee, P. L. Das, Y Pradhan, and J. Quick. 1996. "Can Licensed Drug Sell- ers Contribute to Safe Motherhood? A Survey of the Treatment of Pregnancy-Related Anemia in Nepal." Social Science anid Medicuize 42 (11): 1577-88. Salamon, L. M., and H. K. Anheier. 1996. The Emerginzg Nonprofit Secto,: Manchester: Manchester University Press. Sandiford, P., A. Gorter, and M. Salvetto. 2002. Vouchers for Health: Public Polic for the Private Secto7: World Bank, Washmngton, D.C. Available online at http://rru.worldbank.org/viewpoint/HTMLNOTES/243/ 243 summary.html. Savas, E. S. 2000. Pnvatization and Public-Private Parti-erships. New York: Chatham House. Savedoff, W, and K. Slack. 2000. Public Purchaser-Private Provider- Coltract- ing for Health Services: Examples for Latint America anld the Caribbean. Sustainable Development Department Publication. Washington, D.C.: Introduction to Private Participation in Health Services * 73 Inter-American Development Bank. URL: http://www.iadb.org/sds/ doc/slack.pdf. Simon, K. 1995. "Privatization of Social and Cultural Services in Central and Eastern Europe: Comparative Experiences." Paper presented at A Recipe for Effecting Institutional Changes to Achieve Privauza- tion, Conference at Boston University, April 26. Smith, E., R. Brugha, and A. Zwi. 2001. Working with Private Sector Pro- viders for Better Health Care: An Int7roducto7y Guide. London: Depart- ment for International Development (United Kingdom). Sommers, A. S. 1999. "The Structure and Function of Patient Organiza- tons in the Netherlands: Lessons for the American Health Care Sys- tem." AHSR Abstract. www.ahsr.org.1999/abstracts/sommers2/htm Soumerai, S. B., T. J. McLaughlin, and J. Avorn. 1989. "Improving Drug Prescribing in Primary Care: A Critical Analysis of the Experimental Literature." Millbank Quarterly 67: 268-317. Stone, A. H. 1998. "Private Sector Assessments Best Practice Note." On- line Intranet Text. World Bank, Washington, D.C. URL: http//afr. worldbank.org/aft2/pvtsect/psa.htm. Tawfik, Y. Forthcoming. "Utilizing the Potential of Formal and Informal Private Practitioners in Child Survival: Situation Analysis and Sum- mary of Promising Interventions." Support for Analysis and Research in Africa Project and World Bank HINP Series. World Bank, Wash- ington, D.C. Uplekar, M., V Pathenia, and M. Raviglione. 2001. Involving Private Prac- titioners in Tuberculosis Control: Issues, Interventions, and Emerg- ing Policy Framework. Geneva: World Health Organization. URL http://www.who.int/gtb/publications/privatepractitioners/index.htm. Wagstaff, A., N. Watanabe, and E. van Doorslaer. 2001. Impoverishment, In- sutrance, and Health Care Payments. World Bank, Health, Nutrition, and Population Network, Washington, D.C. Walt, G. 1998."Implementing Health Care Reform: A Framework for Dis- cussion." In R. Saltman, J. Figueras, and C. Satellandes, eds., Critical Challengesfor Health Care Reform in Eur7-ope Buckingham, U.K.: Open University Press. 74 o Private Participation in Health Services Wasem, J. 1997. "Health Care Reform in the Federal Republic of Ger- many: The New and Old Lander." In Health Care Reform in Gerniany. Waters, H., L. Hatt, and H. Axelsson. 2002. Working with the Private Sector for Child Health. Prepared for the USAID-sponsored SARA Project (Academy for Education Development), the World Health Organiza- tion, and the World Bank. Washington, D.C.: World Bank, Health, Nutrition, and Population Network. URL: http://wwwl.worldbank. org/hnp/pub-discussion.asp. WHO (World Health Organization). 1993. Gutide for Imiproving Diarheae Treatment Practices of Pharmtacists and Licensed Sellers. Geneva. . 2000. World Health Report 2000. Health Systemis: Imlprovinzg Peifor- mance. Geneva. URL: http://vww.who.int/health-systems-performance/ whr2000.htrn. Williamson, 0. 1991. "Comparative Economic Organization: The Analy- sis of Discrete Structural Alternatives." Administrative Scienzce Qaa,7 terly 36 (June): 269-96. World Bank. 1993. World Development Report 1993. Washington, D.C. .1997a. handbook on Good Practicesfo- Laws Relatizg to Non-Goverin- mental Organizations. Prepared for the World Bank by the Interna- tional Center for Non-Profit Law. World Bank. Available on-line at: http://www.icnl.org/handbook/ . 1997b. World Developrizemt Report 1997: The State inz a Changiing World. Washington, D.C./New York: World Bank/Oxford University Press. 2001 a. India, Raising the Sights: BetterHealth Systems for Indis Poor: Health, Nutrition, Population Sector Umt, India, South Asia Region. - . 22001b. World Development Indicators 2001 (print edition). Washing- ton, D.C.: World Bank. Zuckerman, E., and E. de Kadt. 1997. The Pahlic-Private Mix in Social Ser- vices: Health Care and Educiattion in Chile, Costa Rica anid Venezuela. Washington, D.C.: Inter-American Development Bank; and Social Agenda Policy Group. CHAPTER 2 Conducting a Private Health Sector Assessment Sarbani Chakraborty and April Harding This handbook is intended to support developing-country policy- makers seeking to make changes in health policies and administra- tion that will enhance the contribution of private providers to sec- toral objectives. Among the largest barriers to formulating such policies is the dearth of relevant information available to these poli- cymakers. Therefore, this chapter provides general guidelines for collecting and evaluating information about the private health sector or a segment of it (also called the private health sector assessment, or PHSA). These guidelines are intended to help health policymakers, in collaboration with other key stakeholders, to understand the exist- ing configuration of the private health sector in their countries, and to identify policies that will improve interactions between the public and private sectors in order to enhance sector performance generally or in specific areas.' In conjunction with chapters 3 and 4 on con- tracting and regulation, guidance is also provided on which instru- ments to use to engage which private entities and toward which aims. Additional instrument chapters will subsequently be developed cov- ering additional strategies. Interested readers are encouraged to con- sult the World Bank's Web site for health, nutrition, and population for new materials in these areas. Since selecting and implementing strategies to work with the pri- vate health sector sometimes implies a reconfiguration of public and 75 76 o Prnvate Participation in Health Services private roles, this chapter begins with a brief review of the main cO_i- ceptual foundations regarding the role of the state in the health sec- tor. First it describes perspectives from public finance and institu- tional economics that are often applied to determine or rationalize the structure of a government's activities in the health sector. Next, the broader literature and the empirical evidence are reviewed, to identify areas in which the private sector's contribution to health sec- tor objectives can be increased. Third, applying this framework, thie chapter guides users in conducting the following components of an assessment: o Collecting information for a PHISA based on primary and sec- ondary data sources o Using the framework to analyze the data to understand the struc- ture and function of private health care markets and to evaluate the current interaction between the public and private sectors o Using this analysis to develop effective strategies for increasing the private sector's contribution to health objectives o Working with key stakeholders to promote communication be- tween public and private stakeholders, and to generate needed "buy-in" on policy recommendations. These guidelines may be used to put together a comprehensive report on the private health sector. However, just like any sector re- port the assessment can be structured to target a specific issue (child mortality) or a specific subsector (hospitals). C ncepf d Furamaw r k k § b -- -h in @lmdlh swiVc A quick scan of the world's health systems reveals a huge amount of variation in the role of government compared with markets. 'This balance is not static, but rather evolves over time in response to di- rected policies as well as to underlying, spontaneous forces. In a sim- Conducting a Private Health Sector Assessment * 77 ilar way, health systems vary widely in the balance of public versus private health service provision. It is widely agreed, and supported by the principles of public economics, that government should fund or ensure funding for a wide range of services. Public or collective ex- penditure is merited based on the existence of market failures, or more simply, based on the belief that certain goods and services should not be allocated based on the ability to pay.2 There is no such prevailing wisdom on the right "mix" of service providers, however. Absent a "technical" answer to this question, govermunents through- out the world have developed their own health service delivery ar- rangements, reflecting their history, their cultural and social values, and the distribution of influence emerging from their political sys- tems. Some governments rely heavily on public provision as the "im- strument of choice" to address market failures and preferences re- lated to distribution. In these integrated systems, private provision of goods and services plays a marginal role. On the other hand, some governments rely on financing arrangements, regulation, and other such instruments to create a framework within which public and pri- vate providers operate to achieve critical sector goals. Among developed countries there are highly performing health systems of both types. Among developing countries, unfortunately, we often observe a dysfunctional amalgamation: a government heav- ily focused on public provision and extensive private delivery and out-of-pocket (nonpublic, nonpooled) expenditure on health goods and services. Absent both an adequate public delivery system and the complementary instruments of financing arrangements, regu- lation, and the like, these countries' health systems simply do not generate the quality, efficiency, or distribution sought by patients or policymakers. Using Financing Arrangements to Guide Provision As noted above, financing is one of the instruments that govern- ments may use to correct market failures in the health sector. A range of criteria has been developed, based on public finance and cost-effectiveness, to aid in prioritizing items for public expenditure 78 ° Private Participation in I lealth Services (Musgrove 1999). Economic factors are combined with other crite- ria to determine how public funds should be allocated for health. The following is a summary of resource-allocation criteria that are based on generally accepted principles for allocation of public re- sources in health: o Public money should favor the poor and the sick (that is, should have vertical and horizontal equity). o Public money is the principal financing source for public goods and interventions, which private markets will not offer because of low private demand. o Public money is also the principal source of financing for partly public goods with large externalities (that is, there is spillover of benefits to nonusers) since private demand is inadequate for these goods and services. o The above objectives should be achieved before consideration is given to financing other goods and services, regardless of the providers or producers of those goods and services. Public expenditure is only one instrument for addressing market failures in the health sector. Virtually all countries have regulations and regulatory processes to address problems related to quality, effi- ciency, cost containment, and so on. Mlany governments also support dissemination of information to help patients and private payers make better choices. Such practices can address market failures di- rectly, through improving the health-seeking behavior of patients, or indirectly, through guiding demand to higher quality or more effi- cient providers. Hence, the criteria listed above apply to allocating scarce administrative capacity as well as to allocating public funds. Altering the Statzus Quo Governments have a range of alternative instruments to ensure pro- vision of priority goods and services, including information disclo- sure, regulation, and contracting.3 Selecting which instrument to Conducting a Private Health Sector Assessment * 79 use is complex, and is burdened by connections to social values; al- tering these arrangements is politically and administratively costdy. As a result such calculations are often not made, engendering ad hoc arrangements for fulfilling governments' responsibilities in the health sector. While policy recommendations should never be de- veloped without reference to existing institutions and political con- straints, the instruments to be used to pursue health sector objec- tives can and should be considered in a rational and strategic way. Such analysis is at the heart of efforts to improve the interaction with the private health sector. While public economics refers only to allocation of public funds, institutional economics provides some guidance on the choice of in- strument to reduce market failures. Synthesizing principles and evi- dence from this field, Preker, Harding, and Girishankar (1999) sug- gest that the poor incentives and information problems that are frequently associated with public provision justify a thorough con- sideration of alternative instruments for pursuing policy objectives and addressing market failures. This reasoning underlies pursuit of alternative strategies, such as public funding for purchasing of pri- vately produced health goods and services, while public production remains concentrated on health goods and services that are difficult to buy. Following this approach the choice of policy instrument is determined on a case-by-case basis, grounded in the extent to which the goods and services are "buyable."4 The characteristics of goods and services that determine their buyability are their intrinsic levels of contestability, information asymmetry, and measurability, as de- fined below. * Contestability exists when firms can enter the market freely, with- out any resistance from other firms, and exit without losing any of their investments. Low barriers to market entry and exit generally characterize contestable goods. In contrast, noncontestable goods have high barriers to entry such as sunk costs, monopoly market power, geographic advantages, and asset specificity. Generally, primary care-including the delivery of priority services related to effective treatment of communicable diseases and childhood illnesses-has high contestability. In contrast, the provision of so- 80 * Private Participation in Health Services phisticated hospital services is less contestable, since entry and exit from the market can be cumbersome. * Information asymmetry is the degree to which users, beneficia- ries, or contracting agencies are unable to assess the quality of a good or service. Information asymmetry is a particularly difficult problem in the health sector, and is applicable to varying degrees for most health goods and services. * Measurability is the precision with which inputs, processes, out- puts, and outcomes of given goods and services can be measured. In general, the outputs and outcomes of health goods and services are hard to measure, although goods are usually more measurable than services. Health goods and services can be categorized according to their combined levels of contestability and measurability (table 2.1).5 This table plots a wide range of goods and services in the health sector. Table 2.1 The Nature of Health Care Goods Based on Institutional Economics HIGH MEDIUM LOW CONTESTABILITY CONTESTABILllY CONTESTABILITY High Type I Type 11 Type Illi measurability * Retail of * Wholesale * Production * Drugs * Drugs * Pharmaceuticals * Medical * Medical * High technology supplies supplies * Other goods * Other goods Medium Type IV Type V Type VI measurability * Routine * Management * High-tech diagnostics services diagnostics * Hospital support * Training * Research services Low Type VIl Type VIII Type IX measurability * Ambulatory * General hospitals * Policymaking clinical care * Public health * Monitoring and * Medical services evaluation * Nursing * Health insurance * Dental Conducting a Private Health Sector Assessment * 81 A number of goods and services, such as retail medical supplies and pharmaceuticals, are relatively contestable and measurable, en- abling governments to purchase needed items. Not surprisingly, in the vast majority of countries these goods and services are sold by private vendors. Opposite these easy-to-buy goods and services in our table we find a few health goods and services with both low measurability and low contestability, such as policymaking; and core tasks related to mon- itoring and evaluation. The inherent difficulty associated with buying such services justifies reliance on direct public provision, which (again) is widely observed in reality. Unfortunately, in the health sec- tor most goods and services fall somewhere in between in terms of "buyability." Goods such as wholesale pharmaceuticals and medical equipment, and support services such as catering, cleaning, and facil- ities maintenance, are relatively straightforward to buy. Again, this buyability ranking is borne out by widespread private production and delivery. Even less buyable goods and services, such as pharmaceuti- cal production and ambulatory care, are, as a rule, privately delivered, again with suitable contracts and regulation playing an important role. Without getting bogged down in discussions of the more con- tentious goods and services, it is clear that the majority is buyable, at least in certain contexts.6 That is, most goods and services can be ad- equately produced and delivered through the private sector, provided that the public sector undertakes financing (where appropriate), un- dertakes essential regulatory functions, promotes dissemination of critical information, and creates enabling conditions for private sec- tor participation, where appropriate. In performing these functions the public sector has to provide the leadership, but it can work with a range of governmental and nongovernmental organizations (NGOs) in fulfilling the various functions. To summarize, the public and private sectors can and do play a range of roles in the organization, financing, and management of health services. The role of the public sector in the health system can be encapsulated in its overarching responsibility for stewardship of the sector. At a minimum, this responsibility entails financing a wide range of services for the vulnerable, and those critical goods and 82 o Private Participation m Health Services services that will not be readily financed through private means. it also entails creating a policy environment in which private providers and producers deliver needed goods and services, under the influ- ence of the range of instruments at the government's disposal. Conducting the Privete Health Sector Assessn;2e;t-Steps A PHSA is designed to collect information on the role of the private health sector and the strengths and weaknesscs of these markets (in- cluding the regulatory enviromnent and the role of the public sector in fulfilling its stewardship fiunction), and the general economic ard policy environment for private sector development in the health sec- tor. This information is necessary to identify instruments that will harness existing private providers and producers, and to develop poli- cies that will support strategic growth of the private sector in health. PHSA activities can be divided into three parts: 1. Part 1: The first task is to assemble enough general, easily available information to identify the most important health- (or health sys- tem-) related problems, in which the private sector plays, or could play, a role. The following are the areas in which information is needed: information on the organization, management, and fi- nancing of health services, including basic information on the pri- vate provision of health services; basic country information, withn a focus on the economy and socioeconomic conditions; and infor- mation on the general environment for private sector activities. 2. Part 2: The second task is to identify the most pressing or prom- ising public-private policy issues, as well as potential strategies to address them. This is accomplished through analysis of the infor- mation gathered and consultation with informed stakeholders. Potential strategies to be explored in more depth should be within the remit of the ministry of health or other primary counterpart, since it is desirable that the recommendations be "actionable." 3. PaTt 3: The third task is to undertake in-depth studies on one or more of these issues. The studies should have an operational focus, informing decisions regarding possible strategies to ad- dress problems or to take advantage of opportunities identified. Conducting a Private Health Sector Assessment * 83 Examples of PHSAs include: * An inquiry into the capacity of NGOs to meet a particular need, such as primary care, ambulatory care, acute care services, or the needs of a particular population * A disease- or program-focused study to assess the private sector's ability to contribute to tuberculosis, sexually transmitted diseases (STDs), or human immune deficiency virus/acquired immune de- ficiency syndrome (H1V/AIDS) detection and treatment * An investigation into the specific issues related to regulating the private sector and into the strengths and weaknesses of existing arrangements * Determination of the potential and prerequisites for the private sector to contribute to expanding capacity in long-term care, to enable hospital rationalization * An evaluation of successful public-private partnerships with the objective of expansion. This chapter cannot provide detailed guidelines for all possible focused studies. Instead, the reference section lists a range of avail- able materials that will support the development of necessary terms of reference (appendix 2.A). The time needed for a PHSA will depend on the size of the coun- try; the strength and size of the private sector providing health ser- vices; the amount of information available on the health system and private provision of health services; the scope of the study (described in box 2.1); and the resources available. For example, a PHSA in India was undertaken in the context of a larger World Bank study on public-private partnerships. The PHSA, consisting of desk reviews and primary data collection in two states of India, took approxi- mately 12 months from start to finish (box 2.1). In contrast, a PHSA conducted in the West Bank and Gaza over 4 months included a fo- cused study on government contracting with NGOs for the delivery of health services. However, unlike the PHSA in India, the West Bank and Gaza PHSA depended primarily on a literature review and key informant interviews. 84 * Private Participation in Health Services Box 2.1 Private Health Sector Assessment Examples India-Private Health Sector Assessment (Peters 1999). The objective of this PHSA was to determine how India could take advantage of the private sector to meet social goals. Specifically, the study sought to improve understanding of constraints, incentives, subsidies, and the ways current functioning of the private sector should influence policy formulation and project design; to identify possibilities for new partnerships in delivering and financing health ser- vices; to identify new approaches to regulation and quality assurance; and to promote new public accountabilities and benchmarking of standards for health services delivery. The studies contained an extensive literature review and primary data collection in one northern state (Uttar Pradesh) and one southern state (Andhra Pradesh). Ecuiador-National survey ofprivate health facilities. This sur- vey of 300 public and private health facilities in Quito and Guayaquil examined interaction between the public and private sectors and each sector's providers and clients. It looked at general characteristics of the providers and cli- ents, physical structure, equipment, and stores of drugs and other medical supplies. In addition, financing, manage- ment, and operational aspects of each facility were ex- plored. The samples of facilities were drawn from the four distinct domains: (a) large, complex, inpatient, public hos- pitals; (b) private hospitals and clinics providing inpatient services; (c) public, outpatient facilities (such as ministry of health; and municipal and social security health centers and dispensaries); and (d) small, private, outpatient facilities. A local Ecuadorean research finn, Centro de Estudios de Pa- ternidad Responsible, was contracted to conduct fieldwork and data entry. The survey instrument was developed by the Conducting a Private Health Sector Assessment 0 85 Initiatives and adapted by the local researchers to capture issues specific to Ecuador. This survey can be accessed through http://wxw.jsi.com (go to "Initiatives Project"). Ghanva-Private health care provision in the Greater Accra re- gion. This study uses Ghana's Greater Accra region as a case study to explore the contribution of private health care providers to health care delivery in Ghana, and to recom- mend policy instruments for enhancing the role of private health care providers. The study methodology entails the use of primary and secondary data sources, including a se- ries of questionnaires distributed to private practitioners, pharmacists, traditional health providers, and midwives. Key findings of the study include that all socioeconomic groups patronize private health care services and that clients' perception of services provided by the private prac- titioners was generally more favorable than their perception of services provided by public facilities. In light of these findings the study recommends policy development that supports and regulates the private sector and that responds to the different types of private health care in the region. This study, including survey instrumnents, can be accessed through http://wwv.phrproject.com (go to "Publications" and then to "Small Applied Research"). PHSA Part 1: Collecting and Organizing Information The purpose of Part 1 of the PHSA is to collect and organize infor- mation on the following: o Basic macroeconomic and social indicators, such as gross domes- tic product (GDP) per capita, population growth rates, depen- 86 o Private Participation in Health Services dency ratio, urban-rural ratio, and percentage of the population living in poverty The organization, financing, and management of the health sec- tor, critical problems, and health sector goals, including policies and plans in the medium and long terms o The general environment for private sector activity in the coun- try, irrespective of the particular sector within the private sector o Private sector participation in health, focusing on the demand and supply and price characteristics of private health care markets (structure), and the way these characteristics interact to produce specific behavioral responses (function). The following steps are necessary to complete Part 1 of a PHSA. o Collect information on the country, the healtll system, and private sector participation (general and health). o Identify gaps in the available data on private provision of health services and undertake primary data collection (qualitative and quantitative). o Analyze the information and identify key points about the role of the private sector in the provision of health services, and the main strengths, weaknesses, and opportunities for supporting an effec- tive public-private mix in achieving health sector goals. o Develop a policy note describing the main points about public- private mix. Background Informatown The background information needed includes: o Basic country information such as GDP per capita, population growth, urban population (percent of total), urban population growth, and percent of population below the poverty line Conducting a Private Health Sector Assessment * 87 * Data on major causes of morbidity and mortality in the country (burden of disease information) * Health financing system data, including total health expenditures (public and private), the purposes for which public and private funds are used, the type of financing system, the existence or nonexistence of public and private insurance systems, use of funds for specific types of services (hospital, ambulatory drugs, or verti- cal programs), and the extent of out-of-pocket payments,7 risk pooling, and purchasing arrangements * Information on the service delivery system, including the number and configuration of public and private hospitals, primary health care centers, physicians (including specialists), nurses, pharmacies, diagnostic clinics, and laboratories * Information on any critical problems facing the health sector in terms of health outcomes, and demand and supply of health ser- vices and the factors influencing these patterns * Description of government policies, plans, and priorities for the medium and long term. General socioeconomic and health sector information can usually be obtained from any of the following sources: * Ministry of health documents, especially five-year plans. * Donor and multilateral reports, particularly sector reviews such as those conducted by the World Bank, or health system reports un- dertaken by the World Health Organization (WHO) and public expenditure reviews conducted by the World Bank (http://wwwl. worldbank.org/publicsector/pe/plpers.htin), including benefit- incidence studies, poverty assessments, and health care demand studies. * International databases, which provide comparative information on the economy, health, sector outcomes, financing, and delivery system. 88 0 Private Participation in Health Services o World Bank's Statistical Information Management Analysis sys- tem: http://sima.worldbank.org/ (internal Web site); and http:// www.worldbank.org/data/ (external Web site). o World Development Indicators: http://www.worldbank.org/data/ wdi/home.html. o VW O databases: http://www.who.int/whosis/; regional offices of the W-HTO, such as the Pan-American Health Organization, http://www.paho.org/, and the Regional Office for Europe, http://www.who.dk/, often have useful data and country studies with qualitative information about the private health sector. o World Bank Health, Nutrition, and Population statistics, http:// ddg-as4/hnpstats/. o The U.S. Agency for International Development (USAID)- funded Partnerships for Health Reform maintains a database with a number of useful publications reviewing the status of the private health sector in specific developing countries. This database can be searched at http://www.dedata.com/abt/abt. htm. Materials can be downloaded or requested, free of charge. Though there are currently no standardized instruments in use in developing countries that are structured specifically to render infor- mation on private delivery of health services, the following surveys and databases do provide some useful information. • Measure DHS + is a USAID-funded organization that supports Demographic and Health Surveys (DHSs). DHS is a household survey with an optional service provision module that renders use- ful information on the service delivery arrangements. This op- tional module has been implemented in more than 3 5 countries. Information can be found at http://www.rneasuredhs.com. o The Living Standards Measurement Survey (LSMS) is a house- hold survey supported by the World Bank's Research Department that renders some useful data regarding private delivery and uti- Conducting a Private Health Sector Assessment * 89 lization of services. The World Bank's Web site, http://www. worldbank.org/lsms/, is externally accessible and provides access to all the survey data obtained to date, as well as links to research papers based on the data. Service Delivery Surveys, the World Bank's Research Depart- ment, has recently launched an initiative to support development and widespread utilization of Quantitative Service Delivery Sur- veys. These surveys will provide a good source of information on private providers. As this information comes in it will be posted at http://www.worldbank.org/research/projects/publicspending/ tools/. In most countries basic economic and social indicators and infor- mation on health financing and delivery will be available from vari- ous government ministries. These documents and any sector assess- ments conducted by the World Bank, WHO, or other international organizations, supplemented with data from international databases, should be enough to provide the basic information on the health sys- tem. If a health sector review has not been undertaken the necessary information will have to be gathered to produce a health sector note that broadly sketches the health system. Without this contextual in- formation it is not possible to conduct the necessary analysis to de- velop policies to support enhanced contributions from the private sector-to-policy objectives. Private Sector Environment The general environment for private sector development can pro- vide valuable information for evaluating the potential for enhanced public-private interaction in health. A sound business climate for private sector development would mean that, if the government im- plemented health sector policies to enhance the contribution of cer- tain private subsector activities, the private sector would be able to respond. Alternatively, the presence of serious constraints in the macroeconomic and business environment, such as exchange rate 90 o Private Participation in I lealth Services and tax policy problems, will render the private sector less respon- sive to government efforts to harness or grow the private sector to- ward health objectives. Health policymakers must therefore be aware of such constraints and their potential to undermine their own efforts. In this regard, information on the role of the private sector in the economy (Stone 1999), and on constraints to private sector growth and competitiveness, can be useful. The private sector's role in the economy may be synthetically characterized by: o The scope of government activity, as measured by government ex- penditures as a proportion of GDP o The extent of public ownership of economic assets o The extent of private participation in infrastructure and public services. Constraints to private sector growth and competitiveness can be characterized by: o The effectiveness of the fimctioning of the judicial and legal sys- tem as measured by backlogs and delays o The security of private property provided by the legal framework, and norms o Corruption o The financial system's level of development o The existence and effectiveness of competition regulation o The extent of the country's integration with the global economy, trade barriers o Tax rates. Information on these topics can be obtained from: o Private sector assessments completed either by the government or by donors. For example, the World Bank has completed private Conducting a Private Health Sector Assessment * 91 sector assessments in 39 countries that present an analysis of the general environment for private sector activity. Policy briefs on the private sector assessments conducted by the World Bank can be obtained through http://www.worldbank.org/html/extdr/ topic-psd.htm.8 * General economic development reports completed by the gov- ernment or donors (such as World Bank Economic and Sector Work, government five-year plans) * Surveys conducted by business groups within the country or in- ternational business groups, for example, the Global Business En- vironment Surveys, http://wwwl.worldbank.org/beext/resources/ assess-wbessurvey.htm, or the World Economic Forum's Global Conmpetitiveness Report and the World Comipetitiveness Yearbook pub- lished by the International Institute for Management Develop- ment ('World Bank 2000b). * The World Bank maintains an annotated list, with hyperlinks, of all country surveys of business environment, and general govermnent effectiveness related to institutional quality. This can be found at: http://www1.worldbank.org/publicsector/indicators.htm. Nonprofit organizations-a special case. Nonprofit organizations play an important role in delivering health services in many countries, and the preconditions for supporting their participation are slighdy different from those for the for-profit sectors. For example, the legal and regulatory environment must be conducive to nonprofits' for- mation and sustainable operation.9 Therefore, in addition to the general business environment, information on legal and regulatory issues specific to nonprofits is useful. This kind of information con- cerns (Simon 1995): * Laws and regulations that allow the formation of nonprofit or- ganizations, societies (both religious and lay), and foundations * Financial incentives to nonprofits (for example, tax breaks for par- ticipating in activities that are beneficial to society (providing so- 92 o Private Partcipaton in Health Services cial services for underserved groups); and the right to receive do- nations, especially from foreign sources) o Transparent and uncomplicated procedures for obtaining licenses to establish nonprofits and reporting requirements. The International Center for Non-Profit Law has developed a database of assessments of the environment for nonprofits in a large number of developing countries. This database can be searched at: http://www.icnl.org/databasesearch.asp. Professional associations, consumers, or patient's rights groups are also likely to be organized as nonprofits. The review must collect in- formation on these entities as well, since they can contribute substan- tially to the assessment, as well as to subsequent policy actions. Their participation is also likely to be central to implementing some policies arising from the assessment. The International Alliance of Patients' Organizations maintains a database of patients' groups throughout the world, which can be a useful starting point for identifying local organizations: http://iapo.surfnet-is.com/cgi-bin/directory.cgi. Obtaining Infor0nation on the Role of the PFivate Sector and Health The activities outlined above focus on obtaining broad information on the country's health sector and the general environment for pri- vate sector, including nonprofit, participation. The search for gen- eral health sector information will undoubtedly render some infor- mation pertaining to the private sector. This section outlines the collection and organization of information on the private sector's role in health, and the factors that are responsible for demand and supply of private health care services. For example: o Private expenditures as a percentage of total health expenditures o Private expenditures on hospital care, outpatient visits, and drugs o The number of private hospitals, physicians, and retail pharmacies o Utilization of private services Conducting a Private Health Sector Assessment * 93 This information provides important insights into the demand and supply of private sector health services. In many countries there is a positive correlation between private expenditures on health and the extent of private sector participation. Good examples are India and Lebanon; in both of these countries private expenditures make up about 70 percent of total health expenditures, and the private sec- tor provides most health services. The information obtained through the health sector review will be at the aggregate level, however, and will need to be complemented with additional information. The pur- pose of collecting this information would be to obtain answers to the following questions: * Is private sector participation in health prevalent across socioeco- nomic groups, or is it restricted to higher income groups? Where are the focal points of demand for, and utilization of, private health care services? * In which activities is the private sector involved (for example, are they hospital-based services; ambulatory care; diagnostic centers and laboratories; retail pharmacies; or ancillary services)? * Who are the private providers? Are they in the formal or informal sector? Do they practice in both the public and private sectors? What is known about the ownership of private facilities (are they for-profit, not-for-profit, foundations, or associations)? * What is known about the technical quality of care among private health providers? Is there any information on perceived quality and client satisfaction? * Do parallel public and private providers deliver a similar package of health services? Do public and private providers compete? * Do the existing public financing mechanisms support private sec- tor participation? * How and to what extent does the public sector fulfill its steward- ship function? In which areas of the health system does it fulfill that function (for instance, in financing, service delivery, resource mix, or in overall coordination)? 94 o Private Participation In Health Services Since the goal of Part 1 of a PHSA is to draw upon available in- formation, this section should depend largely on the following sources of information: o A literature review o Household surveys (for example, DIS or LSMS) o Facility surveys o National health accounts (NI-As) Household suirveys. Analysis of data from household surveys, espe- cially when disaggregated according to income quintiles, can pro- vide important clues about various socioeconomic groups' private expenditures on health care and their use of the private sector. Ob- taining information on current utilization and expenditure patterns can be an important breakthrough in addressing private sector par- ticipation in health. In addition, data from household surveys can be used to conduct regression analysis for understanding why people seek health care in the private sector. Many countries regularly un- dertake household expenditure surveys, which include health as onc of the determinants. Several countries also undertake health care uti- lization and expenditure surveys. These are an excellent source of in- formation on demand for health care (in addition, the LSMS has been conducted for more than 30 countries (http://www.worldbank. orgAlsms). Information from household surveys for most countries can be accessed at the following Web site: http://www.worldbank. org/poverty/data/povmon.htm). DHSs are available for 66 countries and contain information on utilization of reproductive and child health services. Most of these data sets are in the public domain and can be downloaded through http://www.measuredhs.com. The World Bank has used DIIS data to obtain information on maternal and child health indicators by asset quintile (proxy for socioeconomic status). Although these data do not demonstrate the extent of use of the private sector, they do have information on percentage of population seeking care for com- Conducting a Private Health Sector Assessment * 95 mon childhood illnesses such as acute respiratory illnesses (ARI) and diarrhea and the percentage seen in a public facility. This provides some clues regarding use of the private sector among specific in- come quintiles. These data can be accessed through: http://www. worldbank.org/poverty/health/index.htm. Another study has analyzed DHS data from 11 developing coun- tries to understand health-seeking behavior for maternal and child health services in the public and private sectors (Berman and Rose 1994). It can be accessed at the following web address: http://www. hsph.harvard.edu/ihsg/publications/pdf/No- 1 8.PDF. Health facilhty su7veys. Health facility surveys that include the public and private sectors are becoming more common. These surveys- which capture information on the types of providers, services, qual- ity of care, and information on clients-could provide important in- formation on the private sector. For example, the DHSs increasingly include Service Provision Assessments (SPAs), which survey the types of reproductive and child-health facilities available in the country. Though restricted to certain aspects of health care, these surveys can be an important complement to other available information on pri- vate providers. The SPAs can be accessed through the same Web site as for the DHS (http://measuredhs.com). National health accounts. Typically, NHAs disaggregate health expen- ditures by type of service. For example, a country's NHIAs can reveal where most public and private funds go. A recently completed NHA in a middle-income country found that most public funds pay for pri- vate hospital services and private expenditures, which are mostly out- of-pocket, for drugs and ambulatory care visits. Tracking where the money goes is an excellent way to determine the extent of private sector participation in a country. In addition, NHAs typically include a descnption of public and private providers. NHAs are now avail- able for many countries in Africa, Asia, the Middle East and North Africa, and Latin America and the Caribbean. Information about NHAs can be accessed through http://www:who.org and http://www. phrproject.com. 96 o Private Participation in Healtlh Services If a country has developed NIHAs, useful information on demand for health services and health expenditures (public and private) can be obtained. Through a collaborative effort, a "Global NHA Data- base" is under development, containing NI-A time-series data for 1972-98 for 193 countries. At this point in the PHSA the information gathered from the lit- erature review and analysis of existing data should be reviewed to see what is disclosed about private delivery of health services and to de- termine the scope of primary data collection that will be necessary during Part 2 of the PHSA. As mentioned earlier, most countries do not have comprehensive data on the private sector, and in most cases, the PHSA will require collection of information from primary sources. Tools and Techniques for Piriaiy Data Collectios In most countries primary data collection on the private sector and public-private mix issues will be needed to supplement the informa- tion obtained from the literature review and secondary data analysis. Depending on the resources available data collection can be primar- ily qualitative or a combination of quantitative and qualitative. In ad- dition, it is useful to identify the areas in which additional informa- tion must be collected. Areas might be, for example: o The particular sector-hospitals; ambulatory care including pre- ventive and primary health care services; diagnostic facilities and laboratories; and retail pharmacies o The topics on which to focus-the private sector's demand and supply characteristics; the factors responsible for the particular demand and supply characteristics; and the behavior of private providers and the factors underlying these behavioral responses o The area or areas to be covered in the survey-urban, rural, or both. Various qualitative and quantitative techniques can be used to col- lect primary data on private providers. Generally, quantitative tech- Conducting a Private Health Sector Assessment * 97 niques are better suited for rigorous analysis but require more time and resources. Qualitative techniques, especially rapid assessment techniques, can be used to get a quick overview of critical issues in private provision but may not allow much flexibility for analysis. The most complete approach is to use a combination of quantitative and qualitative techniques, such as household and provider surveys (quantitative) and key informant and focus group interviews (quali- tative). Often, the development of quantitative surveys will require the use of qualitative methods to fully identify the issues that should be included (triangulation). Qualitative methods. Interviews and focus group discussions with pro- viders. Private providers are an important source of data on private providers. This section provides a step-by-step approach for using qualitative techniques, such as interviews and focus group discus- sions, to obtain information from private providers. A qualitative private provider survey can be used to obtain information on: * Characteristics of private providers, including their background, qualifications, type of services offered, schedule of fees, organiza- tional characteristics, payment methods, types of patients seen, hours of work, and organization of services, including for-profit and not-for-profit services * Key problems in private provision (poor quality of care, supplier- induced demand, cost escalation, or monopoly) * Key constraints experienced by providers in the delivery of health services (competition with the public sector; lack of access to cap- ital, skilled workers, and technology; high cost of providing health services, such as in rural areas) * Environment, including the political economy environment, for private provision of health services; insights into the changes that are needed to make the environment conducive to private sector participation. 98 o Private Participation in Ilealth Services Key informant inzterviews with private providers- methodology and de- sign. The scope of primary data collection will be a critical factor in deciding which type of private providers or facilities to interview and visit and where the provider survey will be carried out. Deciding whom to inlterview. Qualitative techniques typically do not use formal sampling. However, it is important to make sure that no single group of providers or type of facility is over- or underrepre- sented in the data collection. For example, if there were a mix of large, medium, and small hospitals in a locality, if the survey were to include only large hospitals it would bias the survey. In determining the types and numbers of facilities to sample, it would be useful to include some information about the private providers' characteris- tics in the survey-at least enough information to ensure represen- tation of the various types. For example, if large private hospitals provide a similar range of services, it is not necessary to oversample from that group. However, if size, type of facility, and services of- fered among small hospitals are quite dissimilar this group should be oversampled. In terms of formulating the list of providers to be interviewed, the best place to start is with provider associations (such as hospitals, physicians, nurses, or pharmacists). Provider associations can be an important source of information regarding the configuration (for ex- ample, the types of practices) of their members, and can provide easy access to a vast network of providers. Since private providers, who are generally pressed for time, are often reluctant to participate in interviews and are suspicious about the way the information will be used, approaching them through these associations can greatly en- hance access to them. If there are no private provider associations (which is unlikely in any country with an active private sector), the next-best sources are ministries of comimnerce or business develop- ment, who are responsible for licensing health facilities. It is best to develop a list based on facility or provider type (for example, com- mercial orientation, organizational form, or type of service, if avail- able) and then select a few from each category. No fixed numbers of interviews need be completed. However, sampling at least 30 will allow some quantitative analysis, such as cross-tabulations. Conducting a Private Health Sector Assessment * 99 In many developing countries, although the informal sector gen- erally makes up a large part of the economy, especially in remote rural areas, information on this group is usually sparse. Studies in several countries, however, have shown that the poor are more likely to use informal sector providers (Chakraborty, D'Souza, and North- rup 2000). Since an important policy goal in many countries is im- proving the poor's access to quality health services, collecting data on informal sector health care providers is important. Box 2.2 de- scribes techniques that have been used to identify and obtain infor- mation from informal sector providers who serve the poor. Developing a questionnaire. Examples of the types of questions that can be used to obtain information are included in appendix 2.B. The sample questionnaire was developed for ambulatory care facilities. This sample questionnaire should be adapted by whoever conducts the provider surveys to fit the country context and the types of fa- cilities to be covered. In addition, since qualitative interviews are essentially unstructured, the interviewers should merely use these questions as a guide, to increase the likelihood of discovering some unanticipated comments or insights. Trainin7g the interviewers. The effectiveness of qualitative inter- views is enhanced if the interviewer is well informed about the top- ics to be covered and can probe as needed. This means that the in- terviewer must have some health sector expertise, be fully acquainted with the questionnaire, understand the rationale for asking certain questions, and take different approaches to get answers to the ques- tions. To ensure that all the interviewers are on the same wavelength, an orientation session is useful. Orientation may be necessary even if a market research firm is hired to conduct the survey, because it might not have previous experience conducting provider surveys. Conducting the interviews. Once the names of providers or facilities included in the survey are available, the questionnaires have been pretested, and the orientation session is finished, the interviewers are ready to conduct the survey. Interviewers need to remember some simple tips during the survey. * They must fully document the conversation with the provider as soon as the interview is over and complete as much of the ques- 100 * Private Participation in Health Services Box 2.2 Obtaining Information on Informal Sector Private Providers Informal private providers such as drug vendors in Africa and unqualified medical practitioners in South Asia are im- portant sources of health care for poor households in devel- oping countries. It is often difficult to obtain information from these providers, especially in Africa where they are fre- quendy itinerant. Several studies have used innovative tech- niques to reach these informal providers. Drug vendors in Afiica. A study in Abidjan (C6te d'Ivoire) interviewed 60 female drug vendors who sold drugs for the treatment of STDs. The study obtained basic information on the characteristics of the drug vendors, the magnitude and types of drugs sold, the type of clients, and the quality of care. Another study used a simulated client technique, where trained interviewers pretend to be clients, to interview drug vendors in rural Eritrea (http://www.basics.org) (go to "Pub- lications-General Child Survival"). As in the case of the C6te d'Ivoire study, this second study obtained information on the characteristics of drug vendors, the types of drugs normally prescribed for common childhood illnesses (such as diarrhea and ART) and the drug vendors' knowledge and training to dispense medications for these diseases. Unqualified medical practitioners in South Asia. In South Asia, particularly in Bangladesh, India, and Pakistan, un- qualified private providers in urban and rural areas are the most important source of health care for poor households. At least six separate studies in India have documented that these providers treat 95 percent of all major diseases among the poor, including childhood diarrhea, childhood ARI, tu- berculosis, malaria, and STDs. Several of the studies have used interviews with randomly selected mothers in the Conducting a Private Health Sector Assessment * 101 study areas to identify the providers and seek them out for interviews. These studies have collected detailed informa- tion about the characteristics, magnitude, and types of ser- vices; demand and supply issues; and quality of care among these providers. tionnaire as possible as soon as possible. At the beginning of the interview, the interviewer must ask the provider for his or her permission to take notes or not. If the provider does not mind, the interviewer should take notes. They should share information with other interviewers to deter- mine if the interviews are going as planned and if there are some experiences that each can draw upon to improve the interviews. Analyzing the results. Since the sample size for these provider sur- veys is small, not much quantitative analysis will be possible. How- ever, if at least 30 general practitioners are interviewed, it will be possible to do some tabulations (number and percentages, and cross- tabulations) regarding their characteristics. Information on struc- tural inputs such as training, availability of basic medical equipment, and cleanliness can also be used to reach some judgments about quality of care. However, most of the analysis will be qualitative. To reiterate, the purpose of the analysis is to determine what the survey reveals about: * Characteristics of private providers, including type and magnitude of health services provided, and the providers' incentives and motivations * The key factors affecting supply of private services * The key problems with the technical quality of services * The environment for private provision of health services, includ- ing insights into changes needed to make the environment con- ducive to private sector participation. 102 0 Private Participation in Health Services This information has to be integrated into the information ob- tained from the literature review and secondary data analysis. 1i or example, if there were large gaps in the section on provider charac- teristics, these gaps should now be filled with information obtained in the survey. Focus group discussions with private providers. Focus group discus- sions are a cost-effective qualitative technique for obtaining infor- mation; the technique has its own set of strengths and weaknesscs. Cost-effectiveness is one strength, as mentioned. If the group con- sists of outgoing persons who enjoy discussion and debate, focus groups can contribute to a rich understanding of selected topics. The weakness of focus groups is that some participants may be s-hy and unwilling to speak in front of others. In this situation one or two individuals sometimes dominate the discussion, thereby biasing the information. This happens most often when the group consists of both men and women, in which case women tend to speak less. Con- ducting a focus group discussion, unlike conducting an in-depth interview in a hospital or a doctor's clinic, does not allow the collec- tion of information on the environment in which the provider con- ducts his or her business. However, this methodology is well suited for gathering information on the business environment and private providers' supply constraints. Conducting foacs group discussions. Focus group discussions require trained facilitators who can use a list of questions to guide the dis- cussion and keep the discussion on track. Too large a group can reduce a focus group's effectiveness. It is best to limit the number of participants to no more than 10 at a time. Typically, participants should be a homogenous group. For example, mixing government officials and private providers in the same group would be ineffec- tive, because then discussion can easily turn into a dialog of the deaf, with a limited disclosure of information. Interviews and focus group discussions with government officials. Inter- views and discussions with key public sector officials will be an im- portant complement to the information obtained from private pro- viders (see appendix 2.C). Changes are needed in government policies and programs directed toward the private sector in order to Conducting a Private Health Sector Assessment * 103 truly harness the private sector to advance health services. Private providers will be an important source of information on government policies that inhibit private sector delivery of health services. In ad- dition, private providers will be able to provide information on gov- ernment programs that regulate and contract with the private sector, since many providers may already participate in these programs. However, public sector officials will provide additional information on topics related to public-private interactions, use of government instruments, and opportunities for and constraints on involving the private sector. It is also important to remember that the lack of in- formation and resultant misguided perceptions are often as impor- tant a barrier to private sector participation as tangible policy barri- ers, and that public sector officials are often suspicious of the private sector. Finally, supporting private sector development often implies to the government a reduction in its power and functions if it has been the main provider of health services. All these factors strongly reinforce the need to interview public sector officials. Deciding which public officials to interview. Ministry of health em- ployees will be an important group to identifying which officials to interview-in particular, this group comprises employees who are in charge of government programs such as contracting, registration, licensing, and supervision of private providers and health facilities, quality-of-care regulation, and other functions related to private sec- tor programs. This group will help provide additional information about the programs and identify possible constraints on improving and expanding the programs. The director of health services should also be interviewed, as should other individuals who are responsible for delivering public sector services (such as primary care or hospi- tal care services). These officials are critical for understanding how public and private facilities compete or interact in the health system and how interactions between the public and private sectors could be enhanced. Questionnaires. Detailed information will have to be collected in order to understand government contracting arrangements, regula- tory structures, and standards. 104 o Pnvate Participation in Health Services Interviews andfocus group disciusions with consumers. Speaking with consumers can provide important perspectives on factors influenc- ing demand for private and public providers, consumer perceptions of the strengths and weaknesses of the private sector, the role of the government in health care, and consumer responsiveness to an en- hanced role for the private sector in health. Deciding whom to interview. The easiest and most cost-effective way of determining whom to irnterview is to target consumers con- nected in some way to the facilities or providers included in the sur- vey. For example, interviews could be conducted with patients wait- ing to be seen or those who have just completed treatrnent (exit interviews). The only problem with exit interviews is that the con- sumers may be reluctant to say anything negative about the en- counter just completed. Therefore, it is important to keep the ques- tions general and to focus on the public and private sectors and their role in health care delivery. Alternatively, a neighborhood group dis- cussion on a particular day could be announced through the pro- viders or facilities, and a focus group discussion could be conducted with the people who attend. Consumer questionnaire. The following types of topics and ques- tions should be included in discussion with consumers: o Health-seeking behavior for various family members, particularly the interactions between the public and private sectors, and con- sumer perceptions about the public and private sector, especially with regard to quality of care and satisfaction o Consumer perceptions regarding the constraints on using the public and private sectors, and "activities where the private sector could make a greater contribution" options on an enhanced role for the private sector in health care delivery. Consumers in many developing countries use a combination of public and private facilities during a single illness. For example, in countries where out-of-pocket spending is the main form of private expenditures, consumers, especially the poor, use private ambulatory care but seek hospital care from the public sector, since hospital care Conducting a Private Health Sector Assessment * 105 is expensive. Understanding the interactions between the public and private sectors from the demand side is useful in developing private sector policies and addressing important issues such as continuity of care; these issues influence the efficiency and quality of health care delivery. Quantitative methods. In order to understand private markets for health goods and services information on both the demand and sup- ply side is required. Household surveys that focus on health, or that include a detailed section on health, are typically the main source of quantitative information on the demand side.10 The use of quantita- tive techniques for obtaining information on the supply side (private providers) is limited in most developing countries, and the key fea- tures of quantitative provider surveys are worth highlighting. Increasingly, provider surveys are being recommended as a part of a basic package of data collection for decisionmakmg in developing countries. For example, provider surveys have been carried out in sev- eral countries, including the Arab Republic of Egypt and Poland (box 2.3) under a USAID-financed health project focusing on improving the analytical base for health sector reform. Similar provider surveys focusing on the private sector were carried out under the World Bank-supported PHSA in India (Peters 1999). Structured interviews with a randomly selected sample of private providers are a major part of these surveys. Sample sizes for these types of surveys vary. Developing a questionnaire for a -tructured survey. An example of a structured provider survey questiolnaire is included in appendix 2.B. These questionnaires should be pretested and adapted, as needed, to fit the country context. Analyzing data firom a structured su7 vey. A larger sample size pro- vides greater opportunities for data analysis. At a basic level, providers' characteristics will have to be tabulated. Next, providers could be classified according to the type of services offered and any available data on structural inputs. Information on providers' knowl- edge and process of care for specific diseases could also be collected. The information obtained can be tabulated to enable comparisons across different groups of providers. 106 * Private Participation in Health Services Box 2.3 Poland: A Provider Survey A provider survey was conducted in Krakow, Poland. It is one of the sources of data used for a provider market analy- sis (PMA), a tool developed by the Data for Decision Mak- ing Project for understanding the organization of health care delivery. Additional sources of data for a PMA include household surveys and other sources of secondary data. In the Krakow analysis provider surveys were the main source of information for the private sector. The study fo- cused on ambulatory care. The study included 154 private health care facilities, 160 private pharmacies, and about 100 dental practices. The surveys were designed to collect in- formation on supply-related topics such as hours of work, number and specialization of medical personnel employed, number of patients examined, types of services provided, schedules of fees, statement of costs, and type of contracts with various financing agents. The provider survey was combined with data from pub- lic health facilities to develop a typology of public and pri- vate providers such as the number of providers and the volume of services provided, the content of the services provided (type of human resources, scope of ambulatory services, and patient perceptions of quality), the governance of health facilities (public, quasi-public, private, for-profit, or not-for-profit), providers' motivations and incentives to maximize the supply of health services and deliver high- quality health services to their clients, and the principal types of payment methods. Based on this information, the study identified the implications for changes in the financ- ing and organization of health services in Poland. Source: Chawla and others 1999. Conducting a Private Health Sector Assessment * 107 Analyzing the data. The purpose of collecting information on the health sector (public and private) and on the general business envi- ronment is to understand the structure and function of existing health markets. The objective is to determine the types of policy in- terventions needed to improve their functioning, especially as re- gards the interface between the public and private sectors. Where private markets are dysfunctional the analysis should focus on iden- tifying the source of these problems and possible government poli- cies to alleviate them. This requires using the available information in the context of the conceptual framework described earlier. This section of the chapter will help people who conduct the assessment to use the conceptual framework in order to identify appropriate pol- icy interventions and to develop a policy note on public-private mix. Some of the core topics that should be included in the policy note are: (a) structure and functions of the private health care markets; (b) problems in private delivery of health care; (c) constraints on pri- vate participation; and (d) absence of private health care markets. Private Health Care Markets The st7ucture and finctions of the private health care miar-kets. This sec- tion describes the main demand and supply characteristics of the pri- vate health care market. The following information should be included under demand characteristics: What is the extent of consumer demand for private health care goods and services, among which groups, and for which products and services? How much do consumers pay for particular health goods and services? In what form are these payments made? The following information should be included under supply char- acteristics: the organizational typology for providers (such as solo practice, dispensary, hospital-based, or group practice); the type of therapeutic system; whether the providers are in the formal or in- formal sector; the volume and types of services provided; the types of clients; and provider characteristics such as age, gender, back- ground, and training (box 2.4). It is also useful to map the participa- tion of the private sector in various areas of the health system, using the conceptual or analytical framework. 108 * Private Participation in Health Services Box 2.4 Constructing a Typology of Private Providers Private providers in most countries are extremely diverse; in order to identify the private sector, its contributions to the health sector, and possible public actions for improving private participation in health, it is important to classify the private providers. One useful way to organize them is ac- cording to the following criteria: organizational form, com- mercial orientation, and therapeutic system. Using these criteria, private providers can be classified on a continuum of high to low complexity. 1. Organizationalform. Organizational form refers to char- acteristics such as formal and informal sector; the types, levels, and diversity of health services provided (such as ambulatory, inpatient care, preventive or promotive, gen- eral medical, or specialized medical care); type of ancil- lary services provided; and whether at a fixed or mobile location. 2. Commercial orientation. The for-profit and not-for-profit nature of health provision is a key distinction influenc- ing provider motivations and incentives. Organizations such as nongovernmental organizations (NGOs) will typically fall under the rubric of nonprofit. 3. Therapeutic system. This characteristic helps classify pro- viders according to different medical paradigms. Since many providers of alternative medical paradigms treat diseases that are important to public health, it is useful to link the types of services provided to the types of medi- cine practiced, in order to identify appropriate interven- tions. In addition, providers who practice alternative medicine often combine their practice with modern medicine (such as giving injections). Source: Adapted from Hanson and Berman 1994. Conducting a Private Health Sector Assessment * 109 The objective in this section is to understand how a market is be- having and to relate this behavior to its structural characteristics. For example, does the market operate in an acceptable manner, or are there significant problems or missed opportunities, and, if so, where? Are any of these problems related or susceptible to government poli- cies, such as lack of regulation or enforcement, poorly targeted fund- ing, or information provision? Improving theefinctioning of narketsfor health goods and services. Many developing countries already have a large private sector in health, but limited stewardship. 'While providing access to much-needed goods and services, under these conditions the private sector is prob- ably not contributing much to other sector objectives, such as equity, efficiency, and quality. This section briefly describes the key weak- nesses of private sector delivery of health care goods and services and demonstrates ways of using available information to identify prob- lems, their determinants, and opportunities. These weaknesses re- late to cost escalation, quality of care, poor allocative and technical efficiency, and the types of services provided by the private sector. Cost escalation. Rapid cost escalation is often a problem in health systems where there is wide-scale private delivery of health services and few mechanisms for modifying consumer and provider incen- tives and motivations to consume or provide cosdy and often un- necessary care. The type of provider payment systems used play a key role in controlling or exacerbating the cost of health services. For example, under third-party fee-for-service systems, costs esca- late rapidly because consumers and providers have no incentive to control costs. Under such a plan, the price the patient pays at the point of service is considerably lowered, creating incentives for pa- tients to seek unnecessary care. Providers, under such a system, also have incentives to deliver excessive and unnecessary care, contribut- ing to problems such as supplier-induced demand. The tendency among private providers to increase prices, which in turn contributes to cost escalation, may also be related to other types of problems such as the lack of laws supporting competition. In these situations, private providers may collude to raise the prices of health goods and 110 ° Private Participation m I lealth Services services to the detriment of consumers. Rapid cost escalation and ex- cessive utilization of health services are, in the long run, detrimental to overall health system performance, leading to problems of ineffi- ciency, poor quality, and unsustainability. Qzualty of care. The private sector is usually highly responsive to clients and creates an environment that generates highly satisfied consumers. Since the nature of health services is complex and highly technical, however, consumers cannot easily evaluate the technical quality of care. This can lead to a situation where private providers can skimp on certain aspects of quality, depending on their motiva- tions and incentives. Policy actions to address quality problems are quite challenging, because they require information on structure, process, and outcomes of care. Health care quality can be assessed from the following perspectives. o Structure refers to the key ingredients or inputs that providers must have in order to deliver high-quality care. Good examples include appropriate training, support staff such as nurses, and cor- rect diagnostic tools. This is the most common mechanism to ad- dress quality concerns in developing countries. o Measuring the process of care can be complex and requires evalu- ating provider performance against accepted standards of care. Vhile evaluating the quality of health care processes is challeng- ing, some useful analyses have been performed in Bangladesh, India, Indonesia, Pakistan, and Tanzania. o Finally, outcomes are even more difficult to measure since the data needs are high in order to allow corrections for other factors that may influence health outcomes. Mechanisms to assess the im- pact on health of health care provision are fairly rare in develop- ing countries. Poor allocative and technical efficiency. A third possible problem that is commonly experienced in private provision of health services is the excessive use of health services that may not be valuable or cost- effective in terms of their health impact. This problem is also related Conducting a Private Health Sector Assessment * 111 to cost escalation and quality of care. An information gap between providers and consumers is partly responsible for this problem. For example, patients often equate good treatment with the number of medications and, in some cases, injections prescribed. They might even decide to choose one provider over another because of a repu- tation of a "quick cure." This puts pressure on providers to compete with each other by providing health services that are not necessarily beneficial, with subsequent implications for allocative efficiency. In addition, since preventive health services are not very popular among patients, responsive providers may underprovide cost-effective pre- ventive health care. Types of services provided by the private sector The private sector is in- terested mainly in health services that are in high demand by con- sumers who are willing to pay for them: This often means that the private sector is not motivated to provide sufficient levels of preven- tive health services for which consumer demand is low. The private sector also may not adequately serve poor or rural people, since their willingness or ability to pay may be low, and the cost of providing quality health services in rural areas is high. Experience in several Asian, African, and Latin American countries has shown that, in these situations, distorted markets emerge, often consisting of unqualified providers. This has implications for the health and well being of poor populations in urban as well as rural areas. Analyzing Problems with Private Sector Delivery of Health Care Goods and Services As noted above, the key weaknesses of private sector delivery of health care goods and services include cost escalation, quality of care, poor allocative and technical efficiency, and the types of services pro- vided by the private sector. Identifying the presence and prevalence of such problems in developing countries is often challenging. Cost escalation. To see whether cost escalation is a problem in the health sector, time series data are needed that would cover public 112 0 Private Participation in Ilealth Services and private health expenditure data (as a percentage of GDP, or per capita health expenditure). This information will have to be com- bined with other information, such as an increase in the use of med- ical technology and expensive surgical procedures. All this informa- tion then must be analyzed within the country's demographic and epidemiological context. Quality of care. The literature review and interviews with providers, key officials in the public sector, and consumers will provide infor- mation on quality of care. The PHSA team's job is to highlight the nature of the quality-of-care problem with private providers. Evalu- ation of the satisfactory or deficient care quality requires standards or benchmarks. The following should be taken into consideration when drawing any conclusions about quality of care: o Do private physicians, nurses, pharmacists, and other medical per- sonnel have the appropriate educational qualifications? National qualification requirements for each category of medical personnel could be used as a benchmark. General (global) standards can be used in the absence of national requirements (if these general standards are used this should be noted). o Are medical personnel licensed to practice the type of medicine that they are practicing? As in the case of educational qualifica- tions, national standards could be used as benchmarks. It is im- portant to note whether there is an absence of national licensing standards. In analyzing the information, any examples of dual roles among medical personnel should also be noted. For exam- ple, do pharmacists give injections? Do nurses prescribe meai- cines? Do general physicians conduct mninor surgery? o Is there any information about other structural inputs regarding provision of health care? For example, do hospitals have the ap- propriate medical equipment for the types of services they pro- vide? Do general practitioners have basic medical equipment (for example, a stethoscope and a blood pressure machine)? Conducting a Private Health Sector Assessment * 113 * Obtaining information on process and outcome dimensions of quality of care is difficult and time-consuming. Therefore, the PHSA may well have to depend on structural dimensions to infer quality of care. In several countries, however, information is avail- able on private providers' performance on disease management (process). For example, studies focusing on specific groups of providers have been conducted in many countries, using VWHO guidelines for treating infectious diseases. A complete list of these studies is included in appendix 2.A. If the literature review yields any information, this should be included in the analysis. * Finally, public and private providers' ratngs on various measures of care quality can usefully be compared. Equity. The equity dimensions address any evidence of adverse selec- tion or access, or lack of services for certain groups in society (such as the poor, the elderly, or women). Equity should be analyzed from the broader perspective of the health sector as well as in relation to particular issues connected with private sector provision. The fol- lowing areas should be explored: * Who are the private sector's patients? If the private sector serves mainly the upper- and middle-income groups, the links between groups served and payment mechanisms should be analyzed. For example, upper- to middle-income groups may have private health insurance, social insurance, or an employer-based program. If the private sector does not provide services to the poor, why is that the case? * Where are services delivered? If private services are concentrated in urban areas the reasons for that should be evaluated. For ex- ample, the most common reason for the private sector's con- centration in urban areas is easy access to markets, including the market for inputs. This translates into lower cost of setting up a practice, higher demand for medical care (since education and in- come levels are higher in urban areas, and those are indicators for 114 o Pnvate Participation m I lealth Services health-seeking behaviors), access to medical insurance among pa- tients, and access to capital. What would it take to encourage the private sector to provide services in rural areas? o What types of services does the private sector deliver? For exam- ple, the private sector may be involved only in ambulatory care and not in acute or preventive health care services. In many coun- tries the lack of health insurance means that private sector partic- ipation is low for the hospital sector but high for ambulatory care, where many people pay out-of-pocket for services. Efficiency. Efficiency relates to both public and private spending and its impact on private provision of health services. For example, if pub- lic spending is targeted to government clinics and hospitals where utilization is low, while private expenditures are used to run a paral- lel, private, health sector, the effects on the total health system are likely to be highly distortionary. When consumers pay out-of-pocket for health services they often get poor value for their money. This is because of the peculiar nature of health care, where there is quite a bit of disconnect between consumer and provider information (such as information asymmetries, or the principal-agent problem). Absence of Private Health Care MPirkees: U72de; Snding the Pmoblepn Private markets for health care goods and services in many countries are either extremely small or are concentrated in certain service areas. For example, in many of the Gulf countries where the gov- ernments provide good-quality free health care to all their citizens, private markets for health care are almost nonexistent. In other countries private markets are concentrated in the provision of med- icines (in private pharmacies) and in ambulatory care. The emer- gence of private health care markets is heavily determined by a com- bination of the socioeconomic conditions in the country (such as economic conditions and the levels of urbanization) and the types of policies adopted by governments. Governments can play a key role Conducting a Private Health Sector Assessment * 115 in supporting policies that create appropriate demand and supply conditions to improve the functioning of private health care mar- kets. This section describes the characteristics of demand and supply that influence private provision of health care. Demand. Box 2.5 describes factors likely to influence demand for pri- vate health care. These include: price (monetary and nonmonetary), quality of care (especially perceived quality of care), health insurance prevalence, and health-seeking behavior habits. If data from house- hold surveys are available and time and resources permit, multivari- ate analysis could be undertaken to understand factors influencmg demand for private health care. For example, a study in Egypt used the Egypt Household and Health Expenditure Survey to analyze the influence of price and quality on consumer choice of providers (http://www.hsph.harvard.edu/ihsg/topic.htmnl#13). If quantitative analysis is not possible, qualitative information from discussions with consumer groups could be used to highlight the factors that are likely to influence demand for private health care. Supply. Box 2.6 describes the factors influencing the supply of health services. As in the previous section, if quantitative data are available on the various factors, quantitative analysis will be possible. In the absence of this information, information from the interviews and focus group discussions can be used to identify the factors that in- fluence the supply of health services. Table 2.2 applies the list of demand and supply factors for private health care provision to a specific country context. A matrix can be a very useful way to organize and present information, because it con- veys the information in an understandable format and is useful for presentation and dissemination during stakeholder workshops and business consultations. If the private sector is being analyzed across a number of health care goods and services, separate matrices could be developed for each activity. This would make the next stage of de- veloping recommendations easier. 116 * Private Participation in Health Services Box 2.5 Demand-Side Influences on Private Health Care Delivery Price. The choice of a public or private health provider is influenced by the difference in prices between available comparable alternatives. Cross-price elasticities measure the change in demand for one type of provider with a change in another provider's price. An increase in the price of public providers will result in lower utilization of public providers, or increased self-care or substitution of private for public providers, if all other factors influencing health care demand remain constant. The price of health care includes both monetary and nonmonetary costs (such as the opportunity costs of traveling and waiting). Where the money price is low or zero (as is the case with free public services), non- monetary public and private prices become important. Quality. Demand is influenced by consumer perceptions of quality. Consumer perceptions of quality are typically re- lated to nonclinical aspects of care, such as proximity of facilities, ability to schedule appointments, waiting time, cleanliness of health facilities, and the interpersonal skills of the staff. Health insurance. The presence of risk-sharing payment mechanisms (such as health insurance) gives major impetus to private demand for health care. On the demand side, health insurance and other risk-sharing mechanisms effec- tively reduce the price that consumers pay for health care at the point of service. Since the direct cost of health care is no longer the most important factor under health insurance, other nonprice factors such as expected benefit, conve- nience, and perceived quality become important indicators. Conducting a Private Health Sector Assessment o 117 Public program reimbursement of private providers. In most countries public financing is the single largest source of ex- penditures for health services. In most industrial countries (with the exception of the United States) private health in- surance provides supplementary benefits, and direct out-of- pocket payments are for cost sharing and the few uncovered services. In most developing countries the public sector is the largest single payer, followed by direct out-of-pocket- payments, and then private health insurance. Since hospital services are inherently expensive for patients who pay di- rectly, and private health insurance is minimal, public fund- ing is the main potential source of financing to support pri- vate hospitals. Governments in most developing countries use their funding almost exclusively to support public facil- ities, however. Thus, development of a private hospital sec- tor is usually constrained by the lack of risk pooling and hence effective demand. Structure of the medical refemral systemz. The structure of the medical referral system also indirectly influences demand for health services, including private health services. Source: Berman and Rannan-Eliya 1993; and Griffin 1989. Key Constraints to Private Sector Participation in Health Services Delivery A number of factors commonly block private participation in health services delivery in developing countries. Barriers to entry and competition. A level playing field is critical to the creation of an environment within which competitive forces can emerge. In many cases however, governments, often in collaboration with donors, provide health product or service at such low prices that the private sector can't compete with the public sector. This is 118 * Private Participation in Health Services Box 2.6 Supply-Side Influences on Private Health Care Delivery The supply of private health care services depends not only on demand but also on the availability and prices of the main inputs for health services delivery (such as skilled and unskilled staff, equipment, medical supplies, pharmaceu- ticals). The availability of these inputs is strongly influenced by government action on a number of fronts. A good supply- side analysis will include evaluation of the impact of these policies on the supply of targeted goods or services. Government regulations. Government regulations such as immigration laws and import regulations for medications and medical technology can significandy influence private sector participation in health care services delivery. There may be various barriers to market entry for the private sec- tor such as cosdy and cumbersome licensing procedures for new businesses, restrictions on marketing products and services, restrictions on foreign ownership, and high taxes. Public sector employment. Two factors related to public sec- tor employment are likely to influence private delivery of health care: (a) a large public sector that employs the ma- jority of the country's health personnel, and (b) adequate staff salaries, wages, and benefits in the public sector. If these two factors are in place personnel have litde incentive to leave the public sector for private employment or to start a private practice. Public sector employment, combined with restrictions on immigration, can be a serious bottle- neck in the supply of labor needed to privately delivered health care. Capital. The supply of complex private services such as hospitals and diagnostic centers is often contingent on the availability of capital to fund start-up costs. Lack, of long term financing is a barrier to development of such activities in many developing countries. Conducting a Private Health Sector Assessment 0 119 Labor The supply of private health services is also con- tingent on the availability of trained medical personnel. Without enough trained persolnel and under tight labor market conditions for medical personnel, the private sector will have to depend on labor from other countries. Import- ing trained medical personnel from other countries can considerably add to the start-up costs. Source: Adapted from Berman and Rannan-Eliya 1993; and Griffin 1989. often the case in delivery of contraceptives, where low-cost contra- ceptives are available in urban areas to a population whose willing- ness and ability to pay is higher than the price of the publicly pro- vided contraceptives. In a situation such as this the private sector must work harder and spend more on marketing in order to promote its products and services, thereby making the prices of the product for those lacking access to the subsidized public supplies even higher. Other issues related to the business environment, highlighted ear- lier, also pose barriers to competition by making it unnecessarily dif- ficult to start up production or service delivery. o No government contracting of health services. Government contract- ing or outsourcing of health service delivery, either entirely or in part, can give a huge impetus to private sector participation. Many countries use public funds exclusively to finance public services, even in the face of consistent failure to achieve the objectives related to access, distribution, or quality, which was the initial jus- tification for the use of public funds. It is critical, in these situa- tions, to help governments take a more strategic or performance- oriented approach to ensuring service delivery. Analysis must therefore be done to support the government in reaching deci- sions about whether to continue to provide services themselves or kiEab 2.2 Sample Analysis Matrix of Key Demand and Supply Factors Influencing Private Sector Participation in Health Services CRITERIA CURRENT SITUATION N COUNTRY IMPUCATIONS FOR PRIVATE SECTOR DEVELOPMENT Price of health care Extensive network of publicly owned and run health Consumers have little incentive to seek care from facilities has made access easy, and opportunity private sector Private sector has no incentive to cost of seeking health care is low Government pro- enter market Even in market niche, private sector vides extensive package of health benefits virtually cannot compete with government since the point- free of charge to population and expatriates in pub- of-service price is very low and demand is limited lic sector and at highly subsidized prices to expatri- in relation to country's size and geography ates working in private sector Direct cost of seeking care is low Quality Information on perceived quality is limited There is Some people in capital city seek care from private some evidence that waiting time in public clinics clinics because of convenient clinic hours and short o may be a problem waiting times This demand creates very small mar- ket niche for private sector in areas where its prices are low (such as ambulatory care) Public reimbursement Public resources for health are directly used to fund The impact is negative on demand for private hospi- public facilities tal and other high-cost health services, retards development of more sophisticated purchasing and related performance pressures for private sector Health insurance Limited health insurance because of market size Has a negative impact both on demand for and and risk exposure of private sector expatriates. supply of private health services and on private Entire population and public sector expatriates are health insurance insured by government, largely financed by budget Health-seeking behavior Health-seeking behavior is adequate and high If people can pay for care, demand for private and historical experience compared with that in other countries in region health core would be adequate to create a supply response, but given high costs of quality hospital care, such responses are likely to be limited to ambulatory care Government regulations Licensing and regulation system for private clinics Current system will have to be streamlined and seems to work Private sector is allowed to employ refined If it has to address needs of a growing pri- health personnel from neighboring countries vote sector Availability of capital Government has program of land subsidies Capital is potentially not the maior problem, rather, and other resources Country's economic development is adequate it is lack of effective demand (such as public or private insurance-based reimbursement of private facilities) Labor supply and policies Doctors and nurses are mostly in public employment Health personnel have limited incentives to establish including public sector and are not allowed to have private practice private practice employment Most health personnel are expatriates with fixed contracts Working conditions are good 122 o Private Participation in hIealth Services to contract with the private sector (this is thus a make or buy de- cision). When conducting assessments to support such "make or buy" decisions the reader is referred to chapter 3 ("Contracting for Health Services") of this handbook. ° Other barriers. Cumbersomc licensing procedures, high taxes for private entities, corruption, an inability to access capital for start- up costs, bottdenecks in the health care labor market, and restric- tions on migration of skilled personnel and on medical technol- ogy and equipment can create huge barriers for private and NGQ entry into the health market of many countries. If one or more of these conditions is present, then initiatives to expand the supply of services will need to address these problems. Public spending. The government can support private sector par- ticipation by shifting from the direct provision of health services to contracting with the private sector to provide these services. In some countries selective contracting with the private sector is com- mon, especially for inputs into the health provision process. This does not really encourage private sector participation in the provi- sion of health services, however, since it is a piecemeal approach; neither does it help the government reap any of the benefits of tar- geted purchasing of health services such as influencing the type and quality of services provided by the private sector. In the United States, for example, the government has considerable leverage on private health markets because of its direct financial support for health insurance programs for the elderly (such as Medicare). The PHSA can usefully identify ways that public spending could be used more effectively to support efficient and cost-effective private sector provision. Regulation. Regulation of the private sector is an important func- tion of the state. In many countries, though, the regulatory frame- work creates unnecessary barriers to private sector entry and fails to provide for sufficient monitoring of service quality and provider compliance with health sector standards. In some countries, although Conducting a Private Health Sector Assessment * 123 the regulatory framework is appropriate, laws and regulations have not been updated, nor are they enforced. For the purposes of a PHSA it is adequate to collect and evaluate information on the country's regulatory instruments and mechanisms and determine where the problems might lie for each. For example, in many developing coun- tries with a vibrant private sector, self-regulation by providers is the most common form of regulation. However, in the absence of gov- ernmental and NGO (consumer organizations) activities that coun- terbalance the powers of the provider organizations, the effective- ness of regulation in addressing the problems in the private market for health services is much less. Reviews of the regulatory frame- work must also address the laws and regulations that either support or constrain private participation in the provision of health services. For example, if the government has cumbersome licensing proce- dures, this not only acts as a barrier to easy entry but also creates opportunities for corruption. The lack of national quality standards and the absence of mechanisms to ensure compliance with the stan- dards usually translate to inadequate quality of care. Inforniation dissemination. Another very important function of the state is to serve as a vehicle for public information. Information em- powers consumers of health care to take charge of their health through appropriate behavior modifications and to successfully nav- igate the public and private health systems. When consumers pay out-of-pocket for health care, the negative effects of being misin- formed are extremely high, and the consumer is liable to receive health services that are poor value for money. A PHSA should col- lect and analyze information on this topic to determine if the state is performing this function and, if it is, to identify the strengths and weaknesses of the particular program with regard to private health care provision. Identifying Policy Options Following analysis along the lines discussed above, the next step is to identify goals and objectives for private sector participation in the provision of health services. The goals and objectives can be broadly 124 0 Private Participation in Ilealth Services classified into (a) improving the operation of the existing private health sector in the areas of equity, quality, and cost-effectiveness; and (b) supporting expansion of private sector health care delivery to address issues such as coverage and access. In some countries a blend of both goals and objectives might be selected. In others, de- pending on the extent of private health markets, the goal might bc defined as the creation of a policy environment conducive to effec- tive private sector participation. Based on these goals and objectives the next steps are to use the information from the PHSA to identify the priority problems in each area, to identify their determinants, and to make policy recommendations that will address the prob- lems. Besides identifying the various policy options, it is also im- portant to specify the actors, groups, or level at which the policies are targeted (for example, these might be third-party payers, pro- viders, or consumers). In developing policies, reference to the conceptual and analytical framework described in chapter 1 is necessary, regarding the ap- propriate domains of action for the public and private sectors. To recapitulate: o There are key market failures in private health markets that are related to public goods, externalities, competition failures, asym- metric information, and missing markets. o The public sector has a range of instruments for correcting these failures, including financing, information provision, and regula- tion. These are core activities for governments in the health sec- tor, falling in the domain of its stewardship responsibilities. o The government must take responsibility for the health care goods and services used by the population, and not just their own publicly operated facilities. o The particular nature of a health good or service, as determined by contestability, measurability, and information asymmetry, pro- vides guidance as to which private activities are more amenable to policy influence. Conducting a Private Health Sector Assessment * 125 Key Policy Areas to Consider in Formulating Policy Recommendations In most developing countries, five policy issues will be of concern. Enhanced targeting of publtc expenditures. Usually, the most powerful instrument at the government's disposal for influencing the private sector is the use of public funds. Therefore, in order to improve their interaction with the private providers, policymakers must be willing and able to calculate and identify the most important uses for public funds-and must evaluate the potential impact of funding public and private provision. Absent such comparison, public funds are likely to flow exclusively to public facilities, and opportunities to achieve sec- tor objectives through working with private providers will be missed. For example, the data may show that, although public expenditures are allocated for government provision of primary health care, the majority of the poor pay local providers out-of-pocket for inade- quate or low-quality care. In that case, the recommendations should explore whether primary health care allocations can be better used by buying services directly from the private sector, and should con- sider the leverage that might give government in regulating the pri- vate sector. In addition, the fact that the government decides to con- tract or outsource primary health care services could encourage the entry of new private providers, thereby improving provider choice for patients. The right kind of contracting could prove a win-win situation for the public and private sectors (see chapter 3, "Con- tracting for Health Services"). Improving the effectiveness of contracting ar-rangenients. In many cases the government may already be contracting with the private sector for specific inputs or health services, but the contracting process may not be efficient or transparent. This information should become known in the course of interviews and focus group discussions with the private sector and key public sector officials, and should be presented in the PHSA analysis. This section of the PHSA should highlight some key weaknesses in current government contracting arrangements and out- line approaches for improving the system. Depending on the avail- 126 0 Pnvate Partcipation in Hlealth Services ability of the information the recommendation could highlight the need for additional analysis, which can be addressed through a PHSA Part 3. If adequate information is available the policy recommenda- tions could suggest ways to improve the current system. T he recom- mendations should include ways to make the government a more informed and more efficient purchaser of services from the private sector. It should also present ways of improving government business practices to make it a better business partner for the private sector. Improving the effectiveness and imple-mentation of reg-ulations. The im- provement of the regulatory framework and the implementation of these frameworks in the context of private provision are major con- cerns in many developing countries. Essentially, governments can use a combination of legal restrictions and incentives to regulate and encourage the private sector by, for example: o Designing regulations in areas such as quality of care, standard setting, and others if these do not already exist. if such regulations do exist recommendations should focus on ways of improving them, such as by strategic updating. o Getting rid of regulations that create barriers to private sector entry. o Improving the implementation of regulations by developing in- centives and censures through direct and indirect mechanisms, and by increasing the resources and attention devoted to regulation. The formulation of policy recommendations is context specific. For example, in many countries a regulatory framework for the pri- vate sector may not exist or may be outdated and ineffective. In these cases, the regulatory framework will have to be strengthened. Other countries may have an adequate regulatory framework but imple- ment it poorly. Another group of countries may have to strengthen both the regulatory framework and its implementation. Developing a workable plan for improving regulations, in light of a country's types and forms of institutions and organizations, may re- quire additional data collection and analysis of different options from Conducting a Private Health Sector Assessment * 127 those in use. For example, in a country that has a rich tradition of NGOs working in the health sector, some regulatory functions could be contracted out to these NGOs. (For details on regulatory strate- gies and institutional arrangements adopted by different countries, see chapter 4 ["Regulation of Health Services"] of this handbook.) Improvinzg competitiveness. Government policies play a critical role in making the business environment more competitive and reducing the opportunities for the growth of monopolistic cartels that tend to con- trol prices. In Australia and the United States antitrust laws and reg- ulations prevent private organizations, including health care organi- zations, from forming monopolies and colluding to control prices. Mitigating the adverse selection problem. One source of problems in the private (for-profit) sector is the profit motive, which offers every incentive to maximize the difference between revenues and expendi- tures. This may lead providers to cream-skim7, choosing to serve only young and healthy patients, particularly if the payment mechanisms are not risk adjusted. Government's policy role here is important in order to prevent adverse selection issues-that is, those issues that are related to private health insurance and private delivery of health services. For example, by adopting the correct provider-payment mechanisms for contracting the government can mitigate private providers' opportunities for adverse selection. The government also plays a role in ensuring that poor and vulnerable groups are not ex- cluded from health care in the private market context, particularly through mandating community ratings and risk pooling. Information resozurces at completion of PHSA, Part 1. Upon comple- tion of PHSA Part 1, information about the following should be available: * Structure and function of the private health care market and its place within the overall health sector * Main demand and supply factors influencing private sector provi- sion 128 0 Private Participation in Iealth Services o Main weaknesses with regard to private provision (for example, quality of care and equity); recommendations on actions to miti- gate the problems; and relation of these problems to failures of government's stewardship finction o Main constraints on private sector development, in either a par- ticular sector, area, or type of service, and recommendation for public policies that can be adopted to reduce these constraints. FHS$ prf 2: -; ; Once the information from PHSA Part 1 is available in the form of a policy brief, the next step is to organize a stakeholder consultation. The development and implementation of policies to support private sector participation in health care requires consultation and col- laboration between the government and key stakeholders (defined as private for-profit and NGO providers, and consumers). In most countries the channels of communication between the government and these stakeholders are lirnited or even nonexistent. Therefore, the earlier the consultation and participation process is started the easier it will be to get key stakeholders on board for implementation of selected policies to engage the private sector. The PHSA, Parts I and 2, is a good starting point for the consultation process, since the information from Part 1 can be extremely informative and provide grounds for discussion about Part 3. Participation can be solicited in various ways, such as by: o Involving stakeholders (defined as private for-profit and NGQ providers, and consumers) in the coordinating group for the pri- vate sector and health strategy that is likely to emerge from Parts 1 and 2 of the PHSA. o Consulting with stakeholders throughout the Parts 1 and 2 process and while formulating the strategy. Conducting a Private Health Sector Assessment * 129 Ensuring stakeholder representation in particular thematic areas and groups that will feed into the overall strategy development. For example, consumer groups may play an important role in reg- ulation, and may be the direct beneficiaries of government pro- grams for empowering consumers through information. There- fore, it makes sense to involve consumer groups in assessing this thematic area. For the thematic groups on "making the business environment conducive to private sector participation" and "con- tracting as a mechanisms for harnessing the private sector," it makes sense to involve private providers, who are the key stake- holders in the process. Throughout the PHSA process it is important to remember that the stakeholders in private sector participation are often unaccus- tomed to being consulted by the government. Private providers who have little interaction with government may feel threatened by the idea of participating. Therefore, it is important for the government and those organizing the stakeholder workshops to be extremely open and transparent about the goals and objectives of the consulta- tion process, and to ensure that the time stakeholders spend at the workshops is well used and that their thoughts and comments are taken seriously. In addition, it is important to maintain continuity in the process, and to organize at least several meetings with the stake- holders and to report to them if specific recommendations have been followed up. PHSA Part 3: Developing Workable Strategies and a Policy Brief Part 3 of the PHSA is designed to collect and analyze information on the private sector with the objective of developing specific, work- able strategies. This work could include: * An inquiry into private sector capacity to meet specific needs, such as primary or ambulatory care and acute-care services, or the needs of a target population in a particular region. For example, the World Bank's Latin America and Caribbean Region has developed 130 Private Participation m I lealth Servmces survey instruments for evaluating the capacity of NGOs based in rural areas to provide primary care services under contract. o A disease- or program-focused study to strengthen the private sector's ability to contribute to child health services, tuberculosis (TB), STDs, or HIV/AIDS detection and treatment. Box 2.7 de- scribes several studies that have focused on these areas. o Strategies for improving the regulation of private health services. Regardless of the focus or the findings, the results should be pre- sented in a policy brief. This brief should be user-friendly and jargon-free, and the recommendations should be "actionable." User-friendliness can be enhanced greatly by selecting the story or story line of the brief, to enhance the structure and narrative flow. The purpose of Parts 1 and 2 of the PI ISA is to raise decision- makers' awareness of the current role and status of private secter participation in health and to help identify policy actions toward tec private sector. At the completion of Part 3 decisionmakers and other stakeholders should be able to identify a few areas within private sec- tor participation in health that are important in the context of the country's priorities in the health sector. For example, decisionmak- ers may support the idea of encouraging private sector participation in the hospital sector in certain urban centers. In these cases a more in-depth study, focusing on the strategies needed to mobilize private sector participation in this area, will be necessary. Several examples of such studies are listed in appendix 2.A. In order to conduct a detailed study of this nature and identify strategies, it is necessary to be clear about: o The segment of the private sector that is targeted (for example, whether hospitals, primary care providers, or retail pharmacies) o The type of services targeted (whether encouraging the private sector to provide preventive and promotive health services, con- tracting out surgical procedures to private hospitals by the gov- ermnent, improving drug prescription practices among retail pharmacies) Conducting a Private Health Sector Assessment 0 131 Box 2.7 Studies Exploring Strategies for Enhancing the Private Sector Contribution to Public Health Objectives NGOs and women 's health seNvices in Haiti. This study exam- ines the work of three NGOs in Haiti in the delivery of women's health services. The study uses several concep- tual frameworks to evaluate NGO performance-to com- pare NGO development strategies; to describe health ser- vices; to document imnovative strategies; and to summarize lessons learned. According to the study the NGOs provided approximately 70 to 88 percent of essential women's health services, and are working to eliminate the three delays that most influence maternal mortality. All three NGOs face common weaknesses in addressing delays related to travel time, transportation, and cost. All three NGOs use a com- bination of facility-based and community-based health de- velopment strategies, and at least two are working to ad- dress sustainiabihty issues. http://wblnO013/External/lac.nsf/ Sector+Units/LCSHD/. Private providers and TB. Studies have been conducted on the magnitude of private provider involvement in TB treat- ment in India, the Philippines, and Vietnam. These studies describe the approximate magnitude of private provider in- volvement in the treatment; the main problems in private treatment, especially the gap between expected standards and providers' practices and the implications for TB con- trol in these countries; and some public-private mix strate- gies for involving private providers in TB control, particu- larly in complying with national TB program guidelines. Some of the reconumended strategies include education, and contracting with private providers to deliver TB care. http://www.who.int/gtb/policyrd/TBPPM.htm. Private providers and integrated management of childhood ill- nesses. The USAID-funded BASICS Project conducted (Box continues oN the following page) 132 * Private Participation in Health Services Box 2.7 (continued) studies in Bangladesh, India, Indonesia, and Pakistan to identify appropriate strategies for involving private pro- viders in the integrated management of childhood illnesses (IMCI). This was based on the rationale that, since the pri- vate sector is an important provider of child health services in these countries, success in implementing IMCI could not be achieved without involving private providers. As was the case for the TB studies these studies also focus on under- standing the magnitude of child health services provided through the private sector, providers' current treatment practices for childhood illnesses, and provider incentives and motivations. Specific strategies focus on training the providers, contracting with them to meet IMCI standards, increasing consumer awareness of IMCI, and defining rea- sonable expectations for private treatment. These interven- tions were tested on a pilot basis in all four countries. http:// www.basics.org. Private providers and reproductive health services. Various USAID projects (such as SOMARC and PROFIT) have targeted their efforts at harnessing the private sector for de- livery of quality reproductive health services (particularly family planning). Under these projects various private sec- tor assessments have been undertaken to understand the range of demand- and supply-side factors affecting private sector delivery of family planning services. Demand- and supply-side interventions have been designed based on these studies. The sustainability of the interventions and the fact that donor support for harnessing the private sector was not sustainable have led more recent efforts in this area to take a close look at the environment for private sector participa- tion, including government policies. http://www.tfgi.com/ somahome.asp. Conducting a Private Health Sector Assessment * 133 * The area and population targeted by the study (such as urban upper- to middle-class to support market segmentation policies, or the poor living in urban and rural areas) * The types of strategies that have worked in addressing the partic- ular area of concern and ways these lessons of experience can be used to develop local strategies * Multipronged strategies that target various levels of the health system such as government (whether policies or programs), pri- vate providers, and consumers Because the topics that might be covered under Part 3 of the PHSA are numerous, step-by-step guidance cannot be provided for each topic. A list of documents included in appendix 2.A also provides in- formation on various country examples and case studies. Conclusions This chapter of the handbook has explained how to do a PHSA with an eye to working with a country's private sector to achieve health sector goals such as improved access, efficiency, quality, and cost- effectiveness. It encourages evaluators of the private sector to move from a broad perspective of the private sector's nature and charac- teristics to the identification of specific areas where the private sec- tor can be mobilized. To recapitulate, the major steps in a PHSA are: 1. Get a broad picture of the organization, management, and fi- nancing of the health system. 2. Determine the structure and function of private health care mar- kets. In other words, understand the demand, supply, and price characteristics in the private sector, the particular market failures, and key constraints in mobilizing the private sector for health. 3. Hold business consultations and stakeholder meetings to discuss and deliberate on the results of the private sector overview and 134 o Private Participation in Health Services identify medium- and long-term plans for developing an appro- priate public-private mix. i2A Cc- for examination is 9 re-examination taken Possed Passed License is License is awarded awarded Hospital is open] (Physician begis to treat patients Qmedical practice Regulation of Health Services o 259 Box 4.11 The Kyrgyz Republic: Hospital Licensing Standards In order for a hospital to receive a license in the Kyrgyz Re- public, the following standards must be met: o A licensed physician who is responsible for assuring that every patient is diagnosed as to the nature of his ailment and receives either effective therapy to alleviate the mal- ady or palliative care in cases where effective therapy is not available. o Nursing care any time there are patients at the facility. o A bed that is occupied by a single individual, except in sit- uations of extreme need. At no time may more than one person occupy a bed when such sharing would result in an adverse medical outcome for any of the persons. o The minimum set of medical equipment and surgical in- struments required by existing norms. o Linens, bed supplies, and other "hotel" service necessities. o Sanitary facilities adequate to prevent the spread of com- municable disease. o Safe drinking water. o Food service providing meals appropriate to patients' needs, adequate kitchen facilities, or arrangements with outside contractors to provide food for patients. o Transport, or regular and reliable access to transport. o A working telephone in each facility. O Compliance with public health and environmental standards. Source: Becker, Ente, and Standards Development Commit- tee 1995. 260 O Private Participation in Hlealth Services inspected for evaluation of their physical standards, laboratory fa- cilities, kitchen sanitation, fire safety, radiological hazard protection, and related matters. Enforcement of these laws was, however, weak, since the staffing of the state inspection authorities (usually the state's department of health) was generally meager. lMoreover, most of the state laws stressed standards connected with the hospital's physical features and demanded little in the way of standards for the functioning of the staff. The U.S. JCAHO was established in 1950 to compensate for this deficiency (refer to box 4.10). In Western Europe the level of government authority responsible for facility licensing differs from one country to another. In both the British and French systems the national ministries of health prom- ulgate quality standards for both construction and operation of hos- pitals, but regional or provincial authorities monitor them. In the United Kingdom, where most hospitals are owned and controlled by the central government, this task is performed directly through public sector administration. In France, where the government sponsors a large proportion of hospital beds, but not all, the imple- mentation of standards is particularly challenging for the non- governmental minority (Roemer 1977). Hungary established minimum hospital standards in 1997 that are implemented by the regional offices of the ministry of health. Even though 35 percent of Hungarian hospitals have failed to reach the minimum standards, none has been closed (Scrivens 2001), a fact that underscores the importance of ensuring standards are rele- vant in the local setting. The impact of setting standards is under- mined when a large portion of hospitals cannot meet them, since noncompliers feel relatively less concern about enforcement if they represent a substantial portion of the sector. In China's decentralized model the provincial authorities autho- rize operation of new hospitals or health centers, but the facilities may voluntarily obtain advice on technical standards from the cen- tral health ministries. In practice, hospital beds are so badly needed and the resources to build them so limited that the impact of starn- dards has been low. Regulation of Health Servces o 261 Box 4.12 Germany: Regulating Nursing Staff Numbers In Germany the 1993 Health Care Structure Reform Act established mandatory nursing time standards that directly translated into necessary nursing personnel. According to that regulation a daily documentation of nursing activities put every patient in one of nine categories with a standard- ized amount of necessary nursing time. The total amount of minutes per ward and per hospital was used to calculate the necessary nursing staff. Nursing time standards were intro- duced to end the period of (perceived) nursing shortages. It was expected that 13,000 new jobs would be created. After the regulation had led to 21,000 new nursing jobs in only three years, it was abolished as too costly and restrictive for hospitals. Sources: Busse and Schwartz 1997; and Busse 2000. In most LMCs, imunistries of health are charged with licensing new health facilities. However, licensing is mostly a one-time pro- cess, and disciplinary controls are rarely exercised if a hospital fails to meet central government standards. Germany used a form of structure-oriented regulation in the mid- 1990s to increase the amount of nursing resources available in the delivery of acute-care services. They did so through establishing mandatory norms for staffing (in this case, the nursing intensity of patients treated). The new standards brought about a direct increase in the number of nurses employed in the facilities (box 4.12). Personnel licensing. Personnel licensing is the process by which legal permission is granted by a competent, usually public, authority to an individual to engage in a practice or an activity that is otherwise unlawful. Licensing is thus mostly mandatory. A license is usually 262 o Private Participation in Iealth Services granted on the basis of examination or proof of education, or boch, rather than on measurement of actual performance. The agency, by issuing a license, certifies that those licensed have attained the min- imal degree of competency necessary to ensure reasonable protec- tion of public health, safety, and welfare. A license is usually perma- nent but may be conditional on annual payment of a fee, proof of continuing education, or proof of competence. Grounds for revo- cation of a license usually include incompetence, commission of a crime (whether or not related to the licensed practice), or extremely immoral behavior. The scope of responsibilities of licensing agencies varies from one country to another but may involve some of the following activities: o Examination of applicants' credentials to determine whether their education, experience, and moral fitness meet statutory or admin- istrative requirements o Administration of examinations to test the academic and practical qualifications of medical graduates against preset standards o Granting of licenses on the basis of reciprocity or endorsement to applicants from other localities or foreign countries o Issuance of regulations establishing professional standards of practice o Investigation of charges of violation of standards established by statute and regulation; suspension or revocation of violators' li- censes; and restoration of licenses after a period of suspension or further investigation. Personnel licensing practices vary from one region of the world to the other. In the United States and Canada individual states or provinces (not federal authorities) have the legal authority to license practitioners, a practice that is relatively uncommon around the world. The states and provinces generally coordinate their activities through voluntary membership in national associations (the Federation of State Medical Boards in the United States and the Federation of Provincial Medical Licensing Associations in Canada). The requirements for li- Regulation of Health Services * 263 censure typically include graduation from an accredited medical school; postgraduate training in an approved internship or residency program; and passing a national examination-in the United States, the U.S. Medical Licensing Examination (USMLE) or, in Canada, the Medical Council of Canada Licensure Examination. The USMLE is administered by the nongovermnental voluntary National Board of Medical Examiners, which standardizes licensure standards nationwide through this unified exam.' Over the years reciprocity gradually grew among U.S. states and among Canada's provinces in recognition of one another's licensees, thus permitting mobility of doctors. Reciprocity between the two countries is more complicated and depends on the state and province involved (HEW 1977). In Germany standards are set nationally by law, but the states (in German, "Lander") do the licensing. In the United Kingdom personnel licensing is a function of the General Medical Council (GMC) and is available only to graduates of accredited institutions. In Australia licensing is done by the state (or territory) medical boards. These boards make decisions about the qualifications of ap- plicants seeking licensing. Applicants whose credentials are not ac- ceptable must pass an examination, which is currently conducted by the Australian Medical Council. In Eastern Europe and in most developing countries governmen- tal personnel licensing is limited to granting entry permission with no attempt to assess competence. Licensing of physicians with the ministry of health follows automatically from completion of pre- scribed courses of training-without any additional licensing exam- ination. In Colombia's ministry of health, for example, there is a council of professional practice that registers all physicians and other health personnel who have completed training at a recognized school. Physicians must also show proof of a one-year hospital in- ternship, plus a second year of service in a public health post or a rural facility. Many Latin American countries require the latter form of service as an approach to solving the shortage of rural doctors. Nurses and allied health personnel are registered in essentially the same way as physicians. Beyond these formal licensing procedures, physicians, dentists, and others engaged in individual practice must 264 o Private Participation in Health Services join a professional society for purposes of ethical control over their behavior. These societies may also engage in bargaining with gov- ernment agencies on rates of payment for services, or they may es- tablish parallel nongovernmental bodies for such purposes. Process-Oriented Quality Regulatiovn Structure or input-oriented regulation is the most basic form of health services regulation. It is clear that health care delivery can still be of poor quality even if all needed inputs are available, howevcr. Policymakers therefore utilize more sophisticated forms of regulation that focus on the actual process of producing and delivering health care, as well as the output, or service. In the rest of section 4 we dis- cuss the process; in section 5 we discuss regulation of service outputs. In health care, process-oriented regulation is applied to providers as well as to educational programs and organizations. It is applied both prospectively and retrospectively. Facility accreditation. Accreditation is the formal process by which an authorized body evaluates health care facilities according to a set of standards describing the structures and processes that directly con- tribute to desirable patient outcomes. These standards provide guid- ance on achieving the highest level of care quality that is possible with the available resources. When a hospital meets or exceeds tele structure, process, and outcome standards of the care delivery sys- tem it earns the honor of accreditation (figure 4.4). Accreditation is the most common form of external review for health care facilities. The earliest attempt to set and monitor standards for health care organizations was initiated in the United States in 1917. Although full-fledged accreditation programs have been established in only a few other countries (such as Australia, Canada, and New Zealand), recent experience suggests that accreditation programs can be insti- tuted in many more countries if the standards reflect realistic condi- tions in local facilities. The definition of quality in accreditation models has evolved in recent years from standards monitoring to continuous quality im- provement (CQI) or total quality management (TQM). The notion Regulation of Health Services * 265 Figure 4.4 The Accreditation Process Standards define Survey evaluates facility optimal performance, ioperatons and provides given existing recommendations resources for improvement Accreditation body Facility is awarded t determines if facility accreditation has earned _ ~~~~~~~~~~~~~accreditated status _ of standards implies fixed points in the definition of quality-points that may, from time to time, be revised and upgraded but that pro- vide clear-cut criteria and well-defined targets. The notion of quality, as interpreted in the CQI and TQM ap- proaches, implies a continual process of self-examination, a never- ending effort to improve without a fixed end point. The concept of quality as something in a continuous state of evolution is now being incorporated into modern accreditation models. Accreditation models in Australia, Canada, and the United King- dom are reviewed in boxes 4.13, 4.14, and 4.15. The review shows a case study in the international propagation of models in the health policy arena. The U.S. model of accreditation directly shaped the systems in Australia and Canada and indirectly influenced develop- ments in Britain. In each case, however, the model had to be adapted to national circumstances. As a result, despite their common ances- try, there are revealing differences in these four countries' systems. However, they are also converging in the way that they are revising their approaches and standards. All accreditation systems are devis- ing or considering outcome indicators that measure the quality of 266 * Private Participation in Health Services Box 4.13 Australia: Health Facility Accreditation The Australian Council on Hospital Standards (subse- quently renamed the Australian Council on Health Care Standards) was launched in 1974 in Victoria, subsequently extending its functioning to other states. The Council was the product of a long campaign by the Australian Medical Association and the Australian Hospital Association. The influence of the U.S. JCAHO model in shaping this initiative was widely acknowledged. As in the United States (pre-1993) the medical profession dominates the membership, although nurses, allied health profession- als, and consumers are also represented (albeit sparsely). Like its North American counterparts, the Australian Coun- cil has adapted its accreditation processes over the years. Two developments, in particular, are noteworthy. First, the Australian Council puts much emphasis on reviewing the quality assurance activities of the facilities being accredited, as part of its emphasis on promoting continuing improve- ment in the quality of care. Second, like the JCAHO, the Australian Council, in cooperation with the medical col- leges, has been developing a set of clinical outcome indica- tors, the first of which were used in accreditation reviews during 1993. - Source: Scrivens, Klein, and Steiner 1995. care provided more direcdy than the traditional review of inputs and processes. The focus is also shifting toward assessing quality in terms of the patient's experience, and a growing emphasis is being put on quality improvement rather than assurance. Striking differences emerge, however, in other respects, partic- ularly between the U.K. and the U.S. systems. In the United States the JCAHO has become a quasi-governmental accrediting body. Regulation of Health Services o 267 Box 4.14 Canada: Health Care Facility Accreditation- The Peer Review Model The Canadian Council on Hospital Accreditation (renamed the Canadian Council on Health Facilities Accreditation in 1988) was founded in 1958. Like the JCAHO, it is an au- tonomous body. Unlike the JCAHO, it was officially recog- nized from the start, receiving its letter patent from the sec- retary of state. It is the sole authority to accredit hospitals in Canada, and its accreditation activities embrace not only general hospitals but also long-term, mental health, and re- habilitation facilities. The Canadian Council's history, like that of the JCAHO, is one of steady expansion. By the end of the 1980s it was accrediting around 1,300 facilities annually. The results of accreditation visits are graded from nonaccreditation to a four-year accreditation, with four intenrediate awards. It also engages in a continuous process of standards revision. Ln 1990 a marked shift in the standards occurred, which re- duced the number of questions and marked a move toward outcomes instead of inputs and processes. Unlike the situation in the United States, there is not strong financial pressure to receive accreditation. The coun- cil's emphasis is on orgamzational education and self-devel- opment. The client for accreditation in Canada is the in- dividual health care provider. The accreditation process is designed to act as a yardstick by which health care organi- zations can measure their own perforIuance against national standards. However, the Canadian Council has permitted some moves toward regulation, at least for training pur- poses, in that it is required of hospitals wishing to train med- ical interns and other health professionals. (Box continues on the following page) 268 o Private Participation in Ilealth Services [X3 4 .: 4tDndL2 I The C anadian system is less Dur-cauer: ic and lcgai-stic than the U.S. model, and che acc.-C1i .aIcn !cnmcitaLzcan much less complex. Less c -lpblasis s p a:, o rziyng to, r-educe t'he discretion of rsureyors i)y clal-_nroic sco,fing svster.-s. The Canadian system is also mulch closo_r Lo z .-cfcssiez peer revicw model than thlc J.S. on-,-ig . Soutrce: Scrivens, Slein, ad $ei e- S iY)5. Though theoretically voluntary, it has become a prerequisite key to accessing public funds, and is therefore virtually merged with gov- ernment regulation. In contrast, accreditation in Britain is still pre- dominantly an exercise in self-improvement, and can be seen as an offspring of the quality movement rather than an instrument of pub- lic policy. Australia and Canada are somewhere in between the U. and U.S. models. In neither Australia nor Canada has accreditation become a condition for access to public finance, but in both cases- in contrast to Britain-a national body uses national standards to ac- credit hospital activities. Efforts are under way to develop and implement hospital accred- itation programs in many more countries worldwide (appendix 4.C). Within the last few years accreditation has been spreading to many Western European countries (Scrivens 2001). The Netherlands, for example, is implementing a universal hospital accreditation pro- gram, and Belgium and France have introduced accreditation sys- tems run by their national governments (box 4.16). Accreditation is also being considered in most Central and East- ern European countries, as well as in several low- and many other middle-income countries. The approach taken in these countries has been to conduct an appraisal of local conditions and available re- sources and to modify another system's standards to reflect a level of Regulation of Health Services o 269 Box 4.15 United Kingdom: Health Facility Accreditation The hierarchical control of the National Health Service (NHS) over Britain's health care system has traditionally obscured quality issues, since the issues were perceived to be handled internally. The interest in standards began to develop after the hospitals were made somewhat more in- dependent following the 1991 reforms. In contrast to the North American experience, the changes were not driven by the medical profession, which has remained on the side- hnes, and have not led to the creation of a single dominant accreditation body. Instead, progress toward accreditation has been halting, and a number of competing actors have taken part. Britain's only comprehensive hospital accreditation sys- tem operates within one Regional Health Authority (South Wlestern) and is directed only at small and community hos- pitals. This was derived from the Canadian model, has ex- plicit standards, uses health service practitioners as survey- ors, and awards a pass or fail. The standards focus only on organizational processes and make no attempt to incorpo- rate clinical standards. There is also a partial accreditation system developed as an independent foundation by King Edward's Hospital Fund in London. The fund, with a mission to improve quality in the NHS, has been testing JCAHO standards in pilot hospitals. Again, the focus was on organizational processes with no attempt to incorporate clinical audits or outcome indicators. Later, the fund established an Or- ganizational Audit Scheme and is now moving toward grading outcomes and becoming a full-fledged accredita- tion system. (Box conztnues on the following palge) 270 * Private Participation in Health Services Box 4.15 (continued) Last, the private health care sector is pushing for an ac- creditation system, which it sees as an advantage in com- peting for contracts in the NHS internal market-as well as substituting for potentially increased public regulation. Some hospitals are actually accrediting themselves, using a national system, designed for all service industries, that sur- veys the effectiveness with which participating institutions maintain the standards they set for themselves. Sources: Scrivens, Klein, and Steiner 1995. care that can be achieved, given environmental realities (box 4.17). The JCAHO, building on its experience in accrediting health care institutions in the United States, has established an international ac- creditation division to provide technical assistance to countries try- ing to introduce accreditation as a regulatory instrument (box 4.18; see also JCAHO Web site at http://www.jcaho.org/). More electronically available resources are listed in appendix 4.D. Educational accreditation. Above we discuss accreditation related to service provision. However, health care quality is also strongly influ- enced by the quality of education of health workers. Hence accredita- tion of educational programs and organization related to health care is another critical regulatory instrument for enhancing health care quality. Educational accreditation is the regulatory process whereby an external association or agency grants public recognition to a school, institute, college, university, or specialized program of study meeting preset criteria or standards, as determined through initial and periodic evaluations. The purposes of accrediting educational institutions include: * Establishing criteria for professional licensing * Assisting prospective students in identifying acceptable programs Regulation of Health Services o 271 Box 4.16 Belgium and France: National Accreditation Systems The Belgian system, introduced in 1987, is administered by local government. Participation is compulsory, and proof of accreditation is required for contracting with and re- imbursement from the national insurance system. The na- tional standards are based on planling requirements and are structLural in nature; local government can add standards to reflect local needs. This is actually a form of inspection. Surveys of compliance with the standards are undertaken by full-time civil servants who visit every hospital at least once every five years. France adopted accreditation in 1996, which requires all public and private health care organizations to partici- pate in an external procedure of evaluation. Accreditation is intended to ensure continuous improvement in the quality and safety of care and to promote standardization of hospi- tal and health care organization. The accreditation process is managed by an external agency called the Agence Na- tionale d'Accreditation et d'Evaluation en Sante, which is tasked with developing the standards and designing and implementing the accreditation process. Source: Scrivens 2001. o Stimulating higher standards among education institutions o Identifying institutions and programs for investments of public and private funds and providing bases for determining eligibility for governmental assistance. The accreditation process usually involves these basic steps: o The accrediting agency, in collaboration with professional groups and educational institutions, establishes standards. 272 0 Private Participation in Health Services *n A;. v d7X,>w ,Kl> L. . v- in 1997 Zambian health :iCvmake-s ie-utificd as a -e' ,in priority the developmelnt ,f a ocal;sTr for establishing standards and evaluating 1ospitals. ^h faciltiate thc 1esig of an accreditation pi- -a1, < tritidisciiIiary advisowv group called the Zamb'I >iealtl Accredlit-aicn ',Lncil (ZHAC) was establishcd. The ZH EAC was acti,clv :nvclved in cldvckoping ondl field-testing a first drafL of standards 1 haI idcntifie 13 l;ey functional areas for eve - I spiaU as N.ell as 'f9 peVor- mance standards and ^sso a ted resuirahle cri.cr a. '-k set of d!Lraft standards was disributedC L, all hosrmtals anld health profcssionial associ t.ions t-ioughocit Zainbia Is Part of a consensus-building p-,oc2ss o', as a 4'We-d rCv:CVt.%1 Followivng the field review, the standadiLls v:crc rev,sed, andn a draft survey process was dicvelopc-i an(id eeltd tested at hos- pitals of various sizes and types, -anping franr a 00-bed mission hospital in a ru--al vdillagc tWo ia :,8020-bcd teach`ng hospital in a major city. :.ccause of iiiited resources and the relative absence of Z'r-al i ^ii.en ,-uiices and procC- dures in mcst Zaiibian h::s ta!s, much of ,lC so--ev's eii- phasis is on evaluating p--cesscs atnd outcomes e' c2;c through observation ard interliet The monitoriing and eU-laiiot "it cf -le ccntral board of health, operating under the dirccLonIl o' hc cnirt;sti-y of` health, administers the hosptal accredita-tion progran. A.1 l.~?R~ $ 0d, Q25g AssusrClnc( e s§$rce Q( lEntermatiolal-http://www.qci-intl.com This full-service consulting, training, and publishing firm is a source for products and services related to total quality management. It focuses on teams such as employee involvement teams, with spe- cial emphasis on building facilitator and team-leader skills. Medlical Quuaity Assurance-http://www.doh.state.fl.us/mqa MQA is responsible for planning, developing, and coordinatinlg programs and services of 18 regulatory boards, six councils, and five professions directly administered by the Florida Department of Health. MQA develops policies to regulate medical professionals while protecting the health and safety of Florida residents. Many links are available, including health care provider license look-up and information on regulated professions. H(2Q1H¢Q-http://www.hqhq.org This Web site provides online training for health care profession- als. The training is certified as fulfilling the requirements in the United Kingdom for continuing medical education. An "Evidence of Learning" section gives participants a chance to check their ovn progress (including their responses to text questions) via an e-mail review. international Society fir (Qualty in Ie th (Care- http://www.isqua.org.au This international nonprofit organization, based in Australia, pro- vides a forum for individuals and institutions with a common inter- est in health care quality, to share expertise via a multidisciplinary forum. ISQua is supported by members, including leading quality health care providers and agencies in just under 70 countries. ISQua runs the Agenda for Leadership in Programs for Health Care Ac- creditation, which: assesses and endorses the standards of national organizations against internationally approved principles for health Regulation of Health Services * 325 care standards; surveys and accredits national accreditation bodies to international standards for performance excellence; and assists countries to develop health care accreditation programs. ISQua pub- lishes the International Journal for Quality in Health Care. http:// www.isqua.org.au/isquaPages/journal.html IQMA Classifieds-http://www.openhouse.org.uk-E-mail address: iqma@openhouse.org.uk This site is a clearinghouse for people interested in all aspects of quality assurance. Individuals may post classified ads in these cate- gories: quality-training courses, recruitment, articles for sale, articles wanted, research, publishing, and general classifieds. This Web site is not specifically oriented to health care. AddVal Inc.-http://www.addvalinc.com AddVal Inc., founded by nurse executives, specializes in creden- tials and primary verification, quality improvement, and accredita- tion consultation. Its mission is to add value to health care. It creates products and services for physicians, managed care companies, and hospitals. Its nurse consultants create specific work plans for organi- zational needs and resolve issues in a timely fashion. Appendix 4.E Case Studies Germany: Regulating Technology Capacity and Diffusion Evaluating the success of CON-type regulation is difficult. This can be demonstrated using the example of Germany, which experiences continued conflict regarding the diffusion of expensive medical de- vices and their distribution between the ambulatory and hospital sector (Bruckenberger 1998). This judgment is a result of assorted attempts by corporatist and legislative bodies to improve planning of expensive medical devices in light of increasing costs and new types of devices such as extracorporal shock-wave lithotripsy. Until 1982, when expensive devices came under hospital planning requirements, 326 o Private Participation in Health Services they had not been regulated. Since then, devices that were not part of an agreement could not be considered in the per diem charges, and thus their costs could not be covered in social insurance pay- ments (the Swiss use a similar regulatory approach). Between 1989 and 1997 diffusion and regional distribution of expensive medical equipment for supply to the population covered by social health in- surance were controlled intersectorally through joint committees in- volving both the hospital and ambulatory sector. Site planning was accomplished by state-level committees, made up of representatives of hospitals, doctors' associations, health insurance funds, and a state representative. They negotiated aspects of the joint use of devices, service requirements, the need for the technology based on popula- tion density and structure, and operators' qualifications (Perleth, Busse, and Schwartz 1999). Though abolished in 1997, the regulation appears to have been relatively successful in containing excess technology diffusion and related cost escalation during the period it was utilized Jakubowski and Busse 1998). Maryland, United States: (Combining Cometiion with Regulation for (Cost (Continment Price regulation and competition are traditionally viewed as alterna- tive cost containment mechanisms. The U.S. state of Maryland has successfully combined price regulation and competition in the hos- pital market to contain costs. In the United States the lack of com- prehensive cost control programs, encompassing all payers and providers, frequently leads to cost shifting. In the early 1990s the growth of managed care made costs more difficult to shift, resulting in reductions in care to the uninsured or underinsured. Maryland is one U.S. state where the success of an all-payer system in contain- ing hospital costs coincided with substantial growth in enrollment in health maintenance organizations (lIMOs) over the last decade. Some inferences can be drawn from Maryland's experience about the compatibility of all-payer systems and managed competition. Regulation of Health Services * 327 In 1971 Maryland was the first U.S. state to implement an all- payer hospital rate-setting system. The system uses a quasi-public utility approach to hospital rate regulation. The principle of rate set- ting is to base hospital reimbursement on the reasonableness of the relation between costs and charges across all the payers. Each Mary- land hospital has had at least one full rate review. Most hospitals also have their rates revised each year. The revision process takes into consideration inflation adjustments, volume adjustments, and changes in payers and case mixes. If a hospital's revenues per admission are less than (more than) its cap, it will receive additional (reduced) revenues through higher (lower) updates of the service rates the next year. The rate-setting commission adjusts each hospital's data in several ways to ensure fair comparisons, and then sets a statewide limit on hospital revenue per admission. The Maryland all-payer system has successfully contained hospi- tal costs. Maryland's growth in per-admission hospital costs was less than the national average for 17 consecutive years. The success of the all-payer system in controlling hospital costs coincided with substan- tial growth in the number of HMOs in the last decade. The Mary- land experience suggests that regulatory and competitive strategies can be compatible (Wallack, Skalera, and Cai 1996). Notes 1. A special licensing is required for graduates of medical schools outside North America and is administered by the Educational Commission on Foreign Medical Graduates in the United States and by the Medical Coun- cil of Canada in Canada. 2. The same approach is adopted by the National League of Nursing re- garding professional nursing schools. 3. Medicare is a federal program that provides comprehensive health in- surance to individuals 65 and older in the Umted States. 328 o Private Participation in Health Services 4. Utilization reviews study retrospective service utilization patterns and use them as a basis for preapproval (or denial) of future service provision. Medical audits are postservice reviews and are thus purely retrospective in nature. 5. Visit at http://www.nice.org.uk. Altenstetter, C. 1998. "Implementmg the EU Regulatory Policy on Med- ical Devices." In D. Chinitz and J. Cohen, eds., Governments e/ad Health Systems. Chichester, U.K.: John Wiley. Anderson, G., R. Heyssel, and R. Dicker. 1993. "Competition vs. Regula- tion: Its Effect on Hospitals." Health Affairs (Spring): 70-79. Anderson, G., D. Halcoussis, and L. Johnston. 2000. "Regulatory Barriers to Entry in the Health Care Industry." Quarterly Review of Economics and Finance (Winter): 485-502. Asiimwe, D., and J.C. Lule. 1993. "The Public/Private Mix in Fmancing and Provision of Health Services in Uganda." In S. Bennett and A. Mills, eds., Proceedings fi-on the Workshop on the Public/Pi-vate Mix for Health Care in Developing Countries. Health Policy Umt Report. Lon- don: London School of Ilygiene and Tropical Medicine. Ayres, I., and J. Braithwaite. 1992. Responsible Regulation. Oxford: Oxford University Press. Baldwin, R., and M. Cave. 1999. Understanding Regulationt: Theo?y, Strategy and Practice. Oxford: Oxford University Press. Becker, G. 1995. Strategy for Health Facility Acereditationz. Bethesda, Md.: Abt Associates Inc., Zdrav/Reform Project. Becker, G. C., B. Ente, and Standards Development Committee, Republic of Kyrgyzstan. 1995. Licensing and Accreditation Manualfor Hospitals. Bethesda, Md.: Abt Associates Inc., Ministry of Health, Republic of Kyrgyzstan, and Zdrav Reform Project. Bennema-Broos, M., P. P. Groenewegen, and G. P. Westert. 2001. "Social Democratic Government and Spatial Distnbution of Health Care Facilities." European Journpl of Public Health 11: 160-65. Regulation of Health Services * 329 Bennett, S., and E. Ngalande-Banda. 1994. Public and Private Roles in Health. A Review and Analysis of Experience in Sub-Saharan Africa. Geneva: World Health Organization. Bennett, S., G. Dakpallah, P. Gamer, L. Gilson, S. Nittayaramphong, B. Zurita, and A. Zwi. 1994. "Carrot and Stick: State Mechanisms to In- fluence Private Provider Behavior " Health Policy and Planning 9 (1): 1-13. Berg, 0. 1999. "The Organization of the Norwegian Health Care System: The Rise and Declne of a Public latrocracy." In 0. Molven, ed., The Norwegian Health Care System. Oslo: University of Oslo. Bhat, R. 1996. "Regulation of the Private Health Sector in India." Interna- tional 0iournal of Health Planning and Management 11: 253-74. Boerma, W G. W, and D. M. Flemmng. 1998. The Role of General Practice in Priniary Health Care. London: Stationery Office. Boerma, W G. W, J. van der Zee, and D. M. Fleming. 1997. Service Pro- files of General Practitioners in Europe. British Jourznal of General Practice 47: 481-86. Brennan, T. A., and D. M. Berwick. 1996. New Rules: Regulation, Markets and the Quality of American Health Care San Francisco, Calif.: Jossey- Bass Publications. Bruckenberger, E. 1998. "Vernetzte Versorgungsmodelle mit Kliniken, Praxen und Kassen." Zeitschrift fir Allgemeinmedizin 74: 259-62. Bundesumisterium fur Gesundheit, ed. 1998. Leitlinien in der Ges.ind- heitsversorg7ung [Guidelines in Health Care]. Vortrage und Berichte von der WHO-Konferenz zu Leitlinien in der esundheitsversorgung [Papers and Reports of the WHO Conference on Guwdelines in Health Care Practice]. Baden-Baden: Nomos. Busse, R. 2000. Health Care Systems in Transition-Ger7nany. Copenhagen: European Observatory on Health Care Systems. http //www.euro. who.int/eprise/main/WHO/Progs/Obs/hits/TopPage Busse, R., and E W Schwartz. 1997. "Financing Reforms in the German Hospital Sector-From Full Cost Cover Principle to Prospective Case Fees." Medical Care 35 (10): OS40-OS49. Busse, R., T van der Grinten, and P.-G. Svensson. 2002. Regulating En- trepreneurial Behaviour in Hospitals: Theory and Practice. In R. B. 330 o Private Participation in Health Services Saltman, R. Busse, and E. Mossialos, eds., Regulating Entrepreneui7al Behaviour in European Health Care Systems. Buckingham, U.K.: Open University Press. Cassels, A. 1995. "Health Sector Reform: Key Issues in Less Developed Countries." Journal of International Development 7 (3): 329-48. Data for Decision-Making Project. 1993. Consultation on the Private Health Sector in Afrtca: Szrmmaiy ofPt-oceedings. Washington, September 22-23, 1993. Draft. Cambridge, Mass.: Data for Decision-Making Project, Harvard School of Public Health, Cambridge, Mass. Evans, R. 1976. "Does Canada Hlave Too Many Doctors? Why Nobody Loves an Immigrant Physician." Canadian Publhc Polhcy 2: 147-60. Freidson, E. 1970. Profession of Medicine: A Study of the Sociology of Applied Knowledge. New York: Harper & Row. Gilbert, R. J., and D. M. Newberry. 1994. "The Dynamic Efficiency of Regulatory Constitutions." RandJoui-nal of Econo2mics 25 (4): 538-54. Guasch, J. L., and P. Spiller. 1999. "Managing the Regulatory Process: De- sign, Concepts, Issues, and the Latin America and Caribbean Story." World Bank, Washington, D.C. HEW (U.S. Department of Health, Education and Welfare). 1977. "Re- port on Licensure and Related Health Personnel Credentialmg." Washington, D.C. Hughes, D. 1993. "General Practitioners and the New Contract: Promot- ing Better Health through Financial Incentives." Health Policy 25: 39-50. Hursh-Cesar, G., P. Bernan, K. Hanson, R. Rannan-Eliya, J. Rittmann, and K. Purdy. 1994. Summary of Count7y Studies: Private Providers' Con-tri- butions to Public Health in Four African Coun7tries. Conference Report, November 28-December 1, 1994, Nairobi, Kenya, Data for Decision- Making Project, Boston, Mass. http://www.hsph.harvard.edu/ihsg/ publications/pdf/No-21 - l.pdf Jakubowski, E., and R. Busse. 1998. "Einflufifaktoren fir Grofigeratean- schaffung lassen einen deutlichen Anstieg der GroIgerateanzahl er- warten." [translation] Gesundheitswesen 60: A56. Regulation of Health Services * 3 31 Kenney, G. 1993. Assessing Legal and Regulatory Reform in Family Planning: Manual on Legal and Regulatoty Reformz. Washington, D.C.: Futures Group International, OPTIONS Project. Kessler, D., and M. McClellan. 1999. "Designing Hospital Antitrust Policy to Promote Social Welfare." Workmng Paper 6897. Cambridge, Mass.: National Bureau of Economic Research. Knowles, J., A. Yazbeck, and S. Brewster. 1994. "The Private Sector Deliv- ery of Health Care: Senegal." Major Applied Research Paper 16. Health Financing and Sustainability (HFS) Project, Abt Associates Inc., Bethesda, Md. Kumaranayake, L. 1997. "The Role of Regulation: Influencing Private Sec- tor Actnvity within Health Sector Reform." Journal of International Development 9 (4): 641-49. Laffont, J., and J. Tirole. 1993. A Theory of Incentives in Procurement and Regulation. Cambridge, Mass.: MIT Press. Langenbrunner, J., and M. Wiley. 2002. "Paying Hospitals in Eastern Eu- rope and the Former Soviet Union." In M. McKee and J. Healy, eds., Hospitals in a Changing Europe. Buckingham, U.K.: Open University Press. Maboshe, M., J. Tembo, and A. Rooney. 1999. "Development of a Hospi- tal Accreditation Program: The Zambian Experience." QA Brief 8 (2): 15-17. URL http.//www.qaproject.org/ Maor, M. 1998. Choosing a Regulatory Regime: The Experience of the Is- raeli Electricity Market. Draft. Mujinja, D. Urassa, and K. S. Mnyika. 1993. "The Tanzanian Public/Pri- vate Mix in National Health Care." In S. Bennett and A. Mill, eds., Proceedings from the Workshop on the Public/Private Mix for Health Care in Developing Countries Health Policy Unit Report. London: London School of Hygiene and Tropical Medicine. National Commnssion on Quality Assurance Web site. URL http://www. ncqa.org/ Naylor, C. D., P. Jha, J. Woods, and A. Shariff. 1999. A Fine Balance. Sonie Options for Pnvate and Public Health Care in Urban India. Washington, D.C.: World Bank, Human Development Network. 332 o Private Participation m Health Services Newble, D., B. Jolly, and R. Wakeford, eds. 1994. The Certification anzd Re- certificationz of Doctors: Issyues in the Assessment of Clinical Competence. Cambridge: Cambridge University Press. NHS (National Health Service) Executive. 1994. The Operatioio of the NIJS Internal Market: Local Freedoms, National Responsibilities. HSG (94) 55. London: HMSO (Her Majesty's Stationery Office, U.K.). Norton, E. C. 1992. "Incentive Regulation of Nursing Homes." Journael of Health Economics 11: 105-28. Perleth, M., R. Busse, and F. W. Schwartz. 1999. "Regulation of Health- Related Technologies in Germany." Health Policy 46: 105-26. PHR (Partnerships for Health Reform Project). 1999. Health Reformi aend Priority Services. Bethesda, Md.: Abt Associates Inc., Partnerships for Health Reform Project. URL www.phrproject.com Porter,J. D. H., andJ. Grange, eds. 1999. "Involving Private Medical Sec- tor in Tuberculosis Control: Practical Aspects." Tuberculosis: An Intei- national Perspective. London: Imperial College Press. Ravenholt, B. B. 1996. Potentialfor Increased Involvemien7t of the Com7mei-cial Sector in Family Planning Service Delhve;y in the Philippines: Assess-nent and Initial Strategies. Washington, D.C.: Futures Group Interna- tional, POLICY Project. Rodwin, V G. 1997. "Managed Care in the US: Lessons for French Health Policy." In C. Altenstetter and J. W. Bjorkman, eds., Health Policy Re- form, National Vanations, and Globalization. London: MacMillan. Roemer, M. I. 1977. Coomparative National Policies on Health Care. New York: Marcel Dekker, Inc. . 1991. National Health Systems of the WVorld. Vol.1. Oxford: Oxford University Press. Saltman, R. B. 1998. "Convergence, Social Embeddedness, and the Future of Health Systems in the Nordic Region." In D. Chinitz and J. Cohen, eds., Government and Health Systems. Chichester, U.K.: John Wiley. Saltman, R. B., and A. de Roo. 1989. "Hospital Policy in the Netherlands: Parameters of a Structural Stalemate." 7Jou2r7al of Health Politics, Pol- icy, and Law Wmter, 14 (4): 773-95. Regulation of Health Services * 333 Saltman, R., R. Busse, and E. Mossialos, eds. 2002. Regulating Entrepre- neurial Behavior in European Health Care Systems. Bucklngharn, U.K.: Open University Press. Saltinan, R., and R. Busse. 2002. "Balancing Regulation and Entrepre- neurialism in Europe's Health Sector: Theory and Practice." In R. B. Saltman, R. Busse, and E. Mossialos, eds., Regulating Entrepreneurial Behaviour in European Health Care Systenms. Buckingham, U.K.: Open University Press. Schneider, M., and J. Wasem. 1998. Regulating Private Markets and Insur- ance. Flagship Course on Health Sector Reform and Sustainable Fi- nancing. Washington, D.C.: World Bank, Economic Development Institute. Schut, F T. 1995. Com7petition in the Dutch Health Care Sector. Rldderkerk: Ridderprint. Scrivens, E. 2001. "Accreditation and the Regulation of Quality in Health Services. In R. B. Saltman, R. Busse, and E. Mossialos, eds., Regulat- ing Entrepreneurial Behaviour in European Health Care Systems. Buck- ingham, U.K.: Open University Press. Scrivens, E., R. Klein, and A. Steiner. 1995. "Accreditation. What Can We Learn from the Anglo-Phone Model? Health Policy 34 (3): 193-204. Silver, M. H. 1997. "Patients' Rights in England and the United States of America: The Patient's Charter and the New Jersey Patient Bill of Rights: A Comparison." _ournal of Medical Ethics 23: 213-20. Slater, S. R., and C. Saade. 1996. Mobilizing the Commercial Sectorfor Public Health Objectives. A Practical Guide. Arlington, Va.: BASICS, and New York: UNICEF. Starfield, B. 1996. "Is Strong Primary Care Good for Health Outcomes?" In J. Griffin, ed., The Future of Primay Care. London: Office of Health Economics. Trubek, L. G. 1999. "Informing, Claiming, Contracting. Enforcement in the Managed Care Era." Annals of Health Law 8: 133-45. Vincent, D., and A. Rooney. 1999. "Improving Health Service Delivery with Accreditation, Licensure and Certification." Quality Assurance Brief Project 8 (2): 9-10. 334 o Private Participaton in Health Services Wallack, S., K. C. Skalera, and J. Cai. 1996. "Redefining Rate Regulation in a Competitive Environment." Jouwnal of Health Politics, Poliy, and Law 21 (3): 489-520. Walt, G. 1998. Implementing Healthcare Reform: A Framework for Dis- cussion. In R. B. Saltman, J. Figueras, and C. Sakellarides, eds., Crit- ical Challenges for Health Care Refo7m inZ Eur7ope. Buckingham, U.K.: Open Umversity Press. Weill, T. P., and R. M. Battistella. 1998. "A Blended Strategy Using Com- petitive and Regulatory Models." Health Care Management Review 23 (1): 37-45. WEHO (World Health Organization). 1996. Continuous Quality of Care De- velopment: Outcomes and Qualhty of Care. Copenhagen, Regional Office for Europe. Wildavsky, A. 1979. Speaking Trugth to Power: The Art and Craft of Poliy Analysis. Boston: Little, Brown. Wiley, M. M. 1998. Financing Operating Costs for Acute Hospital Ser- vices. In R. B. Saltnan, J. Figueras, and C. Sakellarides, eds., Critical Challengesfor Health Care Refor-m in Europe. Buckingham, U.K.: Open University Press, p. 218-35. Wilsford, D. 1995. "States Facing Interests: Struggles over Health Care Policy in Advanced Industrial Democracies." journal of Health Politics, Poliy, and Law 20 (3): 571-614. Wooldridge, M. 1996. Opening in AMA Summit proceedings. Compe- tition in Health: a brave new world? Canberra: Australian Medical Association. Yesudian, C. A. K. 1993. "Behavior of the Private Health Sector in the Health Market of Bombay." Heelth Policy and Planning 9 (1): 72-80. About the Editors and Contributors The Editors April Harding is a Senior Economist in the Health, Nutrition, and Population Department of the World Bank. Since arriving at the World Bank Ms. Harding has provided technical assistance to gov- ernments in more than 13 countries, primarily on issues related to private sector development and privatization. She currently manages the analytical work, operational support, and training related to pri- vate participation in the health sector. She speaks and publishes in numerous forums on public-private partnerships, private participa- tion, privatization, and reform of health services. She has recently edited a volume on hospital reform in developing countries, Innova- tions in Health Service Delivery: Autonomization and Corporatization of Hospitals. Prior to joining the World Bank Ms. Harding was a Research Fel- low in Economic Studies at the Brookings Institution. From 1987 to 1991 Ms. Harding was a Fellow of the Russian and East European Center at the University of Pennsylvania, where she also received a Ph.D. in Economics, with a concentration in Comparative Eco- nomic Systems and Public Finance. 335 336 0 Private Participation in Ilealth Services Alexander S. Preker, Chief Economist for Health, Nutrition, and Population and Editor of the H1NP Publication Series, is responsible for coordinating the World Bank's Health Systems Development team and overseeing its analytical work on health financing and ser- vice delivery. He coordinated the team that prepared the Bank's 1997 Sector Strategy on health care in developing countries, was one of the authors of the World Health Report 2000 on Health Systems, and was a member of Working Group 3 of the WHO Commis- sion on Macro-Economics and Health which reported in 2001. Mr. Preker has published extensively on topics related to health systems development and is a frequent speaker at major international confer- ences. He is on the editorial committee of several journals and on the scientific committee of the International Health Economics Associa- tion Conference in San Francisco, 2003. Mr. Preker has an appoint- ment as Associate Professor at the George Washington University, is on the External Advisory Board for the London School of Eco- nomics Health Group and is a member of the teaching faculty for the Harvard/World Bank Institute Flagship Course on Health Sector Reform and Sustainable Financing. His training includes a Ph.D. in Economics from the London School of Economics and Political Science, a Fellowship in Medicine from University College London, a Diploma in Medical Law and Ethics from King's College London, and an MD from University of British Columbia/McGill. Vhle onMhjra Reinhard Busse, Ph.D., is a professor of health care management at Technische Universitit Berlin, as well as the associate director of research of the European Observatory on Health Care Systems. The primary focus of his research is comparative European health sys- tems and health technology assessment. He has degrees in public health as well as in medicine. Sarbani Chakraborty is a Health Specialist in the Europe and Central Asia Region of the World Bank. Since joining the Bank in 1999 Ms. About the Editors and Contributors * 337 Chakraborty has been involved in Bank projects and analytical work in several countries (Georgia, Lebanon, Mongolia, and Oman). This has involved technical work in areas such as decentralization of health services, public-private mix, provider payment systems, poverty and health, and primary health care. Prior to jolning the Bank she was involved in health sector re- search and project work in South Asia. Ms. Chakraborty has a Mas- ters of Public Health and a Ph.D. in Health Services Research from the Johns Hopkins School of Public Health. Her Ph.D. dissertation focused on measuring and understanding the determinants of tech- nical quality of care for childhood illnesses among informal private providers in rural India. Nihal Hafez Afifi is a health policy and management consultant. Her training includes, in addition to an M.D., a Masters of Business Administration from the American University and a Masters of Pub- lic Health, with a concentration in International Health, from Har- vard University. Dr. Hafez Afifi has worked with the U.S. Agency for International Development, the World Bank, the Harvard Institute for International Development, the Data for Decision-Making Proj- ect of the Harvard School of Public Health, the Partnership for Health Reform Project, and Abt Associates. She provides technical assistance in health care regulation, cost recovery systems, health sector institutional development, analysis of the political environ- ment for health policy change, and designing health care reform programs for developing countries. RobertJI. Taylor has served as a manager, educator, and consultant in hospital and health services management in more than 25 countries. After receiving an MHA in Health Services Administration from the University of Minnesota, he served as an administrator in a num- ber of private hospitals in Minneapolis. In 1977 he was appointed chief executive officer of Hennepin County Medical Center, a public teaching hospital in the same city. While there he was a founder of the Health Futures Institute, established to examune the potentials of public-private cooperation in health care. In 1981 Mr. Taylor moved 338 o Private Participation in Iealth Services with his family to Karachi, Pakistan, where he served four years as Director General for Commissioning at the Aga Khan University Hospital. In 1985 he founded Taylor Associates International, a con- sulting firm specializing in organizational development and manage- ment strengthening in developing countries. He is an instructor and lecturer and has written extensively on health care management, change management, medical specialty services, and trends in health care. Index Accreditation. See also Certification, Bennett, S., 230 Licensing Bidding on contracts educational, 270-271, 275-276 evaluation guidelines, 196-197 facility market structure planning and, 167 defimtion, 264, 265 open bidding, 195 quality standards, 264-266, qualifying bidders, 195-196 268, 270 tendering guidelines, 196-197 international models, 268-270, Bloom, Abby, 186 272-273 Braithwalte, J, 240 to regulate quality of care, Busse, Reinhard, 219, 223 253-254, 255 Buyability of goods or services, 15, sources of information, 324-325 79-81 systems worldwide, 321-323 AddVal Inc., 325 Canada Afifi, Nihal Hafez, 219 accreditation model, 267-268 Africa, 247, 272-273 educational accreditation, 276 Antimonopoly regulations, 249-251 new infrastructure approval Australia authority, 245 accreditation model, 266, 268 personnel licensing, 262-263 competition regulation, 249 specialty board certification, personnel licensing, 263 277-278, 280-281 specialty board certification, 279, Capacity regulation 281 direct and indirect mechanisms, Ayres, I, 240 246 international experiences, Baldwin, R, 225 248-249 Bed grants, 33 new infrastructure approval Belgium, 268, 271, 278 authority, 244-249 339 340 0 Index Capacity regulation-continued national health accounts use, private sector considerations, 95-96 212-214 purpose of collecting, 93 through licensing procedures, qualitative methods. See 241, 244, 245 Qualitative methods of data Capacity strengthening collection data collection and analysis, quantitative methods, 105-106 207-208 sources of information, 87-89 government's financmg capacity, subjects covered, 85-86 210, 212 surveys and databases available, monitoring and evaluatng 88-89 performance, 209-210 Colombia, 263 negotiating and managing Community financing, 45 contracts, 208-209 Community organizations and phases, 211 regulauon, 290 planning, 208 Competition skills and experience needed, 207, constramts to participation, 117, 208 119, 122 tasks and timeline, 205, 206 for contracts Cassels, A., 231 benefits of, 192, 195 Cave, M, 225 bidding. See Bidding on Certificate of Need (CON) programs, contracts 222, 245 regulation of, 249-251 Certification. See also Accreditation; CON (Certificate of Need) programs, Licensing 222, 245 personnel recertification, 279-281 Consumers personnel specialty certification, commuruty organizations and 276-279 regulation, 290 to regulate quality of care, 253-254 focus groups, 104-105 Chakraborty, Sarban, 75 household surveys, 94-95 Chlldhood illnesses, PHSA example, patients' organizations, 287-289, 131-132 290-291 China, 260 Contestability, 79-81 Collecting and organizing information Contracting for health services for a PHSA benefits and limitations, 164, 179, areas requring additional 181-182 information, 96-97 benefits and risks evaluation, background information needed, 185-187 86-87 capacity strengthening economic environment data collection and analysis, information needed, 90-91 207-208 on nonprofit organizations, 91-92 government's financing on private sector services capacity, 210, 212 health facility surveys use, 95 monitoring and evaluating household surveys use, 94-95 performance, 209-210 Index * 341 negotiating and managing Control-based regulatory Instruments, contracts, 208-209 227, 230-231, 319-320 phases, 211 Conversion of public to private planning, 208 services skills and experience needed, benefits to governments, 37-38 207, 208 capital investment, 57, 61 tasks and timelne, 205, complexities involved, 38-40 206 contracting-financmg challenges, 183-185 arrangements, 64-65 contracting uses, 162-163 existing facility or operation, 57, contract provisions 61, 62 considerations, 23-24 facility ceases public services, defined, 157, 158 63-64 enabling environment, 214 market considerations, 40-41 government's purchasing role, market structure, 66 176-177 new construction, 61-63 as a government tool, 159-160, new operations, 63 161 to nonprofit status, 63 for growmg the private sector, regulation of, 66 35-36 table of categories, 58-61 to improve service quality for the transaction-related issues, 64 poor, 49 Costs/benefits analysis of regulation, obstacles to governments, 311-313 165-166 options, 179, 180 Data collection. See Collecting and private sector capacity, 212-214 orgamzing information for a PHSA for promoting preventive care Data for Decision Making Project, services, 48 106 public referral networks, 51 Demographic and Health Surveys public vs. private sectors, 168-170 (DHSs), 88 purchasing selectivity, 177-179 Denmark, 298-299 range of services to consider, Designing regulatory institutions 22-23 accountability and oversight, requirements for use, 21-22 309 service provider's perspective, 23 agency funding, 308 sources of information, 214-216 agency staffing, 308 stewardship concept, 161-162 elements to consider, 305-306, as a strategic process. See 307 Contracting as a strategic governance issues, 306 process operationalizing regulation, 310 structuring planned markets procedures and judicial review, competitive bidding, 167 309-310 financial incentives, 167-168 regulatory discretion, 308-309 performance measures, 168 terms of reference, 307-308 sunset clauses, 313 view as an ongoing process, 313 342 ' Index Detailing as an outreach mechanism, Focus groups 32-33 consumers, 104-105 Developing countries and private government officials, 102-103 health care, 9-10, 220. See also private providers, 102 specific countries France Domberger, S., 186 accreditation model, 268, 271 facility hcensing, 260 Eastern Europe, 263, 279 information collection, 17 Ecuador, 84-85 specialty board certification, 279 Education to improve service quality for the Germany poor, 43 capacity regulation, 296-297, as an outreach mechanism, 31-32 325-326 Educational accreditation, 270-271, hospital regulation, 297 275-276 outcome-oriented financial Enabling environment incentives, 285 contracting for health services, personnel licensing, 261 214 self-regulation model, 242-243 growing the private sector, 36-37 Ghana, 85, 238, 291 hospital regulation, 295, 296-297 Girishankar, N., 15, 79 Government officials Facility accreditation focus groups, 102-103 definition, 264, 265 policymakers as PHSA quality standards, 264-266, 268, interviewees 270 objectives of interview, 151 Facility licensing, 253 purpose of interview, 150-151 Financial incentives-based regulation suggested questions, 151-153 access to capital, 232, 234 Grants, bed, 33 low-cost loans, 234 Growing the private sector provider payment methods, 237 contracung and subsidies, 35-36 staff mobility control, 236 enabling environment, 36-37 subsidies, 232, 234-236, 237, 238 regulatory reform, 36 taxes, 232, 234-236, 237, 238 Financial issues m provision Haiti, 131 arrangements in contracting, 210, Harding, April, 7, 15, 75, 79, 219 212 Harnessing the pnvate sector. See arrangements to guide provision, Contracting for health services; 77-78 Outreach mechanisms, Regulatory impact of pnvate services use by reform the poor, 11-12, 13 Health care facilities. See Facility incentives and contracting, accreditation 167-168 Health care providers regulation public financing for NGOs, 33-35 hospitals subsidies by communities, 45 access for patients, 295, subsidies to improve servce 298-299 quality for the poor, 49, 51-52 areas to regulate, 295 Index * 343 enabling environment, 295, India, 84, 291, 302 296-297 Information asymmetry, 80 reimbursement, 299 Information dissemination service specifications, 295 as a constraint to private sector types of services provided, participation, 122-123 297, 299 to improve service quality for the primary care poor, 43 behavioral incentives, 293 as an outreach mechanism, 28-31 elements needed for success, In-kind support and NGOs, 34 292 Institutional accreditation, 275 environment and Insurance packages and preventive instruments, 292-293 care services, 49 goals of providers, 292 International Alliance of Patient's professional values and Organizations, 92 standards, 293 International Center for Non-Profit regulatory elements, Law, 92 294-295 International Society for Quality in social controls, 293-294 Health Care, 324-325 Health care rationing, 282 Interviews for a PHSA Health facility surveys, 95 policymakers as interviewees Health, Nutrition, and Population objectives of interview, 151 statistics, 88 purpose of interview, Herfindahl-Hirschman Index (HHT), 150-151 250 suggested questions, 151-153 Hospital regulation See also Structure- sample survey for primary care, oriented regulatory instruments 137-149 access for patients, 295, 298-299 training for and conducting, 99, areas to regulate, 295 101 enabling environment, 295, IQMA Classifieds, 325 296-297 reimbursement, 299 Japan, 247 service specifications, 295 Joint Commission on Accreditation of types of services provided, 297, 299 Health Care Organizations (US) Household surveys, 94-95 UCAHO), 17, 254, 255-256, 266, HQHQ, 324 268, 270, 273-274 Hudelsohn, P., 47 Hungary, 260 Kyrgyz Republic, 256, 259, 307 Incentive-based regulatory instr-uments Latn American countries, 263-264 advantages/disadvantages, 231-232 Licensing. See also Accreditauon; financial. See Financial incentives- Certification based regulation for capacity regulation, 241, 244, forms of, 25, 232, 233 245 nonfinancial, 238-239 of facilities, 253 outcome-oriented, 283, 285-287 of personnel. See Personnel self-regulation, 239-241, 242-243 licensing 344 0 Index Living Standards Measurement Survey selective purchasing, 238 (LSMS), 88-89 social marketing programs, 238 trairung, 239 Management of contracts. See Nonprofit/Nongovernmental Performance management for organizations (NGOs) contracts conversion of public to private Mandates to expand services for the services to, 63 poor, 43, 45 legal and regulatory issues Market structure information, 91-92 buyability of goods and services, public financing for, 33-35 15, 79-81 role in health service delivery, contracting and 29-30 competitive bidding, 167 Norway, 278, 298-299 financial incentives, Nurses. See Certification; Personnel 167-168 licensing performance measures, 168 conversion of public to private Open bidding, 195 services, 40-41, 66 Outcome-oriented quality regulation, demand and supply factors, 115, 283, 285-287 116-117, 118-119, 120-121 Outreach mechanisms health sector regulation and, 26 education, 31-32 private health care, 107 to encourage preventive care Maryland, United States, 326-327 practices, 48-49 Measurability, 80-81 to improve service quality for the Medical education institutions and poor, 49-51 accreditation, 270-271, 275-276 information dissemination, Medical Quality Assurance, 324 28-31 Mills, A., 188, 209 persuasion, 32-33 Musgrove, P., 14 publhc financing, 33-35 National Agency of Accreditation and Partnership for Health Reform, 88 Evaluation in Health (France), 17 Patients' organizations, 287-289, National health accounts (NHAs), 290-291 95-96 Payment strategies for contracts, Nauonal Health Plannung Resource 191-192, 193-194 Development Act (1974), 245 Performance management for National Institute for Clinucal contracts Excellence (NICE) (UK), 283 data evaluation, 202-203 Negotiation as an outreach differences resolution, 203-204 mechanism, 33 extension or renewal, 204-205 The Netherlands, 268, 296, 297 monitoring, 200-201 Ngalande-Banda, E., 230 objectives, 199-200 Nonfinancial incentives-based Personnel licensing regulanon reasons for failures, 230 credentials, 238 responsibilities of licensing patient movement, 239 organizations, 262 public-private alliances, 239 variations in practices, 262-263 Index * 345 Personnel specialty certification, regulatory elements, 294-295 276-279 social controls, 293-294 Persuasion Private health care providers to improve service quality for the associations and data collecrion, poor, 43 98 as an outreach mechanism, 32-33 demand and supply factors, 115, Pharmaceuticals and information 116-117, 118-119, 120-121 publishing, 31 focus group discussions with, Philippines, 237 102 Physicians See Certification; government tools for influencing Personnel licensing; Private health of, 14-15 care providers involvement in health services PMA (provider market analysis), 106 delivery, 10-11 Policymakers See Government the poor and private health care officials curative care treatment and, The Poor and private health care 49-52 curative care treatment and, expansion of preventive 49-52 health measures, 46-47 expansion of prevenuve health expansion of services, 43-45 measures, 46-47 financial impact of use, expansion of services, 43-45 11-12, 13 financial impact of use, 11-12, 13 instruments available, 42-43 instruments available, 42-43 obstacles to improving obstacles to improving quality, quality, 41-42 41-42 percentage treated outside percentage treated outside the the publhc sector, 42 public sector, 42 prevalence in developing PRACTION (Private Practitioner countries, 9-10 Treatmlent Improvement public health role, 45-46 Intervention), 33, 50-51 regulation of. See Health care Preker, A.S., 15, 79 providers regulation Prequalification for bidding, 195-196 Private health sector assessment Preventive health care (PHSA) contracting used for promoting, business consultation, 128-129, 48 128-129 insurance packages and, 49 buyability of goods and services, outreach mechanisms, 48-49 79-81 the poor and private providers categorization of goods and and, 46-49 services, 80-81 Primary care regulation classifications of private behavioral incentives, 293 providers, 108 elements needed for success, 292 collecting and organizing environment and instruments, information See Collecting and 292-293 organizing information goals of providers, 292 conditions needed for effective professional values and standards, participation, 81 293 constraints to participation 346 0 Index Pnvate health sector assessment- resource-allocation criteria, 78 continued sources of information, 127-128, barriers, 122 134-136 competition, 117, 119, 122 stalceholder meeting, 128-129 information dissemination, strategies development 123 goal, 130 public spending, 122 scope of data collection, regulation, 122-123 129-130, 133 delivery problems analysis studies examples, 131-132 cost escalation, 112 structure and functions of efficiency, 114 markets, 107 equity, 113-114 supply of servces, 115, 118-119, quality of care, 112-113 120-121 demand for services, 115, time nccded, 83 116-117, 120-121 Private Practitioner Treatment examples of a PHSA, 83, 84-85 Improvement Intervention financing arrangements to guide (PRACTION), 33, 50-51 provision, 77-78 Process-oriented regulatory improving functioning of markets instruments allocanve and technical educational accreditation, efficiency, 110-111 270-271, 275-276 cost escalation problems, facility accreditation. See Facility 109-110 accreditation quality of care, 110 Professional associations and types of services provided, 111 regulation, 249, 281-282, 293 interview conducting Professional standard review sample survey for primary organizations (PSROs), 281-282 care, 137-149 Prospective process-oriented template for policymakers, regulation, 283, 284 150-153 Provider market analysis (PMA), 106 overview of steps, 82, 133-134 Public financing. See Financial issues policy areas to consider in provision adverse selection problem, Pubhc health policy 127 affect on private sector competitiveness participation, 150-151 improvement, 127 challenges of implementing, contracting arrangements, 52-54 125-126 focus group discussions for, public funds use, 125 102-103 regulations implementations, mcorporating private delivery 126-127 dialogue and policy options identification, communication, 18 123-124 institutionalized policy public vs. private provision, 77 instruments, 18-19 quality of public care and, knowledge/information 114-115 collection need, 17 Index * 347 lack of definitive performance facility accreditation and, indications, 15-16 264-266, 268, 270 public-private partnerships market considerations, 110 definition, 20 outcome-oriented quality rationale for cooperation with regulation, 283, 285-287 private sector, 11-12, 13 regulation, 251-254, 255-256 strategies for private sector sources of information, 324-325 involvement Quantitative methods of data ' comparison of strategies, collection, 105-106 55-56 conversion. See Conversion Rationing of health care, 282 of public to private Recertification, 279-281 services Regulation. See also Regulatory reform growing the private sector. of capacity. See Capacity See Growing the private regulation sector of competition, 249-251 harnessing existing sectors. consideration in a PHSA, 126-127 See Harnessing the private as a constraint to participation, sector 122-123 tools for influencing the private as a constraint to private sector sector, 14-15 participation, 122-123 Public referral network, 51 as a control measure, 25 Purchasing and the poor conversion of public to private to expand services, 44 services, 66 to improve service quality, 42-43 current issues in developing countries, 220 QCI International, 324 definition, 221-223 Qualitative methods of data collection to expand services for the poor, analyzing results, 101 44-45 focus groups, consumers, of health care providers. See 104-105 Health care providers focus groups, govemment regulation officials, 102-103 importance of dialogue between focus groups, private providers, government and private sector, 102 220 interviewee selection, 98 to improve service quality for the interview training and poor, 43 conducting, 99, 101 institutional structure obtaining information on balance of rules and goals, informal sector private 310 providers, 100-101 consideration of regulation private provider survey, 97 capacity, 300, 301, 302 questionnaire development, 99 costs/benefits analysis, Quality of care 311-313 delivery problems analysis, cultural context 112-113 considerations, 310-311 Index * 347 lack of definitive performance facility accreditation and, indications, 15-16 264-266, 268, 270 public-private partnerships market considerations, 110 definution, 20 outcome-oriented quality rationale for cooperation with regulation, 283, 285-287 pnvate sector, 11-12, 13 regulation, 251-254, 255-256 strategies for pnvate sector sources of information, 324-325 involvement Quantitative methods of data comparison of strategies, collection, 105-106 55-56 conversion See Conversion Rationing of health care, 282 of public to private Recertification, 279-281 services Regulation. See also Regulatory reform growing the private sector. of capacity. See Capacity See Growing the private regulation sector of competition, 249-251 harnessing existing sectors. considerauon in a PHSA, 126-127 See Harnessing the private as a constraint to participation, sector 122-123 tools for influencing the private as a constraint to private sector sector, 14-15 participation, 122-123 Public referral network, 51 as a control measure, 25 Purchasing and the poor conversion of public to private to expand services, 44 services, 66 to improve service quality, 42-43 current issues in developing countries, 220 QCI International, 324 definition, 221-223 Qualitative methods of data collection to expand services for the poor, analyzing results, 101 44-45 focus groups, consumers, of health care providers. See 104-105 Health care providers focus groups, government regulation officials, 102-103 importance of dialogue between focus groups, private providers, government and private sector, 102 220 interviewee selection, 98 to improve service quality for the interview trainung and poor, 43 conducting, 99, 101 institutional structure obtaining mformation on balance of rules and goals, informal sector private 310 providers, 100-101 consideration of regulation private provider survey, 97 capacity, 300, 301, 302 questionnaire development, 99 costs/benefits analysis, Quality of care 311-313 delivery problems analysis, cultural context 112-113 considerations, 310-311 348 0 Index Regulation-continued Regulatory reform. See also Regulation design issues. See Designing design issues, 26 regulatory institutions for growing the private sector, 36 political context instunments available, 25-26 considerations, 310-311 need for an effective framework, 27 regulatory regime. See objectives and function, 24 Regulatory regime targets of regulation, 24-25 mstiuments and their strategies. Regulatory regime See Regulatory instruments assessment of, 303-304 lessons learned, 314-315 informing vs. enforcing objectives, 224-225, 226-227 regulations, 304-305 prerequisites for success, 315-3 17 players involved, 301, 303, 305 of prices, 251, 252 scope of, 304 purpose and need for, 219-220 Reproductive health services, PIISA of quality of care, 251-254, example, 132 255-256 Retrospective process-onented, rationale for, 223-224, 226-227 281-282 Regulatory instruments Rice, Thomas, 182 categories, 225, 227 Rwanda, 251 control-based, 227, 230-231, 319-320 Saltman, R., 223 incentive-based. See Incentive- Schools, medical. See Educational based regulatory instruments accreditation outcome-oriented, 283, 285-287 Scotland, 286 patients' orgamzations, 287-289, Seed funding for NGOs, 34 290-291 Self-regulation as a regulatory process-oriented instrument, 239-241, 242-243 educational accreditation, Senegal, 236 270-271,275-276 Service Delivery Surveys, 89 facility accreditation. See Service Provision Assessments (SPAs), Facility accreditation 95 prospective process-oriented, 283, Specialized accreditation, 275 284 Specialty certification for personnel, retrospective process-oriented, 276-279 281-282 Statistical Information Management strengths and weaknesses, Analysis, 88 228-229 Structure-oriented regulatorv structure-oriented instruments. See also Hospital facility licensing, 254, regulation 256-261 facility licensmg, 254, 256-261 personnel licensing, 261-264 personnel licensing, 261-264 personnel recertification, personnel recertification, 279-281 279-281 personnel specialty certification, personnel specialty 276-279 certification, 276-279 Subsidies, financial summary table, 318 by communities, 45 Index * 349 to improve service quality for the CON programs, 222, 245 poor, 49, 51-52 educational accreditation, 276 as an incentive-based regulation facility accreditation, 255-256 instrument, 232, 234-236, 237, facility licensing, 256, 260 238 information collection, 17 for private sector growth, 35-36 new infrastructure approval Sunset clauses, 313 authonty, 244-245 Supplies discotmts for NGOs, 34 outcome-oriented financial Sweden, 298-299 incentives, 285 Switzerland, 296 patients' organizations, 288 personnel licensing, 262-263 Tanzania, 247 prospective process-oriented Taxes regulation, 283, 284 framework needed for NGO specialty board certification, success, 29-30 277-278, 280 as an incentive-based regulation USAID, 88 instrument, 232 public financing for NGOs and, Vietnam, 12, 13 34 Vouchers for NGOs, 35 Taylor, RobertJ., 157 Terms of reference (TORs), 307-308 Walsh, K., 203 Thailand, 231 Web sites Tuberculosis, PHSA example, 131 accreditation models, 324-325 general economic environment U S. Agency for International information, 91 Development (USAID), 88 household surveys, 94 United Kngdom national health accounts, 95 accreditation model, 266, 268, non-profit legal and regulatory 269-270 issues, 92 educational accreditation, 276 socioeconomic and health sector facility licensing, 260 information, 87-89 outcome-oriented financial V/HO database, 88 incentives, 285 World Bank, 87 personnel licensing, 263 World Development Indicators, regulation of supply of physicians, 88 245 Western Europe. See also specific specialty board certification, 279 countries United States educational accreditation, 176 accreditation models, 17, 254, facility licensmg, 260 255-256, 265, 266, 268, 270, new infrastructure approval 273-274 authority, 245-246 competition and cost containment specialty board certification, 278 example, 326-327 competition regulation, 250 Zambia, 272-273 07)vg@ 8°i B)' 1' - ,'. w . | : w .11 ' !.1 ,|1:.: i.s , L. ! .1.!1. (C{OL^O\f t tIrnZ2M .'Ut,i 'l:i ''1 t ill.t 1 -)" f r ',4I. -.rIL-Ic14.l bC) *'IU .T. .1 , i' |* . *i** 1. - ':: ' ':fi ';C r',S P '. r ;,~ fiiDc,' '..... -ri .. '-"Y.'' l i:;lt' ^'o *'u :.,Tl..lr.r :-'........i............ 4.1 , LCZ- 'li 1jl, *. I. ,,,~' IL~~~ * xti g1 I,Ti.1 'F. I t 1j' "I ti' 1l. 14'1 t 7 ,L'L1-. L: 'YibyfI'- 1-tt lh,01P, 1i ga ' ' 1. :n 1 ' 17/ 4 .r~ l . Li tl - 'dlT 40,1- i 4.EH l - i llq A 2ll ' 'I, ; i ii -.. uI i t m '- o - 01 it H fioff- 1 8l d . !. . r ffw:l' ;, I~|ilJf23TP H- (ORXL t&gN W., ~olIjlf dI4' ftoxor P -0 - I-A ..' ~~~~I. ... .2... i i [ sr, Wm, ' '-'T7 i ,ig, T fmi., I', * i . - U ' '4 ll;i 't.*t o T oQ,i t o l 2;.1 i: . Ti-f;1 " ' I - t' 1 . -i -I:\, .* 0 * m>)Uhc § LR1.nbTof ciT.por Ji± 01.] lri'4.. ' i.1 .| 9 -I "di-'-. .;..jhi m,rCl l-: ii <