primer - phrplus · while the private sector may not provide superior results in all of these...

Developing a strategic mix of private andpublic provision of health services in

order to achieve health reform objectives can be complex. Policymakers may wonderabout what private providers could contributeto public health goals. The decision to collab-orate with the private sector depends onwhether working with the private sector offersa more cost-effective way to achieve healthobjectives than other interventions involvingpublic providers.

Private sector financing of health care is an integral component of developing countryhealth systems. Private financing may includepayments by individuals for pharmaceuticalsand hospital stays, employer reimbursementfor employees’ healthcare costs, and otherforms of private payments for healthcare.These types of payments may actually be paidto public sector health facilities. Encouragingprivate financing to supplement limited

government funds is an important strategy inaddressing budgetary issues. While it is diffi-cult to separate service delivery and financingissues, this primer focuses more on the public-private service delivery mix rather than on thepublic-private financing mix. The purpose ofthis primer is to provide a conceptual frame-work for policymakers who are consideringhow best to strengthen the delivery of priorityservices by working with the private sector.

References for

International

Development

Health Policies,

Incentives,

Financing,

Organization,

and Management

For PolicymakersPRIMER

Working with Private Providers to Improve the Delivery of Priority Services

Collaboration with the Private SectorThe decision to collaborate with the private

sector depends on whether working with

the private sector offers a more cost-effective

way to achieve health objectives than other

interventions involving public providers.

It is increasingly recognized that privateproviders can (and often do) deliver services thatare of high public health priority, such as immu-nization or STD treatment. In the USAID context,the term priority services refers to a specific set ofinterventions, which include prenatal care, familyplanning, and management of infectious diseases.Within this primer, however, the term will be usedin a broader context to refer to those services thatare public health priorities for local policymakers.

Importance of the Private SectorIn many countries, private providers are primarycare providers for large segments of the popula-tion, and thus they are a valuable distribution chan-nel for priority services. In India, there are onemillion semi-qualified urban and rural medicalpractitioners, and 61 percent of outpatient consul-tations are made with private providers. Using the delivery of family planning as an example, the table below shows the range of private sector par-ticipation in delivery of a priority service amongdifferent countries.

In addition to being very large, the privatesector is very heterogeneous. In some countries it consists primarily of the NGO or mission sector.In other countries it may consist primarily of non-Western medical providers, ranging from tradition-al birth attendants without formal training toaccredited ayurvedic practitioners. Private phar-macies are also important providers, since manypeople self-medicate without seeking a medicaldiagnosis. Lastly, the private sector may include

sophisticated state-of-the-art hospitals in the urbancenters of more well-off countries. Governmentstrategies to work with the private sector will varyaccording to the types of providers that are preva-lent in the country.

Private Sector Contribution to Health Reform ObjectivesMost countries undertaking health sector reformgenerally seek to improve equity, access, quality,efficiency, and sustainability of health care.Private providers may have advantages over public providers in assisting the government toachieve these objectives:

▲ Equity. Encouraging higher income segmentsof the population to use unsubsidized privateproviders can contribute to equity by freeingup government funds that can be used to provide priority services to segments of thepopulation that cannot afford to pay.

▲ Access. Private providers may be located in areas where there is no existing publicprovider, or they may be available duringmore convenient hours (in the evening).

▲ Quality. Quality must be differentiated intoclinical and non-clinical quality. Patients oftenconsider private providers to be higher qualitythan public providers, since they generallyconsider short waiting times, courteous staff,or greater privacy to be attributes of high qual-ity. These measures all relate to non-clinicalquality; clinically, however, private providersmay or may not provide better quality.

▲ Efficiency. It is often argued that privateproviders are more efficient than publicproviders, that is, they are able to provide services of equal quality at lower cost.Although there is limited empirical evidenceto support this, private providers may haveefficiency advantages such as lower adminis-trative costs or more motivated staff.

▲ Sustainability. Private providers can con-tribute to sustainability by creating an openmarket for health care services, independentof changes in government policies and bud-getary constraints. Encouraging people to use and pay for unsubsidized private providerscan also reduce the government’s financialburden.

PHR Policy Primer ▲▲ 2

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Keny

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Bang

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Indi

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Mal

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80

70

60

50

40

30

20

10

0

Percent of Modern ContraceptiveMethods Supplied by Private Providers

While the private sector may not providesuperior results in all of these areas, strengths in some areas suggest that private providers can be an important part of the broader strategy toimprove delivery of priority services. The deci-sion to mobilize the private sector to help achievegovernment objectives largely depends on a cost-effectiveness question: is working with privateproviders the most cost-effective way to achievethe government objectives? Various strategiesinvolving the private sector must be comparedwith potential interventions that can improve public sector delivery — improving managementto increase efficiency, establishing new publicfacilities to improve access, etc. This primerdescribes a framework for market analysis, strate-gy selection, and implementation that policymak-ers can use to analyze the desirability of workingwith private providers.

Analysis of the Market for Priority ServicesCareful data collection and analysis is needed to determine whether private providers would be useful partners in achieving government objectives. This analysis should incorporate:

1. the relative strengths of public versus privateproviders;

2. characteristics of providers; and

3. the behavior and characteristics of targeted consumers.

These three factors are inter-dependent, so theymust be considered simultaneously in a marketanalysis. For example, if private providers aremore accessible for consumers in urban areas, theywould not be good partners if the objective is totarget consumers in rural areas. Private providersalone will seldom be the solution — a marketanalysis may find that the most effective interven-tions involve strengthening public providers, influ-encing consumer behavior, or offering some com-bination of these strategies.

1. Relative Strengths of Public and PrivateSector Providers in Service DeliveryThe most relevant characteristics of public and private providers are their relative strengths inimproving access, quality, and efficiency. Havingan accurate assessment of the strengths of eachtype of provider will help determine whetherworking with the private sector might help achievehealth reform objectives. Unlike the characteris-tics of accessibility, quality, or efficiency, neitherpublic nor private providers are intrinsically more equitable or sustainable. It is the underlying

financing systems that determine the equity andsustainability of public and private providers, andso these concerns are discussed briefly.

The ability of private providers to increaseaccess to priority services depends on the locationof private providers with respect to publicproviders. In some countries and depending on the type of provider, private practitioners are exten-sive, with a provider in nearly every village. Theseproviders may also be more accessible in terms oftheir hours of operation. Similarly, a not-for-profitprovider may have an extensive network of com-munity-based health workers in a particular area.In these cases, it would be advantageous for thegovernment to collaborate with these providers,who already have an extensive presence, and aremore accessible to the consumer than public healthfacilities. On the other hand, private providers maybe concentrated in relatively wealthy urban areas,in which case they would not expand access tounderserved populations but may be useful if the government is seeking to encourage affluentconsumers to use unsubsidized providers.

Private providers often deliver better non-clinical quality compared to public providers.Higher quality could influence people to use ahealth service or to pay for it, when they wouldnot do so at a public provider. But there are alsosituations where the clinical services provided byprivate providers are of lower quality. If these ser-vices do not meet minimum quality standards, itwould not be effective for the government to workwith private providers, even if they could attractmore users. In this case, it might be effective toinvest in additional training or supplies for the private providers, to improve the quality of theirservices.

In addition to considering quality and accessibility issues, governments should useproviders who are most efficient, or who candeliver services at the lowest cost, thus savingmoney for the government. Although it may bedifficult to analyze the cost of specific serviceswithin the public health system, such informationis critical to formulating a government strategy.The decision to use private providers depends

3 ▲▲ PHR Policy Primer

Private ProvidersPrivate providers often deliver better non-clinical quality

compared to public providers. Higher quality could influence

people to use a health service or to pay for it, when they

would not do so at a public provider.

on a comparison of the government’s cost of provi-sion and the price a private provider would chargefor delivering the same service. Government costsare impacted by the operational capacity of gov-ernment facilities and by the level of privateprovider involvement in replacing or expandinggovernment services. For example, if there isexcess capacity (no additional facilities, equip-ment, or staff are needed), then the cost to expandgovernment delivery will be relatively low (justthe cost of medicines or supplies). But, if the gov-ernment is operating at full capacity or is expand-ing delivery in an area where there are no govern-ment facilities, then government costs will bemuch higher, as they will include investments incostly facilities and equipment. This type of costcomparison would also apply if the government isconsidering using private providers to completelyreplace its own services.

Equity and sustainability are also importantgoals, but they relate more to financing rather thanto service delivery policies. For example, if equity is a concern because services are unaffordable forthe poor, then improving equity means relievingthe financial burden. Designing the best strategyto accomplish this task begins with consideringpublic and private providers in terms of theiraccessibility, quality, and efficiency. Regardless of whether private or public providers are found tobe the most cost-effective, equity is dependent onchanges in financing policies, such as providingsubsidies to certain providers or vouchers to thepoor. Similarly, if the goal is to improve equityand sustainability by shifting affluent users to theprivate sector, analysis of the relative strengths of

public and private providers is required to deter-mine whether the strategy would be appropriate. If it is found that public providers are more acces-sible for the affluent and provide higher qualityservices, then a better strategy may be to eliminatesubsidies for the affluent at public facilities and notto force a shift to the less accessible lower qualityprivate providers.

If it is found that public providers are moreaccessible and efficient, and provide higher quality services, then working with private providers is not the best way to improve or expand servicedelivery — concentrating on improving andexpanding public sector services would be moreeffective. If it is determined that private providershave certain strengths that can assist the govern-ment meet its health objectives, then specific infor-mation about private providers and consumers isneeded in order to identify strategies for increasingthe level of private sector supply and consumerdemand to meet health goals.

2. Characteristics of Providers (Supply)Designing appropriate government interventions to encourage private sector supply of servicesrequires information about providers in order to target the most effective group of privateproviders. Analysis of the provider market shouldfocus on those providers that serve or could servethe target population. Key data needed are:

▲ information about the types of providers(cadre of provider, public or private sector)who provide the priority service — andwhether they are serving or can serve the target population;

▲ information about the types of providers with whom the target population has frequentcontact — and whether they could deliver thepriority service;

▲ information about the types of clients privateproviders serve — and whether these clientsare the targeted population;

▲ information about why certain types ofproviders do not deliver the priority service,or do not deliver it to the target population —reasons may include lack of training in servicedelivery, lack of appropriate inputs (equip-ment or medications), lack of capacity, or lack of financial incentives.

All these factors must be considered in rela-tion to the providers’ contribution to access, quali-ty, and efficiency. It may be found that the groupof suppliers that serves the target population hassubstandard quality services, in which case thegovernment may choose either to forego working


with those providers, or to design interventions toimprove their quality.

3. Behavior and Characteristics ofTargeted Consumers (Demand)Understanding the behavior of consumers and thenature of market demand is critical if the govern-ment wishes to expand coverage to non-users, or toencourage some users to pay for services at privateproviders. Defining the characteristics of the tar-get group would include obtaining informationsuch as:

▲ location of target group — rural/urban, specific province, etc.

▲ socio-economic status of target group —informal sector workers, people from poorcommunities, or higher-income groups whouse subsidized services

▲ religion or ethnicity of target group

▲ age of target group — children under five,elderly

▲ health status of target group — HIV/AIDSpatients, pregnant women

Once the target group is defined, further studyis required to understand why this segment of thepopulation behaves as it does. Non-users may notseek the service because of lack of knowledgeabout health benefits, limited willingness or abilityto pay, lack of knowledge of providers, or lownon-clinical quality (difficulty accessing providers,inconvenient hours, rude staff). People who couldafford to pay may choose to use subsidized publicservices out of convenience or habit, lack ofknowledge about private providers, or becausethey are unwilling to pay. In addition to interven-tions to address private or public sector supply ofservices, policies and interventions to influenceconsumer behavior are often necessary to achievehealth goals.

Synthesis of Market InformationAll the market factors must be considered simultaneously as they are inter-related, and theymust be considered in conjunction with the gov-ernment objectives. In many cases, findings aboutproviders will lead to further information require-ments about consumers, or consumer-focusedinterventions. The table on page 6 provides aframework for analysis of the various market factors. After all the factors are considered andspecific obstacles to achieving government objectives are identified, intervention strategies can be designed to overcome the obstacles.

Selection of Intervention StrategiesIf it is determined that private providers haveadvantages in terms of access, quality, or efficien-cy, then interventions that remove barriers or provide incentives to private providers serving thetarget consumers would help achieve governmentobjectives. Government interventions can encour-age private providers of the priority service todeliver to the target population, or, conversely,encourage those private providers currently servingthe target population to provide the priority ser-vice. The government may also want to undertakeinterventions aimed at changing the behavior ofthe consumers. It is important to set clear objec-tives so that strategies can be measured accordingto their contribution to the objectives.

The challenge is to consider all the alternativestrategies and to assess which of those would be most effective — most likely to produce thedesired outcome at the least cost. A successfulstrategy must be appropriate for all conditions inthe market. Most likely, a combination of two or more strategies will produce much better out-comes. For example, a strategic approach forreaching non-users may include training providerswho are accessible for non-users, contracting withthose providers to deliver the service, and conduct-ing an education campaign to increase consumers’awareness of the benefits of the service and theavailable providers. These three interventionstogether address all the market obstacles blockingthe achievement of the health objective, and aremuch more likely to produce the desired outcomes.

After analyzing the market for priority ser-vices, some obstacles identified may be:

a. private providers do not deliver the servicebecause they lack training

b. private providers deliver services to the targetmarket but services are of substandard quality

c. private providers do not provide the servicebecause they lack inputs (equipment/supplies)

d. private providers have no financial incentivesto deliver the service

e. private providers who deliver the service are not in the same locations as the target consumers


Public ProvidersIf it is found that public providers are more accessible and efficient,

and provide higher quality services, then working with private

providers is not the best way to improve or expand service delivery —

concentrating on improving and expanding public sector services

would be more effective.

f. consumers do not seek service due to lack of knowledge of benefits or ability to pay

g. consumers do not seek service due to unwill-ingness to pay

h. consumers do not seek service due to lownon-clinical quality (inaccessible, rude service)

i. consumers do not use private providers due to convenience or habit

j. consumers do not use private providers due to lack of knowledge of providers

k. consumers do not use private providers due to unwillingness to pay


Analyzing the Market for Priority Services

PRO

VID

ERS

It is moreeffective towork with

publicproviders

Are privateproviders

more efficient,higher,quality,more

accessible?

What arecharacteris-tics of targetmarket?• location• socio-

economicstatus

• religion• age• other

Are services of sufficient

quality?

Whichprovidersserve the target market?Do they deliver priorityservice?

Are services ofsufficient quality?

Why doesn’ttarget marketseek priorityservices?

Why don’tthey deliver

priority service?

Why don’tthey serve

target market?

Lack knowledge of benefits

Lack training, inputs,financial incentive

No demand

Not in same location

CON

SUM

ERS

Defining Characteristics & Behavior Government Actions

Yes

YesNo

No

No

Yes

No demand

Lack finanical incentive

No

No

Ability to pay

Lack knowledge about providers

Low quality (non-clinical)

Lack knowledge about private providers

Habit/convenience

Willingness to pay Low quality(non-clinical)

Provider Intervention

Consumer Intervention

Consumer Behavior Change

















Identifying Obstacles

Which privateproviders deliver priority services?Do they serve targetmarket?

Why isn’tmarket usingunsubsidizedprivateproviders?

Willingness to pay Low quality(non-clinical)

Depending on the obstacles identified and the government objectives, a variety of interventionsmay be appropriate:

1. Training and/or certifying private providers(alleviate obstacles a, b, j). The governmentmay wish to train private providers who currently do not provide the service, thusexpanding the number of qualified suppliers.In many countries, the delivery of priorityhealth services is limited to a specific cadre of health professionals. For example, tradi-tional birth attendants may be an integral part of many communities and serve womenof reproductive age, but they have no formaltraining in family planning. Providing training to these providers may eliminatemissed opportunities for family planningdelivery.

A market analysis may find that privateproviders deliver the service to the target population, but the clinical quality is substan-dard and so the service does not have the full health impact. An appropriate govern-ment action may be to train those providerswho currently deliver the service but lack adequate or up-to-date skills. In addition, the government may choose to certifyproviders who meet the minimum qualityrequirements in order to raise quality standards and to inform consumers aboutqualified providers.

2. Ensuring private providers have access tonecessary supplies (alleviate obstacle c). Ifthe necessary equipment or supplies are costlyand private providers are unwilling or unableto invest such resources, then the governmentcan lower the cost by providing free or subsi-dized supplies or reducing taxes on supplies.Private providers may not offer immuniza-tions simply because they do not have arefrigerator to store the vaccines or do notknow where to purchase the vaccines. Privateproviders may be willing and able to pay forsupplies, but simply do not have a reliable orconvenient source of supply. In this case,identifying and establishing suppliers may be the only intervention required to facilitateprivate providers delivering the service.

3. Contracting with private providers to deliverthe service (alleviate obstacle d, f, g, h, k).Contracting refers to a mechanism for “hir-ing” private providers to deliver the service,through a formal agreement specifying pay-ments for services. Contracting with privateproviders may provide the necessary financialincentive for providers to deliver services tothe target population if users are otherwise notable to pay an acceptable price. Contractingwith private providers can also lower the costof service delivery if they are more efficientthan public providers, thus producing savingsfor the government.

If consumers do not use the service due toinaccessible providers or low non-clinicalquality, encouraging use of private providers(contracted by the government at no addition-al cost to the consumer) who offer higherquality may be an important solution. Non-users may be more likely to use the service if it is more accessible, convenient, and avail-able in a more attractive facility.

4. Encouraging private providers to locate within reach of the target population (alleviate obstacle e). Market analysis mayfind that users want the service and are will-ing to pay for it, but do not have easy accessto providers. If private providers are moreefficient or offer higher quality services thanpublic providers, then the government maywish to provide incentives to private providerswho are willing to locate close to the targetpopulation. Incentives may take the form ofsubsidies (free or low cost equipment, sup-plies) or service delivery contracts.

5. Undertaking education efforts aimed atchanging the behavior of consumers (alleviate obstacles f, g, i, j, k). This type of intervention is most appropriate to educateconsumers who do not understand the benefitsof the health service, or are unwilling to payfor it, unaware of where to obtain the service, or unaware of its availability at privateproviders. It may be effective to include private providers in the education effort, if they have advantages in communicatingeffectively with the target groups.


If consumers are willing and able to pay forservices offered by private providers but failto do so simply due to habit or lack of know-ledge, then public education combined withlower subsidies (higher prices) at public facili-ties may be part of the solution. An assess-ment of the provider market may find that private providers are not offering the servicefor various reasons, which must be addressedin different ways. An education and commu-nications campaign targeted at users who areunwilling to pay can convince them of thevalue of the service.

6. Increasing subsidies to encourage non-users who are not able or willing to pay forservices or to ease the burden of costs forcurrent users (alleviate obstacles f, g, k).While education efforts may increase users’willingness to pay, some portion of the targetpopulation may still be unwilling or unable topay for services. In this case, increased gov-ernment subsidies may be necessary toencourage people to use the service. Someissues around increasing subsidies includedesigning mechanisms for distributing thesubsidies only to the targeted group, andselecting providers who would deliver suchsubsidized services.

Pharmacists in Romania

In order to increase family planning awareness in Romania, a program was initiated in October1996 to educate young adults about modern contraceptive methods and to advise them of the availability of contraceptive services at commercial pharmacies. In addition to a national media campaign, pharmacists were trained in contraceptive technology andclient care. A contraceptive technology guide was distributed to 3,000 private pharmacists to be used as a reference tool to better advisetheir clients. This two-pronged approach was used effectively to increase family planningawareness.

Overall Market InteractionIn addition to conditions shaped by consumer or provider behavior, public sector programs and policies also impact on the private market for health services. Government policies designed to address one objective may adversely impact

other objectives or impede the development of an efficient private sector. Effective health systems depend on the interaction of different policies and development of a coherent sector-wide strategy, and not just on the effectiveness of any single government policy or program.

As an example, in an effort to maximizeusage, many countries provide family planning services free of charge or at a very low cost at public health facilities. In order to address budget constraints, government may wish toencourage use of unsubsidized private providers,thus lowering its costs. But it is difficult for pri-vate providers to be profitable competing with free providers, thus private sector activity is likelyto be inhibited as long as the government providesfree services. Lowering subsidies, or raising feesat public facilities, lowers barriers to private sectoractivity, while generating additional funds for thehealth sector.

At the same time, the government cannotfocus solely on raising fees or encouraging the private sector without first considering consumers’ability or willingness to pay for family planning.If many consumers are unwilling or cannot affordto pay the higher fees, they may choose to foregoservices. An education campaign may be able to convince some users of the value of the service.Depending on the percentage of consumers whocannot pay, it may be effective to target subsidiesto them. But, if it is found that a great majority of users would no longer seek the service if it were unsubsidized, then encouraging use of unsubsidized private providers, without firstaddressing consumer behavior, does not serve government objectives and would have negativehealth consequences.

This example illustrates how focusing solely on increasing coverage or encouraging use of unsubsidized private providers without analyzing the overall market can lead to negativehealth results. In most cases, neither the publicnor private sector can be ignored. Failure to consider consumer behavior and consumer-related interventions can also jeopardize results. A balance of public and private sector strategies, in combination with consumer-based interventions,is needed.

Implementation ChallengesIn addition to setting objectives, analyzing themarket, and selecting intervention strategies,assessing whether to work with the private sectorrequires consideration of the implementationchallenges and costs. Accurate projections of


implementation costs are required to determinewhether working with the private sector is themost cost-effective way to achieve governmentobjectives.

Even a well thought-out strategy will not besuccessful without the appropriate mechanisms tosupport smooth implementation. Successful imple-mentation of any new program requires significantresource investments, but often the required invest-ment is underestimated, leading to implementationproblems and disappointing results. Two keyimplementation issues are government capacityconstraints and transactions costs.

Lack of capacity leads to ineffective imple-mentation of otherwise promising strategies. Even a simple policy of providing training to private providers, a type of activity that govern-ments are accustomed to, can prove to be a challenge. It can divert resources of a fairly meager health system from other high priorityactivities. Developing an appropriate curriculum,committing trainers to the activity, and providingtransport and other logistical support are substan-tial inputs.

Capacity issues are particularly acute whenthe government is carrying out a new activity, such as contracting with private providers. Awhole new set of skills is required, such as abilityto negotiate and develop an enforceable contract,to maintain accurate accounting and managementinformation systems, and to monitor the servicesdelivered by private providers. Some minimumpatient identification procedures and electronicinformation systems are required to be able to prevent and identify fraud, such as a providerbilling for services not delivered. Such skills are not generally prevalent among public healthofficials, and such systems are not generally inplace in developing countries. Furthermore, inmany cases, the underlying legal and regulatorysystem does not allow for effective enforcement of contracts.

In addition to the increased capacity issues,ongoing transaction costs must be taken intoaccount when assessing whether new activitieswith private providers are cost-effective. Suchtransaction costs may include processing of billsfrom providers, periodic supervision of servicedelivery, and audits of providers. If ongoingadministration of activities is not effective, it caneliminate any efficiency gains from working withprivate providers.

Contracting Out Hospital Services in South Africa

There has been extensive experience contracting out for hospital services in South Africa. A studycomparing the efficiency of contracting out withdirect public provision found that, where govern-ment provision is inefficient or capacity insufficient,contracting out can be an efficient mechanism forservice provision. This study found that in practice,however, the government’s lack of information of its own production costs, information on the competitive conditions in the market, and capacity to negotiate and monitor contracts resulted in inefficiencies. Even though the costs of service production were lower at the private hospitals, thesavings were offset by longer lengths of stay due to lack of appropriate incentives in the service contract.

The government can increase the efficiency ofits activities with private providers (lower transac-tions costs), if it can identify capable and motivat-ed partners. For instance, if rural private practi-tioners are all members of a professional associa-tion, then the association can play an importantrole in the management and oversight of its mem-bers. Transaction costs are generally lower if theproviders are large and organized. An examplemight include a well-managed NGO network,whose facilities are accessible to 10 percent of the population. Working with the network NGOwould be more efficient than working with individual practitioners to cover 10 percent of the population.

Indonesian Midwives Association

The Indonesian National Family PlanningCoordinating Board together with the IndonesianMidwives Association (IBI) and Bank RakyatIndonesia operate a loan fund for private midwivesin five provinces. Midwives can access loans toestablish new practices or to refurbish and improveexisting practices. IBI plays a critical role in this program by disseminating information about the loan fund to its members, assisting midwives toapply for loans, and supervising usage of the funds. Without the input of a strong partner, this program would not be feasible for the government.


Implementation issues are an integral part of the decision to work with private providers. Theassociated capacity constraints and transactionscosts must be considered from the onset in order to provide an accurate assessment of the cost-effectiveness of alternative strategies. Not takingthese costs into consideration from the beginningcan lead to disappointing results. One scenariomay find a government contracting with privateproviders because of their lower costs. After twoyears of operation, it is found that once accurateadministrative costs are added to the scenario, contracting with private providers is actually costlier than service delivery through the publicproviders.

Lessons Learned from International ExperienceThere is no specific approach for working with private providers that is a guaranteed success.Even the strategic decision-making approach out-lined here can only serve as guideline for analyz-ing all the conditions that must be factored into thedecision. Key lessons learned from past experi-ences include:

▲ Set clear objectives and prioritize them inorder to develop appropriate interventionstrategies and criteria with which to evaluatethese strategies.

▲ Identify and capitalize on the relativestrengths of the public and private sector: Is the private sector more efficient? Does itoffer higher quality? Is it more accessible?

▲ Design programs with public or privateproviders based on their effectiveness, and noton preconceived biases toward governmentresponsibility to provide health services orprivate sector efficiency. Work with privateproviders when it is the most cost-effectiveway to meet objectives.

▲ Be open to working with unconventionalgroups of providers (such as traditional birthattendants), if they have unique qualities —more accessibility to the consumer, moralauthority in rural areas. Often such providersare respected and trusted community members.

▲ Develop a strategy incorporating a package ofcomplementary interventions designed toaddress the specific local conditions. Avoidpreconceptions and imported strategies.

▲ Consider the overall market effect of all policies. Regardless of the strategies pursuedor the types of providers involved, neither thepublic nor the private sector can be ignored.Consider the impact on all providers and onconsumer behavior.

▲ Design programs that are in line with themanagement capacity and resources available.Consider not only the initial start-up costs, butalso the ongoing implementation costs.

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Partnerships for Health Reform is funded byUSAID and implemented by Abt Associates Inc.,in collaboration with Harvard University School ofPublic Health, Howard University InternationalAffairs Center, Development Associates, Inc., andUniversity Research Company, LLC.

This Primer was written by Grace Chee with valuable input from Sara Bennett and CharlotteLeighton. The author also wishes to acknowledgePeter Berman and Mukesh Chawla for their work, “A Model for Analyzing Strategic Use ofGovernment Financing to Improve Health CareProvision,” PHR Major Applied Research 4,Technical Paper 1 which also contributed to thisPrimer.

The PHR Primer series is a reference to orientpolicymakers and stakeholders to the terminology,concepts, and results of health reform so to partici-pate effectively in policy dialogue and decision-making.

For more copies, or for more information aboutPHR activities and publications contact:

PHR Resource CenterAbt Associates Inc.4800 Montgomery Lane, Suite 600Bethesda, MD 20814 USA

Fax: 301-652-3916E-mail: [email protected]://www.phrproject.com

Photos: Panos Pictures

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