Private hospitals in health systems: strategies, policies and challenges

Introduction to thePrivate Hospitals Module

April HardingWorld Bank

Pathumwan Princess Hotel, BangkokMay 30-June 4, 2011

Your advice requested

Your Health Minister just came back from a meeting with potential international hospital investors.

They have expressed interest in investing in existing and new private hospitals in your country.

Your minister asks you:

Your advice requested

What should my response be?

Should I encourage this?

If so, Why• what potential gains?• what potential problems?

Private hospitals’ potential? More capital

◦ (which is often in very short supply)

Better maintenance of capital investments

Private hospitals’ potential? More capital

◦ (which is often in very short supply)

Better maintenance of capital investments

Better Management

Management practice score

105

95 95

90

UK heart attack mortality rates

Bottom quartile

3rd quartile

2nd quartile

Top quartile

There is a strong relationship between management practices and outcomes

Source: LSE CEP and McKinsey cross country hospital study

Hospital Ownership

2.4

2.5

2.6

2.7

2.8

2.9

3

Private Public

Private hospitals tend to have higher management scores

Source: LSE CEP and McKinsey cross country hospital study

Efficient use of resources

Efficient allocation of staff

Efficient cost-risk balance on intervention choice

Management also matters for productivity

Broomberg compared PPP hospitals with similar public hospitals.

Conclusion: delivered same quality, at a lower cost (productivity!).

But……… Public sector management of contracting

was poor, so public sector paid the same price for public as private (no cost containment)

Insight: public sector action and capacity is KEY to capturing the gains

South Africa hospital study

But challenges: Even if private hospitals are more productive, could:

cause cost escalation; distortion/inequality; still have poor quality

What would you advise the minister to: obtain the good, while containing the bad?

Private hospitals’…..pitfalls

That is what this module is about:

Finding the combination of policies that fit your setting and help capture the benefits of private hospitals, while containing potential problems.

Private hospitals’…..pitfalls

Outline

Private hospitals in health systems: global models

Introduction to module Goals, Strategies, Policy Instruments

What is so special about hospitals? Time, capital, complexity, non-profits

Overview of module sessions

International models

Segmented

Edge

Integrated

World Health Report 2000Core Functions of Health Systems

Financing collecting funds; pooling funds; purchasing

Service Delivery public health/ population services; individual & curative

services (PHC, hospitals)

Stewardship

Input generation

World Health Report 2000Core Functions of Health Systems

Financing collecting funds; pooling funds; purchasing

Service Delivery public health/ population services; individual & curative

services (PHC, hospitals)

Stewardship

Input generation

Little or no linkage between public sector and private hospitals

Health system with private hospitals segmented: UK example

Public sector Private sector

Public hospitals Private

hospitals

Private insurers

OOPs

Regional health

authority

Regional health

authority

Regional health

authority

Regional health

authority

Public financing organizations

Social health insurers

Government exercises stewardship over both public and private hospitals , especially through the funding arrangements

Health system with private hospitals integrated: Germany example

Public sector Private sector

Public hospitals

OOPs OOPs

Public sector stewardship domain

Private hospitals

Public financing

organizations

Temporary public purchasing from private providers to fill immediate shortfalls in capacity

Health system with private hospital services purchased “at the edge”: UK Independent Treatment Centers example

Public sector Private sector

Public hospitals Private

hospitals

Private insurers

OOPs

Private companies temporarily provide

services

Unpacking stewardship Stewardship of private hospital in integrated mixed

systems (e.g. Germany, Australia, France, Belgium, Switzerland, US) goes far beyond funding

Yes: public/social sector is funding private

hospitals, but also:

Intense regulation

Extensive co-regulation

Information collection and dissemination

Training support

Tax incentives – location, specific services

Reg

ula

tio

n N

irva

na!

Non-Profit Organization

Hospital License

Beneficial NPO Tax Exemptions

Social insurance eligibility/ payment

Medical Education Provider

Subsidized Capital

Accreditation

Private Hospitals: US Regulatory Regime Example

Fed. Statute: Commercial Code

State Govt

FederalTax Code

Federal Govt (Medicare)

Joint Commission

Med. School Regulator

Local Gov’t

Disease Reporting/ Surveillance Fed. Center for Disease Control

Participation in Disaster Planning & Response

Local Gov’t

Developing countries Often have large private hospital sector, but public

sector is not exercising stewardship Funding (rare) Regulation (on the books….)? Co-regulation (rare) Collaboration on disease reporting, disaster

response (rare) Training (rare) Tax incentives – location, specific services (some)

Much potential to improve private hospital contribution to sector goals….by changing this

Introduction to module: three core elements Goals Strategies: Policies:

Introduction to module: three core elements Goals: which are the most important goals

which policymakers engage with private hospitals to achieve?

?

Introduction to module: three core elements Goals: which are the most important goals

which policymakers engage with private hospitals to achieve?

AccessQuality

Cost containment

Introduction to module: three core elements Strategies: which strategies do

policymakers pursue toward private hospitals?

Framework: Strategies

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

Grow

A well-functioning part of the private sector

could contribute to expanding access by increasing investment & service provision

• Romania dialysis contracting

Priv

ate

Hos

pita

l Situ

atio

n

Framework: Strategies

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

Harness

A large existing private sector with good quality could be leveraged

to provide good public services at lower cost (contain costs)

• South Africa hospital contracting

Priv

ate

Hos

pita

l Situ

atio

n

Framework: Strategies

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

Convert

Well-performing non-profit hospitals

could run public hospitals more effectively (quality; cost containment)

• Sao Paulo Brazil hospital PPP initiative

Priv

ate

Hos

pita

l Situ

atio

n

Framework: Which policies do policymakers use to implement the strategies?

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

Grow

• Contracting• Regulation &

deregulation (enabling environment)

• Accreditation• Taxation

Priv

ate

Hos

pita

l Situ

atio

nP

olic

ies

used

to

impl

emen

t st

rate

gy

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

Harness

• Contracting• Regulation• Accreditation• Information

dissemination & exhortation

• Taxation

Priv

ate

Hos

pita

l Situ

atio

nFramework: Which policies do policymakers use to implement the strategies?

Pol

icie

s us

ed t

o im

plem

ent

stra

tegy

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

Convert

• Contracting• PPPs

Pol

icie

s us

ed t

o im

plem

ent

stra

tegy

Framework: Which policies do policymakers use to implement the strategies?

What is so special about hospitals? Time Capital Complexity Non-profits

Harding-Montagu-Preker Framework: Overview

• Access

• Efficiency/

cost containment

• Quality of Care

Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

• Contracting/ purchasing

• Regulation

•Accreditation

• Information dissemination & exhortation

• PPP transactions

Ownership•For-profit corporate • For-profit small business

• Non-profit

Capacity planning

Grow

Harness

Convert

StrategyPoliciesGoal Focus

Private Hospitals

PublicSector

Restrict

Overview of module sessions Today

◦ Capacity Planning, Shita◦ Ownership and Taxation, Dominic ◦ Regulation, EK Yeoh

Tomorrow◦ Contracting + Purchasing, Jack Langenbrunner◦ Thai Case on Hospital Contracting, Chantal/Siripen◦ Case Workshop: (1) Accreditation, Jiruth ,(2) Contracting, William Ho◦ Field trip

Thursday◦ Exhortation /Information Dominic◦ Hospital PPP - Intro and Models, April ◦ (Jakarta Case), Shita◦ Facility and Financing PPPs (PFI), Dominic ◦ Services Contracting PPPs (Operating Contract), April◦ Putting it all together, April and Dominic

Private Hospital Share

Private

Public

Low

Medium-Low Medium-High High