Private hospitals in health systems: strategies, policies and challenges Introduction to the

1. Private hospitals in health systems: strategies, policies and challenges Introduction to the Private Hospitals Module April Harding World Bank Pathumwan Princess Hotel, Bangkok May 30-June 4, 2011

2. 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:

3. Your advice requested

4. Private hospitals’ potential? • More capital • (which is often in very short supply) • Better maintenance of capital investments

5. Private hospitals’ potential? • More capital • (which is often in very short supply) • Better maintenance of capital investments • Better Management

6. There is a strong relationship between management practices and outcomes Source: LSE CEP and McKinsey cross country hospital study

7. Private hospitals tend to have higher management scores Source: LSE CEP and McKinsey cross country hospital study

8. Management also matters for productivity • Efficient use of resources • Efficient allocation of staff • Efficient cost-risk balance on intervention choice

9. South Africa hospital study • 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

10. Private hospitals’…..pitfalls • 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?

11. 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.

12. 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

13. International models • Segmented • Edge • Integrated

14. World Health Report 2000 Core Functions of Health Systems • Financing collecting funds; pooling funds; purchasing • Service Delivery public health/ population services; individual & curative services (PHC, hospitals) • Stewardship • Input generation

15. World Health Report 2000 Core Functions of Health Systems • Financing collecting funds; pooling funds; purchasing • Service Delivery public health/ population services; individual & curative services (PHC, hospitals) • Stewardship • Input generation

16. Health system with private hospitals segmented: UK example Private sector Public sector Regional health authority Regional health authority Regional health authority Regional health authority Private insurers Public financing organizations OOPs Private hospitals Public hospitals Little or no linkage between public sector and private hospitals

17. Health system with private hospitals integrated: Germany example Public sector stewardship domain Social health insurers OOPs OOPs Public sector Private sector Private hospitals Public hospitals Government exercises stewardship over both public and private hospitals , especially through the funding arrangements

18. Health system with private hospital services purchased “at the edge”: UK Independent Treatment Centers example Private sector Public sector Public financing organizations Private insurers OOPs Private hospitals Private companies temporarily provide services Public hospitals Temporary public purchasing from private providers to fill immediate shortfalls in capacity

19. 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

20. Private Hospitals: US Regulatory Regime Example Subsidized Capital Local Gov’t Participation in Disaster Planning & Response Local Gov’t For-profits too! Med. School Regulator Medical Education Provider Accreditation Joint Commission For-profits too! For-profits too! Federal Govt (Medicare) Social insurance eligibility/ payment Regulation Nirvana! Beneficial NPO Tax Exemptions FederalTaxCode Hospital License For-profits too! State Govt Non-Profit Organization Fed. Statute: Commercial Code For-profits too! Disease Reporting/ Surveillance Fed. Center for Disease Control

21. 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

22. Introduction to module: three core elements • Goals • Strategies: • Policies:

23. Introduction to module: three core elements • Goals: which are the most important goals which policymakers engage with private hospitals to achieve? • ?

24. Introduction to module: three core elements • Goals: which are the most important goals which policymakers engage with private hospitals to achieve? • Access • Quality • Cost containment

25. Introduction to module: three core elements • Strategies: which strategies do policymakers pursue toward private hospitals?

26. Framework: Strategies Grow Private Hospital Situation • A well-functioning part of the private sector • could contribute to expanding access by increasing investment & service provision • Romania dialysis contracting Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

27. Framework: Strategies Harness Private Hospital Situation • 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 Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

28. Framework: Strategies Convert Private Hospital Situation • Well-performing non-profit hospitals • could run public hospitals more effectively (quality; cost containment) • Sao Paulo Brazil hospital PPP initiative Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

29. Framework: Which policies do policymakers use to implement the strategies? Grow Policies used to implement strategy Private Hospital Situation • Contracting • Regulation & deregulation (enabling environment) • Accreditation • Taxation Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

30. Framework: Which policies do policymakers use to implement the strategies? Harness Policies used to implement strategy Private Hospital Situation • Contracting • Regulation • Accreditation • Information dissemination & exhortation • Taxation Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

31. Framework: Which policies do policymakers use to implement the strategies? Convert Policies used to implement strategy • Contracting • PPPs Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

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

33. Harding-Montagu-PrekerFramework: Overview Policies Strategy Focus Goal • Contracting/ purchasing • Regulation • Accreditation • Information dissemination & exhortation • PPP transactions • Access • Efficiency/ • cost containment • Quality of Care Private Hospitals Grow Harness Convert Ownership • For-profit corporate • For-profit small business • Non-profit Capacity planning Restrict PublicSector Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

34. 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

35. Private Hospital Share Medium-Low Medium-High High Low Private Public