1. No category

A Comparative Analysis of
Health Markets and Private
For-Profit, Pro-Poor
Interventions in East Africa
Private Sector Innovation
Programme for Health (PSP4H)
Insert job reference
Prepared for
Department for International Development
(DFID)
December 2014
A Comparative Analysis of Health Markets and Private For-Profit, Pro-Poor Interventions in East Africa
Private Sector Innovation Programme for Health (PSP4H)
Contact Information
Document Information
Cardno Emerging Markets (UK) Ltd
Prepared for
Department for
International Development
(DFID)
Project Name
Private Sector Innovation
Programme for Health
(PSP4H)
Date
23rd December 2014
Oxford House, Oxford Road
Thame
Oxon
UK
OX9 2AH
Telephone: +44 1844 216500
http://www.psp4h.com
http://www.cardno.com/
Implemented by a Cardno Emerging Markets consortium:
Funded by the UK Government:
With partners:
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A Comparative Analysis of Health Markets and Private For-Profit, Pro-Poor Interventions in East Africa
Private Sector Innovation Programme for Health (PSP4H)
EXECUTIVE SUMMARY
With development efforts in recent decades focused primarily on improving the public sector health markets,
private health markets of East Africa (EA) have been relatively neglected by governments and development
partners as a target of research and as a possible strategy to address health challenges confronting the region.
The United Kingdom Department for International Development is supporting an action research programme
in Kenya to foster better understanding on how the private for-profit health sector can benefit the working poor.
The Private Sector Innovation Programme for Health (PSP4H) has commissioned this piece of research to
demonstrate the value of a market systems approach in specific health markets in the region and to illustrate
the steps needed to improve the functions of healthcare markets to better serve the poor.
Based on PSP4H experience in the Kenyan health markets, the report then analyses health markets in the six
countries (Ethiopia, Kenya, Rwanda, Somalia, Tanzania, and Uganda) in EA in terms of macroeconomics,
health financing, insurance, and supply and demand for private sector healthcare services. Through this
comparison, the report identified Tanzania and Uganda as similar private health sector potential with best
opportunity for expanding M4P in health. The report also identified private sector, pro-poor market interventions
with documentation in Kenya, Uganda, and Tanzania for comparison.
The goal of this report is to share lessons learned on how to work with the private sector in health using a
market based approach. The lessons are based on comparative research on PSP4H market interventions
and other private sector programs in similar health markets in East Africa. Although PSP4H has only been in
operation for fourteen months, emerging lessons include:

M4P approach works to analyse and shape health markets but with important differences: The
M4P framework is robust enough to describe and analyse what is happening in select health markets.
There are, however, several key differences between the health sector and other economic sectors.

Implementing M4P differs from traditional donor programming: M4P requires that donors and
implementing partners play a facilitative role. By definition, facilitation of market change is a temporary role
with the goal of exiting the market to foster long-term self-sustainability. There are times, however, when
it is appropriate for a donor to “prime the market” through direct intervention in order to achieve critical
public health objectives. It is critical when “priming the market” to have an exit strategy in place from the
outset of the project.

PSP4H has developed analytical approaches that can jumpstart future M4P programmes: A marketbased approach requires a full analysis of a country context focusing on understanding the health sector,
the poor and the PFP in health. The report shares many suggestions, such as innovative ways to define
the poor and the need to engage PFP sector early on to name a few, that can save time in applying the
M4P approach in other countries.

Using a portfolio approach helps minimize risk when facilitating change in health markets: PSP4H
has found that the portfolio approach allows a flexible mix of interventions, entry points into different
markets, and diversity in partners. As a result, the programme is less concerned with the performance of
any one intervention in the portfolio than with the overall success of the portfolio.

Look for opportunities in markets that meet this set of key conditions: PSP4H developed principles
when exploring potential market opportunities including: i) target the “working poor”; ii) focus on geographic
areas with a critical concentration of formal PFP providers; iii) stay out of donor-funded areas to avoid
“over-crowded” health and geographic areas; and iv) work in underserved health areas identified by the
poor and that are interest to the PFP sector, such as diagnostics, dentistry, optometry, and NCDs.

Field-based learning can guide design and implementation of future market interventions: In a short
timeframe, the PSP4H programme has several suggestions that may help increase the likelihood of
success with market interventions:
- Start with formal health providers and established institutions/networks
- Introduce market interventions that are easy to adopt and do not take the PFP providers away from
core, business activities
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Private Sector Innovation Programme for Health (PSP4H)
- Plan from the start to make network management become financially sustainable
- A successful business model is as important as a high-quality service
- Market interventions with potential scale involving systemic changes, like private health insurance, may
require a long time.

Promising market interventions share several key business practices: There are lessons from
outside the region that demonstrate key business practices found in successful PFP interventions targeting
the poor. Indeed, many of the examples reviewed in this report share similar characteristics. They include:
i) concentrating in urban locations, including as peri-urban areas and smaller towns, ii) carrying out nontraditional marketing techniques designed to reach the working poor; iii) delivering better customer service
than government facilities; iv) offering flexible terms of payment in response to the working poor’s
purchasing habits; v) emphasizing high volume by specializing on relatively simple, low-cost services; vi)
consistently looking for ways to cut costs; and vii) keeping a narrow clinical/technical focus.

PFPs serving the poor may have to partner with the government to achieve scale: Risk-sharing
schemes, such as partnerships with the government or financial support from social health insurance
schemes, are promising ways for governments and donors to engage the PFP to reach the poor on a
larger scale in a sustainable way.
Through this comparison, the report identified Tanzania and Uganda as similar private health sector potential
with best opportunity for expanding M4P in health.
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A Comparative Analysis of Health Markets and Private For-Profit, Pro-Poor Interventions in East Africa
Private Sector Innovation Programme for Health (PSP4H)
ACRONYMS
Acronym
Full spelling
ADDOs
Accredited Drug Dispensing Outlets
DHS
Demographic Health Survey
DFID
Department for International Development (UK)
DLDB
Duka La Dawa Baridi
FP
Family Planning
GDP
Gross Domestic Product
GF
Global Fund to Fight AIDS, Tuberculosis, and Malaria
HIV/AIDS
Human Immunodeficiency Virus Infection and Acquired Immune Deficiency Syndrome
HRH
Human Resources for Health
IFC
International Finance Corporation
LMIC
Low- and Middle-Income Countries
M4P
Making Markets Work for the Poor
MH
Maternal Health
MoH
Ministry (or Ministries) of Health
MSA
Medical Savings Account
NCD
Non-Communicable Disease
OECD
Organization for Economic Co-operation and Development
OOP
Out-of-pocket
PEPFAR
President's Emergency Plan for AIDS Relief
PFP
Private For-Profit
PNFP
Private Not-for-profit
PRINMAT
Private Nurses and Midwives Association Tanzania
PSP4H
Private Sector Innovation Program for Health
SSA
Sub-Saharan Africa
TB
Tuberculosis
THE
Total Health Expenditure
USAID
United States Agency for International Development
VfM
Value for money
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A Comparative Analysis of Health Markets and Private For-Profit, Pro-Poor Interventions in East Africa
Private Sector Innovation Programme for Health (PSP4H)
RECOMMENDED CITATION
Private Sector Innovation Programme for Health (PSP4H), 2014. A Comparative Analysis of Health Markets
and Private For Profit, Pro-Poor Interventions in East Africa. Nairobi, Kenya: PSP4H
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A Comparative Analysis of Health Markets and Private For-Profit, Pro-Poor Interventions in East Africa
Private Sector Innovation Programme for Health (PSP4H)
FOREWORD
The Private Sector Innovation Programme for Health (PSP4H) began in late 2013 with the mission to explore
the markets in which poor people pay for-profit providers for healthcare, a hitherto unexplored area for DFID
Kenya. Informal employment makes up the lion’s share of total employment in Kenya; this group is largely
uninsured, with studies showing health insurance coverage in the single digits. As such, Kenya’s mass of
working poor – about half the population – have grown accustomed to paying out of pocket to the private sector
for healthcare. However, because low income Kenyans do not always receive good value for the money they
spend, a significant opportunity to offer a better value proposition to this vast target audience presents itself to
the private sector.
Successful pro-poor for-profit business models in healthcare are not yet widespread. The programme hopes
to have some impact on this limitation by discovering and disseminating evidence on what does indeed work
for both business and the target group. PSP4H researches existing best practice, endeavours to understand
consumer health seeking and health spending behaviour through primary research, and explores ways the forprofit private sector can bring better quality of care and better access to services to low income groups through
testing innovative approaches in partnership with private actors. Early lessons learnt point to more effective
and sustainable programme design in the future.
PSP4H commissioned this study to compare the for-profit private health markets in Kenya with those in
neighbouring East African countries, with a view towards expanding – and potentially applying – lessons learnt
in Kenya to the wider context. The programme trusts that this foundation of knowledge will encourage more
private sector investment in pro-poor healthcare models, both in East Africa and beyond.
Ron Ashkin
Team Leader,
The Private Sector Innovation Programme for Health (PSP4H)
Nairobi, December 2014
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PREFACE AND ACKNOWLEDGEMENTS
PSP4H would like to acknowledge the work of lead writers Meghan Kumar, Barbara O’Hanlon and Salome
Wawire; and the contribution of PSP4H staff Ron Ashkin, Ambrose Nyangao, Veronica Musembi, Dolapo
Olusanmokun, Pamela Godia, Chris Masila, Mildred Kottonya and Patricia Guchu.
We acknowledge the contributions of those interviewed for the report, particularly Edmund Rutta and Grace
Njeri Gitonga, as well as assistance and recommendations from Nelson Gitonga and Catherine Goodman.
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A Comparative Analysis of Health Markets and Private For-Profit, Pro-Poor Interventions in East Africa
Private Sector Innovation Programme for Health (PSP4H)
Table of Contents
EXECUTIVE SUMMARY
iii
ACRONYMS
v
RECOMMENDED CITATION
vi
FOREWORD
vii
PREFACE AND ACKNOWLEDGEMENTS
viii
Table of Contents
ix
1
INTRODUCTION
1
2
M4P FRAMEWORK APPLIED TO HEALTH MARKETS
3
2.1
2.3
2.4
3
4
6
3
IMPLEMENTING A MARKET-BASED APPROACH IN HEALTH
3.1
3.2
3.3
3.4
3.5
3.6
4
5
What is M4P?
M4P Framework to Analyse and Shape Health Markets
M4P and Donor Role
Portfolio Approach
Pathway to Design Market Interventions
Discovery Phase
Identification Phase
Selection Phase
Implementation Phase
7
7
8
8
10
10
11
READINESS FOR M4P PROGRAMMING IN EAST AFRICA
13
4.1
4.2
4.3
4.4
4.5
4.6
4.7
13
13
13
14
14
15
16
Approach to Select Comparative Health Markets
Level of Macro-Economic Development
Health Financing
Private Sector Contribution
Health Insurance
Demand for Private Health Services
Ranking of EA Countries
LESSONS LEARNED FROM PRIVATE SECTOR PROJECTS IN COMPARATIVE HEALTH
MARKETS AND PSP4H INTERVENTIONS
17
5.1
5.2
Preliminary Findings from the Field
Lessons Learned from other Regions
17
22
6
CONCLUSIONS AND RECOMMENDATIONS
24
7
References.
26
8
APPENDIX 1: KEY M4P CONCEPTS ADAPTED TO HEALTH
28
9
appendix 2: Intervention screening tool
30
10
Appendix 3. Description of PSP4H Programme
32
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Tables
Table 4-1
Table 4-2
Table 4-3
Table 4-4
Table 4-5
Table 5-1
East African Countries Economic Development Indicators (World Bank, 2014) ........................ 13
Health Finance Indicators ........................................................................................................... 14
Select Private Health Sector Indicators ...................................................................................... 14
Role of Insurance in EA Health Sectors ...................................................................................... 15
Health-Seeking Behavior in the Private For-profit Sector ........................................................... 15
Overview of Private Sector Cases in EA ..................................................................................... 17
Figures
Figure 1-4
Figure 1-3
Figure 1-2
Figure 1-1
Figure 1-5
Figure 1-6
M4P Framework ............................................................................................................................ 3
Portfolio Approach ......................................................................................................................... 7
Timeframe to Achieve Market Change ......................................................................................... 8
Process to Build a Portfolio ........................................................................................................... 8
PSP4H Interventions by County.................................................................................................. 12
Ranking of Private Health Sector Development in EA ................................................................ 16
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1
INTRODUCTION
The purpose of this report is to share what PSP4H has learned about working with the
private for-profit sector in different health markets.
With development efforts in the last decades focused on improving the public sector health markets, private
health markets of East Africa (EA) have been relatively neglected by governments and development partners
as a possible strategy to address health challenges confronting the region. There is limited reliable information
about the size, profitability, and dynamics of the private for-profit (PFP) healthcare market in EA, which
hampers even the limited attempts to engage with it. Additionally, there is little evidence on how best to
intervene in health markets and engage the PFP sector to benefit lower economic segments of the population.
Initial attempts at improving this situation have been made by a number of donors (e.g. United States Agency
for International Development (USAID) and International Finance Corporation (IFC), who have supported
analysis of the formal for-profit sector, initiated inclusive policy dialogue between the public and private sectors,
and established programs involving the private health sector. These are an important first step, but more
approaches and initiatives supporting the PFP are needed to determine if this segment of service providers
can deliver accessible, affordable and quality healthcare to the poor in this region.
The United Kingdom Department for International Development’s (DFID) response to the situation is an action
research programme in Kenya to foster better understanding on how the PFP health sector can benefit the
working poor. The Private Sector Innovation Programme for Health (PSP4H) - implemented by Cardno
Emerging Markets and consortium partners - utilizes a market systems approach called Making Markets Work
for the Poor (M4P), originally used in the agricultural development sector. This M4P approach works to
strengthen the PFP health sector’s capacity to reach the poor, then conducts research to assess if consumers
get improved value for the money (VfM) they spend on health in the private sector when accessing that care
through the PSP4H partner interventions.
PSP4H programme objectives include:
 Understanding the Kenyan poor’s provider preference, health-seeking
behaviour, and willingness and ability to pay.
 Identifying and piloting appropriate pro-poor interventions by the
commercial health sector.
 Conducting action research to explore when and why the private health
sector delivers healthcare to the poor.
 Providing evidence about whether the private sector can delivery
affordable, quality health services that reach the poor.
 Sharing lessons learned from the different pro-poor health market
interventions.
During its first year, PSP4H has undertaken a series of research studies to help build both the Kenyan and the
international community’s knowledge on market-based approaches in health. To date, PSP4H research has
published the following briefs:
The Kenyan Poor and Their Use of the Private Health Sector (Demand side)
What Do We Know About Kenyan Private Health Sector? (Supply side)
Formative Survey of the Private Health Sector in Kenya
A Study on Sustainability Outcomes of Donor-Funded Healthcare Programmes
Comparing Kenya’s Private Health Finance Markets with Neighbouring Markets
Study of the Pharmaceutical Supply Chain in Kenya
Preliminary Research Report (Year One)
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In addition, PSP4H conducts action research on all its market interventions. To date, PSP4H is working with
a portfolio of 17 Kenyan PFP health businesses in diverse areas including health finance, maternal health,
supply chain, non-communicable diseases, e-health, and low-cost service delivery. The action research on
each of the market interventions is designed to explore the potential for donors and developing country
governments to engage and support the private health sector as a complementary strategy to current publicfocused approaches to address health priorities.
As part of its focus on learning and sharing knowledge, the PSP4H commissioned this comparative analysis
of the health markets and private sector programs to clarify:
 Market conditions motivating commercial participation in various health
markets.
 Critical factors to engage/interest of the for-profit sector in providing
services to the poor.
 Health areas where a market-systems based approach is most likely to
succeed.
 Reasons for success or failure of different types of interventions in these
health areas.
 Applicability of lessons learned under PSP4H to similar health markets in
the region and perhaps beyond.
Although the target audiences for this comparative analysis are donors and low- and middle-income country
(LMIC) governments, the lessons learned are also relevant for implementing partners working in the
international health arena. The analysis will help demonstrate the value of a market systems approach in
specific health markets in the region and illustrate the steps needed to improve the functions of healthcare
markets to better serve the poor.
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2
M4P FRAMEWORK APPLIED TO HEALTH
MARKETS
The Making Markets Work for the Poor framework is relevant to the health
sector with some key changes in interpretation
2.1
What is M4P?
M4P is an approach to analyse the participation of the poor in market systems and to offer guidance on how
to “influence” markets so they benefit the poor. What distinguishes the M4P framework from others is the
combination of analysis with action. M4P analyses how the poor participate in a specific market (e.g. as a
consumer, producer, etc.) and then recommends how to shape and bring about change in the market system
to benefit the poor based on that analysis.
The M4P approach focuses on market systems and market dynamics. Market systems provide a space for
consumers and suppliers to come together to carry out a transaction to purchase a good or service (core
functions). As figure 1-1 illustrates, a market system is comprised of multiple actors (private sector,
government agencies, representative organizations, and civil society) who carry out numerous functions (core
functions in a market, formal and informal rules and supporting functions). A market system’s range of
supporting functions and informal/formal rules (outer ring) shape a specific market’s performance (inner ring)
by determining market players’ behavior and practices, influencing relationships between the players, providing
information and knoweledge and creating incentives (SDC and DFID, 2008)
Figure 1-1 M4P Framework
Government
Sector
Representative
Bodies
Supporting Functions
Infrastructure
Coordination
Informing and
Communicating
Informal
Networks
Membership
Organizations
Setting and
Standards
Regulations
Standards
Not-for-Profit
Sector
Laws
Enforcing Rules
Informal Rules
and Norms
Private
Sector
Source: (The Springfield Centre 2014)
M4P is concerned with achieving large-scale change in markets. The type of interventions under an M4P
approach go beyond engagement with individual organizations and private sector groups, involving a
multiplicity of actors to achieve systemic change. However, achieving scale does not imply nationwide
implementation – scale depends on the market. Sustainability in a M4P context implies: i) developing capacity
in a market system and actors; ii) supporting a dynamic system to grow and evolve as the market goes to
scale; and iii) the market continuing to deliver goods and service after the intervention ends.
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In any market system, there are three main sets of functions:
 Core functions/market dynamics (inner ring) consists of several factors that influence the supply and
demand of goods and services. The exchange between supply and demand is conventionally a transaction
with money but can also occur through informal payments and/or government subsidies.
 Rules/market system (outer ring) sets the terms by which all the players participate in a specific market
as well as shape market performance. Rules include informal rules and norms, formal regulations,
guidelines and laws and practice. Rules are essentially the domain of government agencies and/or
representative bodies. Their capacity to enforce the rules is as important as the rules themselves.
 Supporting functions/market systems (outer ring) are a range of tasks – such as coordination between
the sectors, adequate infrastructure, research and development, skills and capacity and information –
required to develop and grow the market.
2.2
Why M4P in Health?
There are many reasons why the international health practitioners are turning their attention to the M4P
approach. First, there is a growing recognition that traditional forms of donor assistance focusing exclusively
on Ministries of Health (MoH) and public programs do not effectively reach the poor and, in fact,
disproportionately benefit the middle- and upper-income groups (Makinen et al., 2000). Secondly, there is
growing concern over sustainability of donor-initiated programs – both financially and organizationally. In the
age of the President's Emergency Plan for AIDS Relief (PEPFAR) and the Global Fund (GF) to Fight AIDS,
Tuberculosis (TB) and Malaria, the approach has been for donor agencies to get “the job done ourselves” by
providing finance, advice, materials and labour (SDC and DFID, 2008) – which succeeds in the short run, but
is not sustainable. Finally, purely analytical approaches to understanding why health systems in developing
countries are underperforming are inadequate. Although policy research in OECD countries includes
measurement of health markets and private sector activities, similar research in developing countries does
not, perpetuating the public sector orientation that has been characteristic of donor programming in health and
development to date (Introduction to Markets for Health. DFID-sponsored Workshop, Organized by the World
Bank Institute, January 2013).
2.3
M4P Framework to Analyse and Shape Health Markets
While there may appear to be little in common between a market for
Market: A set of arrangements by
food products and a market for health services, early observations
which buyers and sellers are in
from PSP4H show that the systems supporting these different
contact to exchange goods or
markets share similar characteristics. A working market – whether it
services in health; the interaction of
demand and supply for a health
be for food production or consumption of a health service – requires
service or product.
an enabling environment creating incentives to participate in the
market as well as multiple actors who have the capacity to play their
respective roles. Upon examination, the M4P framework is robust enough to describe and analyse what is
happening in select health markets. However, there are several key differences when using the M4P approach
in health that should be noted and are elaborated in the following section:
Market actors: The main categories of actors (e.g. government,
Private for-profit: Commercial
private sector, representative bodies and civil society) are similar in
entities engaged in a health
health to the generic M4P, though specific organizations differ. The
business that provides health
major differences, however, are the diversity of private sector
services and/or products.
organizations in healthcare in both the PFP and private not-for-profit
Private
not-for-profit:
Faith(PNFP) sectors and the range of private health operations (e.g.
based
organizations,
nongovernment organizations, social
multiple levels of hospitals, diagnostics and laboratories,
enterprises
delivering
health
pharmaceutical production, supply and distribution, medical training,
services and/or products.
etc.). Another distinction is how fragmented and disorganized the
private health sector is compared to other economic sectors.
Examples of this fragmentation include weak representative bodies, and nascent membership organizations.
These two factors make any market intervention more difficult, as actors may not be equally matched nor are
they capacitated to act. Another difference is the role government plays in the health sector: MOH not only set
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the rules (regulate) but also deliver health services. Finally, international donor agencies have become market
players. Heavy reliance on donor funds and grants dampens competition and crowds out the PFP health
sector in specific health markets such as human immunodeficiency virus infection and acquired immune
deficiency syndrome (HIV/AIDS), family planning and maternal health (Public Service Strengthening Using
Market Systems Development Strategies: M4P and Health in Kenya, Presentation delivered at 9th Annual BDS
Conference, Mombasa, November 2013).
Supporting functions: Developing countries’ MOH regard health as a public good and the sole domain of
government. Mistrust between the public and private sectors, as well as suspicion and misunderstanding of
the profit motive, still linger among policymakers and MOH officials (Hozumi, 2008). As a result, there is little
to no exchange of information between the public and private actors in the health sector. Limited access to
information on government health priorities, epidemiological trends and socio-economic profiles of those
affected restricts the PFP and PNFP sectors’ ability to gauge market potential much less align their respective
activities to help address public health goals. In addition, the MOH struggles to regulate all the actors in the
health sector, including both formal and informal PFP providers. As a result, quality in the private health sector
is highly variable. The lack of engagement with and regulation of these entities, particularly informal providers,
can have serious consequences, placing patients’ health and lives at great risk.
Governments play a critical role in ensuring access, affordability and quality of health services for all their
citizenry. MOH have several policy tools and instruments at their disposal to achieve these sector goals,
particularly financing. Direct free provision of health goods and services, cash grants and subsidies are all
common financing tools utilized in the health sector. In recent years, international donors have promoted social
health insurance and service contracts, mostly with the PNFP sector to carry out clinical (e.g. deliver specific
health services or specialty care) functions and PFP to perform non-clinical (e.g. waste management, catering,
security, etc) functions. Moreover, several international agencies have pumped large amounts of money and
resources (including commodities, equipment and staff) into specific health sub-sectors driven by international
agendas (e.g. HIV/AIDS, family planning, malaria, child health). When applied with little regard for the market
dynamics, these policy interventions result in the distortion of the market and crowding out of the commercial
sector. Therefore, the use – or in many cases – improper use of financing and subsidies is an important
distinction when using M4P in a health system context.
Very few developing countries’ MOH have the necessary systems and skills to effectively engage the PFP
health sector. Most MOH do not collect data on the size and scope of private sector activities and are unaware
of or do not acknowledge the private sector’s contribution in health. Moreover, MOH staff are often selected
for their medical background and may lack skills or training to understand how health markets operate or how
to shape them. Economic and financing skills to introduce subsidies and/or grants so as not to distort health
markets (as noted above) are also limited.
Rules: Another consequence of mistrust and suspicion between the public and private sectors in health is the
inadequate involvement of private sector organizations, their representive bodies and membership
organizations in health policy and planning (or Rules, in the M4P approach). In many cases, developing
countries’ MOH implement health reforms that directly affect the private sector without understanding the
policies’ potentially negative impact, nor do governments actively engage the private sector on a regular basis
to implement policies and reforms, missing strategic opportunities to harness private sector resources and
expertise. There is growing recognition that public-private dialogue initiatives in health to set the rules (e.g
laws, policies and standards) and to implement these rules (supporting functions) is a necessary condition to
overcome this deep-seated mistrust between the public and private health sectors.
It is also important to note that health, when compared to other economic sectors, lags behind in putting in
place market-based reforms (Price Waterhouse Cooper, 2011). Health laws and policies were written in most
countries of EA after independence when the governments offered free health services, and in some cases,
the private sector was actually prohibited. Half a century later, many of these countries have not updated their
health policy framework to acknowledge the existence and contribution of the PFP sector with a few exceptions
such as Kenya. In response, many countries have quickly established new regulations allowing for and
regulating private practice but these rules are often insufficient, poorly enforced, or in conflict with other laws
and policies.
Another distinguishing feature of the health sector is the complexity of its rules, with life or death consequences
if these are not followed or enforced effectively. These rules are set by domestic policymakers but must also
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follow international standards. To comply with these rules requires a level of advanced training (medical/healthrelated) not required in many other economic sectors. This level of complexity sets a high barrier to entry into
a health market, but many developing countries’ MOH do not have the systems and capacity to enforce these
rules. As result, the PFP health sector remains mostly unregulated, allowing for the growth of a sizeable
informal, illegal health sector that create strong competition with the formal private sector (PSP4H, 2014a).
Moreover, poorly-enforced rules on quality disproportionately affects the private health sector as quality – aside
from price – is the most important factor distinguishing them from government services in the marketplace.
Any market intervention in health needs to consider impact of poor regulatory enforcement and how to address
competition created by the informal sector.
The M4P literature uses several terms but when applied to the health sector, these concepts can take on
different meanings as described above. To assist the reader, we have developed a list of key M4P terms
adapted for the health sector (see Appendix 1). Note that the M4P framework and these concepts are the basis
of this paper’s analysis of markets and interventions.
2.4
M4P and Donor Role
Implementing M4P differs from traditional donor programming
The M4P approach suggests a role different from traditional
Facilitator, noun
development partners - to shape market systems and NOT
Def. A facilitator is an action or agent that
to participate in the market (SDC and DFID, 2008). In the
is external to a market system but seeks to
health arena, donors and donor-supported health programs
bring about change in order to achieve a
public benefit. A facilitator is a catalyst that
have become actors in the health marketplace. As the
stimulates the market but does not
National Health Accounts data in Table 2 demonstrates,
become a part of it.
external funding as a proportion of total health expenditures
(The Springfield Centre 2014)
in East African countries ranges from over 25% in Uganda
to as high as 46% and 50% in Rwanda and Ethiopia
respectively. In many instances, donor-funded health programs have distorted and crowded-out the PFP
sector.
M4P requires that donors and implementing partners play a facilitative role. By definition, facilitation of market
change is a temporary role with the goal of exiting the market to engender long-term self-sustainability.
Beyond facilitation, there are times when it is appropriate for a donor to “prime the market” through direct
In designing a health programme with a facilitative approach, donors need to ask:
 Is the program design flexible enough to allow the implementing partner latitude to adapt to market
opportunities as they evolve?
 Does the program address the “right” problems (e.g. the root causes why markets are not serving the
poor) given the country’s landscape and setting?
 Does the program balance the country’s health priorities and market priorities with the Agency’s
priorities?
 Do the funder and implementing partner agree on the priority health markets and how to measure
success?
 Is the program’s timetable long enough to allow and measure success?
intervention in order to achieve critical public health objectives. If this approach is taken, it is critical to have
an exit strategy in place from the outset of the project.
In designing a health programme with a market priming approach, a donor needs to consider:
 Finite period of support: There has to be a clear end-point linked to achievable objectives.
 Limited in scale: There is a real danger in “flooding a market” and causing long-term distortions.
 Effective delivery: Carefully consider the structure of the support and the incentives it creates.
 Consistent policy and approaches. Co-ordination with other donor projects is critical so as not to undermine
the direct market support and allow it the time and space to achieve its objectives.
(The Springfield Centre, 2014)
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3
IMPLEMENTING A MARKET-BASED APPROACH
IN HEALTH
Although PSP4H has only been in operation for fourteen months as of this writing, the programme has learned
many lessons in applying an M4P approach in health that can help streamline future M4P country programmes.
3.1
Portfolio Approach
Using a portfolio approach helps minimize risk when facilitating change in
health markets
Selecting which health market to invest in can be a daunting challenge. This is particularly true when the target
sector is unfamiliar to donors, in this case the PFP health sector. To minimize risk and increase the likelihood
of success, it is important to support several interventions with the hope that one or two will succeed.
Like a financial investor, an M4P donor spreads risk across several health markets and different market
interventions, anticipating that some will fail while others will succeed. In a portfolio approach, the programme
maintains a flexible mix of markets, entry points, partners and types of intervention activities. As a result, the
programme is less concerned with the performance of any one intervention in the portfolio than with the overall
success of the portfolio.
The portfolio approach is an iterative and continuous learning process (see figure 1-2). One learns from the
successes as well as failures, using the information to design, adapt, scale-up and/or shut down market
interventions as the markets evolve. If there is a successful intervention, then one shares the findings with
others in the same health market with the expectation that other market actors will then enter into the market
and the change will go to scale.
Figure 1-2 Portfolio Approach
Source: Introduction to M4H. Session 11: What do we really need to know? M&E and its application to M4H,
delivered by Dr. Ruth Berg, DFID-sponsored Workshop, January 2013
Key Findings of Portfolio Approach
 It is adaptable in programming, allowing PSP4H to shut down
unsuccessful interventions or to further invest in promising ones
 It is flexible in budgeting, permitting PSP4H to allocate its budget
according to the size and scope of each intervention and therefore
manage to the bottom line of the total portfolio
 Fosters innovation, permitting PSP4H to take risks and experiment in
new health markets with different PFP actors and new approaches while
at the same time, investing in proven approaches to scale.
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As PSP4H is learning, developing a successful market-facilitating portfolio takes time. The Project spent the
first year gaining an understanding of the Kenyan health sector, its landscape the key actors, defining (or
quantifying) the poor and identifying underserved health markets as possible targets for support. As figure 13 illustrates, shaping the market takes time, often more than six to 10 years. Although systemic change yields
sustainable, large-scale and durable shifts in a health market, it can be difficult for funders to wait for these
changes to happen. Therefore the challenge is balancing short-term impact via direct market interventions
with indirect market interventions that take time but clearly produce lasting changes benefiting the poor.
Figure 1-3 Timeframe to Achieve Market Change
Source: Introduction to M4H. Session 11: What do we really need to know? M&E and its application to M4H,
delivered by Dr. Ruth Berg, DFID-sponsored Workshop, January 2013
3.2
Pathway to Design Market Interventions
PSP4H has developed analytical approaches that can streamline future M4P
programmes in health
PSP4H followed a systematic process shown in Figure 1-4 to identify and understand several health markets
with potential to benefit poor consumers, quickly building its portfolio of 17 interventions in these markets.
Through this process, PSP4H developed analytical approaches and tools as well as strategies to streamline
the application of the M4P approach in health.
Figure 1-4 Process to Build a Portfolio
3.3
Discovery Phase
The Discovery Phase occurs at the inception of the programme. In this phase, the programme team conducts
a variety of assessments and analyses to understand the enabling environment, market conditions and key
actors in the health sector including PFP health providers and low-income consumers. Out of the extensive
work completed by PSP4H during the Discovery Phase, the following steps were identified as essential
components of future M4P programs:
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1. Understand the health sector: PSP4H conducted secondary research to understand the policy and
regulatory environment governing health and regulating commerce. In addition, the team landscaped the
key actors and the functions they play in the health sector and mapped all donor projects in health.
Key Findings
 Data is scarce on the private health sector – gather data from a wide aray
of sources (including but not limited to MOH) to develop insights into the
size and scope of the private health sector.
 Engage the private sector early on the discovery phase to help interpret
and validate the findings from the research. These contacts will also help
during the Identification Phase to refer potential partner businesses.
2. Understand consumers – particularly the poor ones – of health services and products. PSP4H
conducted a series of primary and secondary analyses of Demographic Health Survey and other survey
data to define (in terms of size, income range, geographic location) the working poor, understand their
care-seeking patterns, and identify underserved health services and products. The consumer focus
groups also revealed when the poor seek care in the formal versus informal health sectors and the private
sector or public, and why they prefer the private health sector.
Key Findings
 Using traditional poverty measures is insufficient to define the segment of
the poor that can be served by the private sector. PSP4H focuses on the
“working poor”.
 The assumption that the poor can’t pay or don’t have money is wrong. The
poor are paying now – but they aren’t saving and in some cases, getting
poorer.
 The poor are active – not passive - health consumers making strategic
decisions everyday about where and when to seek healthcare and how to
pay for it
 Well-organized but informal groups may be an alternative means to reach
segments of the target (e.g. poor) population (e.g. Kenya’s jua kali)
3. Understand the private for-profit health sector: Early in the programme, PSP4H established
relationships and networks with the larger private health sector community (e.g. pharmaceutical
companies, commodity manufacturers, laboratory and diagnostics, specialty and general hospitals in
addition to service providers). Initially PSP4H carried out research directly with the private health sector.
PSP4H conducted focus groups and regional stakeholder consultations with PFP healthcare providers to
measure their interest in serving the poor, assess what health services and products they are currently
delivering to the poor and the challenges they encounter in serving this market segment. The focus groups
also explored the PFP health sector actors’ general perspective on the ease/difficulty of operating as a
business and noteworthy market conditions. After the research, PSP4H met and consulted with a wide
range of PFP companies and providers as individuals to further their understanding of the sector and to
establish networks.
Key Findings
 Unclear and inconsistent definition of private health sector (e.g. for-profit vs notfor-profit; social enterprise compared to for-profit) creates challenges in applying
M4P.
 Focus on the PFP sector. To date there is little research on the PFP sector in
most countries; more is known about PNFP sector because they receive
considerable donor support.
 Private providers have strong interest in the “working poor” who have
demonstrated demand for and willingingness to pay for private services and
products.
 Private sector may be unable to reach the poor consumer, particularly those
located in remote and rural areas, unless compensated.
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The team identified a few modifications to this approach, including:
> Utilize different research approaches to ensure that there is depth as well as breadth in the findings.
These include brainstorming forums, qualitative methods, quantitative methods and secondary
research. Each of these approaches is an important tool for gathering information. Together they
create a deeper understanding of the health sector, key actors and point towards potential markets for
intervention.
> Involve all players (including a wide range of PFP entities delivering healthcare, manufacturing and
distribution of commodities and investors in the health sector), in the research to get a broad
understanding of the health markets. Private healthcare associations can quickly help identify the
major PFP players and identify community groups that can organize and represent the “poor”.
> Allow sufficient time to obtain research ethics approval for any research program from local Institutional
Review Boards. The approval process may take more than a month even when expedited.
3.4
Identification Phase
The analyses conducted in the Discovery Phase helped
Health area:
identify potential health areas for a greater PFP role to
Def. A segment of the health system, also
serve the poor. The Identification Phase drills down into
known as a ‘sub-sector, e.g. family planning,
these health areas, requiring additional research and
malaria
Health market:
networking to understand: i) how each market works, ii)
Def. The interaction of demand and supply for
the principal market actors (formal and informal), iii) the
a health service or product, e.g. Condoms, longfunctions each market actor plays, and iv) the
lasting insecticide-treated bednets
relationship between these actors. This diagnostic
process is not a fixed sequential process using specific
tools. Instead, it is a way of thinking through information needs and organizing it to inform programme strategy
and market interventions (The Springfield Centre, 2014).
One of the first challenges when applying M4P to the health sector is defining what is a health market. Public
health practitioners might mistakenly use the terminology ‘market’ when referring to a health area – for
example, malaria prevention, family planning or maternal health. However, a market is a set of arrangments
in which a buyer and seller come together to exchange a health service or product. So malaria prevention, for
example, is actually a series of interconnected markets in which several types of buyers and sellers exchanges
goods and/or services.
Key Findings
 Defining what is a health market is a challenge – public health
practitioners confuse a market with a health area or sub-sector.
 Leverage networks with the private sector for referrals of potential
partners.
3.5
Selection Phase
While developing a more nuanced understanding of strategy health area, the PSP4H market intervention
managers simultaneously engage potential private health sector companies to explore partnership
opportunities. Essential components of this phase are:
1. Process to assess partners should be explicit
The PSP4H team developed eleven iterations of the intervention screening tool, improving the tool with
each generation of applicants (see Appendix 2). The tool covers a range of elements assessing the
potential partner’s capacity to implement a proposed market intervention. The intervention manager
scores each major area and sub-topic, and narrative comments are provided to justify each decision.
PSP4H developed criteria by which to select which market interventions and partners to work with (see
Box below). The team reviewed over one hundred proposals before deciding on the initial twelve. As the
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programme develops, the team continues to receive and assess new partnership opportunities using the
screening tool, adding new market interventions along the way.
Intervention Screening Criteria:
 Relevance: Health sector, pro-poor, private sector, for-profit, innovative,
addressing a systemic constraint?
 Impact: Scale, depth, feasibility, positive growth dynamic, attribution?
 Engagement: Mutual engagement, willing to invest, willing to share data?
 Do No Harm: Has the impact of the potential intervention on all stakeholders
been considered so there will be no adverse unintended consequences?
2. Principles for selecting market interventions
In addition to the screening criteria, the team also developed principles guiding the selection of market
interventions (See below).
Guiding Principles
 Stay out of donor-funded areas – map donor projects and avoid ‘overcrowded
health and geographic areas’ when exploring potential market opportunities
 Jumpstart an existing business rather than initiating a new one from scratch. It
saves time, creates value for money and improves portfolio performance.
 Start with “low hanging fruits” (in terms of ease of implementation and level of
impact) to demonstrate early success and create momentum in the portfolio.
 Select organizations that have sound business and financial management
capacity, permitting the market intervention to focus on market conditions.
The most common reasons why partner proposals were not accepted included:
> Partner’s business model not pro-poor;
> Issues faced by partner are business-specific problems, not systemic ones;
> Partner unwilling to share data publicly;
> PSP4H does not give financial support.
3. Facilitative approach is new to private sectors partners
The M4P approach is new to the health sector in Kenya but donor-funded programs supporting the private
sector are not. Despite (or perhaps because of) this, PSP4H encountered several challenges while
exploring potential partnership opportunities. Foremost among them is the lack of understanding on how
a market-based approach programme will or will not support the PFP sector – particularly, that this support
will not include any form of financial aid. To create a better understanding between the organization and
potential partners, PSP4H developed a one-page description that the programme staff used during every
contact with the private sector (see Appendix 3). Facilitative support to the PFP partners includes: market
research, marketing initiatives, business/financial skills strengthening, networking existing providers and
introduction of a new product into the market.
3.6
Implementation Phase 1
The PSP4H team initially selected market interventions in five sub-sectors: healthcare finance (1), maternal
and child health (3), supply chain (3), non-communicable diseases (3) and E-/m-health (1). As one can
1
Implementation has been ongoing for a relatively brief period of time, with the longest-running intervention running for just about 6
months. Thus, key findings regarding implementation will be included in future program documentation when the market interventions
are more mature.
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observe, the market interventions are concentrated in population-dense areas where there is also significant
private sector operations, as seen in Figure 1-5 below:
Figure 1-5 PSP4H Interventions by County
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READINESS FOR M4P PROGRAMMING IN EAST
AFRICA
4
Tanzania’s and Uganda’s health sectors are the most comparable to Kenya’s
4.1
Approach to Select Comparative Health Markets
The research team used a systematic approach to compare the Kenyan health sector with those of countries
in the region to identify whether they represent good comparators. The team examined several factors to
assess these countries in terms of the maturity of the private health sector. The following is a discussion of
these factors.
4.2
Level of Macro-Economic Development
First, we examined the macroeconomic development of the EA countries by examining gross domestic product
(GDP), poverty profile, and urbanization rates for most recent data available (2013 except where noted
parenthetically after the data point). GDP, combined with percent living in poverty, provides a general sense
of a country’s overall wealth and size of the population with the ability to purchase health services in the private
sector2. The data suggests that Somalia is extremely poor, with a GDP of just USD128, as might be expected
given the country’s ongoing political instability. This makes it an unlikely target for successful sustained
development of the private sector. Ethiopia has the next lowest GDP, though it is more than three times that
of Somalia at USD498. Interestingly, low GDP does not correlate with the highest poverty gap. That suggests
that the country is uniformly poor. This contrasts with Rwanda, where the GDP is USD632 but the percent
living on less than $2 per day is higher, suggesting a greater income inequality than in Ethiopia. In addition,
high concentration of population in urban and peri-urban settings helps private sector growth with densely
population areas with many potential customers. Discounting Somalia, urbanization rates range from 15% in
Uganda to 30% in Tanzania.
Table 4-1
Country
Ethiopia
Kenya
Uganda
Rwanda
Somalia
Tanzania
4.3
East African Countries Economic Development Indicators (World Bank, 2014)
GDP per capita (current USD)
Poverty gap at $2 per day (PPP)
% of pop in urban areas
498.1
23.6 (2011)
18.6
994.3
No data
24.8
571.7
27.4 (2009)
15.4
632.8
44.6 (2011)
26.9
128.1
No data
38.6
(est. UN data)
694.8
No data
30.2
Health Financing
Beyond general macroeconomic indicators, the research team examined the size of the heath sector in EA
countries. Table 4-2 shows an overview of health finance indicators.3 Although the Abuja Declaration of 2001
admonishes sub-Saharan African (SSA) countries to allocate 15% of GDP to health, one can see that Rwanda
(10.7), Uganda (8.0), Kenya (4.7) and Tanzania (7.0) come closest but still fall short of the target. A low level
of GDP spending in health has major consequences for the health system – aging infrastructure, out-of-date
technology and staffing constraints to name a few. The very low number of hospital beds per 1,000
demonstrates the lack of public investment in the health system.
More than half of all healthcare costs in SSA are currently met by out of pocket (OOP) spending (Economist
Intelligence Unit, 2011), and this pattern holds true in EA as well. A significant percentage of individuals spend
their healthcare dollars in the private sector (over 40% of Total Health Expenditure [THE] in three of the six
countries in the region), demonstrating demand for PFP services and products. But OOP spending masks
2
3
There is no World Bank data available for Somalia, but it is placed based on UN estimate to fall below Ethiopia.
Given the LMIC status of the countries of interest, it was expected that data would not be available every year and so for all data points,
any data collected after 2008 (last five years) were considered. The only country with multiple missing data points was Somalia. This
is due to the last 20 years of instability and current disagreement about borders and the number of governments that should be
recognized.
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inequitable access to health services, creating higher risk of impoverishment due to catastrophic health
spending by individuals. And with many of the poorest unable to afford treatment, true costs are kept down
artificially by people’s inability to pay (Economist Intelligence Unit, 2011). In addition, these EA countries rely
on external sources to finance a significant percentage of healthcare, ranging from over a quarter (Uganda,
28.6%) to half (Ethiopia, 50.3%) of THE. The global economic crisis raises questions about the sustainability
of donor funds as a major source of financing of healthcare in Africa (Economist Intelligence Unit, 2011).
Table 4-2 Health Finance Indicators
Country
Health %
Public/ Private
of GDP
Mix of THE
Ethiopia
3.8
48.4/51.6
Kenya
4.7
38.1/61.9
Uganda
8.0
23.9/76.1
Rwanda
10.7
57.3/42.7
Somalia
No data
No data
Tanzania
7.0
39.3/60.7
% THE that
is OOP
41.2
47.6
49.3
21.1
No data
31.8
% THE from
external sources
50.3
42.3
28.6
46.6
No data
37.7
Hospital beds
per 1000 pop.
6.3 (2011)
1.4 (2010)
0.5 (2010)
No data
No data
0.7 (2010)
All indicators are measured from the most recent year available as of October 2014 (2012 unless otherwise stated).
Where no data are available, records were checked for a 5-year historical range, from 2009 – present.
Source: (World Bank, 2014).
4.4
Private Sector Contribution
There are several indicators that help measure the size and scope of the private health sector: including
number and type of private health facilities levels (infrastructure), number and type of private health
professionals (HRH), and total dollar amount spent in the health sector and or drugs purchased. There is
limited availability of these data particularly in LMIC.
Table 4-3 shows that the PFP health sector owns and operates a significant portion of the health facilities in
the region, ranging from 27.4% in Tanzania to 49% in Ethiopia and Kenya of all health infrastructure. It is
important to note, however, that the majority of these facilities are small- to medium-sized hospitals and solo
practitioners.
Also, the private health sector (PFP and PNFP combined) employs a significant number of the human
resources in health (HRH), ranging from 22% of all HRH working in Tanzania to 58% in Uganda. The majority
of these private HRH work in PNFP facilities. Upon further examination of the data, one observes throughout
SSA/EA the majority (upwards of ¾4) of physicians – particularly specialists – and similar level of pharmacists
work in the private sector at least part of the time, though some are also employed in the public sector and
dual practice is common in all countries of the region. This pattern varies with nurses – in some countries
such as Tanzania the majority of nurses’ work in the public sector while in Kenya, they work in the private
sector.
Table 4-3 Select Private Health Sector Indicators
Country
% PFP Sector InfrastructureA
Ethiopia
49%
Kenya
48%
Uganda
7%
Rwanda
45%
Somalia
No data
Tanzania
27.4%
% Private HRH
55% GPs (PFP only)
74% MDs (PFP only)
58% of all HRH (PFP & PNFP)
No data
No data
No data
Source: Private Sector Assessments (Barnes et al., 2010; MoH Uganda et al., 2012; White et al., 2013; Ethiopia Private
Sector Assessment (Unpublished draft awaiting MoH approval); Ministry of Health [Rwanda] et al. (2003).
A: Where possible, hospitals only were the facilities measured. For Rwanda, includes PFP as a % of all health facilities.
For Kenya only, FBOs are included as part of PFP. These modifications are due to data availability.
4.5
Health Insurance
Insurance, whether public, private or mixed, is an important driver of growth for the PFP health sector. A
number of SSA countries have established or are widening eligibility for social health insurance to increase
coverage of the population, including Ethiopia, Kenya and Rwanda in EA. There are currently no major
4
Estimate derived from several USAID and World Bank supported Health System Assessments (Ethiopia, Uganda, Tanzania) and
Private Health Sector Assessments (Uganda, Kenya, Tanzania, Namibia, Malawi, Ghana, Nigeria).
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initiatives in Uganda and Tanzania to expand national health insurance. At the same time, private health
insurance schemes have been growing in countries with larger affluent populations and industries capable of
funding large employer-based plans, such as in Kenya.
However, as shown in Table 4-4, total penetration of health insurance remains low. Even in countries and
communities that currently offer some form of insurance scheme, many drugs and services are still not included
and must be covered by OOP spending (Economist Intelligence Unit, 2011). Furthermore, there is concern
that the fragmented approach to health financing will create a two-tiered delivery system. However, this
fragmented approach to financing healthcare is likely to come under scrutiny over the next 15 years as
governments, multi-lateral lenders and private investors look for more sustainable ways to finance healthcare
in Africa (Economic Intelligence Unit, 2011).
Table 4-4
Role of Insurance in EA Health Sectors
Public health insurance
Availability of Public health
expenditure as % of
insurance
THE, 2012 (%)
(e.g. NHIF in Kenya)
Ethiopia
48%
Kenya
38%
Rwanda
Tanzania
Uganda
Somalia
57%
39%
24%
N/A
4.6
Social health insurance and community
based health insurance
National Hospital Insurance Fund
(NHIF)
Community Based Health Insurance
National Health Insurance Fund
National Health Insurance Fund
N/A
Total insurance
penetration
(Premiums as % of
GDP), 2012
0.50%
3.20%
0.90%
0.90%
0.70%
N/A
Demand for Private Health Services
Another way to measure the contribution of the private sector in health is from the demand side. Demographic
Health Surveys (DHS) provide data on consumers’ health-seeking behaviour in each EA country, with the
exception of Somalia where no DHS was available. As Table 4-5 demonstrates, the public sector is the primary
source of healthcare for family planning (FP) (e.g., Ethiopia, 82% public versus 14.7% PFP), maternal delivery
(MH) (e.g. Rwanda, 67.9% public compared to 1.0% PFP) and malaria (e.g., Tanzania, 51% public compared
to 30% private). International donors heavily subsidize these health areas. However, private health sector
also contributes to these priority health services, in particularly Kenya (39.7% in FP, 10.3% in MH and 42.5%
in malaria) and Uganda (45.4% in FP, 13.4% in MH and 47.3% in malaria). In contrast, Ethiopia (14.7% in FP
and 1.2% MH) and Rwanda (4.2% in FP, 1.0% in MH and 15.7% in malaria) have the smallest percentage of
private sector providers offering these same services. It is interesting to note that higher percentages of
consumers go to the private sector when seeking care that relies on commodities (e.g. FP, malaria, childhood
illnesses) when compared to clinically based services, such as MH.
Table 4-5 Health-Seeking Behaviour in the Private For-profit Sector
Country
Public/Private
Public/Private
Family planning1
Maternal Delivery1
Ethiopia
82.0/14.7 (PFP only)
8.7/1.2
Kenya
57.3/39.2 (PFP only)
32.3/10.3
Uganda
46.6/45.4
44.0/13.4
(excludes FBO/NGO)
Rwanda
92.0/4.2
67.9/1.0
Somalia
No data
No data
Tanzania
65.2/26.4 (PFP only)
41.0/1.6
Public/Private
MalariaA,2
68.9/46.6 (MIS)
64.8/42.5 (MIS)
36.0/47.3 (ACTw)
71.7/15.7 (MIS)
No data
51.0/30.0 (PSA)
All indicators are measured from the most data available as of October 2014.
A: Totals may exceed 100% if patients sought treatment at multiple locations for the same illness.
Source 1: Demographic Health Surveys (Kenya (2010), Uganda (2011); Rwanda (2010), Tanzania (2011); Ethiopia
(2011)).
Source 2: ACTwatch Group and PACE/Uganda (2013); Division of Malaria Control [Ministry of Public Health and
Sanitation] et al., (2011); Ethiopia Health and Nutrition Research Institute (2012); MAL & OPD Division-RBC Rwanda
and ICF International (2014); White et al., 2013.
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4.7
Ranking of EA Countries
Figure 1-6 pulls together all the factors to rank the EA countries: countries are mapped by GDP levels, use of
PFP services in three health areas and a composite of several indicators serving as proxies for the size of the
private health sector. Somalia quickly dropped from the analysis due to low GDP as well as lack of data on
the health sector. Ethiopia was also eliminated because of the low GDP and the small size of their private
health sector. Although Rwanda shows promise – having one of the highest GDPs in the region, growing
social health insurance, and important percentage of PFP health infrastructure - it still is primarily a publiclydriven health sector, as evidenced by the low demand for private sector services as shown in Figure 1-6.
Based on the analysis, the research team selected Tanzania and Uganda as comparable health markets to
Kenya’s and thus potential target markets for future M4P in health programming.
Figure 1-6 Ranking of Private Health Sector Development in EA
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LESSONS LEARNED FROM PRIVATE SECTOR
PROJECTS IN COMPARATIVE HEALTH
MARKETS AND PSP4H INTERVENTIONS
5
Field-based learning on key intervention types can guide future
M4P programmes in health
5.1
Preliminary Findings from the Field
Based on the regional comparison in READINESS FOR M4P PROGRAMMING IN EAST AFRICA section
above, the research team reviewed documents, grey literature and spoke to contacts in Kenya and the
comparison countries (Uganda and Tanzania) for non-PSP4H private sector initiatives serving the poor.
Although the team uncovered many examples, very few are well-documented or mature enough to show
results. As a result, the team reviewed in detail four projects similar to PSP4H market interventions (see Table
5-1). Findings that might help shape future interventions are described below, in the context of the relevant
identified case.
Table 5-1
Market
Overview of Private Sector Cases in EA
Market Intervention
Drug Retail
PSP4H
 PHARMNET Network
Pooled Procurement
 Tunza Family Health Network
Low-cost, high quality
maternal service
Low-cost, high quality
maternal service
 Private Community Midwives Network
Micro-insurance for health
 Jacaranda Health (Maternal, Newborn
Other examples
 Tanzania - Accredited Drug
Dispensing Outlets (ADDOs) Network
 Kenya - Kenya Association of
Physician (TB)
 Tanzania - PRINMAT Network of
Nurse Midwives
(no comparator)
and Child Health market research and
strategic marketing planning)
 Jawabu
 Uganda - Microcare
(PCMN) (Bungoma County)
Key Learning: Intervene with established health providers and institutions
In an effort to reach the poor, many donors consider working with informal providers as one of many strategies.
For example, there has been a long history in working with traditional birth attendants to improve home delivery.
But working with informal providers is fraught with challenges, as highlighted by the ADDO case.
Tanzanians in rural and poor urban areas rely primarily on duka la dawa baridi (DLDB), or informal private
drug shops, to get their medicines when public dispensaries and health centers have insufficient stock, are
closed or are too far away to be convenient. DLDBs are licensed to sell only non-prescription medicines, but
typically they provide a much broader range of products and services. Tanzania is in the process of converting
all DLDBs to ADDOs, which are licensed to sell both over-the-counter and a short list of prescription drug
products. Located in peri-urban and rural areas, there are currently over 2,000 ADDOs nationwide. These
retail outlets offer quality medicines for illnesses commonly found in the communities they serve, open long
hours (10-18 hours daily) and six days a week and are convenient for many communities. There have been
several reviews of the ADDO program that have concluded that ADDOs are a frontline source of care, although
the quality of care they provide can be variable (Thomson et al. 2014; Minzi and Manyilizu, 2013). In many
cases, ADDOs provide an essential back-up source of drugs when medicines are not available in public
dispensaries. Many of the consumers interviewed for these reviews expressed satisfaction with ADDOs,
stating that ADDO staff are friendly and available (White, 2013).
In Kenya, PSP4H is partnering with the Kenya Pharmaceutical Association (KPA) to network fully licensed
retail pharmacies and drug shops owned or operated by pharmaceutical technologists. KPA members live and
work in similar geographic areas as the ADDOs - peri-urban and rural areas. The network, PHARMNET,
delivers medicines under a common brand with the promise of higher quality. PHARMNET operators also
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undergo clinical as well as business training. Through group purchasing, PHARMNET operators will access
affordably priced, quality-assured essential drugs from pre-qualified suppliers. In addition, KPA will provide
supportive supervision to its network members.
Both network concepts are similar in that they: i) target drugs shops and/or pharmacies located in poor
communities, ii) bring them under a common name or brand, iii) work with a lower-level pharmacy health cadre,
iv) provide clinical and business training, and v) offer supportive supervision and continuous professional
development. There are, however, differences between the two networks that will help PHARMNET potentially
become self-sufficient in a shorter timeframe.
The main difference is pharmaceutical technologists are already recognized, licensed health professionals in
Kenya whereas in Tanzania, the ADDOs program invested significant time to formalize the ADDO technician
as a licensed health profession. Working with recognized formal providers has created savings in time and
costs:
> No time required to build political will, develop policies and obtain approval to create a new health
cadre which takes time.
> All ADDOs outlets had to undergo inspection and in many cases, upgrades, to meet facility standards,
adding time and requiring resources to literally build the network.
> Donors invested considerable resources in Tanzania to train and improve clinical skills compared to
Kenya where the pharmaceutical technologists invested in their own education and met certain
educational requirements in order to get certified by the government regulator prior to establishing a
practice.
A second difference is how the network is managed. PHARMNET leveraged the KPA’s existing infrastructure
to create the new brand in Kenya, which will be managed under Nairobi TechPharm (NTP), an independent
company owned by KPA, like a business that must be self-sustaining. In exchange for an annual membership
fee, KPA offers its members a full range of services, including: i) use of unifying brand name and logo
(members pay 25% for the pharmacy branding themselves); ii) standardized operating procedures, iii) quality
assurance across the network; and v) pooled procurement of essential medicines from pre-qualified suppliers.
In the case of ADDOs, now that donor funds have ended, the program management has been transferred to
the Tanzania Federal Drug Authority, a government regulatory agency. It is unclear what will happen to the
ADDOs, an ostensibly private establishment, under TFDA management (Dr. Ogillo, Association Private Health
Facilities in Tanzania, interview, 2014).
Key Learning: A market intervention has to be easy or else it will not be adopted
Pooled procurement is considered one of many strategies to help private providers and pharmacies access
affordably priced drugs and assure quality of drugs in the private sector. As observed in the ADDOS network,
the cost of drugs remained a barrier to access. Although ADDOs are better stocked than the public facility,
their prices are often out-of-reach for the poorest because they had to purchase their drugs in the private
market. But pooled procurement, or any market intervention that makes business sense, still has to be easy
for the private provider to adopt as in the case of Kenya Association for the Prevention of Tuberculosis and
Lung Disease (KAPTLD) and the Tunza Family Health Network of providers.
Over 15 years ago, a group of prominent Kenyan chest physicians identified a need for quality, inexpensive
TB products and training on appropriate treatment regimes in the private health sector. They formed and
championed KAPTLD as a mechanism to address this need among similar specialists. Over the years, with
donor support, KAPTLD has worked to improve access to quality TB medicines, strengthen the quality of care
of TB services and reduce the cost of TB care in the PFP sector.
To access more affordably priced, quality TB drugs, KAPTLD decided not to accept free drugs donated by the
Kenyan government, in part due to concerns about quality as well as the reputational implications of using
local, generic products. Instead they pursued a collaboration approach combining orders for TB drugs.
KAPTLD members, comprised mostly of private hospitals, successfully negotiated a reduced price on behalf
of their members with an international pharmaceutical manufacturer. The agreement was a “win-win” for both
KAPTLD members, saving them time and costs when ordering TB drugs, and for the manufacturer, who was
looking to provide its TB drug to the Kenyan market at a reduced price as part of its social responsibility
program.
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KAPTLD was also able to leverage its established relationship with major drug wholesalers and distributors in
Kenya, where in many cases, they were already supplying KAPTLD member hospitals. As a result, KAPTLD
was able to outsource the distribution of the TB drugs through existing supply channels at no extra costs. Each
hospital submits their order to KAPTLD, who in turn pulls the orders and ensure the TB drugs are added to the
wholesaler/distributor routine deliveries to the member hospital.
KAPTLD members recognized the benefits of combining orders early on. Throughout this process, KAPTLD
worked closely with the public sector’s national TB program to qualify training materials and guarantee its
members reported to the MOH. The members feel confident they are compliant with MOH quality standards
and they can now provide long-term specialty treatment with affordable, quality products.
In another example, PS-Kenya, the franchisor, offers pooled procurement through the Mission for Essential
Drugs and Supplies (MEDS) as a service for the Tunza Family Health Network providers. MEDS, a faithbased organization, is one the largest wholesalers/distributors in Kenya serving not only FBOs health facilities
but also private health facilities serving the poor. Tunza is composed of small private health practitioners,
largely comprised of nurses and a few clinical officers, located throughout Kenya. Most of the Tunza providers
are small owner-operated outlets, typically consisting of a reception, consultation room and a procedure room.
Tunza clinics promise friendly, quick, affordable and high-quality family planning services by a qualified and
trained provider. Community health workers, called Tunza Mobilizers, help create demand not only for family
planning but also for the Tunza providers.
Although many Tunza providers stated that purchasing drugs through a pooled system was a major attraction
to join the network, uptake of the MEDS service has been low; currently only 22% of the 354 Tunza clinics
participate in the pooled procurement. A PSP4H (PSP4H, 2014b) assessment revealed that many Tunza
providers found the MEDS application and system complicated and difficult to understand. Although the
providers would greatly benefit from reduced prices on quality drugs, the opportunity cost is too great. These
small businesses, often owner-run with no or few employees, could not afford to take the time away from
paying clients to invest in learning new systems. As a result of the study, PSP4H is working with PS-Kenya
and MEDS to streamline the order forms and make the system more user-friendly and accessible.
Key Learning: Plan early for network management to be financially sustainable
Networking of private providers is in vogue among the global health community as a strategy to “organize” solo
practitioners, improve their quality and/or independent accreditation and extend their reach among
underserved population groups. The assumption is that consumers will actively seek services among branded
facilities offering quality services and safe drugs, all at an affordable price. Managing provider networks,
whether it is a chain of retail pharmacies or a group of private providers, is a complex task requiring a formal
organizational structure. As the network examples show, their management structures vary, raising questions
of long-term sustainability.
The Tunza Network is a social franchise managed by PS-Kenya, a local NGO. To date, the management
structure for the network is integrated into PS-Kenya’s overall portfolio of donor-funded programs with a
dedicated Senior Clinical Manager for quality, two Quality Assurance Managers, and 15 Quality Assurance
Officers who supervise clinics in the field. They also have a business team made up of a Senior Business
Manager and two Business Officers, who assist with financing support through the PharmAccess Foundation.
Beyond that, PS-Kenya staff perform many functions of a network management entity, such as branding,
marketing, demand creation and clinical training, which are supported by donor funds. If Tunza Network were
to become independent, PS-Kenya will need to develop a revenue-generation model and split the network
management staff from those working on PS-Kenya subsidized programs. Tunza are currently discussing
sustainability options, including spin-off from the NGO, but that has not yet been determined.
The Private Nurses and Midwives Association Tanzania (PRINMAT) was established in 2000 as a professional
association representing private sector nurses and midwives. There are 52 member owned maternity clinics
that work under the PRINMAT brand and are distributed through 17 regions (with more planned for the rest of
the country) to increase access to maternal, child and reproductive health services. PRINMAT offers its
members several membership benefits such advocacy efforts surrounding policies and practice of nursing and
midwifery, education and training workshops, supportive supervision and assistance in registering a new
maternity and nursing home. They also give loans and credit to their members in order for them to upgrade
their facilities and offer flexible payment terms to their clients. Some call into question if PRINMAT is really a
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network, with the overlap between the association and network functions and the association subsidizing the
network. The viability of the network remains in question until the benefits of being a network provider is more
clearly defined for PRINMAT members.
The management structure of PHARMNET is similar to PRINMAT’S. KPA’s secretariat overseas operations of
the PHARMNET network offering strategic and regulatory support; and coordinating and mobilizing
pharmacies to join the network. A few years ago, KPA had considered establishing this network but due to
lack of information on how to implement the network, this initiative was delayed. The current attempt benefits
from growing experience in networking private providers and the fact that the association is already established
and functioning. PHARMNET is in its initial stages of network establishment (currently close to 100 branded
pharmacies have completed their induction training), the association will subsidize the network management
through the pro bono service of the directors until they can earn revenue from provider fees and pooled
procurement. The pooled procurement is being conducted through the independent company, NTP, which is
managing the network (under the aforementioned pro bono management). Once the procurement function
becomes robust, a small mark-up will be added on the drugs to support 5-6 staff running the network
secretariat.
In the case of KAPTLD, after many years of operations, donor funds supporting the project ran out. However,
KAPTLD members valued the benefits received from the program and looked for ways to keep it going. First,
they defined the secretariat’s core activities and the number of staff needed to run the network. Secondly,
they reduced the number of secretariat staff. Lastly, they are exploring ways to become financially selfsufficient. Just as PHARMNET envisions doing, KAPTLD added a small mark-up onto the cost of all the drugs
ordered through the program, though they are still working to determine what mark-up is sufficient to cover
their operational costs while at the same will not adversely impact consumer price.
Key Learning: A successful business model is equally as important as a high-quality service
Too many mothers in Kenya die during delivery: maternal mortality remains high at 488 deaths per 100,000
live births (KNBS and ICF Macro, 2010). In response to the maternal health crisis, Jacaranda Health opened
its first maternity centre located in the outskirts of Nairobi in the year 2012. Jacaranda Health aims to build a
network of private maternity clinics in resource-poor settings that combines quality and affordability. Their
model focuses on a comprehensive set of maternal and newborn child services supporting non-complicated
deliveries at a secondary level facility with referral of complicated pregnancies to a tertiary hospital. To date,
Jacaranda Health has delivered maternal healthcare to over 4,000 women and delivered more than 250 babies
at their 12-bed maternity hospital.
Jacaranda relies on a number of management innovations to keep costs low and prices affordable. They
include clinical task-shifting, standardization of operating procedures, and focus on cost-effectiveness.
Nevertheless, the success of this business model is highly dependent on high client volumes, which the facility
does not currently have. There is low uptake of its services and the facility is unable to convert its prenatal
maternal health services into facility deliveries. There are several reasons why Jacaranda is underutilized:
> Lack of accurate information on market size;
> Limited information on community perception of services it offers;
> Limited capacity to deal with complications (i.e. offer caesarean deliveries);
> Inappropriate pricing for different consumer segments;
> Competition (unfair) from other providers, particularly the public health facilities.
Although the clinical delivery model is sound, the business model requires significant improvements. PSP4H
supported a health market research to help Jacaranda Health better understand its target population (PSP4H,
2014c). Some of the findings from this market research were:
> Existing clients had positive perceptions and experiences at Jacaranda Health and were satisfied
with the services in terms of access to facility, cost of services and level of customer care delivered.
> A high number of respondents (80.8%) had not used Jacaranda services, primarily because of low
awareness (51.9%) of the facility and its services. Another important percentage (39.3%) stated
quality was the reason they did not use Jacaranda Health.
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> Although Jacaranda Health states that its target market is bottom of the pyramid, the study findings
show that they actually serve a significant percentage of middle class consumers.
> Clients are willing to pay for private MNH services, irrespective of the existence of subsidized or free
services from public health facilities. Clients look for convenience (e.g. location, hours) and
comprehensive care (e.g. one-stop shop) to save time.
> Availability of emergency care is a factor in selecting which health facility to use.
> Cost, although important, is not the main driver in choosing a healthcare provider for MNH. Clients
will travel extra distance for a quality healthcare provider.
Using the findings from the consumer research, PSP4H is supporting Jacaranda Health to develop and
implement a strategic marketing plan with appropriate pricing of service bundles that will attract its originally
intended market segment – low-income earning mothers and hence increase the number of facility deliveries.
Key Learning: Market interventions with potential scale may require more time and several
attempts
Founded in 2010, Jawabu Empowerment is a for-profit commercial company with the mission of fulfilling key
financial needs of Kenyans working in the informal or Jua Kali sector. The informal sector represents about
83% of the total employment in Kenya and generates 28% of GDP. Jawabu’s approach is to influence healthseeking behavior of Jua Kali Association members by encouraging savings for health.
Jawabu developed Afya Poa, a micro-insurance product, that is a combination of traditional health insurance
covering inpatient care and Medical Savings Accounts (MSAs) covering outpatient care. The MSA-style
approach presents a departure from conventional micro-insurance schemes for health where the outpatient
benefit is insured. Outpatient insurance has been cited as the biggest reason for losses and fraud in the
insurance industry. One of the ways to manage this is to have the user own the money and participate fully in
deciding what this money will pay for but limit the spending only to health related expenditures.
Although an innovative health insurance product, Afya Poa, continues to face challenges, particularly
identifying an underwriter, negotiating with Jua Kali groups and regulatory barriers. The partnership with
Jawabu is one of the longest-running market interventions in the PSP4H portfolio and will still require a longer
period of investment. Fortunately Jawabu has overcome one its greatest hurdles - securing an underwriter for
Afya Poa. If successful, Afya Poa can potentially reach 8 million consumers through Jua Kali Associations.
Microcare, which was managed by Microcare Uganda Limited, is another example of a micro-health insurance
product targeting the same consumer group. Similar to Afya Poa, Microcare’s strategy was to leverage
community groups and microfinance institutions (MFIs) but efforts to sell policies through MFIs proved
surprisingly challenging. Although MFI clients needed an insurance product, Microcare’s sales representatives
failed to develop sufficient levels of trust with them. The sales representatives underestimated the amount of
time needed to convince this target group to buy health insurance and were discouraged by the small
commissions that the small premiums generated. Microcare’s sales staff were provided access to the MFIs’
clients but received little support from the MFI’s field staff who were not trained to sell insurance. The poor
working relationship with MFIs resulted in limited sales success (Greyling, 2013).
Microcare took time and effort but ultimately failed because of solvency issues; medical insurance is a high
cash turnover business that requires significant reserve cash and liquidity, particularly in the initial phases
where customer premiums may not be sufficient to cover the amounts claimed. Yet lessons from Microcare’s
experience can be applied to Afya Poa:
> Pricing strategies need to take account of the fact that premiums are paid for a year in advance. Any
variations on pricing assumptions, such as adverse selection or increased costs, will need to be
carried by the insurer through the policy term.
> Insurers that aim to deploy an aggressive premium growth strategy must ensure that they have the
capital base to maintain solvency. Reserves usually cannot be funded from premiums because they
are needed to pay on-going claims.
> Careful tracking of claim patterns among individual health providers and among clients is critical and
must be pro-actively managed to maintain solvency.
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> Aligning the interests of providers, patients, and the insurer through incentives and risk-sharing (e.g.
MSAs) may be a more effective way to control claim costs than elaborate external control
mechanisms.
Despite concerns often raised about over-valuing services and pricing out the working poor, both these cases
show consumers’ willingness to pay and a potentially large market if the barriers to solvency, including
obtaining a willing underwriter, are overcome.
5.2
Lessons Learned from other Regions
There is growing but albeit still small literature on the PFP health providers serving the poor and the business
practices that contribute to their survival and growth. Though these lessons come from outside the region, the
key business practices relevant to the three identified EA health markets are:
> Urban locations: The majority of PFP providers are located in urban areas with easier access to many
potential customers. In a few cases, the PFP providers focused on smaller towns lacking secondary
healthcare service. PFP strategy is to fill the geographic and hours available gap in service provision and
reduce costs to patients associated with travel time and lost wages (Tung, 2014). Also, one avoids
competition with the high-end private hospitals located in metropolitan areas. Examples include Vaatsalya,
LifeSpring and CARE hospitals, all located in India.
> Non-traditional marketing techniques: Community outreach, similar to the Tunza Community Mobilizers,
is the main strategy to reach low-income groups given the informational and education component
explaining when and why to seek healthcare. For poorer clients, personal and continued contact along with
targeting specific population groups and social networks have been successful strategies to attract new
and retain clients to private facilities (Tung, 2014). Aravind Eye Care and Naranyana Hrudayala Heart
Hospital provide health camps to reach patients in rural areas (Bhattacharyya et al., 2010).
> Customer orientation: A PFP provider must deliver better customer service than government run facilities
to be competitive (Tung, 2014). Several tactics include: i) locating facilities closer to lower-income
populations; ii) opening longer hours to accommodate client work schedules; iii) making appointments
instead of queuing and iv) creating a culture of respect for the patient. To serve even remote areas, Aravind
has set up internet kiosks in remote villages by a community member who takes pictures of the potential
patient’s eye and sends the images to an Aravind physician along with medical history (Bhattacharyya et
al., 2010).
> Flexible terms of payment: In response to the target population’s preferences and purchasing habits,
many PFP companies serving the working poor have created flexible pricing and payment terms
(Bhattacharyya et al. 2010, Tung 2014). For example, private clinics and hospitals offer tiered pricing for
private, semi-private and general wards. Others emphasize clear and transparent pricing and billing to help
alleviate the uncertainty of paying for healthcare. Finally, several of the PFP providers offered micro-credit
to finance more expensive procedures.
> High volume: In order to make a profit, several of the PFP health companies emphasized volume by
specializing on relatively simple, low-cost services (e.g. Narayan Hurdayalaya Heart Hospital is the larger
provider of paediatric heath surgeries in the world, and Aravind, India pioneered high volume, low cost
specialty services).
> Low unit costs: All PFP organizations studied consistently looked for ways to cut costs including: i)
avoiding costly infrastructure investments by leasing the land and/or building; ii) eliminating non-essential
services (e.g. food services) and contracting out expensive services (e.g. ambulance, blood banks and
diagnostics) and iv) reducing human resource costs through task shifting and creative compensations
packages (Tung, 2014).
> Narrow clinical/technical focus: Almost all of the large-scale PFP companies in this space concentrate
on just a few medical processes (Bhattacharyya et al. 2010; Tung, 2014). This allows them to market their
services on a large scale, reduce costs and streamline operations to target poor patients. The predictability
of the problems and treatment strategies also allows PFP providers to task-shift to trained lower-cadre
health personnel while continuing to ensure quality.
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There are few examples of PFP companies serving the poor that have been able to achieve scale
(Bhattacharyya et al. 2010; Tung, 2014). In order to be successful, PFP companies often required partnerships
with the government or support from social health insurance schemes (Tung, 2014). Such risk-sharing
schemes are promising ways for governments and donors to engage the PFP to reach the poor on a larger
scale in a sustainable way, particularly in difficult-to-reach geographic areas or in important health areas.
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CONCLUSIONS AND RECOMMENDATIONS
Key findings from analysis and implementation for future M4P programs
The goal of this report is to share lessons learned on how to work with the private sector in health using a
market based approach. The lessons are based on comparative research of PSP4H market interventions and
other private sector programs in similar health markets in East Africa. Emerging lessons include:
1. M4P approach works to analyse and shape health markets but with important differences
The M4P framework is robust enough to describe and analyse what is happening in select health markets.
There are, however, several key differences between the health sector and other economic sectors. The
significant differences between other sectors and health are detailed in this report; although important,
these differences should not impede using M4P as an approach to understand how to engage the PFP
sector in health.
2. Implementing M4P differs from traditional donor programming
M4P requires that donors and implementing partners play a facilitative role. By definition, facilitation of
market change is a temporary role with the goal of exiting the market to foster long-term self-sustainability.
There are times, however, when it is appropriate for a donor to “prime the market” through direct
intervention in order to achieve critical public health objectives. It is critical when “priming the market” to
have an exit strategy in place from the outset of the project.
3. PSP4H has developed analytical approaches that can jumpstart future M4P programmes
A market-based approach requires a full analysis of a country context focusing on understanding the health
sector, the poor and the PFP in health. The report shares many suggestions, such as innovative ways to
define the poor and the need to engage PFP sector early, only to name a few, that can save time in
applying the M4P approach in other countries.
4. Using a portfolio approach helps minimize risk when facilitating change in health markets
A portofolio approach offers programmes like PSP4H three essential elements:
> Adaptability: allowing a programme to shut down unsuccessful interventions or to further invest
in promising ones;
> Flexibility: permitting a programme to allocate its budget according to the size and scope of each
intervention and therefore manage to the bottom line of the total portfolio; and
> Innovation: enabling a programme to take risks and experiment in new health markets, with
different PFP actors and new approaches.
5. Look for opportunities in markets that meet this set of key conditions:
> Target the “working poor” who have demonstrated demand for and willingingness to pay for
private services and products.
> Focus on geographic areas with a critical concentration of formal PFP providers with existing
networks and demonstrated clientele.
> Stay out of donor-funded areas to avoid “overcrowded” health and geographic areas when
exploring potential market opportunities.
> Explore working in stated underserved health areas (identified by the poor consumers) and that
are of interest to the PFP sector, such as diagnostics, dentistry, optometry, and NCDs among
others.
6. Field-based learning can guide design and implementation of market interventions
In a short timeframe, the PSP4H programme has several suggestions that may help increase the likelihood
of success with market interventions:
> Start with formally recognized (i.e. not informal) health providers and established institutions and
networks to save time and energy in trying to create them
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> Introduce market interventions that are easy to adopt and do not take the PFP providers away
from core, revenue-generating business activities
> Plan early, even if initially donor-supported, for network management to be financially sustainable
> A successful business model should also provide high-quality a service when targeting the poor
> Market interventions with potential scale involving system changes (e.g. policy reforms, health
financing, etc.) may require more time and several attempts
7. Promising market interventions share several key business practices
Both the PSP4H market interventions and emerging literature demonstrate sound business practices that
increase the likelihood of sustainability. They include: i) concentrating in urban locations, including as periurban areas and smaller towns, ii) carrying out non-traditional marketing techniques designed to reach the
working poor; iii) delivering better customer service than public facilities; iv) offering flexible terms of
payment in response to the working poor’s purchasing habits; v) emphasizing high volume by specializing
on relatively simple, low-cost services; vi) consistently looking for ways to cut costs; and vii) keeping a
narrow clinical/technical focus.
8. PFPs serving the poor may have to partner with the government to achieve scale
Risk-sharing schemes, such as partnerships with the government or financial support from social health
insurance schemes, are promising ways for governments and donors to engage the PFP to reach the poor
on a larger scale in a sustainable way.
9. Consider Tanzania and Uganda as target countries for expansion of M4P in Health in the region
In the region, Tanzania and Uganda have most similar health systems to Kenya’s; expanding the M4P
approach in health to those countries will likely be easier than in other countries in the region.
“The market is not slow when everything is ready and the price is right”
-Ron Ashkin, PSP4H Kenya Team Leader
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References.
ACTwatch Group & PACE/Uganda, 2013. Household Survey, Uganda, 2012 Survey Report. Washington, DC:
Population Services International. Available at: www.actwatch.info.
Ashkin, Ron. Public Service Strengthening Using Market Systems Development Strategies: M4P and Health
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APPENDIX 1: KEY M4P CONCEPTS ADAPTED TO
HEALTH
Crowding Out: A policy or program intervention that causes existing actors in a health market to decrease an
activity (e.g. investment, production, donor subsidies) or withdraw completely. Evidence of crowding out
includes declining market share of some market actors or a reduction in the number of market actors.
Crowding In: A policy or program intervention that causes existing market actors to: i) better perform a current
and/or increase a health related activity and/or ii) motivates new players to enter a health market. Crowding in
is demonstrated by shifting market shares or increasing the number of market players or increasing the level
of investment current market actors are making.
Demand: Demand in health is composed of two elements: 1) demand for and actual use a health service or
product and 2) demand for a health service or product that would have taken place if a consumer who wanted
to use the product or service had had access to it. In contrast, need is an assessment of consumers’ physical
requirements to maintain some level of well-being or health. Consumers’ self-perception of their needs links
closely to demand. The perception of health experts of consumers’ needs may have little or no relation to
demand.
Facilitation / Facilitator: Action or agent that is external to a health market system but seeks to bring about
change in order to achieve a public health benefit through systemic change.
Financing Functions: A range of funding activities that government and other market players perform to
operation of a health market; these activities typically aim to achieve higher access, better quality, and/or lower
financial risk in the provision of services and/or products than would be achieved by the “natural market.”
Financing functions can be analyzed on the supply side (facilitating supplier access to credit, subsidizing
supplies or supplier inputs) or the demand side (subsidizing purchases through vouchers or insurance, pooling
of purchases, pooling of risk, prepayment and health savings schemes).
Funder: An organization, such as a social insurer or development agency, which provides resources aiming
to influence or “structure” market operations in order to increase access, strengthen quality, and/or minimize
financial risk.
Health System: The sum of all organizations, people and actions whose primary activity is to directly, or
indirectly, promote, restore or maintain health. A health system includes both public and private institutions
(see below) entities engaged in financial, policy, regulatory, research and academic, and provision of
healthcare.
Impact: The long-term effects on identifiable populations or groups produced by a project or programme.
Impact Logic: A model showing the chain of causality through which a programme’s activities contribute to a
health sector objective. Impact logics derive from the specific content of an intervention and the setting within
which it will be implemented.
Impact Trajectory: The impact of an intervention over time; also referred to as “impact profile”.
Implementing Partner: An organization that is contracted by a Funder to implement a market development
or market structuring initiative.
Institutions: Social, political and economic structures and mechanisms – formal or informal – in a society or
economy that shape health market players’ incentives and behaviours. Institutions establish the “rules of the
game” through supporting functions and/or establishing regulations, laws and policies.
Interconnected or “Linked” Markets: Markets which influence the operation of another health market –
usually related “upstream” or “downstream” to the specific health market.
Intervention: A defined set of temporary activities or actions seeking to effect change in a health system.
Market Player: Individuals or organization active in a market system: including public, private for-profit and
private not-for-profit groups.
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Market Priming (also known as “pump-priming”): A temporary intervention to promote demand and stimulate
commercial markets by demonstrating the commercial viability of the activity (e.g. demonstration effect) or by
strengthening the enabling environment supporting the activity in a health market.
Market: A set of arrangements by which buyers and sellers are in contact to exchange goods or services in
health; the interaction of demand and supply for a health service or product.
Market for the Poor (M4P): An approach that focuses on changing market systems to benefits the poor.
Market Segment: A subset of consumers in a market with a common set of demographic, psychographic or
biological characteristics (e.g. pregnant women living in rural areas in the lowest income quintile).
Market Segmentation Strategy: A strategy that involves dividing a broad market (group of consumers) into
subsets of consumers, who have common characteristics, and then designing and implementing strategies to
target their needs and desires using media channels, marketing messages, and differentiated products and
distribution approaches that best allow reaching them. For social products, market segmentation strategies
are often deployed to target subsidies on low-income customers.
Market Structure: Organizational or competitive characteristics of a market; often with reference to the
number of organizations in a market that produce identical goods and services. Market structure has great
influence on the behaviour of individuals firms within the market.
Market System: A system comprised of multiple players (private sector, government, representative
organisations, civil society, etc.) carrying out multiple functions (core, rules and supporting) through which a
series of exchanges (transaction) takes place in an ongoing manner.
Output: Health products and services resulting directly from project or programme activities.
Adapted from A Synthesis of Making Markets Work for the Poor and World Bank DFID Training Course.
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APPENDIX 2: INTERVENTION SCREENING TOOL
Intervention:
Area:
IM:
Step
Evaluation
1. Relevance
Is the proposed intervention:
In the health sector (preferably in a priority sub-sector)?
Pro-poor?
Private sector driven?
For profit?
Innovative?
Addressing a systemic constraint?
Overall Relevance
2. Impact
Does the proposed intervention have:
Scale (significant number of beneficiaries)?
Depth (change at root cause level)?
Likelihood of making a positive change (feasible business case)?
Space to grow (not crowded out by subsidies and/or other donor projects)?
Attribution (can change be attributed to programme assistance)?
Overall Impact
3. Engagement
Is there an identified private sector partner (or partners) who:
Name:
Has mutual objectives?
Is willing to invest in the intervention?
Will share data with PSP4H?
Overall Engagement
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4. Do No Harm
Has the impact of the potential intervention on all stakeholders been
considered so there will be no adverse unintended consequences?
Overall Do No Harm
Overall Evaluation
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APPENDIX 3. DESCRIPTION OF PSP4H
PROGRAMME
For Potential Partners: Engaging with the Private Sector Innovation Programme for Health (PSP4H)
The Private Sector Innovation Programme for Health (PSP4H) is a two year UK Government-funded action
research project exploring a market systems approach to development entitled ‘Making Markets Work for the
Poor’ (M4P). The programme fosters partnerships with for-profit private sector healthcare providers
who have innovative ideas for serving the poor and wish to develop them in a sustainable manner.
PSP4H encourages private sector investment to serve the poor.
The target beneficiaries for partnerships are for-profit health enterprises that serve the working poor.
PSP4H will facilitate new private sector approaches and invest in purely developmental activities such as
market intelligence, business modeling, capacity building, introduction of innovations and risk sharing. PSP4H
acts as a consulting organisation – an innovation centre for private for-profit health sector investors – but is
not a market player or a financing institution.
How to Work With PSP4H
Following are the steps in engaging with PSP4H for potential private sector partners interested in testing propoor business models through action research – what we refer to as ‘interventions’:
ENGAGEMENT
• Initial stakeholder interviews and discussions with PSP4H regarding areas of opportunity
• Identification of potential action research interventions that are of mutual benefit
• Screening of ideas for pro-poor/M4P Relevance, Impact, Engagement, Do No Harm
PLANNING
• Agreement on intervention concept
• Concept note development in collaboration with PSP4H (Including business case, budget)
• Concept note submission and review
• Concept note decision: approval/rejection
IMPLEMENTATION
• Feedback to partner; if approved, execute partnership agreement/MoU
• Action planning and project implementation
• Continuous monitoring -data gathering, analysis, operating adjustments
• Documentation and dissemination of lessons learned, scale up when successful
Any private sector enterprise with an innovative, sustainable, for-profit idea on how to better serve the poor by
increasing access and/or improving the quality of health services/products is eligible to work with PSP4H.
PSP4H and the partner organisation will enter into an agreement that specifies the mutual objectives of the
partnership and the roles and responsibilities of each party, which will then fund its own activities. The partner
retains control of business outcomes and can invest in scale-up.
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