How governments and private health businesses can work together to deliver services to the poor

Governments use a range of ways to pay private health providers to deliver health services to men and women living in poverty. An analysis of schemes in Kenya, Uganda and India highlights five areas where both public and private actors face challenges when trying to work together: 1) information deficit, 2) weakness in management capacity, 3) insecure funding environment, 4) mismatch in organisational cultures, and 5) corruption. This brief discusses steps that governments, development partners, private sector actors, and market practitioners can take to try and overcome these challenges.


Governments in low and middle income countries (LMICs) use a range of methods to pay private health providers to deliver health services to the poor. These include arrangements like public health insurance schemes wherein government insures poor or otherwise vulnerable populations, and selects both public and private health providers to offer health services to benefit them. Governments may similarly recruit private health providers to participate in voucher schemes that promote certain targeted health services like maternity care and reproductive health services. Finally, they may contract-in or contract-out key medical services like emergency care or diagnostics to private companies to offer services to under-served groups such as men and women living in poverty. 

While the list of such schemes is rapidly growing, the reality is that private health companies often do not understand government policies designed to engage them. Moreover, they often lack the skills and capacity to qualify to participate in these initiatives. Few studies have been undertaken to understand the private providers’ perspectives on the opportunities and barriers to participating in government health schemes in low- and middle-income countries.

Markets for the poor approach in health

Markets for the Poor (M4P), an approach for studying the way the poor participate in market systems, offers a useful lens to explore health policy mechanisms through which governments pay private providers to deliver health services. A market system is built around many actors. As the figure shows, at its heart are the suppliers and consumers of services and the core transaction between them that involves the latter purchasing services from the former. Surrounding them are numerous other actors such as government agencies, civil society groups, private sector actors, and professional associations that both influence the rules that regulate market transactions and perform a range of supportive functions.

Key challenges

Even as governments in LMICs put in place policies to harness the private sector to deliver affordable, quality health services to poor and hard to reach groups, five key challenges mean that many private providers struggle to learn about, or engage in, these initiatives: 1) information deficit, 2) weakness in management capacity, 3) insecure funding environment, 4) mismatch in organisational cultures, and 5) corruption.


Based on the existing evidence as well as the interviews conducted for the research, we offer the following recommendations to governments, private providers, development partners, and health market practitioners:


  • Consult more with the private health sector.  A lack of communication between the public and private sectors fuels mistrust and competitiveness. Governments should consider establishing a formal mechanism to include private sector providers in policy design, program planning and implementation.
  • Move towards formal policy arrangements that include standard operating systems and procedures. Steps include creating standardised procedures and templates that will increase transparency and predictability, and making information on how the policies work more widely available. Involving the private sector in the design of these systems and processes will increase the likelihood of their participation. 
  • Invest in government capacity to administer the new operating systems. To effectively use the different tools of government, MOHs will need to invest in building their staff skills in these new tools. MOHs may also need to hire staff with a different skill base and technical profile, such as economists, lawyers and contract managers. 
  • Address funding insecurity. It is critical for governments to assure private providers that they will get paid and on time or else they will struggle to attract partners in their policy mechanisms. Steps to create a more predictable funding environment include conducting costing studies to better understand the funding levels needed and automating claims processing to ensure providers are reimbursed regularly and on time.

Private health providers

  • Actively pursue the MOH. The private sector should seek out different opportunities to interact with the government to better understand their perspective on the private sector’s role in the health sector, to learn about new policies affecting the private health sector as well as future opportunities for partnership with the government.  
  • Organise into representative bodies. Following the example of countries like Uganda, Tanzania and Kenya, private providers in developing countries should establish representative bodies that can perform important functions for their members, such as conducting market research in key health markets, monitoring health markets, and negotiating terms of government contracts on behalf of their members.
  • Build organisational capacity to become an effective partner. In addition to having clinical expertise, a private provider also needs administrative and management capacity to respond to tenders and to manage government contracts. Private providers can take the initiative to strengthen financial and administrative systems, better understand their costs and how to manage them, and train their staff in key areas related to contracting.

Development partners

  • Strengthen MOH systems to strategically purchase health services from private providers by: 1) Helping developing country MOHs to establish the policies and organisational arrangements needed for contract management, 2) Offering technical assistance to create organisational structures, functions and standardised operating systems, and 3) Investing in MOH capacity and skills to effectively implement and manage the tools of government. 
  • Assist the private health sector to get organised as a sector by: 1) Helping private providers form associations and organisations that group them into larger units that can interact directly with MOHs, 2) Investing in building these groups to become mature associations that effectively represent the private sector in policy and planning, 3) Strengthening private provider capacity, not only in clinical areas but also business areas so they can manage and implement government contracts. 
  • Avoid distorting markets and crowding-out the private sector. While this is true for any market systems intervention, there is a particular risk in the health sector where the provision of goods, subsidies, and grants are common, driven in part by the critical nature of many health challenges. While there are times when it is appropriate for donors to make direct interventions in order to achieve critical public health objectives, there must be an exit strategy in place from the outset of the project.  

International health practitioners

  • Support MOH to better understand the private health actors. When conducting research or providing technical assistance, practitioners should take the time to gather information on private health sector activities, integrate private sector data into research and program design, and involve private sector stakeholders in technical workshops, conferences and briefings.
  • Work with promising private sector interventions to share successful business practices. The literature identified sound practices that increase the likelihood that a private health business will succeed financially. Health practitioners can play a critical role in documenting and disseminating learnings from successful business and policy models. 
  • Retool one’s thinking on policy tools and implementation. The international health community needs to think of policy tools of government to strengthen the whole health system – not just public health services.

The full report will be published later in 2016.

Project overview.