Our evaluation found that only a small fraction of evaluated hospitals and specialty chains attracted public financing.  Most of them continued to rely primarily on private insurance and out-of-pocket payments by private patients, which are not affordable for all.

The private sector plays a role in most health systems. Although the public sector covers a defined set of health services, the private sector (including the nonprofit sector) in many countries offers additional health services beyond those that are publicly funded.  

To reach Sustainable Development Goal 3 to “ensure healthy lives and promote well-being for all at all ages,” many governments around the world are seeking to increase the role of the private sector in the provision of care to complement the activities of the public sector.  However, with so many systems operating simultaneously to deliver health services, it can be difficult for countries to quantify, track, and coordinate the services from each provider to ensure that the system is working as efficiently as it should, to provide the best services at the lowest cost to citizens. 

For this reason, public-private interactions in the health sector have received increasing attention by the global health community.  The World Bank, for its part, outlined its strategy to help governments to better integrate public and private health sectors in 2007, acknowledging the need for effective regulatory frameworks for public-private collaboration. The strategy recognized the World Bank’s comparative advantages in this area and acknowledged that institutional challenges needed to be addressed to allow the World Bank to better support governments that are interested in engaging the private health sector. The Bank restated this strategy in 2015.

Read the Report
World Bank Support to Health Services:
Achievements and Challenges

World Bank Support to Health Services

As part of IEG’s evaluation of World Bank Group support to Health Services, we looked closely at the ways in which public-private interaction in the health sector of client countries had been improved as a result of World Bank Group support.

We found that, to date, follow-through has not matched intent.

What is the impact of poor public-private interactions?

To understand some of the negative outcomes when private and public efforts to provide health services are not effectively coordinated, consider the case of an IFC-financed private health clinic in Romania. The clinic offers some services financed by the government, but the government prices the services too low, pays the clinic late for these services or at times doesn’t pay at all due to fiscal constraints and budget mismanagement. Therefore, to cover its costs the clinic must accept private clients who have private insurance or who can pay out of pocket.

Over the past decade, 53 percent of International Finance Corporation (IFC)’s investment in health services in the hospital and specialty chains sectors went to companies seeking both private and public financing for their services. While this offers a good opportunity to provide services to patients with fewer resources and contributes to Universal Health Coverage, our evaluation found that only a small fraction of evaluated hospitals and specialty chains attracted public financing.  Most of them continued to rely primarily on private insurance and out-of-pocket payments by private patients, which are not affordable for all.

As a result, poor patients who can’t afford to pay for health services are excluded from the additional services offered by private providers.

 What is getting in the way of better coordination?

One challenge is that in many countries private providers are not perceived as an integral part of the health system.

IEG’s evaluation found that World Bank Group support to help governments to strengthen the interaction between the public and the private sector remains limited. Some steps have been taken in the right direction to create and seize operational opportunities with the private sector. However, on the regulatory and policy side, the evaluation found that the Bank’s efforts remain scarce despite strong potential. On the private sector side, IFC investments had difficulties in attracting public financing due to the limited availability of public resources and capabilities, inadequate regulation—including inadequate enforcement, underdeveloped private markets for health services, and difficulties for governments in making true price comparisons between the public and private sectors.

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World Bank Group Support to Health Services: Achievements and Challenges.

The evaluation also found more broad challenges of the health systems where IFC operated. These challenges included:

  • inadequate systems for referring patients, resulting in overflow of patients in hospitals and unexpected fiscal pressures on government;
  • delays in government payments to private providers;
  • inadequate calculation of government contributions;
  • delays in matching the availability of nurses and doctors with infrastructure; and
  • limited government oversight over the private sector function and government capacity to manage and understand the role of the private sector.

 Success stories: where public-private interactions are improving

There are a few cases where the World Bank Group’s support for health services produced positive outcomes for public-private interactions. This happened in Turkey, where four multilateral institutions worked together, although results took many years to materialize. Since 2003, the International Bank for Reconstruction and Development (IBRD) supported the Government of Turkey in undertaking health sector reforms and strengthening its institutional capacity to implement a public–private partnership (PPP) program for health services. One of the main components of the reforms was to restructure the Ministry of Health for effective stewardship. The Multilateral Investment Guarantee Agency (MIGA) provided political risk insurance for six PPP projects, with a total value of $848 million. IFC invested $163 million in senior debt and mobilized an additional $430 million from other lenders for three first-mover PPP projects. The European Bank for Reconstruction and Development (EBRD) provided additional risk mitigation through a greenfield project bond. The combined MIGA-EBRD-IFC financing structure improved the rating of the bond issued—so much so that it was rated higher than Turkey’s sovereign bond.  This combined financing structure also attracted new investors in Turkey’s health PPPs. To date, 10 health PPP projects have reached financial closure and are under implementation. Most of the PPPs were joint ventures established to undertake the financing, design, construction, and operation of public hospital networks in second tier cities, which serve all Turkish citizens—including the bottom 40 percent of the population covered by universal health insurance.

Possible solutions  

Progress toward a successful integration of private provision of health services with public financing will require joint efforts by the World Bank and IFC, according to our evaluation:

  • The World Bank should work with IFC to strengthen the planning, regulatory, and accountability arrangements for public-private interactions in different countries.
  • The World Bank Group’s new Maximizing Finance for Development approach, which aims to mobilize private finance for development by focusing on upstream reforms to address market failures and other constraints to private sector investment, could be a promising strategy.

 What’s at stake if we don’t fix this?

The global community committed to the goal of reaching universal health coverage. In 2014, the World Bank Group joined a global coalition of more than 500 leading health and development organizations that called for accelerating the achievement of this goal. The potential of private provision to contribute to universal health coverage is constrained by the limited success of integrating it with public financing. The poor have little capacity to pay for health services, thus public financing is—usually—necessary to make health services affordable, and thus accessible to them.

Another benefit of successfully integrating private health services with public financing would be a better coordination during pandemics. Private clinics and hospitals are on the front lines of receiving patients, which turn them into a potential source of reporting and tracing new outbreak cases to government health agencies.

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