The COVID19 pandemic and the private sector

By Mark Hellowell, Aurelie Paviza, Yvonne Okafor and David Clarke

In most low- and middle-income countries (LMICs), the private sector is an important player in the health system – providing a broad range of essential health services to a majority of the population. Yet, in the midst of the COVID-19 pandemic, the private sector in most countries has been subject to major financial and operational disruption, reducing its ability to address local healthcare needs.

As one health policy expert stated (with respect to Kenya), “There are real concerns that, should COVID-19 persist without state intervention, many facilities will close down due to the inability to fund operational costs.”

Such concerns have been echoed in media coverage focused on countries across Africa, and in other regions, too.

For example, the President of the Philippine Hospital Association was quoted as follows: “There is an immediate need to ensure that both public and private hospitals are able to recover from the challenges brought about by COVID-19. These not only include higher risks faced by health front-line workers, but also the two-pronged pressure of higher costs combined with dramatically lower revenues.”

In this context, the World Health Organization has conducted research, included a rapid survey of private health care providers in eight African countries, alongside a document and media analysis covering a range of countries in Africa, Asia and South America, to assess the scale of “the problem”, its causes and consequences, and the range of policies currently being used by LMIC governments in support of the private health sector.

So, what did we find?

Scale of the problem

First, it is clear that service availability, staffing and the financial sustainability of private healthcare providers have all been seriously compromised by the pandemic and policy responses to it.

For example, almost all the healthcare businesses we surveyed reported that COVID-19 has increased their monthly expenses and reduced their revenues, indicating a major reduction in net incomes during the crisis. A high proportion of facilities – some 25% on average, across our sample countries - have been forced to close, and around half of businesses have been forced to furlough or lay off staff. Most expect these disruptions to last for the next three-to-six months at least.

Causes

These effects have been driven, in large part, by the actions of governments themselves (i.e. restrictions on healthcare delivery, or on human mobility during ‘lockdowns’) and the wider socioeconomic impacts of the pandemic, which have led to reduced demand for health services, especially paid-for services, from the population.

These impacts have also been aggravated by decreases in the availability and affordability of essential COVID-19 supplies (e.g. a 5000% increase in the cost of personal protection equipment (PPE) was reported in one Nigerian state), and disruptions to both general and health-specific supply chains.

Consequences

The main results of these disruptions - reductions in service availability, staffing, and financial capacity – are that:

1. in countries experiencing a surge in demand for diagnostic and therapeutic health services during the acute phase of the outbreak, reductions in the capacity of private health sector providers have reduced the population’s access to and utilisation of COVID-19-related services; and
2. an even more widespread, and perhaps more severe, impact, is apparent in the form of reductions in access to and the affordability of other (non COVID-19-related) services for the population.

Policy responses

Policymakers in LMICs are currently seeking to address this problem using a variety of interventions. However, one theme that emerges in our data is how policy solutions differ according to the nature of ‘governance regimes’. In particular, countries that operate a more ‘inclusive’ governance regime – in which there is a high degree of collaboration between the public and private sectors in the health system – were both:

1. more likely than other countries to provide support to the private health sector during the COVID-19 emergency; and
2. more likely to structure that support in ways that address the underlying ‘causes’ of the financial challenge (e.g. avoiding closures, easing supply-side cost pressures, and stimulating demand) and not only its ‘symptoms’ (e.g. requiring facilities to re-open or providing support for furoloughed staff).

In short, our results indicate that countries with more ‘inclusive’ regimes have greater capacity to provide more systemic and sustainable solutions to the financial crisis facing the private sector. Yet, it’s clear that, even in such cases, governments and their development partners are facing a major challenge in addressing the crisis – one that requires a sustained response.

The next steps of our research programme will focus on this challenge head on. We’ll focus on which mechanisms and forms of support hold the most promise in resolving the crisis, and how governments and partners can prioritise their actions to optimise national COVID-19 response efforts and strengthen longer-term processes of building strong, equitable health systems.