Politics, Business & Culture in the Americas

Filling the Gap

Reading Time: 8 minutesThe private sector is expanding access to the poor—and making a profit.
Reading Time: 8 minutes

Patients with their eyes bandaged after cataract surgery. Photograph by REINHARD KRAUSE/REUTERS.

Reading Time: 8 minutes

The World Health Organization (WHO) Constitution defines health as a human right and declares that governments “have a responsibility for the health of their peoples which can be fulfilled only by the provision of adequate health and social measures.”1 But the gap between rhetoric and reality is large, particularly in developing nations where scarce resources, corruption and poverty complicate the ability of government-run systems to deliver equitable health care.

That gap, however, is increasingly being filled by the private sector.

Over the past decade, a new kind of health intervention that uses market-based principles has emerged across the Americas and beyond to provide more accessible and affordable health services to the poor.2 While these health market innovations may not solve developing countries’ complex social challenges, they represent stepping stones to more comprehensive health reform—and they merit increased attention by global and national decision makers.

The models differ by country and circumstance, but the private health sector in developing countries is generally quite large and diverse. It encompasses nongovernmental organizations, faith-based organizations, for-profit health care providers, and countless informal providers and “traditional” healers who provide services out of their homes. Data that accurately measure the public-private mix are scarce, but in many developing countries—according to a University of California, San Francisco study—private health provision can be as high as 50 percent or more of total health service delivery to both the poor and the wealthy.3 The study finds that private-sector provision in Latin America is slightly less than in Africa and Asia, with the biggest difference being among the poor. This is most likely due to the relatively small size of the sector in the region, as compared to Africa and Asia, and the still-limited number of affordable private-sector options available to the poor.

But, as in other regions, the private-sector landscape in Latin America is rapidly changing. Private medical care is expanding, and private providers now operate parallel to the public system and are often seen as offering higher quality services than the public sector. This perception, however, is usually based on the comparatively small segment of the private sector with modern medical facilities, modern equipment and shorter waiting times. While many private providers indeed provide high-quality care, a large number operate outside government oversight and regulation. Not surprisingly, that results in wide differences in quality, affordability and accessibility.

Despite the growing abundance of health providers, the poor are often caught between under-resourced public health systems, costly high-end private facilities and unregulated informal providers with questionable healing powers. In many of the world’s most impoverished regions, charity organizations have stepped in to provide free or highly subsidized services. But charity-based interventions are generally very limited in their health scope, geographic reach and longevity.

Typically, low-income populations in Latin America and around the world face bleak choices. Cheap services offered by unlicensed providers may result in inappropriate, inadequate or harmful treatment. But more sophisticated private facilities can drain their scarce financial resources and drive them further into debt. Nevertheless, despite the flaws in the private health sector, private services can be a source of innovation and, if effectively harnessed, have the potential to provide low-income populations with high-quality, affordable care.

Pro-Poor Health Models

In many parts of the world, “pro-poor” health market models, sometimes referred to as social enterprises, social ventures or base-of-the-pyramid businesses, have begun to catch on as alternatives to under-resourced government facilities, expensive private hospitals or home-based care.

Many pro-poor health market systems originate in Asia, where the popularity of microfinance and other base-of-the-pyramid concepts provide fertile ground for health innovation.

One of the most well-known pro-poor models originated in India—the Aravind Eye Care System—and has a remarkable history. It started in 1976 as an 11-bed hospital providing limited eye-care services and evolved to become the largest provider of blindness treatment and prevention in the world. Three decades after its founding, Aravind remains focused on providing affordable eye care to all, with over 70 percent of patients receiving free care subsidized with the revenue from the remaining 30 percent of patients who can afford payment. Its success lies in a high-volume/low-margin approach that is unique to the health sector but common among commercial companies like fast-food chains and car manufacturers. This involves a highly efficient assembly-line service structure where one surgeon can perform two cataract surgeries simultaneously. A highly-trained team of paramedics and nurses performs 70 percent of the work, enabling the surgeon to focus on high-skill tasks. Aravind’s model has now been replicated across the world, with over 260 eye-care hospitals having received training and support from its experts.

Similar in concept to Aravind, LifeSpring Maternity Hospitals is a newcomer to the pro-poor health market space in India, but its remarkable growth has already attracted global attention. Founded in 2005, LifeSpring is an expanding chain of boutique, for-profit hospitals that offer high-quality, affordable health care in highly populated urban areas. Their strategy: standardize procedures and serve a high number of patients to bring down costs. The charge for a normal delivery is $40, or 30 to 50 percent of the market price. As with Aravind, fees are determined based on one’s ability to pay, with the wealthy covering the cost of serving the poor. LifeSpring operates six hospitals and plans to expand to 30 hospitals in 2010 and 140 hospitals by 2014.

Other examples of pro-poor models focus on how to affordably finance health services for the poor. One example is Naya Jeevan (New Life) in Pakistan, which provides health insurance services to low-income urban families at below-market rates. To make this possible, Naya Jeevan forms partnerships with corporate insurance companies such as Allianz EFU and IGI Insurance Limited, which agree to provide emergency care insurance at affordable prices in return for a significant increase in their customer base.

Another type of innovative pro-poor model seeks to improve the performance of the existing health system by enforcing quality standards and investing in training and education. For example, Tanzania’s Accredited Drug Dispensing Outlets program (ADDO), a national network of privately owned drug-dispensing outlets, has significantly improved the quality of that country’s private-sector pharmaceutical services. All drug outlets in the program must adhere to high standards of product and service quality and be accredited by the government. ADDO provides shop owners with business training and technical support, which has not only increased the number of customers but improved the quality of pharmaceutical services.  A 2004 evaluation4 of the program by Strategies for Enhancing Access to Medicines Program, a project developed by a for-profit consulting firm, showed that inappropriate dispensing of antibiotics declined from 39 percent in 2001 to 14 percent in 2004.

The Americas, with a burgeoning private health sector and a large low-income population, is a vibrant laboratory for new private-sector models of health care.

Centro Ginecológico Integral (CEGIN) in Argentina’s Jujuy province, a for-profit high-volume/low-cost hospital that provides high-quality medical services to poor rural women at half of the market price, has reported remarkable results.

The center serves 130 patients a day, administers 1,000 tests for cervical and ovarian cancer and estimates that it has prevented the development of 300 cancer cases since its founding in 1989. In addition to a medical center, CEGIN runs a microinsurance plan, the SER system, which for a small fee-per-person gives low-income communities access to discounted CEGIN services and lower prices at pharmacies and other local shops.

Other pro-poor models in Latin America create new partnerships with the government that build on what is already in place.  Andean Health and Development (AHD) in Ecuador is an example of this. In 2000, AHD built a secondary care hospital in a rural area of northwest Ecuador to provide a range of services, including maternity care, emergency care, diagnostic services, and specialized surgeries. The hospital became fully self-sustaining seven years into its operation thanks to an innovative mix of financing mechanisms that combine revenue generated from the social security system, municipal contributions and out-of-pocket payments. In 2008, the Ministry of Public Health approached AHD with a proposal to jointly operate an existing rural public hospital located in the city of La Mana in central Ecuador and introduce the established AHD secondary-care model to the public system with the goal of improving its efficiency and lowering costs.

These examples show that the pro-poor health model is a truly global phenomenon and that an increasingly broad range of creative solutions is being developed to provide greater health care options for poor populations. Some build on existing structures, attempting pragmatically to improve them rather than replace them; others take proven commercial concepts, such as assembly-line production, and repackage them for low-income patients. Still others have developed innovative incentive structures that stimulate existing corporate industries to focus on the poor. But what distinguishes them from conventional public health delivery models or pure profit-driven businesses is their shared goal of improving the functioning of health markets with a focus on the poor.

Not a Quick Fix, but a Promising Step Forward

Despite their relative newness, health market innovations have started to attract increased attention from the global health community.
In May 2009, the Results for Development Institute5 investigated the global landscape for pro-poor innovative health models and profiled a selection of 33 market-based programs, ranging from donor-driven initiatives to large-scale government-subsidized efforts and for-profit businesses. This research found that, while unable to transform health systems on their own, these models can successfully complement government-run health financing and delivery platforms and effectively support a country’s health goals.

All the models mentioned here, as well as others profiled in the still-sparse literature on the subject, have reported some positive results, ranging from improvements in efficiency and quality of service to increasing access for poor populations and greater consumer choice.

But our understanding of these models continues to be limited. There are still questions about their significance and value. Research points to many programs that have failed to achieve any results and stresses the unproven track record of health market innovations. Indeed, while positive preliminary results are a promising step forward, very few programs have been rigorously studied to better understand their success factors, business and financial models, paths to scale, and ultimately, their potential to make a significant contribution to improving lives.

Several factors hinder a more nuanced and comprehensive understanding.

One is the fragmented nature of health market interventions. They are inconveniently scattered all over the globe, with very little information available to the implementers who may learn from them, the donors and investors who may support them, the research and academic community who may study them, and the global and national policymakers who may promote their growth.

Another factor is the disagreement over how to assess impact. Measures of success for individual models range from their financial sustainability and their scalability (or replicability) to evaluations of impact on health outcomes and overall contributions to health system goals.

While many institutions are working toward developing comprehensive evaluation metrics for specific types of models (social franchise models, demand-side financing models, technology models, etc.), each group tends to use different language when it comes to defining and measuring success. Given the range and diversity of models, a universal standard for measuring impact may never be feasible or even desirable. But agreeing on common definitions and frameworks for categories as well as information-collection standards is an important development that could guide decision makers in comparing across regions and model typologies and identifying programs for support.

This type of industry-wide collaboration and targeted support to funders and national governments would effectively facilitate the study of programs’ successes and shortcomings and help promote the diffusion of promising solutions. Many health market innovations have already been in existence for at least a decade—the average time for programs to reach scale—and may be ripe for a more systematic examination of their business model and their impact.

The global health research agenda is beginning to focus on such cases. The opportunities for cross-fertilization and learning across national and geographic boundaries are immense. Equally important are the potential contributions such programs can make to broader health-systems reform. More coordinated efforts by governments, the private sector and the research community to study and support pro-poor models would help transform these innovations into a dependable health-care alternative for those who need it most.


1. The Constitution was adopted by the International Health Conference held in New York from June 19-July 22 1946. It was signed on July 22, 1946 by the representatives of 61 states (Off. Rec. Wld Hlth Org., 2, 100), and entered into force on April 7, 1948.
2. The definition of “poor” is highly contextual. In this article it is used to broadly define low-income populations in developing countries.
3. From April 2009 to March 2010, Aravind performed 2,539,615 outpatient visits and 302,180 surgeries, Two-thirds of the outpatient visits and three-fourths of the surgeries were serviced to the poor, free of cost.
4. The evaluation was conducted by Strategies for Enhancing Access to Medicines Program (SEAM) in October and November 2004.
5. The report synthesized the findings of 2009 research led by R4D and partners and funded by the Rockefeller Foundation. The report and other relevant materials are available for download at www.resultsfordevelopment.org

Tags: Health care, Poverty and inequality, Private Sector
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