How COVID-19 (coronavirus) affects private health care providers in developing countries

Policy makers’ initial emphasis on “flattening the curve” of COVID-19 (coronavirus) cases has reduced the demand for health care and created new costs for the private sector. This has led to a cash crunch, forcing some providers to scale back their businesses and lay off health workers.

Data from 12 low- and middle-income countries demonstrate that the stress is particularly acute for small and medium-sized enterprises, such as solo practitioners, small hospitals, labs, and pharmacies, some of which may not survive the crisis without support.

As the owner of a small hospital in Sub-Saharan Africa explained, “This is a terrible time to be in the health care business. Foot traffic has dropped. I have laid off my staff. I am not sure I can stay in business.”

What’s causing the financial strain on providers?

The pressure on private health providers has several key causes:

• Government regulations require health care facilities to defer elective surgeries and outpatient services – often for an undefined period;
• Due to lockdowns, many patients have been unable or unwilling to visit hospitals;
• Private hospitals are spending more on personal protective equipment (PPE), isolation capacity, and supplies for treating respiratory illnesses, increasing their costs;
• Economic disruption has reduced insurance coverage and the ability of individuals to pay for health care; and
• Private insurance companies are in some cases delaying claims settlements.

What’s the impact on developing countries?

The cash crunch is likely to have major implications for health systems – especially in low- and middle-income countries, where private providers play a major role in delivering health services, including to the poor. Governments are under pressure to ensure that the private health sector has access to the support – loans, guarantees or grants – needed to prevent companies from collapsing under this financial stress.  

How should governments respond?

Where countries already engage with private health businesses through financing, policy makers will often have a clear sense of which providers have the quality systems in place to provide safe and effective care. This will help them ensure efficient use of taxpayer dollars.

These governments are also well-placed to design and implement appropriate models for payment to private providers. For example, moving from volume-based payments that are linked to use of services, to availability-based payments that are not linked to demand, can ensure that providers are able to deploy their resources quickly if and when a surge in demand for health care occurs.

Where governments are new to offering support to private sector providers, effective solutions will require closer engagement and dialogue. Global health and development agencies such as the Global Financing Facility, the World Bank and International Finance Corporation, and the World Health Organization, are working to support governments in engaging effectively with their private sectors.

Helping governments develop clear criteria for resource allocation is a key priority. Without them, public funds may be misallocated, with well-connected and politically influential companies getting priority for funding. Those who play a larger role in providing cost-effective health care to most of the population could end up losing out. Other adverse effects could include corruption, price gouging, and poor-quality care.

Good governance is key

Governments need to be transparent about the details of state aid and monitor who has benefited in terms of profits. Where possible, this information should be in the public domain and subjected to independent scrutiny and audit.

Policy makers will need to invest time and resources towards a more transparent, accountable, and strategic plan for their private health sectors.  The challenges in/ responding to COVID-19 present an important opportunity to strengthen accountability and the relationship between public authorities and private providers. 

This is also a moment for governments to rekindle discussions about Universal Health Coverage. Better governance and effective oversight of the private sector are important for developing countries to strengthen their health systems while tackling the COVID-19 pandemic.