Payment Arrangements for Private Healthcare Purchasing Under Publicly Funded Systems in Low- and Middle-Income Countries: Issues and Implications

Abstract

This paper examines private healthcare purchasing under publicly financed health systems in low- and middle-income countries (LMICs) to argue that the payment methods and rates applied to private and public health providers need careful attention to ensure equity, efficiency and quality in healthcare service provision. Specifically, public purchasers should develop a clear mechanism to establish justifiable payment rates for the purchase of private health services under publicly funded systems, using cost information and appropriate engagement with private health providers. In order to determine the validity of payment arrangements with private providers, clarification of the shared roles and responsibilities of public and private healthcare providers is required, including specification of types of services to be delivered by public and private providers, and the services for which public providers receive government budget and salaries above payments for other publicly funded services. In addition, carefully designed payment methods should include incentives to encourage healthcare providers to deliver efficient, equitable and quality health services, which requires consideration of how the healthcare purchasing market is structured. Furthermore, governments should establish sound legal frameworks to ensure that public purchasers establish 'strategic' payment arrangements with healthcare providers and that healthcare providers are able to respond to the incentives sent by the payment arrangements. To deepen understanding of public purchasing of private healthcare services and gain further insight in the LMIC context, in-depth empirical studies are necessary on the payment methods and rates used by public purchasers in a range of settings and the implications of payment arrangements on efficiency, equity and quality in healthcare service provision.