Private Vs public provisioning of healthcare services

A cross-country meta-study of health care delivery in low and middle-income countries by public and private sectors questions the conventional wisdom that the private sector is more efficient, accountable, or medically effective than the public sector.

This finding goes against the grain of mainstream thinking that the path towards achieving greater effectiveness in health care services delivery lies in increasing private participation. It goes further and raises concerns that the private sector may be cornering an increasing share of the scarce public resources being spent on health care, thereby depriving public systems off investments. This is apart from the competitive dynamics between both sectors and the deeper pockets of the private sector crowding in specialist medical practitioners.

The study evaluated both types of health care systems across developing countries based on the six WHO health systems framework themes - accessibility and responsiveness; quality; outcomes; accountability, transparency, and regulation; fairness and equity; and efficiency. The authors find from the comparative cohort and cross-sectional study,

Providers in the private sector more frequently violated medical standards of practice and had poorer patient outcomes, but had greater reported timeliness and hospitality to patients... the private sector appeared to have lower efficiency than the public sector, resulting from higher drug costs, perverse incentives for unnecessary testing and treatment, greater risks of complications, and weak regulation... Public sector services experienced more limited availability of equipment, medications, and trained healthcare workers. When the definition of "private sector" included unlicensed and uncertified providers such as drug shop owners, most patients appeared to access care in the private sector; however, when unlicensed healthcare providers were excluded from the analysis, the majority of people accessed public sector care. "Competitive dynamics" for funding appeared between the two sectors, such that public funds and personnel were redirected to private sector development, followed by reductions in public sector service budgets and staff.

Since private sector is in general associated with superior outcomes, in case of healthcare with treatment outcomes, the paper's finding to the contrary comes as a big surprise. It writes,

Public sector provision was associated with higher rates of treatment success for tuberculosis and HIV as well as vaccination. For example, in Pakistan, a matched cohort study in Karachi found that public sector tuberculosis care resulted in an 85% higher treatment success rate than private sector care... In South Korea, tuberculosis treatment success rates were 51.8% in private clinics as opposed to 79.7% in public clinics, with only 26.2% of patients in private clinics receiving the recommended therapy, and over 40% receiving an inappropriately short duration of therapy...

In India, an analysis of over 120,000 households, adjusted for demographic and socioeconomic factors, found that children receiving private health services were less likely to receive measles vaccinations. Similar findings were reported from Cambodia. Studies comparing pre- and post-privatization outcomes tended to find worse health system performance associated with rapid and extensive healthcare privatization initiatives. In Colombia, following major privatization reforms in 1993, population vaccine coverage declined for several diseases in the country, and tuberculosis incidence rose significantly. In Brazil, privatization of fertility control services led to increased abortions, sterilization, and improper use of oral contraceptives (obtained without medical consultation), ultimately linked to higher mortality rates among young women.

Interestingly the study questions the claims of private sector superiority in studies by organization like the World Bank, 

The World Bank has made strong claims that investing in public–private partnerships will improve efficiency and effectiveness in the health sector, yet several of its publications revealed that these assertions were either unsupported by data or the data was not provided in sufficient detail to pass minimal inclusion criteria required for this review... Despite the lack of data about private sector performance, recent initiatives by the World Bank's International Finance Committee are underwriting the expansion of private sector services among low- and middle-income countries. For example, in sub-Saharan Africa, the International Finance Committee has created a private equity fund to make 30 long-term investments in private health companies. These conflicts of interest pose a potential threat to the validity of World Bank–sponsored studies and raise the need for independent scrutiny.

The exhaustive findings of the study should serve as a strong reminder about the limitations of privatization of essential services like health care. This is especially true of developing countries where private markets are constrained by lack of adequate breadth and depth on both the supply and demand sides. On the one hand, supply-side competition is limited, while on the other hand, demand side affordability and ability to pay are questionable. Both these contribute to several distortions and inefficiencies.