Embracing PPPs to Strengthen Nepal’s Health Infrastructure and Health Service Delivery

Many countries have successfully implemented PPPs in healthcare. Photo credit: Asian Development Bank.

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By leveraging private sector expertise, resources, and innovation, PPPs can help ensure cost-effective healthcare delivery.

Introduction

Meeting the healthcare needs of the Nepalese population is a significant challenge, given the increasing burden of diseases and shifting health conditions.[1] Public healthcare providers face formidable obstacles, such as shortages of high-quality human resources, intermittent supply of public health logistics, and the high cost of care. As a result, the quality of health services provided through public facilities has been compromised. Public hospitals in Nepal could not consistently offer the same level of care and advanced equipment as that of private institutions.

Adding to the challenges, Nepal’s Current Health Expenditure is notably lower at $58 compared to South Asia average of $174.[2] The country also faces higher out-of-pocket health expenditures as percentage of Current Health Expenditure (54%), compared to the South Asia average of 48%.[3] Thus, households are vulnerable to catastrophic health expenditures and potential impoverishment.

In response to healthcare issues, Nepal introduced a social health insurance program in 2016. However, its coverage remains limited, including only 25% of the population,[4] and it contributes only 2% to the Current Health Expenditure.[5] Further, the popular practice of building more healthcare facilities to address these challenges encounters difficulties due to high construction and maintenance costs.

A different approach that combines the strengths of private healthcare with efficient use of public funds could help improve the condition of healthcare in Nepal. Through public-private partnerships (PPPs), Nepal can optimize healthcare access and quality, while ensuring cost-effective healthcare delivery. This approach has the potential to bridge the access gap by leveraging the large pool of public funds available for building and operating and hospitals, as well as through different health insurance schemes implemented by the government.

Impact of PPPs in Different Countries

Many countries have successfully implemented PPPs in healthcare. By learning from their valuable experiences and lessons, Nepal can strive toward achieving comprehensive and improved healthcare services for its citizens.

Japan, for example, partnered with private healthcare facilities to successfully achieve universal health coverage[6] in the early 1960s. Even today, the country leverages its strong network of privately owned health facilities to improve its health outcomes and expand quality health services. In 2021, more than 80% of the hospitals in Japan were privately managed.[7]

Sri Lanka also adopted PPPs as one of its health sector development strategies, resulting in remarkable health indicators compared to its regional peers and countries with similar income level. The country witnessed significant improvements in maternal and infant mortality rates and the elimination of several communicable diseases.

PPPs in India, Iran, and Pakistan, as well as in Italy and Puerto Rico, have yielded profound results leading to greater utilization of health services and improved institutional child deliveries driven by strong private sector involvement.

A multi-country systematic review across South Asian countries, including Bangladesh and Maldives, also found that PPPs in primary healthcare led to improved access, economic benefits, and improved service quality.

Examples of successful PPP models include

  • Urban primary healthcare project in Bangladesh. It utilizes performance-based contracting out of primary healthcare services to NGOs. Success factors include long-term contracts and budgetary support from the government that ensure its sustainability. Healthcare services are provided free of cost to the poor as the contracts are designed to recover 10–15% of the cost from user fees, while the rest are subsidized by the government.
  • Family medicine performance-based contracting model in Turkey. The Provincial Directorate of Health individually contracts family medicine clinical personnel, including physicians, nurses, and other staff to provide a comprehensive range of healthcare services. Payments are based on a capitation basis, with provision for higher base payments based on coverage and geographical access, such as remote areas. Performance-based payments further incentivize quality service delivery.
  • Primary care model in the UK. Primary Care Organizations commission 80% of the National Health Services budget and execute performance-based contracts with general practitioners (GPs). GPs are rewarded based on the points accumulated for providing various services to citizens, encouraging high-quality care delivery.
  • Social organizations delivering healthcare under performance-based contracts in Brazil. The State Secretariat of Health negotiates performance contracts with social organizations, wherein specific volume and performance targets are agreed upon. These organizations manage public health infrastructure for a contracted period, with autonomy in service delivery and resource management to achieve set targets that match local community needs.
Potential PPP Models in Nepal

By leveraging private sector expertise, resources, and innovation, PPPs can improve health care service delivery and lead to better results in the health sector. Successful application of PPPs requires clear objectives, transparent and accountable governance frameworks, engagement of relevant stakeholders, and robust legal and regulatory frameworks to guide the partnerships. Nepal could consider the following potential models of PPPs to strengthen its healthcare delivery and ultimately achieve universal health coverage:

(i) PPPs in health infrastructure development. PPPs can be utilized to develop healthcare infrastructure, particularly in underserved areas. The government can partner with private entities to design, finance, construct, and maintain hospitals and healthcare centers. This approach can help expand the reach of quality healthcare facilities and reduce the burden on public healthcare institutions. The government can provide incentives to private institutions that establish healthcare facilities in challenging geographical locations.

(ii) PPPs in health service delivery. PPPs have the potential to improve the quality and access of health service delivery by engaging private healthcare facilities. The government can contract private hospitals, clinics, or diagnostic centers to deliver healthcare services in areas with limited access. In particular, the government can collaborate with private entities to develop and implement quality improvement programs and guidelines, and create partnerships to train and mentor healthcare professionals in delivering high quality services. PPP models can be developed to partially or fully finance healthcare services to poor and vulnerable populations. In partnership with the private sector, the government can also establish monitoring mechanisms to ensure the quality and accessibility of free healthcare services. These collaborations can enhance the availability of specialized care, reduce waiting times, and improve overall service quality and beneficiary satisfaction.

(iii) PPPs in telemedicine, e-health, and supply chain. PPPs can be instrumental in leveraging technology to enhance healthcare delivery. The government can partner with private telemedicine providers or technology companies to establish telemedicine networks, develop digital health platforms, and expand access to remote consultations. PPPs can help establish mobile health clinics and telemedicine networks for hard-to-reach areas. Partnerships with private logistics companies can improve the supply chain and distribution of medicines and medical logistics.

(iv) PPPs for domestic production of drugs and medical supplies. Partnerships can be developed with private pharmaceutical companies and medical supply manufacturers to promote domestic production of medicines and public health logistics. Incentives and support can be provided to the private sector for research and development of locally produced drugs and medical supplies. Collaborations can be fostered between the private sector, academia, and government to enhance domestic manufacturing capabilities.

(v) PPPs in healthcare financing. The government can partner with private health insurance companies or financial institutions to develop and implement health insurance schemes. This collaboration can increase access to affordable healthcare services and provide financial risk protection to the population.

Utilizing the Private Sector’s Potential in Nepal’s Healthcare

The private sector plays a substantial role in health service delivery in Nepal. With over 360 private hospitals spread across 63 districts and a bed capacity three times that of public hospitals, they served around 70% of the Nepalese population in 2019, and further expansion is ongoing. Embracing PPPs can effectively harness this potential.[8] The Government of Nepal’s commitment to modernizing health infrastructure aligns with the objective of engaging in such partnerships, enhancing the capacity of government hospitals, and encouraging private investments in healthcare. Effectively implementing PPPs in the health sector could also be instrumental in achieving Nepal’s ambitious goal of universal health coverage as part of its 2030 sustainable development goals agenda.

Addressing quality and affordability

While availability and quality of health services vary among private hospitals, appropriate monitoring by government agencies can ensure consistent standards of care. Devoting adequate resources to quality improvement activities and establishing effective oversight mechanisms will promote high-quality services. Additionally, some private hospitals in Nepal have implemented social security schemes to prevent financial shocks for patients, although affordability of services can still be improved.

Strategic infrastructure development

A careful assessment prior to making any infrastructure decision can maximize the benefits of PPPs. Procuring health services from private providers instead of further developing public infrastructure could be considered where private provision has already flourished. This strategic approach will optimize resource allocation and ensure more efficient use of public funds.

Conclusion

In Nepal’s quest to further modernize its health infrastructure, embracing PPPs, could be a viable and pragmatic strategy. By harnessing the strength and reach of the private sector, the country can expand access to high-quality healthcare services while utilizing available public funds effectively. Nepal can apply various models of PPPs in health infrastructure development, such as expanding access to telemedicine and digital health, enhancing access and quality of service delivery, domestic production of medicines and public health logistics, and improving its health financing.

As PPP contracts are usually signed for 20 to 30 years and the return on investment is usually generated in the later part of the contract period, private partners value predictability and reliability of government counterparts the most.

Also, PPPs should not be seen as cost-savings measures but instruments to improve quality of service delivery by leveraging private sector’s strength. Therefore, establishing and maintaining solid regulatory and legal frameworks, ensuring sustainable financing, and reliable contract management—with both public and private partners meeting their agreed contractual obligations as reported by preferably independent monitoring and quality assurance mechanism—will be the key to realizing the full potential of PPPs.

If these PPPs are developed collaboratively, Nepal can overcome the challenges posed by resource constraints and bridge the gap in healthcare access, ultimately improving the overall well-being of its population and achieving universal health coverage.


[1] In 2019, the majority of the deaths in Nepal were caused by the non-communicable, communicable, maternal, neonatal, and nutritional diseases, according to the institute of health metrics and evaluation. These diseases are also attributable to increased healthcare demands among Nepalese population.

[2] Computed from the World Health Organization 2023 Global Health Expenditure Database.

[3] Computed from the World Health Organization 2023 Global Health Expenditure Database.

[4] Nepal Health Insurance Board Annual Report. 2022.

[5] Obtained from the World Health Organization 2023 Global Health Expenditure Database.

[6] The World Health Organization defines Universal Health Coverage as the situation where all people have access to the full range of quality health services they need, when and where they need them, without financial hardship. Sustainable Development Goals target 3.8 focuses on Universal Health Coverage.

[7] H. Sakamoto et al. 2023. The Role of Private Sector in Asia: Challenges and Opportunities for Achieving Universal Health Coverage. New Delhi: World Health Organization Regional Office for South-East Asia.

[8] Data presented in the National Joint Annual Review of the Ministry of Health and Population. 2019.

Rakesh Ayer
Consultant, Asian Development Bank

Rakesh Ayer, MSc, and PhD, is a health systems and financing expert. He formerly led human development financing assessments in Nepal at the World Bank. He has multiple peer-reviewed articles in global health and serves as a visiting global health scientist at the University of Tokyo.

Rudi Hendrikus Louis Van Dael
Principal Social Sector Specialist, Human and Social Development Sector Office, Sectors Group, Asian Development Bank

Previously, Rudi Van Dael was a Principal Portfolio Management Specialist based in the ADB Nepal Resident Mission. He also was the ADB focal for the COVID-19 support in Nepal. From 2010 until 2019, he was a social sector specialist in ADB on various education projects in Bangladesh, Indonesia, and Nepal. He was involved in studies on using human-centered design, entrepreneurship programs, skills for the electricity sector, minimum service standards in education, and subsidized employment programs. He has a diploma in computing science, a master’s in public administration, and a PhD in sociology. 

Sonalini Khetrapal
Senior Health Specialist, Human and Social Development Sector Office, Sectors Group, Asian Development Bank

Sonalini Khetrapal is leading ADB's support to the National Urban Health Mission in India and Health Systems Development Programme in Bhutan. She is well-versed in addressing health sector challenges in health policy, health system strengthening, human resources for health, health financing and health insurance. She holds a PhD in Health Economics & Policy, LSHTM, University of London. She graduated in engineering and economics from Cornell University and received her master’s degree from Columbia University. 

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