Page 48 - 20211214_OHKF_Health_Finance_Research_Report_E (1)

2.1.3 PUBLIC-PRIVATE PARTNERSHIPS: IMPLEMENTING
STRATEGIC PURCHASING IN A MIXED SYSTEM

One of the many ways in which strategic purchasing can be implemented centres around the
vehicle of public-private partnerships (PPPs), a method to better mobilise resources
particularly in public-private mixed health systems with a significant private sector. PPP has
been defined as “an agreement between the government and one or more private partners
(which may include the operators and the financers) according to which the private partners
deliver the service in such a manner that the service delivery objectives of the government
are aligned with the profit objectives of the private partners and where the effectiveness of
the alignment depends on a sufficient transfer of risk to the private partners” (OECD, 2008).
Different countries and health systems conceptualise PPP differently in specific political,
social, and economic environments, so that the range, scope, and scale of PPP programmes
vary in practice. One important conceptualisation of PPPs is to purchase
services from the private sector, promoting greater private-sector
participation in the government-initiated framework (Wong et al., 2015).
This form of PPP needs to be informed by the decision on the question posed by strategic
purchasing of how to generate the services deemed necessary to achieve UHC–whether the
health system should “make” the services through public sector providers, or if the system
should “buy” the services from private providers.

In health systems, such as Hong Kong’s, that features a strong public healthcare sector
operating in parallel to a strong private sector, PPPs can be strategically designed
to strengthen access to needed healthcare services through leveraging
private sector resources. Moreover, PPPs can access the strengths of the design in
the private sector, such as innovation, technical knowledge and skills, managerial efficiency,
and technological resources, while also reinforcing the public sector’s commitment to social
responsibility, public accountability, and local knowledge (Rao, 2019; Roehrich et al., 2014).
The combination of these two sectors has the potential to create an environment where
high quality health infrastructures and services can be delivered (Roehrich
et al., 2014). A review of PPPs launched in European countries found that private sector
involvement alleviated the service demand on the public sector, reducing wait times for
patients and costs to the government (Barlow et al., 2013). Beyond the financial risk that
becomes shared between the two sectors in a PPP, social responsibility in the health system
also becomes shared between the public and private sectors. PPPs also allow for a more
nuanced discussion on creating efficiency and equity within health systems and how
purchasers choose to allocate resources based on the dynamics of a health system (The
World Bank, 2007). PPPs can take on many forms with varying functions. The more common
forms of PPPs include and have been infrastructure based on: private financing initiatives to
purchase quality services from the private sector; designing, building, and operating contracts
for hospital construction; and incorporating more private sector participation in government-
initiated infrastructure projects (Wong et al., 2015). More recently PPPs have also been
featured in purchasing of chronic disease management from the private primary care sector.

There are two main modes of PPP of financing in strategic purchasing that can be used to
stimulate change in healthcare service usage: supply-side financing and demand-side
financing (Box 2.3). Supply-side financing uses incentives and payment
guarantees to motivate change in providers and those who deliver healthcare services with the
goal of improving access and quality of services. Demand-side financing offers financial
subsidies and incentives to individuals in order to stimulate demand for services,
while simultaneously reducing the financial burden of care (Bowser et al., 2016).

Supply-side financing mechanisms are comprised of three main forms: capitation,
fee-for-service (FFS), and performance-based payment (Bowser et al., 2016;
The World Bank, 2004). The general structure for these three forms is similar with significant
overlaps of the features. A provider organisation, such as a government agency, will provide

46