John Paul

Healthcare Delivery: Franchised Solutions

Despite their best efforts, government and NGO programs have generally failed to achieve the scale and sustainability necessary to provide adequate and affordable healthcare to many living below the poverty line. But as the Time Global Health Summit illustrated, the role of the private sector in improving the delivery of healthcare in developing countries is still being debated. Although private sector strategies may improve efficiencies and lower costs, some fear that turning healthcare entirely into a consumer service will marginalize the poor even further. There is also the question of whether or not providing healthcare to low income communities can be done profitably.

The debate may finally be settled based on the success of several new business models that are blurring the line between NGOs and the private sector. Over the next week, I will be highlighting a number of innovative enterprises that leverage cross-sector partnerships to provide affordable healthcare to the poor. They will be organized in four broad categories: franchised networks that provide health services, ventures that produce health-related consumer products, enterprises that provide financial services and health insurance, and entities that are using the latest technologies to provide world class healthcare.

Franchising

The franchise system is one of the most successful private sector business models. Its decentralization enables rapid scaling and replication, and may be particularly suited for penetrating rural underserved areas. The size of a franchised network can also be leveraged for cost savings and greater government and private sector support. Several initiatives are already demonstrating their effectiveness in providing healthcare to low income communities.

In Bihar and Jharkhand, India’s two most impoverished states, the NGO Janini is leveraging partnerships with the private sector to supplement the government’s efforts and make healthcare and family planning services more affordable.

The program has reduced health costs to half the market prices by playing the role of an intermediary between the government and three interlinking franchised healthcare delivery networks: doctors who deliver clinical services; rural centers that sell over-the-counter products and services, and counsel and refer clients to doctors; and shops that sell products to urban clients and replenish supplies to doctors and rural centers.

Janini uses a combination of social marketing and franchising techniques to provide value to its partners and ensure the sustainability of its networks, which currently consist of 260 franchised medical clinics, 39,000 rural health centers and 40,000 shops. By purchasing government subsidized healthcare commodities in bulk for its franchisees, the NGO reduces prices and increases the earnings of its providers. Janini further reduces costs by increasing the volume of patients utilizing its franchised services. The network is heavily advertised through local and mass media, as well as through direct outreach activities in slum areas.

Although the reduced prices are still not affordable to the poorest of the poor, Janini is leveraging its strong linkages with the government to offer further subsidies to the most vulnerable. Added value is provided through additional training and support of its franchisees.

The program is the first of its kind in the world, and demonstrates a scaleable model that has been recommended by the Indian government as an effective strategy for public-private partnerships. Over the past nine years, it has provided healthcare and family planning services to 4.3 million couples. Although operational costs are still partially funded by donations, Janini is in the process of scaling up. Discussions have begun to expand to two other states of India and to another poor country in Asia.

A new enterprise in Africa is also using the incentives, controls and scale of the franchise model to provide high quality primary care at very low cost. The non-profit HealthStore Foundation (HSF) currently operates a network of 68 independently owned and operated HealthStore pharmacies in Kenya employing the same principles driving successful multi-national franchisers, namely consistent quality and care through tight franchise systems and controls, and efficiency through scale and standardization across the entire network.

With locations in underserved villages and urban areas throughout Kenya, the HealthStores provide access to much-needed healthcare, while generating enough revenue to pay their nurse-owners and staff a competitive annual salary. HSF leverages the combined buying power of the full network to obtain quality medicines at the lowest possible cost and strictly controls prices at retail.

Like Janini, the organization works closely with the government. It collaborates with the Kenya Ministry of Health on health education and outreach, particularly though free primary school health screenings. The government also licenses each franchise.

Its network of 68 independently owned and operated health outlets served more than 224,000 in 2004, and is now in the process of scaling up. The foundation aims to triple the number of its franchises in the next three years, expanding to cover all of Kenya and eventually replicating its model in other African countries. At scale, the cost to improve access to basic medicines with the HS model will be less than US $1 per person per year.

In Costa Rica, ASEMBIS has established five clinics and a mobile unit that brought medical services to 350,000 clients last year. The network utilizes a high level of technology and first class professionals, but is still able to price services 70% lower than market rates. The high quality service attracts people from all social levels to the clinics, allowing the network to have a scale of prices tied in with the ability to pay. Although the majority of their clients are low-cost patients–some even receive care for free – ASEMBIS has been self-sufficient for the last 10 years; 95% of their budget is composed of resources brought in by customers.

Up to now, ASEMBIS has had control over all the branches, but according to founder Rebeca Villalobos Vargas, that may soon change: ?Work capital is necessary to open a clinic, but since attending the Pyramid Business Opportunities conference in Mexico, I would consider franchises as an option as they would allow for a faster scale up and would allow for people to succeed through their own businesses while perpetuating ASEMBIS at the same time.?

Another franchised venture that also attended WRI’s Mexico BOP conference is Farmacita Nacional. The nationwide pharmacy chain provides low-cost generics, consultations, and pre-op services to underprivileged individuals. To supplement their income, the independent franchises also provide additional services like telephone and Internet. Each pharmacy serves an average of 2,500 households.

The government of Mexico supports the venture by providing generous tax exemptions to franchised networks. Like the other examples discussed, the pharmacy chain also generates cost savings due to its size, allowing it to expand into markets currently underserved by the private sector.

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