By Francis Edonyu & Benon Tumwine
Uganda’s health system operates a two-tier payment system in an attempt to bridge the funding gap for public facilities. This means that some public facilities are allowed to operate private wings at full or partial cost recovery.
The government has fostered the growth of this system, acknowledging the challenges Ugandans face in affording health services at private hospitals. This may seem to undermine universal health coverage ideals of financial fairness and protection, as out of pocket costs are disproportionately borne by the poorest and most vulnerable which at times exposes such households to financial hardship. Furthermore, private wings in public facilities remain underutilized yet the free service sections are characterized by overcrowding and long waiting times. Moreover, it is unclear whether private wings are subsidized by public funds intended for the free service sections of public facilities.
However, the justification for private health services is that private wings have the potential to improve quality of service, increase revenue and accountability in public facilities. Moreover, private wings typically cater to populations with greater economic means seeking shorter waiting times and enhanced access to specialist care.
As a result, private wings in public facilities are often seen as a means for public facilities to sustain themselves, bridge the funding gap and maintain a motivated workforce. From this standpoint, private health services wings can potentially help enhance service delivery in the free service wings of public facilities.
The ability of private wings to mobilize additional resources and subsidize the general ward is dependent on the model adopted and the user fees applied.
Two models
In Uganda, public health facilities operate private wings through the co-location and public-private service models. In the co-location model, the facility allocates hospital land and/ or premises for sustained use by the private health care business in exchange for payment and specified benefits.
This arrangement refers strictly to the physical proximity of the two facilities and does not constitute any form of ownership or contractual relationship.
On the other hand, the public-private service model which is also known as “private wing” in a public facility allows physicians to cater for private patients in designated areas of the public facility and does not involve investor ownership or relationship. Medical Doctors in the private wings sign a written contract and are expected to rent offices and equipment. This model is more viable with further fiscal federalism where public hospitals are provided with enhanced budgetary, administrative and tariff autonomy.
User fees
In both models, it is expected that public health facilities should operate fee- paying wings or services on an opt-in basis and should not consider bypass fees. Therefore, charges for private health services need to be carefully regulated to ensure fairness and consistency. To achieve fairness and consistency, user fees should be underpinned by pricing principles.
a) Principle of graduated fee levels – In general, fees should be set lower for “lower” levels of services or “lower” level facilities. This is a health system gatekeeping strategy that encourages patients not to bypass lower facilities or unnecessarily use more expensive specialist care and enhance efficiency in consumption of health services.
b) Principles of horizontal imbalance – The health facility fees for private wings are set with full knowledge of the fees set by other nearby health facilities of similar type and range of services. If fees for service are either much higher or lower than nearby facilities, patients will tend to gravitate to where prices are lowest. This shift in demand could upset the referral chain and create undue financial hardships on some health facilities or patients.
c) Principles of cost recovery – Health facilities are encouraged to generate fee-for-Service revenue through whatever means possible. In general terms, charges for services provided in private wings should exceed total cost, while charges for services in general wards should approximate costs. Encourages judicious use of health
resources for cost efficiency.
d) Principle of differential pricing – Health facilities set different fees for residents and non-residents. The non-residents usually pay more for the same service in the private wing. Private wing fees should not consider bypass fees; fees charged when treatment is sought directly at hospital level, without a referral, thus circumventing primary health care. Fees for private wing clients should separately indicate payments for various services.
Key Considerations
Presently, there is no clear policy in Uganda for operating fee-paying wings in public facilities on the recommended model and the pricing strategy. This has led to inadequate data quality and data management practices within the private wings resulting to financial opacity. This highlights the sector’s challenge in demonstrating the private wings’ contributions and linking financial resources to outcomes.
Enhancing the financial capabilities of public facilities through private wings could be achieved by automating financial management processes. This involves transitioning from manual to computerized systems for budgeting, billing, and revenue reporting.
Public facilities operating private wings should consider an effective revenue redistribution model which allocates user fees collected to incentivize clinician participation and retention or a fair investor profit margin that benefits the non- private patients with improved clinical services and better facilities.
In summary, public facilities with fee-paying wards should assess the effectiveness of the private wing model and the fairness of reallocating user fees. Non-tax revenues from private wings should prioritize financial equity, safeguarding poorer patients, and improving the quality of care in free-service wings of public facilities.
Francis Edonyu (fedonyu@Kpmg.Com) and Benon Tumwine(btumwine@Kpmg.Com) Advisory Managers with KPMG Uganda. The views and opinions are those of the authors and do not necessarily represent the views and opinions of KPMG.