Outsourcing healthcare in developing nations

We think our healthcare system in the USA is pretty messed up with the 100’s of billions of dollars we’re spending each year with so many people still un-insured. Some are advocating for the USA to pursue a more nationalized healthcare system like Canada and most of western Europe.

An interesting experiment was reported on in today’s New York times in an article called “A Cure That Really Works: Cambodia Tries the Nonprofit Path to Health Care” which describes how outsourced healthcare is resulting in significant improvement in healthcare services delivery for the average, poor citizens of Cambodia.

The Cambodia Situation … As you’ll recall, the Khmer Rouge led a reign of terror in Cambodia in the 70’s with a particular focus on mudering the educated including the medical professionals. It was only 1998 when the war eventually ended living the country in shambles and, not surprisingly, poorer with little working infrastructure. The government was paying doctors and nurses poverty-level salaries, so most of them spent their time operating private hospitals in order to survive. Most of the hospitals were stripped of all of their usable medical equipment such that even if there were people willing to work at the hospitals, there weren’t even basic things like thermometers let alone electricity to support their work. To add to that a minimum of 40% (often 100%) of government allocated hospital monies were being siphoned off by the rampant corruption.

Finally, the government was convinced to give health services monies directly to some international health care nonprofits (including Health Net and Save the Children Australia) to provide an outsourced management of health care delivery. The nonprofits “are paid based on their performance in improving services, like childhood immunizations and the proportion of women getting prenatal care and delivering babies in a health center.” Now (with some additional international support), this approach covers 1 in 10 Cambodians. And the cost (government AND donors combined) is a whopping $4 per year per person!

The article describes how Health Net made some significant economics-related changes. First, they realized that they’d need to raise wages for hospital staff, so they immediately used some of their contracting fees for this. Additionally, they instituted small end-user fees — e.g. 25 cents to see a doctor and 75 cents to stay in hospital for a day — which generated additional funds for wages. With these higher wages, they demanded better results from their staff including punctuality, 24×7 on-call and service-level targets. In addition, they paid clinics and staff “bonus” fees for recruiting women to use the hospital services vs. traditional, higher-risk options. The result in one district noted is now 50% of women give birth in clinics vs. 10% for Cambodia overall. And the patients are viewed as customers who are to be treated respectfully!

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