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184 Harvard Health Policy Review

HEALTHHIGHLIGHTS

Social Franchising to Improve Quality

and Access in Private Health Care in

Developing Countries

David M. Bishai, MD, PhD, Nirali M. Shah,

Damian G. Walker, PhD, William R. Brieger, DrPhil,

David H. Peters, DrPH

David Bishai is an associate professor at Johns Hopkins Bloomberg School

of Public Health. He earned his medical degree in from UC San Diego, a PhD

in Health Economics from Wharton Business School. Dr. Bishai conducts

research on the role of public health in health systems. Nirali M. Shah is a PhD

Candidate at Johns Hopkins Bloomberg School of Public Health. She earned

her Bachelors at University of Virginia. Damian G. Walker is an assistantprofessor at Johns Hopkins Bloomberg School of Public Health. He earned a

PhD in Health Economics from the London School of Tropical Medicine and

Hygiene. Bill Brieger is a professor at Johns Hopkins Bloomberg School of Public

Health. His special expertise is in malaria control. David H. Peters is an associate

professor at Johns Hopkins Bloomberg School of Public Health. He earned his

medical degree in from University of Manitoba, and a DrPH from Johns Hopkins

Bloomberg School. He leads the Future Health Systems consortium funded by

DFID.

Article 25 of The Univer-sal Declaration of HumanRights proclaims that ev-

eryone has a right to medical care

necessary for health and well be-ing [1]. As members of the UnitedNations, states have a normativeresponsibility to ensure access tonecessary healthcare for their citi-zens. Nevertheless, private provi-sion of healthcare is omnipresentand surpasses public provision inmany developing countries [2]. Thegoal of this paper is to examine the

ways in which public and privatesectors can cooperate to improve thequality and accessibility of primary

healthcare (PHC) to the poor in de-veloping countries. The promise ofalternative business models lies intheir ability to accomplish several

important functions in PHC. Busi-ness-style contracts can organizesmall providers into units that arelarge enough to yield returns to scalein investments in physical capital,supply chains, and in worker train-ing and supervision. Furthermore,

with donor assistance, businessmodels can potentially arrange for

cross subsidies to help improve ac-cess to care. In order to understandthe problems that business modelscan help solve, this paper will set up


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BISHAI ET AL: SOCIALFRANCHISING TO IMPROVEQUALITY AND ACCESS

a simple economic model of public-private interests in healthcare. Themodel identifies two key social inter-ests in healthcare markets: quality ofservice provision and access to care

by disenfranchised groups. Theseparticular aspects of healthcare de-livery are merit goods, meaningthat ensuring quality and access forthe poor have positive benefits forsociety that are greater than whatindividual consumers perceive. Athird component of the health sys-tem which will not be explicitly con-sidered here is the risk spreading orinsurance function that needs tobe carried out in society so that theunpredictably heavy consequencesof illness and injury are borne eq-uitably. The alternative businessmodels that will be considered hereare models of primary healthcareprovision at facilities, not models ofhealth insurance.

Definitions of key terms

Primary healthcare services are takento include those delivered at primarylevel facilities (such as health posts andhealth centers) or mobile clinics andconsist of basic diagnostic proceduresand prescribing services. At first glance,the profit goal of private enterprise mayseem inimical to the interests of thepoor. However, several alternative busi-ness models, such as voucher systems,contracting out, and social franchising,can be used to effectively transformthe private sector into a conduit forpublic financing to support the publicand donor interest in the health of thepoor.

The term alternative business mod-els is used to describe a variety of con-tractual arrangements between networksof private providers and coordinatingagencies. The term coordinating agen-cies refers to administrative bodies thatare able to offer in-service training, ac-cess to information and expertise, net-

working opportunities, monitoring ofservice provision, access to subsidizedinputs, and, in some cases, promotionand marketing of a trademark or brandname. Coordinating agencies may befor profit, non-profit, or an agent act-ing on behalf of the state. The strategiesthey use and their contractual arrange-

ments with individual providers areanalogous to those used in the business

world. Nevertheless, when commercialenterprises provide healthcare, regula-tory oversight is necessary. Healthcaredelivery lends itself to commercialmethods of arranging cooperative be-havior between several parties, each

with individual goals and incentives. Inbusiness, each agent pursues financial

gain. However, healthcare is differentbecause financial gain should not be thesole goal of providers, patients, or thecoordinating agencies. The inability ofpatients to evaluate the quality of theproduct they are buying invalidates theusual theorems about the optimality ofthe free market.

Section 2 of the paper sets up themodel and reviews how quality and ac-cess may falter in a laissez-faire market

for private healthcare. Section 3 of thepaper applies the same model to showthe potential weaknesses of a health sys-tem that is government-owned and op-erated. Section 4 uses the framework toyield predictions about the performanceof several alternative business modelsof healthcare provision and Section 5


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tests the theory using evidence froman alternative business model currentlyoperating in Pakistan. The conclud-ing section discusses future ways toimprove the implementation of alter-native business models in PHC.

A simple system of private

healthcare

Many policy makers in publichealth and healthcare systems see alink between their professional activi-ties and the health of large groups ofpeople. But health itself cannot simplybe allocated to people. The householdis the key ingredient in the health ofeach individual and collectively, it ishousehold decisions that determine thehealth of any nation [3]. Householdmembers themselves enjoy most ofthe benefits of better health; secondarybenefits of health to employers, friends,colleagues, and beleaguered healthcareproviders have lesser magnitude. Con-sequently, most of the incentives to

improve and produce individual healthfall on the household.

Protection of the Poor as a Public

Good

Public goods are goods which arereadily available for any person to con-sume and whose availability is not di-minished when one person consumes ashare [4]. Standard examples include

clean air and domestic tranquility. Un-der ordinary circumstances when oneperson feels sick and takes medicine tofeel better, all or nearly all of the ben-efits the patient and their concernedfriends and family enjoy are private, notpublic, goods. There are special consid-erations that make the health status of

one poor person or poor people in gen-eral a factor that can be enjoyed by a

whole society as a public good.Because each household must devote

some of its own income to health pro-duction, extremely poor households willnot be able to afford substantial inputsto health and thus could acquire andspread contagious diseases. Contagionis a negative externality that motivatespublic interest in the ability of eachhousehold to acquire substantial inputsto health. Reducing contagion ben-efits all of society and is, in this sense,a public good. There are other poten-tial justifications for social concern for

the accessibility of healthcare for allcitizenssimple altruism, a fear of ter-rorist acts by the downtrodden poor, ora belief in social solidarity. These justi-fications differ from contagion in thatthey would motivate a general interestin alleviating poverty, and in address-ing poor health merely as one of thefeatures that exacerbates poverty. Thecontagion externality would motivate a

concern specifically for social efforts tobreak the link between extreme povertyand poor health.

Quality Improvement as a Public

Good

In order to illustrate why quality im-provement is an input which must beregulated or monitored, let us imagine

what would happen in an unregulated,

wholly private market for PHC, wherehealthcare is produced by profit moti-vated firms. In response to householdsdemand for better health, firms will ariseto profit by selling curative and preven-tive health services to households. Inmarkets for goods where quality can beevaluated by customers, prices are gen-erally proportional to the quality of the


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items. Information asymmetry betweenhouseholds and healthcare providers

would make our hypothetical laissezfaire market for medical care operatedifferently. First assume that there is a

way to separately measure both the vol-ume of care and the quality of medicalcare produced, where increased volumeimplies greater access to care due to in-creased supply. For instance, one mightcount the numbers of visits, tablets, orthe numbers of procedures to measurevolume. One might determine thebest practices and form rating scales forvarious types of medical care to measurequality. In order to generate increased

quality or increased units of volume,providers will be required to expend ef-fort and capital.

Quality increases with effort andcapital, but generally decreases withthe volume of service. The amountof medical care supplied also increases

with effort and capital, but decreaseswith the level of quality. Because pa-tients can easily measure the volume

of care, but not the quality of care, thepayment agreement between patientsand providers will generally be based onfee for service volume, not fee for qual-ity. According to the classical economicparadigm, the providers will choose tosupply an amount of volume and levelof quality that will maximize their prof-its. The volume supplied will be in pro-portion to the quantity demanded.

In an unregulated private market for

healthcare, every unit that is purchasedby the client has a cost that is equal to orless than the perceived value to that cli-ent. A provider may be able to generatea profitable amount of perceived valueto a patient who is poorly informed

without investing the costly inputs ofeffort and capital to make the services

of sufficient quality that the health con-dition actually merits. Quality servicesmay be underprovided because patientsdo not know enough to demand them.

Efforts to ensure that health servicesremain of high quality have a naturalefficiency when they are applied acrossthe board, to large numbers of medicalpractitioners. Social efforts to ensurehigh quality health services offer re-turns to scale. They are more efficient

when they are applied across a system.Once quality assurance mechanisms arein place, one patients receipt of qual-ity health services does not diminishthe availability of quality to others, and

thus quality assurance in healthcare is apublic good.

The free market failure for providing

access and quality

Because demand for medical careis well known to increase with income[5], individual free market providers

will locate themselves more densely inareas with higher income. Increased

supply and greater competition be-tween providers in urban areas mayparadoxically lead to cheaper primaryhealthcare for wealthy urban, comparedto poor rural, consumers. While theprivate market can achieve an equilib-rium between demand and supply ofthe volume of medical services, withoutregulation, this equilibrium is unlikelyto achieve societys desired outcome re-

garding the accessibility of services forthe poor. Furthermore, without regu-latory mechanisms or the participationof coordinating agencies to address in-formation asymmetry about the qualityof medical care, the market equilibrium

will suffer from a sub-optimal supply ofquality. If the supply of health servicesis unresponsive to the aspects of qual-


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ity that matter most for health, profit-seeking providers will have no incentiveto address them. Technical quality ofcare may be low while perceived qualityis maintained in the form of aspects ofquality which are easily measured, suchas cleanliness, presence of amenities andstaff politeness.

The medical profession addresses theproblem of medical quality by fosteringprofessional standards among provid-ers, by evaluating medical trainee ap-plications for signals that the applicantis committed to putting patient welfarebefore private gain, and by socializingmedical providers to disapprove of peers

who seek to gain profit by undersupply-ing quality. Governments regulate themedical sector primarily by licensing in-dividuals who have passed examinationsand completed training in accreditedinstitutions where they have presum-ably been socialized to the appropri-ate professional norms. Despite thesemechanisms, there is abundant evidencethat more could be done to improve the

quality of care in the private sector ofdeveloping countries [6-8]. Saying thatmore could be done is also sayingthat the private market described aboverequires additional inputs to help pro-viders to produce service quality. Con-sequently, primary healthcare markets,even in combination with professionaland regulatory sanctions, still fail toguarantee socially desired levels of ac-cess or intangible outputs such as qual-

ity. Section 3 will describe in more de-tail the coordinating activity that couldbe added to improve the production ofservice quality.

Quality and Access of PHC in

Government Facilities

Led by the World Health Organi-zation and other international institu-tions, many countries have become sub-

stantially involved in providing PHCin hierarchical systems of communityhealth workers, dispensaries, clinics,and a tiered system of referral hospitals.In most countries, the public systemoperates parallel to a fairly autonomousprivate system. Despite the fact thatprimary health services have significantpositive externalities, household datafrom several countries suggests that themajority of PHC service episodes in-volve private facilities [2, 9-11]

Higher perceived quality in the pri-vate facilities is an established reason thathouseholds in low income countries ap-pear to prefer private sector PHC [12,13]. This may seem paradoxical in lightof the last section, in which the modelof profit seeking private providers pre-dicted an undersupply of quality. How-ever, not all aspects of service quality are

easily perceived. Additionally, publicsector quality may be low for reasonsthat parallel the problems in the privatesector. Public sector employees are paida salary in most systems, although oc-casionally they may receive a top offdrawn from locally generated user feesor dual practice[14]. In the case of asalaried employee, net profit is a func-tion of salary and effort expended. Since

effort is costly for the public healthcareproviders, they will not supply effortunless they are closely supervised or un-less they derive professional satisfactionfrom the supply of high quality medi-cal care. Nevertheless, the high degreeof concern exercised in admitting andsocializing applicants to the healthcareprofessions makes it quite possible that


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often give greater job security to thosewho focus on internal politics ratherthan the organizational mission.

Although command and controldecision-making can seldom efficientlyachieve adequate levels of volume andquality of care, they can frequentlysurpass the private market in achiev-ing access to services. With commandand control allocation of healthcare re-sources, it is possible to deploy clinicsand staff to remote or poverty strickenareas where there are social benefits ofservice provision that, due to poverty,do not result in private market demandthat would attract the private sector.

While less than ideal, by severely under-paying government workers and tacitlyexpecting them to moonlight (or resellgovernment drug supplies) to make upthe difference, government health min-istries can leverage limited budgets toachieve even more access than would bepossible by paying government work-ers their market wage [13] Similar toindividual patients, elected legislators

are better able to judge service volumethan service quality. Elected legislativeofficials consequently find it more ex-pedient to press for more governmenthealth clinics in their home precinctsthan to insist that adequate salaries andquality are maintained in the currenthealth system.

A key advantage of the governmentsystem is the potential to exploit returnsto scale in purchasing supplies, or in

training staff. The providers in a gov-ernment network can potentially bene-fit from centrally organized training, su-pervision, and coordination. Yet whilehealth ministries possess managementplans and the technical know-how that

would enable them to improve qualitythrough in-service training, the political

some providers will exert themselves forthe sheer satisfaction of helping otherpeople.

The volume and quality of healthcaresupplied by the public sector is deter-mined by a command and control pro-cess heavily influenced by political forc-es and loosely informed by outcomesdata. Unfortunately, good planning is anecessary but not sufficient condition toachieve an efficient market in healthcareprovision. The aspiration to equilibratethe supply of health services to demandis seldom realized during the process ofallocating government budgets, particu-larly since adequate provision of health

services requires many individual com-ponents, from materials and supplies toappropriate staffing. With prices notset by a market, government facilitieslack the ability to tune the supply of ser-vices to price-borne signals of demand.Consequently, governments typicallyunder-provide capital, supplies, andlabor, resulting in under-production ofprimary healthcare services (volume)

and medical quality.It is difficult to specify a single ob-jective for a government decision makerthat is analogous to a private maximiza-tion of profit. The normative theory ofthe government decision maker positsthat they ought to supply the volumeand quality of PHC that enables eachhousehold to optimize health withavailable resources. In reality, this ide-al is seldom realized. There is still no

agreement on a universal descriptivetheory of what government workers ac-tually seek to do, although a variety ofresearch has shown that health workersare motivated by some combination of

job status, compensation, interpersonalrelations and self-efficacy. [15, 16]. Itis a fact that government bureaucracies


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pressure to extend access first has beenhard to resist. In-service training andsupervision does occur in governmentnetworks, but has not achieved its po-tential.

Improving Quality and Access in

PHC using Alternative Business

Models

In the business world there are sev-eral service industries that succeed bycoordinating the activities of individualservice units through an overarchingadministrative structure. Many NGOshave sought to emulate parts of busi-

ness models in working with privatehealthcare providers. In so doing, theyhave realized that two separate actorsmust work together to supply healthservices: the primary health providersand the coordinating bodies that cancheck quality and protect the poor.There are multiple variants of the waythese two actors can play their parts.

While these systems are not mutuallyexclusive, alternative business models

have included:Voucher systems. In these systems, the

coordinating body first certifiesand follows the quality of a panelof private providers. It then issuesvouchers to the poor that can be re-deemed for services at the premisesof certified providers.

Contracted out systems. In these sys-tems, the coordinating bodies spec-

ify measurable outcomes in the ar-eas of quantity, quality, and servicefor the poor and then tender bidsby private agencies and networksof private providers who are con-tractually obligated to deliver themeasurable outcomes.

Incentive Payment Systems. Here,providers are paid bonuses upon

achieving measurable outcomes(number vaccinated, patient sat-isfaction, number of poor personstreated). This system works best

when there is substantial verticalintegration between the providersand the coordinating body, as ifthey inhabit the same firm.

Franchised Systems. This is one of themost complex systems of contract-ing out. In franchised healthcaresystems, the coordinating body notonly specifies the social outcomesthat are desired but also forms apartnership with the providers tohelp them achieve the outcomes

by training, overseeing quality, andassisting with media outreach suchas trade-marking and branding tomobilize care-seeking by the poor.

The franchise model has beensingled out as one that is of particularinterest to healthcare [17]. The termsocial franchise can be applied to anyactivity directed towards a social goalthat maintains an independent coordi-

nating network to support the individu-al activities of network members. Thusmany business relationships that wouldscarcely be recognizable as strict fran-chises can fall under the rubric socialfranchise as long as they use a coordi-nating network and work towards im-proving social welfare. This section willdiscuss the varieties of business franchis-ing and describe the relevant issues forhealthcare delivery.

Franchising

The International Franchise Asso-ciation defines a franchise as

a system by which a com-pany (the franchisor) grants to


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others (the franchisees) the rightand license (the franchise) to sella product or a service withina specified area and to use thebusiness system developed by thecompany" [18]

The core of any franchise arrange-ment is a contract between two spe-cialized business partners. Franchiseagreements can be used by wholesal-ers and retailers (ex. auto dealerships),by manufacturers and wholesalers (ex.soft drink bottling arrangements or thefast food industry), or by business for-mat originators and independent retail

shops. The primary alternative to fran-chising is integration of the two busi-ness partners into a single firm.

Figure 1 shows the essential elementsof a franchised system and contrasts itto a private market and to the publicprovision of healthcare. The role of the

coordinating body varies across the dif-ferent types of provisions, however allsystems can be assessed by the access tocare for the poor provided, the qualityof care provided, and the efficiency with

which the services are rendered. Similarto contracted-out systems, the modelof provision depends on the mecha-nisms by which providers are paid, andthrough which they receive oversight.[19]The key differences are that fran-chised systems retain financial supportof the provider by monetary transfersfrom patients and obtain support forthe coordinating/quality assurancefunction by financial flows from the

provider. Social franchised systems addadditional public support for the coor-dinator in recognition that the coordi-nating function is devoted exclusively toassuring that the public goods aspects ofhealth services are delivered.

The McDonalds Corporation is

Figure 1. Conceptual model of the flows of financing (solid arrows) and

coordination to assure quality and access for the poor (dashed arrows) in

the various types of health systems


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perhaps the most widely known fran-chise in the world. This business for-mat franchise has shown the capacity totransform motivated and hard-workingpeople who know next to nothing abouta particular industry into financiallysuccessful independent entrepreneurs.

Without the training and business sup-port they receive, most McDonaldsrestaurant owners would not be ableto succeed in running an independentrestaurant.

The comparison between McDon-alds franchisees and healthcare provid-ers extends only to the notion of theprovision of additional training, sup-

port and marketing. Potential franchi-sees in the healthcare industry are high-ly trained professionals who are usuallyquite capable of surviving on their own.

Although franchises in healthcare maynot make or break a private practice,they have the potential to add value tothe healthcare operation by improv-ing quality of PHC provision throughtraining, maintaining quality through

monitoring, and signaling to patientsthe presence of high quality provid-ers through the use of trademarks andbrand names. Evidence from existingfranchised systems indicates increasedquality and or access to care are beingachieved [20, 21 , 22 , 23, 24]

Characteristics of franchised and

integrated systems in healthcare

The improvements realized in fran-chised healthcare could potentially beachieved with contractual structuresother than franchising, such as incentivepayment systems or voucher systems.To be successful, the system would in-tegrate the function of the independenthealth provider with a highly pro-activeorganization coordinating and monitor-

ing the quality and access to care. Morethan one business model could formthe template for improving healthcaredelivery.

Neither the franchised contract northe options described above are fullyoptimal because effort is costly and dif-ficult to monitor, so both parties willbe tempted to withhold effort. Thetendency to withhold effort is greatestfor the one getting the lower share ofrevenue. In integrated, top-down mod-els, the provider would be more likely to

withhold effort. In franchised models,a coordinating body subsisting on fran-chise fees would be more likely to with-

hold effort. As industries choose be-tween alternative organizational forms,one would expect integrated forms tobe more common where the effort ofthe coordinating body is more crucial indetermining revenue. Franchised forms

would be more common where the ef-fort of the individual providers is morecrucial, but where coordinating bodieshave economies of scale in marketing

and training [25].Whether they integrate or franchiseto handle their essential functions, allbusinesses must engage in transactions

with other businesses. Both integratedand franchised firms can take advantageof returns to scale in purchasing inputsand supplies. One possible hazard forfranchised firms is that the coordinat-ing body in a franchised system has anincentive to retain some of the advan-

tages of bulk purchasing. Some fran-chise systems depend heavily for finan-cial support on partially marking up theprices of some of the supplies instead ofpassing along all of the discounts to itsmembers. Such a practice does not nec-essarily disadvantage the success of theindividual units and may serve to secure


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stable financing for the coordinatingbody. This is particularly importantsince low financing or weak adminis-tration at corporate headquarters canerode the value of the franchise [26].

Motivating Good Discipline in

Integrated Systems or Franchises

Preserving the reputation of thebrand name is one of the most im-portant functions of the coordinatingbody. The franchise agreement offerslittle contractual recourse for coordinat-ing bodies to discipline franchisees forsubstandard quality. The coordinatingbody is beholden to the providers topass along the royalties and franchisefees, but the providers are not financial-ly dependent on the coordinating unit.If a provider was observed to have lowquality, the coordinator can cajole andencourage, but the simple contracts of-fer very little recourse. Legal actionslaunched on the basis of poor qualityoperation are very difficult to litigate indeveloped countries, and would be even

more difficult in regions with weak ju-dicial systems.

The McDonalds Corporations useof a real estate contract between thefranchisee and the corporation providesa solution to this issue by essentiallymaking the franchisee a tenant of Mc-Donalds headquarters. Repeated mis-conduct by a franchisee of McDonaldscan be used as grounds for eviction.

Adherence to quality standards is morelikely when franchisees are tied to loansand capital outlays that can be used toensure compliance [27].

In PHC, coordinating agencies seekto maintain quality performance byproviders in order to achieve the soci-etal imperative of high quality provisionfor all. This complements the providers

needs for enforcement of quality stan-dards, as lax enforcement will be detri-mental to the value of the brand name.Client perceptions are paramount, andthe brand reputation can be quickly de-stroyed if patients are treated badly.

Case Study: Green Star

NGOs and charitable institutionshave been operating integrated sys-tems of private care for dozens of yearsthroughout the developing world. Inthese systems the medical providersare typically salaried employees of the

NGO. The NGO coordinates andmonitors the quality of care and is in-centivized to maintain high standards ofquality and access to services primarilybecause of professional and ideologi-cal commitments to these principles.These systems offer tremendous ser-vices to humanity, but because they relyheavily on donor support for every unitof service provided, they have limitedgrowth potential.

In contrast a social franchise cantarget the donor support at subsidizing

just the public goods aspects (qualityand access) of the private consumptionof healthcareleveraging local expen-diture that finances the private goodsaspects of medical services.

One such example is Green Star,a joint venture partnership betweenPopulation Services International (PSI)

and Social Marketing Pakistan (SMP),a USAID spinoff. The network com-prises over 2500 female health provid-ers in a fractional social franchise. It iscalled a fractional franchise becausea targeted package of family planninggoods and services is added to the ser-vices of the provider who maintains ad-ditional unfranchised product lines.


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To expand the network, variations ofthe package are offered to male doctors,midwives and pharmacists, resultingin over 11000 network members. Theproviders support themselves throughuser fees, but they receive training,supplies, coordination, and use of theheavily promoted brand name fromSMP, the coordinating body [28]. SMPmaintains standards by ensuring thatproviders are committed to serving low-income clients who have a high unmetneed for family planning, and by moni-toring the quality of service provisionthrough supervisory visits and mysteryclient surveys.

Most of the evidence to date revealsthe encouraging news that the individu-al providers are able to maintain supportfor their own operations through theuser fees they charge. This is expectedsince private practices are sustainablein developing countries and networkmembership should not make themless sustainable. More surprising is theevidence that unlike McDonalds, fran-

chise membership and the Green Starbrand name do not add enough value tothe practices to motivate royalties andfranchise fees to support the coordinat-ing body underlying the whole system.The coordinating bodies do not sustainthemselves without outside support, al-though the providers can.

Study description

A recent survey of 1718 family plan-ning and reproductive health service fa-cilities was conducted in Pakistan. Data

were collected by the Carolina Popula-tion Centers Alternative Business Mod-els initiative, in a multi-stage clustersample of health facilities, providersand clients in urban areas of Pakistan.Two waves of data collection in 2001

and 2004 resulted in a total sample of19801 clients and 2667 health provid-ers in 1718 facilities. More informationon the sampling strategy and data areavailable elsewhere [29].

Four types of facilities were sur-veyed: Green Star franchised provid-ers, public providers, non-franchisedprivate providers, and NGO providers.Cost of service provision included totalsalary and rent. Service quality was de-termined by identifying items in client,facility and provider surveys which fit

within the Bruce framework for qualityin reproductive health services, and cre-ating a summative index for each facil-

ity [30]. Household poverty status wasdetermined by rank of monthly income,

with those households in the twentiethpercentile or below classified as poor.

Study Results

Our analysis shows that Green Starfranchised facilities provided higherquality services (mean total quality =24.9) than other private facilities sur-veyed (mean total quality private forprofit = 15.2; private not for profit =18.1). The quality score was calculatedas the sum of Bruces six domains ofquality: Choice of methods; Informationgiven to clients; Technical competence;Interpersonal relations; Mechanisms toencourage continuity; Appropriate con-stellation of services. Each domain wasconstructed from variables collected

during facility surveys and exit inter-views. Variable selection was decidedstrictly by using principal components

with varimax rotation analysis to iden-tify variables with factor loads greaterthan 0.4. Cronbachs alpha for the mea-surement of each domain ranged from0.72 to 0.94, indicating strong corre-lation within the domain. Green Star


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franchised facilities also served a higherproportion of poor clients than govern-ment facilities, and served clients moreefficiently (lower cost per client) than

government facilities. (Table 1)As government facilities include ter-tiary care centers, greater access for thepoor in franchised facilities may be a re-flection of the broader range of clienteleat a government hospital as comparedto a single provider. The low cost perclient found in not-for-profit facilitiesis likely an indication of lower real costsdue to donations; however, this was un-able to be verified from the survey data.

Analysis also indicated that the fourdifferent types of facilities had nearlyequal levels of client satisfaction, anddifferences were most clearly evidentin choice of family planning methodsavailable and appropriate constellationof services, with greater quality scoresfor government and franchised provid-ers versus private for profit and NGOproviders.

Policy Proposals for Future

Consideration

The quality and enhanced accessprovided by franchised networks of pri-vate providers can partially offset gov-ernment efforts to provide access and

quality. In other words, governmentscould potentially redirect funds awayfrom their own efforts to achieve accessand quality in government dispensaries

and reroute these funds to support thecoordinating bodies (but not the directservice provision) in socially franchisedsystems. The advantage of this is thatthe coordinating bodies of a social fran-chise could have as their primary out-puts quality and accessibility of service.By comparison, government clinics de-vote much of their resources to produc-ing the services themselvesservices

which are in large part private goods.

For certain preventive and promotiveservices that are typically not producedor demanded at optimal levels withoutsubsidy, another strategy is required.Here, governments may finance theprovision of these services indirectlythrough transfer payments to coordi-nating bodies, which would operate asan intermediate agent to subsidize net-

work providers. Qualified medical staff

members are in short supply in mostsystems, so this proposal would notmean that government health workers

would be terminated.In practice, some government provid-

ers would be redeployed to networked,coordinated private facilities instead ofto their government clinics, where theyreceive very little coordination, training,

Table 1. Data comparing costs, access by the poor and quality for the

private sector social franchised Green Star facilities, government facili-

ties, private, and NGO facilities. (Data source Carolina Population Center,

Alternative Business Models Project)


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and support. Instead of making theirrequired appearance at the governmentclinic from 10:00 AM to 2:00 PM thendisappearing to moonlighting in a pri-vate practice where quality is unmoni-tored, they would be put into service innetworks where they support themselveslegitimately through user fees and at thesame time receive support and trainingfrom a coordinating network. Alterna-tively, governments could challenge pri-vate provision of primary healthcare bycompeting successfully on the basis ofquality and reputation. Such a strategy

would require strict attention to well-known organizational and incentive is-

sues faced by public providers.Supporting the coordinating orga-

nizations through government revenueis only one option. A more creativeapproach to supporting the coordinat-ing bodies would be to allow them toexploit their comparative advantage inobtaining capital. An individual medi-cal provider is too small to apply for amultilateral agency or foundation loan.

By comparison, a network of 100 pro-viders could potentially secure capitalon the world market at rates as low as4%. The coordinating body could thenpartially mark up its own lending rateand administer startup loans to privatepractices in the network. The networkcould even offer lower interest rates forproviders working in underserved areas.Combining the coordinating bodysrole in quality assurance with its role as

creditor would mutually enhance bothroles. The coordinating body would befirmly committed to the success of eachunit to avoid default and would workhard to support the needs of its debtor-providers in order to qualify for futurefunding from the international donor.Furthermore, the providers who owe

money to the coordinating body wouldbe very attentive to the advice and sup-port they received. The coordinatingbody would be motivated to increaseaccess to primary healthcare and deliverhigh quality healthcare in the spirit ofinternational agreements such as theDeclaration of Alma Ata, or the Univer-sal Declaration of Human Rights.

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