Health Franchising in Africa: a model for increasing access

to diagnosis and care ofTB and HIV/AIDS

Dominic Montagu

January 2004

contact: dmontagu@uclink.berkeley.edu

Overview

Private Sector in Health Delivery

Prerequisites for Mobilizing Private HR

Franchising

Addressing TB and HIV/AIDS

The Private Sector in Healthcare

Private Expenditure on healthcare:Indonesia, 83% of all healthcare expenditure is private

Kenya, 53%

India, 70+%

Private Consultations:Vietnam, 60% of physician consultations in private sector

Pakistan, 80%

Exclusively Private as % of all doctors:Nigeria, 78%

Uganda, ~75%

Malawi, 21%

Acute respiratory infection and treatment <5, 10 countries

0%

10%

20%

30%

40%

50%

60%

70%

poorest 2nd Q mid 4th Q richest0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

Treated in the Private Sector

Treated in the Public Sector

Illness during previous 2 weeks (right hand axis)

0%

10%

20%

30%

40%

50%

60%

70%

poorest 2nd Q mid 4th Q richest0%

5%

10%

15%

20%

25%

Treated in the Public Sector

Treated in the Private Sector

Illness during previous 2 weeks (right hand axis)

Acute diarrheal disease and treatment <5, 10 countries

Factors that affect use of health services by the poor

Income

Quality of services

Access and opportunity cost

Price

Gender

Castrol-Leal et al. Public Spending on health care in Africa: do the poor benefit? Bulletin of the World Health Organization, 2000 78 (1):66-74

Factors that affect use of health services by the poor

Income

Quality of servicesthe poor will pay for quality improvements

Access and opportunity costhalving distance to public facilities increased use by 96%

PriceThe poor are more price-sensitive than the wealthy

Gender

Castrol-Leal et al. Public Spending on health care in Africa: do the poor benefit? Bulletin of the World Health Organization, 2000 78 (1):66-74

conclusions (context)

the poor use private facilities

access and time matter

quality matters

the role of government

Public healthsocial services water and sanitation, vector control, outbreak surveillance

regulation and enforcementstandards: training, medicines, procedures, facilities, laboratories, etc.

supply of inputsvaccines, local drug sources, trained staff

Health care provisiondirect provisioncontracted provisionsubsidy of private sectorcollaboration with private sector

Factors that affect use of health services by the poor

Income

Quality of services

Access and opportunity cost

Price

Gender

Castrol-Leal et al. Public Spending on health care in Africa: do the poor benefit? Bulletin of the World Health Organization, 2000 78 (1):66-74

Factors that can be addressed by changes in supply

Quality of services

Access and opportunity cost

Price

Castrol-Leal et al. Public Spending on health care in Africa: do the poor benefit? Bulletin of the World Health Organization, 2000 78 (1):66-74

Directlymanaged clinic

Product testing,gold standard

Franchise Programs

FranchiseOrganization(Franchisor)

FranchiseFranchise Franchise

Franchise fee

• Brand Equity• Advertising• Training• Commodities

clients

Specialist (X-RAY, Lab Tech)

Results

Well-Family Midwife Clinics

200 sites in 29 states

• family planning• MCH counseling• pregnancy tests• pap smear• normal spontaneous delivery• pre- and post-natal care• immunization

• $9,000 avg. investment • franchise fee • royalty fee: $3.50/delivery• online store• training, supervision, ads

TANGO II - Philippines

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Janani

Titli centre Surya clinic

DKT - Bihar, India

Greenstar

PSI - Pakistan• Social marketing core• Trained MDs + nurses• Urban only• Approx 2500 female MDs • Monthly visits• Supply of IUDs + branded FP commodities• Limited re-training opportunities• Strong brand• Beginning DOTS

CFWShops

Essential drugs

16 non-prescription drugs only

$1000 start-up

$800 loan

$profit w/in 2 yrs

30 shops

6 nurse-run clinics:

WHO Essential drugs

referrals

SHEF - Kenya

Critical factors for Health Franchising

privately owned self-sustaining medical clinic

standardized medical protocols to assure consistency and quality

franchising agency to set protocols and assure compliance

economies of scale for large scale, cost-effective expansion

Planned Health Franchising in Africa: Services

• Tb testing• Referral to national DOTS • In-house DOTS• DOTS + IPT for HIV+ and re-infected patients• Diagnosis and treatment of non-Tb ARI

• HIV testing and limited counseling• Prevention (condoms, STIs)• OI care for stage II, III• CPT for stage II,III, IV• IPT for stage III, IV or after completion of DOTS

• ARV DOTS

TB HIV/AIDS

Ambulatory Services

Planned operation

• Nigeria

• Ethiopia

• Tanzania

• Kenya

• Burkina Faso

• Malawi

• Zambia

• Zimbabwe

• Uganda

• Mozambique

• Cameroon

• Mali

Assumptions

1. TB Source: Global TB Control, WHO report 2003, WHO/CDS/TB/2003.316 2. HIV Source: UNAIDS/WHO/UNICEF Epidemiological Fact Sheets on HIV/AIDS and STIs, September 2002.3. Estimate.4. Based on Uganda study (Morgan et al, 2002).5. Estimate.6. DHS from 22 countries of SSA.7. Estimate.8. Christy Hanson estimates expenditure by TB clients for both public & private sector TB treatment in Kenya ranges from $25 to $51.9. Reliable data not available. Study in Tanzania found mean expenditure in last 6 mos. of life approx. $65 (Ngalula et. al., 2002). Spending adjusted escalated 3% for inflation). $20 consistent with Hanson estimate expenditure on TB treatment. 10. Estimated combination of Drugs ($1.73), Other Products ($1.38) and Consultation ($0.50).

Population Assumptions:

Population covered by each clinic:

TB Incidence/ HIV Prevalence:

% of Pop. Seeking Treatment for Other Illnesses:

HIV+ clients in Stage II or III:

% that seek treatment:

% to private sector:

% to franchise clinic:

20,000National Avg.1, 2

10%3

71%4

75%5

50%6

50%7

$20.009 $3.6110$14.258Clients able to spend on treatment

HIV Other Drugs/ServicesTBTreatment Price Assumptions:

Progression of care for TB

PTb testing $0.50

Active Tb treatment $14.25

Weekly drug re-supply free

Ancillary care/counseling provider fee schedule

Collection on-site by provider/ franchise staffTesting in DOTS-certified lab - 2 tests, then refer for x-ray

If positive: printed material and counseling about available government services (if any)

If non-compliance household follow-up by franchise-employed nurse

Verified successful treatment $15 bonus to provider$10 bonus to client

Public Health cost per TB Patient

Urban Malawi3

Rural Kenya4

Rural Uganda1

Urban Botswana2

$ 228

$ 294

$ 419

$2,250

Countries Health System Cost/Client

1. “Cost and cost-effectiveness of increased community and primary care facility involvement in tuberculosis care in Lilongwe District, Malawi,” Floyd, et. al., 2003.2. “Cost and cost-effectiveness of community-based care for tuberculosis patients in rural Uganda,” Okello, Floyd, et. al., 2003.3. “Cost and cost-effectiveness of increased community and primary care facility involvement in tuberculosis care in Machakos District, Kenya,” Nganda, Floyd, et. al., 2003.4. “Cost and cost-effectiveness of home-based care versus hospital care for chronically ill tuberculosis patients, Francistown, Bostwana,” Moalosi, Floyd, et. al., 2003.

Franchise subsidy per client

Selected Countries

Income per Franchisee/Year 2

Subsidy per TB Client 1

1. Based on current SFWG financial/operational model. National overhead & administration costs assigned on a percent-of-total-client basis. Includes all national and international franchise costs projected for a steady-state of operations. Start-up supra-organizational costs $10/client.

2. Based on current SFWG financial/operational model. Income per Franchisee is net of projected operating expenses.

Subsidy per HIV Client/Year 1

Financial/Operational Model: TB Drug Prices

Clinics earn a profit on the drugs plus a “Cure Bonus” for each TB successfully treated.

International Supplier sells drugs to

Franchiser

$8.26

$9.50(Cost + 15%)

Franchiser sells drugs to Clinic

Clinic sells drugs to Client

TB Drug Cost1 Clinic Income

$4.75 $14.25(Cost + 50%)

1. FDC (HRZE) tablets 3X/day for 2 mos., RH tablets 2x/day for 4 mos. Treatment source: WHO Operational Guide for National Tuberculosis Control Programs (June 2002). Pricing source: GDF FOB price for 50 kg adult.

Franchiser Pays Clinic for Cure

$15.00 (+10 to client) $15.00(May be split with

client)Total Clinic Income per

Treatment $19.75

“Cure Bonus”

Financial/Operational Model: Clinic Franchisee Income

Franchisee income structure provides the Franchiser with many levers of control.

CLINIC FRANCHISEE INCOME (Kenya Example)

TB Drugs + “Cure Bonus”

HIV Opportunistic Infections ($20 per HIV+ client)

Ancillary Drugs/Products/Services

Total Revenue

$881

$4,254

$1,202

$6,337

TOTAL OPERATING INCOME $1,881

REVENUE

EXPENSE

Drugs

Training

Annual Franchise Fee

Franchise Debt Repayment ($750 over 3 years at 18%)

Staff

Overhead (supplies, equipment, rent etc.)

Total Expenses

$2,903

$60

$290

$345

$500

$359

$4,456

CLIENTS TREATED

TB Treated

HIV Treated

Ancillary Treatment

19

213

375

Financial/Operational Model: National Franchiser Income

A national Kenyan program is projected to require $937,835 to treat 9,975 TB and 111,671 HIV clients.

NATIONAL FRANCHISE INCOME (Kenya Example)

All Drugs & Ancillary Products

Training

Annual Franchise Fee

Debt Repayment1

Total Revenue

$1,554,687

$31,500

$152,250

$36,219

$1,774,656

REQUIRED NATIONAL SUBSIDY $1,122,266

REVENUE

EXPENSE

TB Diagnosis

All Drugs & Ancillary Products

Drug & Product Distribution

Advertising

“Cure Bonus”

Staff, Monitors, Training, Overhead

Total Expenses

$147,656

$1,361,939

$457,108

$157,500

$211,969

$530,750

$2,896,921

CLIENTS TREATED

TB Treated

HIV Treated

Ancillary Treatment

9,975

111,671

196,750

Costs Not Included:

• Clinic capital costs

• Clinic staff

• Net drug costs

1. Assumes after year 3, 20% of clinics will be in first 3 years and will pay $750 start up fee.

Priority Areas

Assuring care for the poor

The role of government

The impact on government HR

Protection for the poor

Testing: affordable, accessible

Choice: information on local care from MOH

Community: community-level micro-insurance

Affordability: TB, OI, and ambulatory care below market

ARVs fully subsidized ARVs

opportunity costs minimized by selection of franchise sites in poor areas

The role of government

registration: of providers

training: in TB and HIV/AIDS care

testing: of clients in Gvt. certified labs

regulation: and quality control

data: collection and collation

Mitigate impact on MOH staff

work only with full-time private providers registered 2 years or more

collaborate on training

geographic targeting where government services are absent or weak

Summary:Benefits of Health Franchising for TB and HIV/AIDS

Service to populations not reached by govt.

Quality

Affordable

Cost-effective

Scalable

end

Current Activities

Survey of private provider in 9 countries(IHSD)

Guidelines for Private Sector Integrated TB and HIV/AIDS Care (KNCV)

Research on Acceptability/Effectiveness of Private TB Care

Next Steps

Consultative Meetings of BAG and MAGHIV/AIDS implementation strategy guidelines

Revision of Business PlanARV strategyevaluation measuresManagement structure

seek funding commitment for 1 + 4 roll-out