While the world continues to battle the Covid-19 pandemic, another, slower-moving health crisis remains. Non-communicable diseases (NCDs) — chronic conditions like cancer, diabetes, cardiovascular diseases, and chronic respiratory conditions — were responsible for 71% of all global deaths in the years before Covid-19 and will remain problematic long after the pandemic ends.
These diseases impose a staggering fiscal toll on ministries of health, and with global populations growing older each year, NCDs are only becoming more prevalent (and thus more costly). According to a 2011 report released by the World Economic Forum, “over the next 20 years, NCDs will cost more than U.S. $30 trillion … pushing millions of people below the poverty line.” Tight on resources and burdened with a monumental problem, governments around the world are faced with a simple, but daunting challenge: how to pay for solutions.
A potent and underutilized tool for reducing this looming cost lies in public-private partnerships, or PPPs. While these programs might be more commonly associated with infrastructure projects, governments are increasingly turning to PPPs as the most appropriate structures for combating large-scale health care challenges.
At its core, a PPP is a collaborative organizational structure in which public, private, and nonprofit partners agree to share risks, resources, and decision-making authority. While there are many different ways for the public and private sectors to engage with one another — from contracts to simple dialogues — it’s the sharing of decision-making authority that makes PPPs unique. For governments, PPPs offer distinct benefits over traditional outsourcing. By leveraging the operational capacity of both the public and private sectors, PPPs can spur innovation. And by managing the allocation of risks and opportunities more effectively, cash-strapped health ministries can reduce risk, ensuring that their funds go farther.
But creating an effective PPP is no small task, and health care PPPs, in particular, require a nuanced approach. I have spent more than 17 years researching PPPs, first as a professor at Harvard and Johns Hopkins, and now as the founder of the PPP Initiative, an independent entity that works with governments, private-sector corporations, and multilaterals around the world to facilitate the development of health care PPPs. Through our research and case studies, the PPP Initiative has found that in order to build a successful partnership, governments and the private sector must meet three key aims: They must build credibility and trust, align their values, and manage conflicts of interest.
Credibility and Trust
Governments and the public are often mistrustful of the profit motive, particularly where public health is concerned. And due to the often adversarial relationship between private-sector corporations and government regulators, it can be difficult for fledgling PPPs to develop a bedrock of trust upon which to build something useful.
Of all the assets that partners bring into a PPP— financial, operational, and human — credibility might be the most essential. It would seem obvious that partners who are unable or unwilling to deliver on their promises are poor candidates for a PPP. Participants in a PPP should look for partners that are well-funded and enjoy the authority to enact changes quickly and expediently.
But the presence of credible partners does not, in and of itself, assure success. Even highly credible partners like blue-chip companies or G7 governments can fail to sustain a PPP if their incentives are not aligned with one another.
Aligning Values
Within the private sector, there are many industries that directly and indirectly influence health care outcomes — and not always for the better. Health-food manufacturers and sporting goods stores might have a positive effect on health, while tobacco companies and firearm distributors have a negative effect. “Value alignment,” then, is a tool for measuring the relative alignment of a given company’s values with public-sector health goals.
Companies in “perfect alignment” are those for whom an increase in demand for their goods and services leads to an increase in health, while companies that are “misaligned” have the opposite effect. Most companies tend to fall somewhere in the middle. For instance, while pharmaceutical companies do have a net positive effect on public health, their business model still relies on the presence of disease. And while manufacturers of sugar-heavy soft drinks are major contributors to diabetes, they may also profit from selling sparkling water, a healthy substitute. By identifying private-sector entities whose goals are aligned with those of the public sector, governments can use value alignment to identify suitable partners for a PPP.
Many governments are already using PPPs to capitalize on the positive externalities associated with value alignment. Singapore’s Health Promotion Board, for example, has partnered with food manufacturers to provide grants designed to encourage healthier reformulations of popular foods. And here in the United States, governments at both the state and national levels have partnered with employers to institute workplace wellness programs which promise to reduce health care costs over the long run.
Managing Conflicts of Interest
But what about when values are not aligned? The presence of a conflict of interest doesn’t necessarily mean that a partnership is unviable. While it is essential to manage conflicts of interest, it is not essential to avoid them altogether. Through careful incentive design, conflicts of interest can be mitigated.
A recent PPP designed to rebuild Lesotho’s Queen Mamohato Memorial Hospital in Maseru demonstrates how. When Lesotho’s ministry of health partnered with South African firm Netcare to rebuild and operate the nation’s largest referral hospital, a significant conflict of interest emerged: Would the private sector operator be incentivized to cut corners, reducing their costs and compromising the quality of care provided at the hospital?
To combat this, the partnership developed a sophisticated payment schedule, which used a highly-specific set of performance metrics to determine how much the government would be required to pay Netcare. But rather than simply relying on broad, non-specific metrics like “number of patients served,” the metrics employed by the PPP were far more specific: How long were turnaround times for lab tests? How frequently were the sheets on hospital beds changed?
By tying Netcare’s profits directly to their ability to meet these criteria, the partnership ensured that Netcare was always incentivized to work in the best interests of the public, while still empowering the firm to find new efficiencies, streamline operations, and reduce unnecessary costs.
Of course, the thoughtful allocation of risks and opportunities doesn’t need to involve a sophisticated contract, either. Governments can use positive incentives — things like advertising dollars, public engagement programs, and public-relations opportunities — to entice potentially aligned companies to work towards better public health outcomes. They can also use disincentives — things like warning labels, advertising bans, or aggressive public-relations tactics.
These kinds of tactics, which are far more politically viable than blunter instruments like taxation or prohibition, can mitigate the impact of a conflict of interest. And so, where PPPs might once have only been considered in the most ideal of circumstances, strong incentive design can enable governments to engage in partnerships even with imperfectly aligned partners.
Burdened with enormous health challenges and limited funds, governments are unlikely to be able to tackle NCDs on their own. Innovative PPPs can be a crucial tool for improving global health — as long as they are managed correctly.