News Column

INVESTING IN HEALTHCARE: Turning Challenges into Opportunities

February 23, 2014

info@ventures-africa.com (Ventures Africa)



VENTURES AFRICA - In 2008, I took a month-long tour of rural clinics across three states in Nigeria, which really opened for me a small window into some of the realities of healthcare provision in the country. The dilapidated structures and lack of critical supplies showed a real failure of government stewardship. Similarly, in some of the privately run clinical centres, a lack of investment also contributed to their ineffectiveness in delivering quality care to the indigent population. Unfortunately Nigeria is not alone, as this scene is replicated across Sub-Saharan Africa in varying degrees of severity.

Most people are familiar with the problems facing the health sector in Sub-Saharan Africa faces: poor infrastructure, a shortage of healthcare workers, a lack of capacity in the existing workforce and substandard quality to name a few. These problems, coupled with inadequate public sector spending on health, have pushed the private sector to the front in the development of the African health sector.

The climate for private sector health investment in Africa has never been better, with Sub-Saharan African countries recording an unbroken pattern of economic growth in the past few years. Ironically, the challenges created by a lack of adequate infrastructure, human capacity and poor-quality healthcare have given rise to favourable conditions for the redesign of healthcare delivery models in the African context.

Other countries have taken advantage of similar challenges and pioneered healthcare models that leverage new technologies and are well suited to the needs of the population. In India, the Aravind Eye Clinic has used innovative care models in conjunction with a ?exible pricing system based on a patient's ability to pay to remain pro?table while providing free eye care to patients who could not otherwise afford it. This is a good illustration of the types of innovative approaches that are needed to solve the unique problems of developing economies.

The healthcare market is large and diverse, with a value chain comprised of manufacturers, health service providers, retailers, distributors, health ?nancing entities, and medical education providers, retailers, distributors, health financing entities, and medical education providers. The entire value chain is in need of investment but thus far investors have been focused primarily on opportunities that can deliver compelling ?nancial returns; namely health service providers, retailers, and ?nancing entities. In Nigeria there has been a ?urry of investments in multispecialty hospitals, niche providers (such as fertility clinics), standalone diagnostic facilities, and Health Maintenance Organisations (HMOs). Although this has created some positive impact on the value derived from Nigeria's health sector, services still remain fragmented, poorly regulated, and variable in their delivery of quality outcomes.

The increased penetration of HMOs is also changing the current healthcare ?nancing landscape, as the ?xed tariffs they impose create a strain on the margins that can be realised by hospitals and clinics. As a result, smaller healthcare providers are ?nding it increasingly dif?cult to manage their resources judiciously while delivering quality care. Such challenges present an opportunity to invest in sustainable mechanisms that can integrate health care providers and improve outcomes for patients. Primary care may just be that mechanism.

Primary care can create value for both providers and patients if it can leverage on a large enough population and an associated network of diagnostic capabilities and specialist input. Primary care in Nigeria has not seen high levels of investment, as most primary care providers are standalone businesses with limited capacity for growth and unattractive revenue streams. Investors have thus far preferred a topdown approach, which favours the high ?nancial returns of specialty hospitals and diagnostic facilities.

There are relatively few organisations that have realised the value in creating integrated networks and even fewer actively creating them in an organised manner. One of the key success factors of these healthcare networks is the level of integration between all participants. If all providers in a network can have access to the same clinical information about a patient, then integration is more likely to succeed. Coordinating the activities of all the different services and departments within a network of providers is only feasible if it relies on information technology that is tailored to their distinct needs.

Similarly to the recent African telecommunications boom, there is now the opportunity on the continent to leapfrog outdated healthcare technology. Developed economies face considerable hurdles in implementing new technology due to the high costs of overhauling existing infrastructure, dealing with vested interests and in?exible regulatory environments.

Investment in the healthcare market is still in its emerging phase and there exist various opportunities across the value chain. Investors interested in healthcare service provision will be well served by taking a long-term view of the market and extracting key lessons from the problems faced by developed economies. An integrated healthcare system supported by robust health information technology can provide continuity of care and keep its patient population healthy through primary care and preventative services. It will also be less likely to succumb to the inevitable ?nancial pressures caused by the increased prevalence of bundled payments and ?xed tariffs.

ABOUT THE AUTHOR

Dr Femi Sunmonu is a medical doctor with a commercial background in healthcare management consulting. He has worked on several systems strengthening and healthcare financing projects in Nigeria. He is currently employed as a director at PurpleSource Healthcare.


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Source: Ventures Africa


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