26583 NOTE NUMBER 263 P U B L I C P O L I C Y F O R T H E privatesector JUNE 2003 Franchising in Health Jeff Ruster, Chiaki Emerging Models, Experiences, and Challenges in Primary Care Yamamoto, and Khama Rogo I n t h e p a s t d e c a d e a g row i n g n u m b e r o f h e a l t h f r a n c h i s i n g s c h e m e s h ave e m e rg e d i n d eve l o p i n g c o u n t r i e s . O f t e n re a c h i n g t e n s o f Jeff Ruster (jruster@ worldbank.org) is lead t h o u s a n d s o f p o o r h o u s e h o l d s , t h e s e p r i vat e s c h e m e s c u r re n t l y T H E W O R L D B A N K G R O U P PRIVATE SECTOR AND INFRASTRUCTURE NETWORK financial analyst, and p rov i d e l og i s t i c a l , m a n a g e r i a l , a n d s o m e t i m e s f i n a n c i a l s u p p o r t t o Chiaki Yamamoto (cyamamoto@worldbank. s m a l l - s c a l e p rov i d e r s ( f r a n c h i s e e s ) o f p reve n t i ve c a re , s u c h a s f a m i l y org) a private sector p l a n n i n g a n d m at e r n a l a n d c h i l d h e a l t h s e r v i c e s . W h i l e f r a n c h i s i n g development specialist, in the World Bank’s Private h a s at t r a c t e d g row i n g i n t e re s t a m o n g g ove r n m e n t s a n d d o n o r s a s a Participation in Public p o s s i bl e way t o a c h i eve h e a l t h o b j e c t i ve s , t h e re i s s o m e d e b at e a b o u t Services Group. Khama Rogo (krogo@worldbank. t h e a b i l i t y o f t h e m o d e l t o re a c h t h e p o o re s t p e o p l e a n d t h e a b i l i t y org) is lead specialist, o f f r a n c h i s e r s t o s u s t a i n t h e m s e l ve s f i n a n c i a l l y . human development, in the World Bank’s Africa A franchise is a type of business model in which a firm (the franchiser) licenses independent Typical franchising structure in the Region. Figure health sector businesses (franchisees) to operate under its brand name. A firm might choose to expand its business through franchising because the arrangement shifts capital investment and day- 1 Franchiser Performance reports Training to-day managerial responsibilities to inde- Member dues Certification Performance monitoring pendent businesses, overcoming two major Bulk purchasing constraints to rapid growth. The franchiser typ- Brand marketing and credit ically has established a successful product line Franchisees and so is able to provide specialized business (for profit, nonprofit, informal) strategies to franchisees in exchange for a fixed fee or royalty payment. Franchisers in the health sector, often supported by international Payment Services donors and nongovernmental organizations (NGOs), establish protocols, provide training Target population for health workers, certify those who qualify, monitor the performance of franchisees, and F R A N C H I S I N G I N H E A L T H EMERGING MODELS, EXPERIENCES, AND CHALLENGES IN PRIMARY CARE provide bulk procurement and brand market- Potential issues ing (figure 1). While the general concept of franchising is applicable to the health sector, the highly tech- Potential benefits nical nature of health care provision and the Franchising offers potential benefits: externalities associated with it raise issues often ▪ Quality control. To protect the brand quite different from those in commercial fran- reputation, the franchiser typically trains its chising. These issues need to be considered franchisees in technical and business admin- when evaluating franchising as an option for istration skills and monitors their perform- health care provision and designing health fran- 2 ance to ensure that they conform to its chising schemes. standards. The monitoring built into fran- ▪ Asymmetry of information. Because judging the chising may be attractive to a government appropriateness of clinical services is that is interested in establishing partnerships extremely difficult for patients, they are with small-scale providers close to communi- unlikely to change providers on the basis of ties but lacks the capacity or resources to service quality. That makes demand shift a oversee their operations. poor mechanism for quality assurance. ▪ Bulk supply of goods and services. The franchiser Designed properly, franchising can address may identify qualified suppliers and negoti- this problem. By signaling the quality of ate long-term bulk prices for goods (drugs, providers, franchising helps inform clients contraceptives, equipment, office supplies) about their choices when seeking care. And and services (finance, insurance). A fran- the franchiser, which is better informed than chiser of primary health care might also patients, monitors and controls the quality of develop a referral network of qualified sec- service on their behalf. ondary care providers, creating opportuni- ▪ Difficulty and cost of monitoring. Because a ties for referrals and professional networking patient’s needs and the appropriate care vary and exchange. significantly from one case to another, mon- ▪ Mass marketing. The franchiser markets its itoring the quality of health services tends to brand name—through billboards, mass be more difficult and costly than monitoring media, and personal contacts (such as local the quality of other goods and services. meetings organized by community health ▪ Limited possibility for standardization. A success- workers)—informing potential clients about ful franchising scheme requires well-defined the availability of services and enhancing the products that enable franchisees to mass- reputation of clinics by allying them with the produce and the franchiser to monitor qual- brand name. ity. In health care the range of services offered ▪ Incentives for care providers. Because franchised is much larger than in other sectors and rela- providers bear the financial risks associated tively few “products� can be standardized. with their success or failure (with ejection This is one reason that franchising in health from the franchise meaning the loss of the has focused on preventive care, such as fam- caseload associated with membership), they ily planning and reproductive health, where have a strong incentive to maintain the qual- standardization, training, and monitoring are ity of their service. As a result, franchised relatively straightforward. providers need less supervision than a net- ▪ Difficulty of franchising and training profession- work of providers employed by a single entity. als. Franchising can enable entrepreneurs A franchising effort in India uses competi- with little knowledge of an industry to launch tion to strengthen incentives to perform well. a successful business. But this is harder in the After training a provider in a rural area, the health sector, where providing services franchiser maintains contact with a potential requires more specialized knowledge. For a replacement and encourages the alternative health franchise to succeed may therefore provider to give feedback on the quality of require a large number of underemployed care by the franchisee. private medical practitioners. Table Three health care franchises in developing countries 1 Country Kisumu Medical Educational Trust Kenya Greenstar Network Pakistan Well-Family Midwife Clinic Network Philippines Geographic coverage Rural Urban and periurban Urban Year established 1995 1995 1997 Area of practice Family planning, postabortion Family planning and Family planning and care, and sexually reproductive health maternal and child health transmitted infections 3 Franchisees Nurses, midwives, and clinical Mostly obstetrician Registered and practicing and medical officers working gynecologists or Bachelor of midwives with community-based doctors Medicine and Bachelor of Surgery (MBBS) doctors from disadvantaged neighborhoods Scope 125 providers (in October 2001) 2,850 female doctors and 205 clinics (in October 2002) 11,867 other health care providers (in June 2002) Services offered by franchiser Supplies Free contraceptives; start-up Subsidized contraceptives and Lease of clinic equipment kit for manual vacuum clinical supplies and instruments; clinical aspiration (MVA) supplies purchased at bulk rate Technical training One week’s training in family 40 hours’ training in 35 days for family planning; planning and reproductive managing intrauterine 4 days for communication health, MVA, sexually devices, or IUDs (for female skills; 4 days for counseling. transmitted infections, HIV/AIDS, providers); 8 hours’ training Additional continuing training and infection prevention in administering hormones available from the franchise Business training Use of revolving loan funds; .. Market feasibility assessment; record keeping 2 days for business planning; 2 days for reporting and monitoring Advertising None Radio, television, and print Radio and television media advertising; personal advertising contacts Monitoring mechanism Monthly visits from Monthly visits from Greenstar Regular monitoring by regional coordinators doctor (informal monitoring) franchisera and “mystery client� to monitor provider quality; biannual evaluation by qualified doctors Fees paid by franchisee Token annual membership None. Fee charged for 500 pesos (about US$10) a fee (for eligibility for revolving additional training month and 200 pesos (about loan scheme) US$4) per delivery. Fee charged for continuing training .. Not available. a. Franchisees that fail to conform to standards receive a written reprimand after the first offense and a one-month suspension after the second, and are ejected after the third. Source: Interviews with franchisers; http://www.greenstar.org.pk; http://www.wfmc.com.ph. F R A N C H I S I N G I N H E A L T H EMERGING MODELS, EXPERIENCES, AND CHALLENGES IN PRIMARY CARE Beyond these issues specific to the health sec- franchise focuses on urban areas and on clients tor, social franchising—franchising to achieve who are unable to pay the full cost of most pri- social goals—also has unique features. For vately provided health care services yet can example, if public subsidy is involved, the poten- afford to pay reasonable fees. tial costs and benefits of a franchising scheme need to be measured against those of alternative Challenges and opportunities viewpoint subsidy mechanisms, including providing subsi- Early results from health franchising schemes dies directly to clinics. Franchised networks are suggest that the model can rapidly expand the is an open forum to unlikely to use financial subsidies more effi- coverage of basic health services to poor people, encourage dissemination of ciently unless their networks are large enough capture economies of scale, and reduce the public policy innovations for to benefit from economies of scale in advertis- information asymmetries that often adversely private sector–led and ing and monitoring. affect the quality of care. The financial sustain- market-based solutions for ability of health franchising schemes is being development. The views Operating models debated, however. While franchisees may reach published are those of the Kenya, Pakistan, and the Philippines offer exam- financial sustainability relatively quickly, as has authors and should not be ples of schemes ranging from an informal net- happened in the Well-Family Midwife Clinic attributed to the World work of providers, which has the potential to Network, franchisers that pursue public policy Bank or any other affiliated evolve into a franchise structure, to a full-blown goals may need to continue to rely on public organizations. Nor do any of franchising operation (table 1). subsidies. the conclusions represent In Kenya a local NGO, Kisumu Medical One proposed strategy is to expand the ser- official policy of the World Educational Trust, provides one-week training vices provided beyond family planning to Bank or of its Executive in postabortion care to a network of rural health include curative care, such as treatment for Directors or the countries care providers—nurses, midwives, health work- malaria and tuberculosis, for which the willing- they represent. ers, medical assistants, clinical officers, and ness to pay is typically higher. Indeed, donors community-based doctors. The NGO visits net- have begun to develop new funding strategies to To order additional copies work care providers around once a month to assist franchising schemes in expanding their contact Suzanne Smith, conduct informal monitoring. operation to cover these services. These new managing editor, Room I9-009, In Pakistan the Greenstar Network franchises funding approaches center on tying the pay- The World Bank, private doctors, female paramedics, and phar- ment of subsidies to the outputs and outcomes 1818 H Street, NW, macists to provide family planning services and of franchising schemes, increasing the need for Washington, DC 20433. reproductive care in urban areas. Clinics receive the schemes to develop appropriate, cost- subsidized supplies from Greenstar as well as ini- effective monitoring and reporting systems. Telephone: tial training and monthly visits from Greenstar 001 202 458 7281 doctors. The monthly visits allow both ongoing Fax: training and informal monitoring. While most 001 202 522 3480 franchisees make little profit from family plan- Email: ning services, participation in the network offers ssmith7@worldbank.org the benefits of more patients and training by Greenstar. Copyedited and produced by In the Philippines the Well-Family Midwife Communications Clinic Network franchises clinics owned and Development Inc. operated by midwives in selected municipalities to provide family planning and maternal and Printed on recycled paper child health care services, including delivery services. The network has contracts with eight NGOs that act as regional franchisers. Midwives who meet the selection criteria and agree to invest in renovating or constructing their clinics sign an agreement with the regional franchiser to obtain membership in the franchise. The This Note is available online: http://rru.worldbank.org/Viewpoint/index.asp