The goal of this paper is to examine the ways in which public and private sectors can cooperate to improve the quality and accessibility of primary healthcare (PHC) to the poor in developing countries. The promise of alternative business models lies in their ability to accomplish several important functions in PHC. Business- style contracts can organize small providers into units that are large enough to yield returns to scale in investments in physical capital, supply chains, and in worker training and supervision. Furthermore, with donor assistance, business models can potentially arrange for cross subsidies to help improve access to care. In order to understand the problems that business models can help solve, this paper will set up a simple economic model of public-private interests in healthcare. The model identifies two key social interests in healthcare markets: quality of service provision and access to care by disenfranchised groups. These particular aspects of healthcare delivery are \"merit goods,\" meaning that ensuring quality and access for the poor have positive benefits for society that are greater than what individual consumers perceive. A third component of the health system which will not be explicitly considered here is the risk spreading or \"insurance\" function that needs to be carried out in society so that the unpredictably heavy consequences of illness and injury are borne equitably. The alternative business models that will be considered here are models of primary healthcare provision at facilities, not models of health insurance.
Harvard Health Policy Review (2008) 9 (1) 184-197