Leading the Way: Private sector can help meet rising healthcare demand

Leading the Way is a column written by PwC's professional staff. It appears in the Business section of the Bangkok Post twice monthly. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.

This article appeared in the March 6, 2012 issue of the Bangkok Post.

By  PwC Global Healthcare


Demand for better health care is growing in Southeast Asia's emerging economies, putting pressure on governments to increase health spending to levels closer to those in the developed world.

By utilising private capital, Southeast Asian countries will be able to satisfy the health needs of their populations and do so faster than developed countries, says a new PwC Global Healthcare report entitled Bridging the Gap: Meeting the Challenges of Healthcare Development in South East Asia .Most developing countries in the region need to increase the amount they spend on health substantially. Some must double, triple or even quadruple their current outlays.

The need for increased spending is becoming a political and social priority as expectations about care rise in line with the growing affluence of regional populations.

Southeast Asia's evolving health systems can utilise health-care publicprivate partnerships (PPPs) to expand capacity efficiently and raise the quality of health care, argues PwC.

PPPs are collaborative arrangements,used in many countries around the world,whereby governments contract out the development and/or ongoing provision of a public service to a private sector provider.

The gap in healthcare spending between developed and developing markets: In the report, PwC compares health spending in China, Singapore and seven developing nations in Southeast Asia  Cambodia, Indonesia, Laos,Malaysia, the Philippines, Thailand and Vietnam.

The consultancy found a large gap between healthcare expenditures in the regional economies and those in Organisation for Economic Cooperation and Development (OECD) countries. The analysis found:

  • While the world's more developed economies currently spend on average 9.9% gross domestic product (GDP) on health care, all the Southeast Asian countries studied except Vietnam and Cambodia spend less than half that.Indonesia commits the lowest proportion of its economic output to health care,just 2.3% of annual GDP.
  • Malaysia spends the most in the region on healthcare  US$353 per person but that is less than 10% of the OECD average expenditure of $4,002 per person.Laos spends the least among the countries in the survey, a mere $34 per person on health care.

To achieve balanced economic growth, the governments of Southeast Asia need to invest heavily in health care, as they invest billions of US dollars on the development of infrastructure including power, water, transportation and telecommunications facilities.

PwC said it sees great potential for healthcare PPP projects in Southeast Asia. It added that a well-structured PPP can play a role in satisfying rising demand through greater efficiency.

How the healthcare PPP model enables delivery of quality care: Many countries worldwide use PPPs to finance both the development of new healthcare infrastructure and ongoing delivery of health care.

Healthcare infrastructure accounts for about 5% of all health spending. The greater cost is that of healthcare delivery.

Healthcare PPPs enable government authorities to maintain oversight and standards of care while bringing private sector competition, innovation and efficiency to the sector.

PPPs are effective in both the development of infrastructure and the delivery of services. PwC said they create the right set of incentives, generate longterm cost savings and improve the quality of public health.

Health PPPs are highly flexible and customisable and thus well suited for the delivery of health care in Southeast Asia, a diverse region with a wide range of demographic and economic conditions.

Governments must engage in sound health planning at the national, regional and city levels, finding the right balance between primary, secondary and tertiary care.

Health PPP models that have worked well in more developed markets must be adapted to suit the distinct conditions in Southeast Asia.

Private capital is available for wellstructured projects. Investors are looking for opportunities in robust, low-risk health systems.

Governments seeking capital will need to put the right conditions in place,spreading the risks between the private and public sectors, concluded PwC in its report.The "Bridging the Gap: Meeting the Challenges of Healthcare Development in South East Asia" report was prepared by PwC's Global Healthcare Group, and PwC Thailand summarised the content. Comments or questions can be sent to leadingtheway@th.pwc.com. A copy of the report and more details can be found at www.pwc.com/asiahealthppp