Private Provider Contracting Cross-Learning Session Key Messages

Countries: Kenya and Ethiopia

Date: 31st January 2023

Despite the benefits that accrue from contracting private providers, countries still face challenges in tapping into them due to inadequate capacity in areas such as proper accreditation processes, payment mechanisms, monitoring quality, performance management and governance arrangements. SPARC brought these countries together to share their experiences with a view to assist those beginning the journey of private provider contracting to overcome institutional, political and technical barriers towards successfully contracting private providers.

On 31st January 2023, the SPARC team hosted a cross-learning session on private provider contracting between Kenya (who has already implemented private provider contracting) and Ethiopia and Rwanda who both plan to do the same. The goal of this activity was to provide Ethiopia and Rwanda with the requisite understanding of Private Provider Contracting to allow these countries to engage private providers in health service provision using strategic health purchasing principles to inform contracting procedures.

The cross-learning session included an overview of private provider contracting presented by the coach and an overview of the NHIF by the Kenya presenter. It also included an active cross-learning discussion where country teams shared lessons learnt from their various levels of implementing private provider contracting.

Overview of Private Provider Contracting

Sub-Saharan Africa (SSA) health systems are mixed; they have both private and public providers. Public purchasers would benefit from engaging private providers as contracting private providers extends access to care, and quality of care and improves the financial protection of the population.

Contracts are tools that define the relationship between purchasers (principals) and providers (agents). The principal is an individual that depends on the actions of another and delegates roles to another party (agent) to be executed. However, the relationship between the purchaser and provider is often marred by self-interest: the providers want to maximize their profits while the purchaser wants to make sure services are delivered in the most cost-effective way and this leads to challenges in contract designs.

Contracts can be leveraged to outline what the provider and purchaser should expect from the relationship. Such as the quality of services required, what payment mechanisms will be used, etc. A strategic purchaser needs to design and use contracts as incentives to elicit positive behavior from private providers. The contract can be leveraged to make sure the provider aligns to the purchaser’s objectives to achieve UHC.

There are two major types of contracts:

  1. Market entry contracts – the essential contracts including licenses, that providers need before delivering care. E.g., accreditation, licenses, etc.
  2. Process contracts – which include input contracts, outcome contracts and service contracts

The process of contracting is a cycle which has four different stages:

  1. Identify and select the private healthcare providers
  2. Design the contract and negotiate with providers
  3. Sign the contract document
  4. Monitor performance of the providers and use the evidence to inform adjustments of future contracts and renewal of contracts based on time periods.

Strategic purchasers should also consider the quality targets to monitor and the capacity of the purchaser to monitor providers while contracting private providers, as this will affect the quality of services the provider gives. Another consideration for contracting private providers is the provider distribution and claims processes, e.g. the use of online systems. Using technology can improve efficiency in claims processes.

Overview of NHIF Kenya


The NHIF has existed since the 1960’s and has evolved over time from covering only government facilities to all facilities. It is governed by the laws passed by the parliament, and there have been revisions to the NHIF act, which expanded the scope beyond hospitals to include other health facilities. Cost of services has been one of the major challenges in the past, and some efforts have been made to correct this. NHIF is expected to reduce the out-of-pocket expenditure and integrate some of the donor funding programs into the existing benefits programs

The Strategic goals for the NHIF 2018 – 2022

  • Contribute to universal health insurance coverage
  • Increase and sustain revenues for 83% of the population
  • Enhance value-based financing and strategic procurement of healthcare benefits. The NHIF has developed four performance indicators to accomplish this:
    • A healthcare investment criterion – providers are assessed on their ability to provide services every 1-2 years.
    • Clinical outcomes
    • Fraud index – because medical fraud is a key challenge in providers
    • Medical records
  • Create a suitable legal and regulatory framework for provider engagement
  • Strengthen governance and management systems
  • Enhance strategic alliances, collaborations, and linkages
  • Leverage on technology to enhance service delivery

Challenges and Lessons Learnt from the NHIF Engagement with Private Providers

The NHIF has made efforts to be move from implicit to explicit benefits specification. Between 2012 and 2015, there was an initiative to indicate the exact services for different categories of treatment. Additionally, in 2016, the cost of services was clearly indicated for public and private providers, and private providers received more for services provided. This caused some challenges, including patients being motivated to move from public to private facilities. The NHIF has recently standardized payments among providers.

Mix of Providers and Categories of Contracts used by the NHIF

Most contracted providers are government providers (68%) with a lower number of private providers (29%) and the least number of faith-based providers (5%). Two categories of contracts exist – the comprehensive contracts which have the whole bill covered by NHIF, and the non-comprehensive contracts, where NHIF pays the rebate with co-payments by the members. 99% of government providers have comprehensive contracts. However, most non-government providers have non-comprehensive contracts apart from faith-based providers. Also, most rural providers prefer comprehensive contracts. The reimbursement is based on the contract types apart from specialized procedures. On average, the rate of reimbursement is lower for non-comprehensive contracts than comprehensive contracts to move the population to comprehensive facilities.

Pros and Cons of Contracting Private Providers

Contracting private providers can improve quality of care and enhance access to services among beneficiaries. It can also incentivize providers to deliver better quality of care and can increase motivation for government providers to increase the quality and consistency of services. Additionally, private providers invest in new technology to increase efficiency in service provision.

However, contracting private providers can also be challenging. Private provider facilities are skewed to urban/peri-urban areas and are profit-oriented as opposed to population-need-focused. Political influence within provider organizations may lead to fraud. Additionally, it is challenging to monitor and validate their performance, and some private providers may not have good financial autonomy. Purchasers may also have challenges reimbursing private providers due to funding constraints, and bureaucracies and policies may interfere with the contracting process. To access additional information from this session, click here to watch the session video.

Private Provider Contracting Cross-Learning Session Key Messages

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