In the third of a three-part blog series on the IRD-CHMI Health Market Innovations Hub in Pakistan, we discuss social business models and provide some key insights regarding sustainability of health market innovations in Pakistan. An overview of the IRD-CHMI Health Market Innovations Hub can be found here.
International donors are increasingly focused on funding programs that can sustain services beyond their grant horizons. Donor fatigue is on the rise as new social service organizations are joining the market and competing for donor resources. While some programs have introduced innovative means to earn revenue and lower donor dependency, other programs recognize sustainability as a lesser priority and are still reliant on grants and donation opportunities available in Pakistan. Pakistan is one of the most philanthropic countries in the world and charity-based models have enjoyed popularity and success in the past. Proponents of this argument claim it remains possible to scale-up services through such models rather than invest time in developing social businesses, and risk losing patients as well as reduce their access by charging for services. This is especially true for programs that target the quarter of Pakistan’s population which lives below poverty line and cannot afford to pay for any healthcare.
However, it should be noted that there are several reasons why sustainability strategies are becoming more relevant in the country. While larger well-established organizations can afford to attract donors and support from international agencies, Pakistan has a number of smaller health programs that need to ensure sustainability since they often struggle to maintain sustained financing for operations.
At the IRD-CHMI Health Market Innovations Hub Working Group Meeting in November 2013, several heads of public health organizations in Pakistan discussed novel strategies for sustainable health programs and the challenges in making such models successful. Each of the organizations funded initial program development costs through grants and sought to transition towards sustainable operations.
Types of Business Models
Cross-subsidization uses income generated from one consumer segment (usually the more affluent) to subsidize the cost of services in another consumer segment (the less affording). These types of programs offer services to people with various income levels, charging them according to their ability to pay. Jaroka Tele-Healthcare uses this model to partially sustain their operation. Jaroka has a hospital in rural Mardan with reputable doctors and nursing staff, a sophisticated EMR system and state of the art facilities. Jaroka charges its clients on their ability to pay. The income of the client is self-reported and then cross-checked with outreach program workers who visit the community of the client to better ascertain his income and wealth status. This practice helps fend off corruption and deters clients from exploiting the payment system. As it is the only hospital in the area, Jaroka attracts both low-income and higher income groups from surrounding areas in the KPK province. The higher income clients pay for the lab facilities and this revenue is used to cover the cost of lower income groups. However, the strategy is not without its problems. If a program using this model is operating in an area where the income level is generally low, the payments made by the relatively higher income level group may not be enough to offset the costs incurred by those that provide services free of charge.
The social franchise model is utilized by Micro Health Franchising Systems (MHFS) and develops franchises that provide health services at a carefully determined price. Franchisees are midwives already present in the community. The midwives are trained by the MHFS. MHFS furnishes a room in the midwives’ home with basic antenatal care equipment; this room serves as the franchise and is the main operating area for the midwives. The equipment is purchased by MFHS in bulk and subsequently leased, allowing them to equip several franchises at lower prices. The midwife charges a nominal fee for their services, which includes care of the mother throughout the prenatal and antenatal period and covers the franchising fee the midwife/franchisee pays to the franchiser while still providing a small profit for the midwife. The franchiser uses the franchising fee paid by several franchisees to cover the cost of developing and maintaining the franchises over the years as well as carrying out the entire operation. This strategy is highly dependent on scaling up of the operation so that sufficient income is generated from the fees while the organization benefits from economies of scale by training several midwives together or leasing the medical equipment at high volumes.
Using the service subsidization model, an organization can offer free or lower-priced health services as well as income generating services, which are charged at full price. The income-generating component of the program covers the cost of the entire operation and offsets the cost of the free services offered. Community Health Solutions started the Sehatmand Zindagi Program which uses a form of this model. Sehatmand Zindagi’s current focus is to provide access to molecular-based rapid TB diagnostics as well as treatment to the working poor. It has built purpose-designed centers for airborne infection control, equipped with mass digital X-ray facilities and GeneXpert testing, in addition to rapid screening and diagnostic equipment for chronic obstructive pulmonary disease (COPD), asthma, and diabetes. Since TB is more prevalent in low-income groups, diagnosis and treatment are free of cost, funded through revenue generated from other services.
Aman Foundation also utilizes this model to a great extent. Aman Foundation has several innovative health initiatives under Aman Health. Amongst these the most prominent is Aman Ambulances that provides high-quality Emergency Medical Services in the city of Karachi. Although private ambulance service ventures do exist in the country, most of them do not offer high quality life support equipment or fully trained paramedic and Emergency Medical Technican staff. A portion of Aman Ambulances is funded through a flat Rs 200/ride fee. The program now seeks to build sustainability by offering a subscription packages for middle to high income clients. This package consists of various services offered to the subscribers such as an annual ambulance insurance. The subscription fees also contribute to Aman Health’s income, offsetting the cost of the free services provided by the organization. In order to recover the rest of their costs, Aman Health takes advantage of their expertise by providing consultancy services for a fee to other health programs. They also help other programs set up referral networks for a fee. These extra services form a part of their income generating strategy.
Interactive Health Solutions uses a different kind of business model. IHS developed eHealth and mHealth software including EMR for different health programs in Pakistan, Nepal, Tajikistan, Bangladesh, Indonesia, DRC, Ethiopia, Malawi, Peru, Kenya, Zimbabwe, Uganda, Tanzania, and South Africa. IHS works with free, open source software and charges a fee for their services rather than the software, allowing them to save their clients extensive software licensing costs. Their service package includes setting up the software and training the workers how to use it. Clients have the option of modifying the code as they see fit. They can also rehire IHS to modify the software for them. Although registered as a for-profit, profit maximization is not the ultimate goal and all the profit incurred in the operation is reinvested into the company.
Photo by Vicki Francis of 11-year-old Daddla Junego with her mother and other siblings in their home in Sindh, Pakistan, used courtesy of the Department of International Development.