Spending on healthcare among the OECD countries and BRIC nations of Brazil, Russia, India and China will grow by 51 per cent between 2010 and 2020, amounting to a cumulative total of more than USD71trn, according to estimates from PricewaterhouseCoopers’ Health Research Institute.
Health spending in these areas is rising faster than gross domestic product, magnifying gaps in budget deficits and spurring governments to look to the private sector for ways to get a better value for taxpayers’ money.
One trend that is emerging globally is the use of public-private partnerships to finance and manage health infrastructure and delivery and, according to PwC, growth in this area could create a multi-trillion global market opportunity for private companies and investors, implement a more efficient use of taxpayer dollars, and offer better quality health systems.
In a new report titled Build and Beyond: The (R)evolution of healthcare PPPs, PwC says that public health authorities around the world are increasingly contracting with private entities to manage healthcare services for defined populations or markets.
These PPPs, which have largely been used for infrastructure finance, are evolving as way to slow the rising cost of healthcare and address larger problems in the health system. PPPs enable public health authorities to maintain oversight of standards while injecting private sector efficiency, fiscal discipline, new innovation and investment in efficiencies, driven by incentives to generate long-term cost savings and improve the quality of public health.
PwC, which has worked on over 100 health PPPs in 15 countries, sees the market growing substantially over the next five years, and says that the model has proven to save healthcare costs. For example, partnerships like Spain’s Alzira project, which includes hospital and primary care services, have saved government 25 per cent of the cost of providing care, according to project partners interviewed for the PwC report..
Already, competition for private capital has prompted governments in Europe, Asia, Africa and southeast Asia to establish PPP agencies that are charged with developing PPP policy recommendations, streamlining procurement and contracting for services.
"The public finance of private innovation and efficiency is a win-win-win for governments, private industry and patients," says David Levy, global health leader, PwC. "Public-private partnerships offer the opportunity to increase access and quality of care, bend the cost curve on health spending and create accountability for health systems among groups that previously haven’t had appropriate incentives to work together."
In 2010, a number of record-setting PPPs formed across three continents as a way to finance hospital infrastructure, including a new 700-bed Karolinska Solna University Hospital in Stockholm, Sweden, which is estimated to be the largest hospital PPP in the world. Other deals were announced or reached in Canada, Mexico, Africa and Spain.
While these landmark deals remain largely dominated by infrastructure projects, they are also expanding the market for private capital and expertise in health services. As the scope of the partnership projects in healthcare grows, so does the size of the potential market for private organisations.
PwC estimates that by 2020, spending on health infrastructure among the OECD countries and BRIC nations will increase to USD397bn annually, up from USD263bn today. However, the larger market for health PPPs will be in non-infrastructure spending, estimated to be more than USD7.5trn annually, up from USD5trn in 2010.
Between 2010 and 2020, the OECD and BRIC nations will spend cumulatively USD3.6trn on health infrastructure and USD68.1trn on non-infrastructure health spending.
