Private Consultations More Effective than Public Provision in Rural India

Doing work across high-income countries (CLAHRC WM) and lower income countries (CLAHRC model for Africa) provides interesting opportunities to compare and contrast. For example, our work on user fees in Malawi [1] mirrors that in high-income countries [2] – in both settings, relatively small increments in out-of-pocket expenses results in a large decrease in demand and does so indiscriminately (the severity of disease among those who access services is not shifted towards more serious cases). However, the effect of private versus public provision of health care is rather more nuanced.

News Blog readers are likely aware of the famous RAND study in the US.[3] People were randomised to receive their health care on a fee-for-service basis (‘privately’) vs. on a block contract basis (as in a public service). The results showed that fee-for-service provision resulted in more services being provided (interpreted as over-servicing), but that patients were more satisfied clients, compared to those experiencing public provision. Clinical quality was no different. In contrast, a study from rural India [4] found that private provision results in markedly improved quality compared to public provision, albeit with a degree of over-servicing.

The Indian study used ‘standardised patients’ (SPs) to measure the quality of care during consultations covering three clinical scenarios – angina, asthma and the parent of a child with dysentery. The care SPs received was scored against an ideal standard. Private providers spent more time/effort collecting the data essential for making a correct diagnosis, and were more likely to give treatment appropriate to the condition. First, they compared private providers with public providers and found that the former spent 30% more time gathering information from the SPs than the public providers. Moreover, the private providers were more likely to be present when the patient turned up for a consultation. There was a positive correlation between the magnitude of fees charged by private providers and time spent eliciting symptoms and signs, and the probability that the correct treatment would be provided. However, the private providers are often not doctors, so this result could reflect different professional mix, at least in part. To address this point, a second study was done whereby the same set of doctors were presented with the same clinical cases – a ‘dual sample’. The results were even starker, with doctors spending twice as long with each patient when seen privately.

Why were these results from rural India so different from the RAND study? The authors suggest that taking a careful history and examination is part of the culture for US doctors, and that they had reach a kind of asymptote, such that context made little difference to this aspect of their behaviour. Put another way, there was little headroom for an incentive system to drive up quality of care. However, in low-income settings where public provision is poorly motivated and regulated, fee-for-service provision drives up quality. The same seems to apply to education, where private provision was found to be of higher quality than public provision in low-income settings – see previous News Blog.[5]

However, it should be acknowledged that none of the available alternatives in rural India were good ones. For example, the probability of receiving the correct diagnosis varied across the private and public provider, but never exceeded 15%, while the rate of correct treatment varied from 21% to about 50%. Doctors were more likely than other providers to provide the correct diagnosis. A great deal of treatment was inappropriate. CLAHRC West Midlands’ partner organisation in global health is conducting a study of service provision in slums with a view to devising affordable models of improving health care.[6]

— Richard Lilford, CLAHRC WM Director


  1. Watson SI, Wroe EB, Dunbar EL, et al. The impact of user fees on health services utilization and infectious disease diagnoses in Neno District, Malawi: a longitudinal, quasi-experimental study. BMC Health Serv Res. 2016; 16: 595.
  2. Carrin G & Hanvoravongchai P. Provider payments and patient charges as policy tools for cost-containment: How successful are they in high-income countries? Hum Resour Health. 2003; 1: 6.
  3. Brook RH, Ware JE, Rogers WH, et al. The effect of coinsurance on the health of adults. Results from the RAND Health Insurance Experiment. Santa Monica, CA: RAND Corporation, 1984.
  4. Das J, Holla A, Mohpal A, Muralidharan K. Quality and Accountability in Healthcare Delivery: Audit-Study Evidence from Primary Care in India . Am Econ Rev. 2016; 106(12): 3765-99.
  5. Lilford RJ. League Tables – Not Always Bad. NIHR CLAHRC West Midlands News Blog. 28 August 2015.
  6. Lilford RJ. Between Policy and Practice – the Importance of Health Service Research in Low- and Middle-Income Countries. NIHR CLAHRC West Midlands News Blog. 27 January 2017.

One thought on “Private Consultations More Effective than Public Provision in Rural India”

  1. Oh dear! Where do I start?

    In lay discourse about health care policy there is endless confusion about the distinction between public and private provision, public and private financing and out of pocket payments. These are quite distinct. This blog adds further confusion.

    Out of pocket payments are what the patient pays, in effect the price of health care to the patient. We can pay out of pocket payments to private health care providers or to public health care providers. Both Finland and New Zealand require many patients to pay small out of pocket payments to use public primary care services. By contrast there are no out of pocket payments for UK patients to use a private provider such as Virgin when it is contracted by the NHS to provide health care.

    The Rand Health Insurance Experiment was not, as suggested in the blog, a comparison of public and private provision. It was a randomised controlled trial of the effects of health insurance: the clue is in the name. Its aim was to understand the effects of out of pocket payments (price) on demand for health care (patient behaviour). It was not concerned with supply by public or private health care providers. The experiment found that patient initiated demand for health care was indeed influenced by price, that the effect was small, and that the effect was indiscriminate in that both useful and non-useful health care consumption was reduced. The reduction in consumption was larger in low income groups and the largest difference in demand for health care was between no out of pocket payments and some out of pocket payments. This was therefore an investigation of the effects of price on demand.

    Like the Rand Health Insurance Experiment, the natural experiment in Malawi demonstrates the effects of price on demand. In this very low income setting a change from no fees to fees had a large and also indiscriminate effect on demand for health care. But throughout the period of the natural experiment the provision of health care was by a non-government organisation (private provision) contracted by the Malawian government (public financing).

    Fee-for-service payments and block contracts are a method of financing health care providers. They are unrelated to out of pocket payments by patients. In recent decades financing of NHS hospital services changed from block contracts to fee-for-service payments based on standard Healthcare Resource Group (HRG) tariffs. These are payments by the health care financing organisations to the providers. There was no introduction of out of pocket payments. The effects of different methods of health care financing are to create different incentive structures for the providers. They do not directly affect patient demand for health care.

    Unlike the Rand Health Insurance Experiment and the Malawian study, the Indian study is essentially a comparison of different methods of health care financing on health care provider behaviour. It compares market provided primary health care with free publicly provided health care. The former is characterised by fee-for-service financing paid for through out of pocket payments by the patient. The latter is characterised by central financing (block contracts or salaries unrelated to activity levels) and is free at the point of use. The Indian study confirms that fee-for-service financing incentivises health care providers to offer more and that appear to affect providers in the same indiscriminate way as patients. Providers spend more time with their patients and also offer unnecessary treatments.

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