It is no secret that many Nigerians live in conditions that cause or aggravate illness while also running the risk of going bankrupt due to high out-of-pocket healthcare costs when the need arises. Health is critical to the development of any country. Therefore, establishing an efficient system and improving our healthcare sector should be a top priority in Nigeria.
What role does the private sector play in this? You may wonder.
For this quarter’s spotlight, we invited Funke Falade to chat about challenges and the role of the private sector in Nigeria’s healthcare system.
Funke Abdulkareem started her career as a management consultant with KPMG and spent eleven years there before leaving to focus on health in 2015. While at KPMG, she had a few minor stints in healthcare, such as strategy development and market studies. Since 2015, she has been working exclusively in the health sector.
She took up an offer to manage a global fund supply chain project and stayed there just long enough to realize she needed a deeper understanding of how health systems work.
Funke went to the Heller School of Social Policy and Management and earned a master’s degree in Global Health Policy and Management. At Heller, she picked up a strong interest in health financing which was not surprising given her background with KPMG and the fact that she was obtaining an ACCA certificate. She returned to Nigeria in 2018 to work with Palladium for a couple of years as a Health Financing Advisor before moving to NSIA in June 2021. At NSIA, Funke co-leads the NSIA’s wholly-owned healthcare subsidiary, NSIA Healthcare Development and Investment Company (NHDIC), alongside the CEO. Her role involves investing in strategic healthcare infrastructure projects in Nigeria.
What role do you see the private sector playing in the health sector?
I see two (2) strategic roles:
Healthcare delivery – There is an often-quoted statistic, I think from National Health Accounts data, that states that over 70 per cent of health expenditures occur in the private sector. Over 60 per cent of Nigeria’s health care is delivered by the private sector. This is despite the existence of more public healthcare facilities in the country. Obviously, from living in Nigeria, we understand that the functionality of a private clinic in comparison with, say, a primary healthcare centre cannot be compared, and this difference Is magnified as we move up the different tiers of healthcare services. The private sector has emerged and should continue to solidify its position as a strategic partner for healthcare delivery in the country.
Financing healthcare services – it’s apparent that the governments (and I speak of all the tiers – federal, state and LGA combined) in Nigeria do not have the resources to fund healthcare and indeed do not significantly fund healthcare. The last National Health Accounts Study that was published shows that governments fund only 14.3% of healthcare spending in the country. To dimension it a little more, we find governments and the private sector funding the majority of the supply of healthcare services while individuals fund the preponderance of the demand side of the equation, hence our huge out-of-pocket expenditure estimates. I think that perhaps if the government focused on and leveraged more of its resources on demand-side financing and purchasing outcomes, it would accelerate the private sector’s supply of healthcare services to an unprecedented level we’ve never seen in this country. The great thing about the private sector is that once it sees a burgeoning market, it rarely needs added impetus to move capital in that direction. For healthcare, the government’s job is to create that market with health insurance or similar pooled, strategic purchasing mechanisms.
Obviously, there are other roles the private sector can play in healthcare, including disruptive innovations for process efficiency, access to information technology, and extending capacity for support infrastructure or systems to healthcare; however, these can be opportunistic in nature relative to the two I mentioned above.
What are some of the major developments in the private sector investment in the health sector?
In the past 5 years or so, we’ve seen huge investments in multi-specialist and single specialist tertiary level health facilities. We’ve often talked about reversing the trend of medical tourism in the country, and I can see the seeds for that being sown right now. For example, in Lagos, there’s Evercare and the Duchess Hospital, NSIA’s Cancer Center in LUTH and the Marcelle Ruth Cancer centre in VI. In the FCT, there’s the Afrexim sponsored multi-specialist hospital project which just commenced development, and at least two (2) catheterization labs have been established in the last couple of years. The true test of these new world-class centres will be the passage of time and how they hold up the quality of healthcare services offered.
We’ve seen much disintermediation through health technologies that skip the ‘’middleman’’ and offer healthcare services and products directly to the consumer. There’s a lot of this happening in the pharmaceutical sector, where there are a number of direct-to-consumer apps such as Medsaf, and end-users can pull the medicines they need when they need them. Also, we have seen the likes of Tremendoc and Life Bank, which, powered by technology, offer healthcare services and not easily accessible medical supplies to consumers and healthcare facilities respectively on, demand. Pharmaceutical manufacturing is also a hot topic right now. While we have active pharmaceutical manufacturers in the country, there have been several discussions around expanding the productivity of this sector in terms of the number and type of finished formulations being produced locally and backward integration into the production of pharmaceutical inputs. There have also been very catchy headlines about Nigeria’s intent to commence local production of vaccines. While none of this has come to fruition, the intensity of the discussions amongst government stakeholders, development finance institutions and healthcare funds indicate that we may have a few projects on board in the next 5 years.
Finally, the term blended financing is becoming less of a theory and more of an approach as we see private sector capital and multilateral grant-making organizations coming together to jointly fund/support large-scale healthcare infrastructure projects.
What are the underlying challenges of private sector investment in health? And how can they be circumvented?
Poor ability to pay – Simply put, we have dismal health insurance coverage rates.
Nigeria and people cannot afford to pay for healthcare. For the private sector, there’s a financial return expected for every investment made. Where these returns are not forthcoming, the private sector will not touch such investments with a ten-foot pole. This is why the spate of private sector investment we see in Nigeria is at the tertiary level, where it is assumed that there’s a market that can pay rather than at the primary health care level, which has traditionally been focused on the bottom of the pyramid. This can be mitigated to some level through government investment in strategic purchasing schemes which provide a ready offtake for healthcare services and guarantees some level of returns to investors.
Business environment – this is a macro issue that affects every sector and ramps up the cost of production, whether for services or goods, to levels that reduce operating margins to low amounts. Let’s take power, for example, to set up a diagnostic centre with an MRI. You need access to clean power that cannot go off for more than a certain number of seconds. How can this be maintained in the face of power cuts, low voltage and the recent (almost) 300% hike in diesel prices? Oftentimes, the full weight of these costs cannot be passed off to the consumer, and this means shrinking margins and lower returns.
What other countries have done in the past is to provide access to financial incentives (such as tax breaks, access to cheap capital) and access to infrastructure (such as special economic zones with dedicated power, gas pipelines and good roads) to protect the focus sectors of the economy they wish to develop. Without these types of interventions, the interest in ventures like boosting local pharmaceuticals and catalysing local vaccine production may very well remain a dream.
Finally, what advice would you give young professionals thriving to impact the health sector?
Be curious and ask questions. I’ve found out that chances are the questions you think are stupid are the ones everyone has in their head but are not bold enough to ask.
At the risk of sounding cliché, there’s no box, and innovation is a key driver for solving Nigeria’s healthcare challenges.