Saturday, January 27, 2007

Health Franchises for Africa

An idea that is working for Africa;

"Western aid contractors have promoted the idea of “social marketing”—that is, selling, at subsidized prices, products such as bed nets treated with insec­ticides to ward off malaria. It’s a sensible notion: people value things they buy. But aid agencies really know little about commerce. They promote prod­ucts where people either have no money or are not truly interested in what’s on offer.

Instead, what Africa needs is its own business solutions—for-profit solutions, at that. One prom­ising approach is developing in Kenya, a nation with a high mortality rate from malaria and other infectious diseases but, as in so many other parts of Africa, a lack of trained medical staff. The World Bank estimates that Kenya has just 13 physicians per 100,000 people (compared with 206 per 100,000 in Brazil) and is not able to replace medical workers it is losing, mainly to Europe. When I visit London hospitals, I find that over half the nurses are African. Not only are Kenyan children dying, but the few people who look after them are leaving. A nonprofit organization based in Minneapolis that is run on a sound business model, the HealthStore Foundation (HSF), has come up with a model to help clinical staff stay.

HSF was founded in 1997 by Scott Hillstrom, a lawyer who was involved in such businesses as technology, health care, and real estate. It is now run by Steve Dahl, who spent ten years in finance and planning posi­tions at such corporations as General Mills, BMC Industries, and Tonka Corporation, and Liza Kimbo, a former senior manager at Standard Chartered Bank in Kenya. The aim was to “prevent needless death and ill­ness by sustainably improving access to essential medicines.” The foundation finds nurses and community health workers who put up a small amount of their own money to buy into a clinic or shop as a franchisee of HSF. The foundation provides up to 88 percent of the capital and gives four weeks of intensive training in mar­keting and management, as well as some medical training. To recoup capital costs, HSF charges a markup on the essential medicines the clinics sell.

The clinics themselves offer testing and diag­nosis of disease in previously neglected locations (from rural villages to the slums of Nairobi) and sell medicines and other health care products as well. Each location is a for-profit enterprise, generating revenue to pay its owners a competitive annual sal­ary, up to about $1,400 a year, compared with an average of $754 a year for a nurse in Kenya.

Of course, even $1,400 is far lower than African nurses can make in Britain and the U.S., but the cost of living is lower in Kenya, and the freedom and responsibility of being an owner are tempting. So far, HSF has helped establish 64 profitable enter­prises, serving more than 400,000 Kenyans. Within a year, the foundation could have well over 100 locations serving one million people. Meanwhile, in 2005 alone, the franchises treated 50,000 cases of malaria.

Says a recent Columbia Business School analysis: “The HealthStore micro-franchise model gives local entrepreneurs the opportunity to own and operate sustainable, profitable businesses while simulta­neously curtailing incentives for corruption…. By aligning the incentives of customers, government regulators and owner-operators, HealthStore’s franchise model is able to deliver a high quality of care to previously underserved Kenyans while real­izing a healthy return on investment.”

The fallout from these HSF clinics is substantial. Drug prices decline in other shops, where com­petition forces service to improve. So, as in other markets, people who never visit HealthStore clinics benefit from their existence. Some government-owned clinics distribute the same medicines for free but are often out of stock, and the HSF clinics could do even swifter trade if they were better informed of such government limitations.

There have been breaches of franchise standards, but the foundation monitors and cracks down. Competition limits price-gouging. Credit facilities have opened up for patients who cannot pay on the spot—and lending experience has been good. Those who can’t pay at all are usually given charitable help, sponsored by HSF. According to Transparency International, Kenya is one of the most corrupt places on the planet, so the HealthStore success is even more remarkable….”

HealthStore's Franchise Approach to Healthcare
Micro-Franchising Model
The Challenge of Global Health
"The fact that the world is now short well over four million health-care workers, moreover, is all too often ignored. As the populations of the developed countries are aging and coming to require ever more medical attention, they are sucking away local health talent from developing countries. Already, one out of five practicing physicians in the United States is foreign-trained, and a study recently published in JAMA: The Journal of the American Medical Association estimated that if current trends continue, by 2020 the United States could face a shortage of up to 800,000 nurses and 200,000 doctors. Unless it and other wealthy nations radically increase salaries and domestic training programs for physicians and nurses, it is likely that within 15 years the majority of workers staffing their hospitals will have been born and trained in poor and middle-income countries. As such workers flood to the West, the developing world will grow even more desperate."


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