Balancing Risks and Reforms: WHO's Guide to Private Providers in Public Health Systems

The WHO report advises middle-income countries in Europe to cautiously integrate private health-care providers into public systems, emphasizing strong regulation, strategic purchasing, and transparency. Without proper safeguards, private sector involvement risks undermining equity, efficiency, and quality of care.

A sweeping new report from the WHO Barcelona Office for Health Systems Financing, in collaboration with the University of Edinburgh, the European Observatory on Health Systems and Policies, and supported by the World Bank, shines a revealing spotlight on the growing trend of integrating private health-care providers (PHPs) into publicly financed health systems in middle-income countries (MICs) across the WHO European Region. The document offers a deep dive into the motivations, risks, and strategies surrounding this shift. Drawing on extensive case studies, research, and country-level experiences, it gives governments a practical but cautious roadmap for engaging private actors to support, rather than undermine, universal health coverage.

Profit vs. Patients: The Risky Balance

At the heart of the issue lies a paradox. Policymakers are often drawn to private sector involvement by promises of greater efficiency, improved competition, and increased patient choice. Yet, as the WHO report makes clear, the incentives driving PHPs primary profit do not always align with the goals of equity, quality, and accessibility in health care. When PHPs become part of state-financed networks, governments often lose some degree of control. In countries with limited regulatory or enforcement capacity, this can open the door to problematic behaviors such as patient selection, supplier-induced demand, and abuse of dual practice, where doctors steer patients from public to private facilities for personal gain. These behaviors are not hypothetical; they are already documented across multiple countries.

Georgia serves as a vivid example of how unfettered privatization can backfire. Following an extensive privatization wave, most of the country’s hospitals and many primary care clinics are now privately owned. Rather than improving outcomes, this shift has created excessive hospital capacity, duplication of services, and fragmentation in care delivery. A surge in hospital beds and expensive diagnostic equipment has not been matched by utilization or improved access, particularly in rural or underserved areas. The system has become skewed toward profit-friendly services and regions, while leaving public health priorities unmet.

The Private Equity Dilemma

Of particular concern is the increasing role of private equity in health systems. These firms, focused on maximizing short-term financial returns, often use high levels of debt financing and seek rapid profitability. According to the report, such ownership models are linked to cost-cutting measures that can reduce the quality of care, including staff reductions and increased service volumes for profit. While most of the current evidence comes from high-income settings like the United States, private equity is becoming more active in the European Region as well, including in countries like Germany, Sweden, and the United Kingdom. The report urges middle-income countries to take a prudent approach, either by limiting or outright prohibiting private equity-owned providers from entering state-financed networks, especially in essential or monopolistic service areas.

Fragmentation and Overcapacity: A Cautionary Tale

One of the key structural issues raised in the report is the risk of fragmentation, particularly in primary care. Without strategic planning or regulation, the entrance of PHPs into the market often results in an over-concentration of services in wealthier urban centers, leaving rural and low-income areas underserved. Small, solo practices, while easier to set up, often lack the resources or scope to provide comprehensive care. In Ukraine, for example, a rise in small-scale private practices has shifted funding away from public primary care centers, undermining progress toward integrated, team-based care models.

Similarly, in the hospital sector, indiscriminate purchasing from all willing providers has led to overcapacity and inefficiencies in countries like Bulgaria. Despite policy efforts to downsize public hospital infrastructure, the growth of the private sector offset these reductions, resulting in increased hospital admissions, higher costs, and continued excess capacity. Strategic purchasing and selective contracting, based on defined health needs and performance standards, are presented as essential tools to prevent such imbalances.

Smarter Contracting, Better Outcomes

Rather than shunning the private sector entirely, the WHO recommends adopting smarter, more strategic contracting practices. Countries like Estonia and Croatia offer promising examples. Estonia limits automatic state contracts to a core network of public hospitals while selectively engaging PHPs only where service gaps exist. Croatia has experimented with a two-contract model for primary care, encouraging the formation of larger group practices that are more capable of offering comprehensive, continuous care. These models suggest that when eligibility criteria, service standards, and payment incentives are aligned with health goals, PHPs can play a constructive role without compromising public oversight.

The report also underscores the importance of transparent information systems. Requiring both public and private providers to report into unified health information systems ensures accountability and enables effective performance monitoring. Public disclosure of contracts, budgets, and provider performance data is encouraged to enhance transparency and reduce opportunities for corruption or state capture.

A Call for Transparency and Inclusive Governance

The final warning from WHO is political as much as technical. Once entrenched in a publicly funded system, PHPs often become powerful actors with the resources and influence to shape policy in their favor. This is particularly risky in environments where policymaking lacks transparency or where civil society engagement is weak. The report urges governments to ensure inclusive policy dialogue that involves not only private stakeholders but also community groups, civil society organizations, and public health experts. Open publication of rules, contracts, and performance data should be the norm, not the exception.

In sum, the report doesn’t oppose private involvement in health care but insists it must be done with eyes wide open. Strategic planning, robust regulation, smart purchasing, and public accountability are non-negotiable. For middle-income countries aiming to strengthen their health systems, the message is clear: start small, proceed carefully, and always keep the public interest at the center of health policy.