In 1996, the public hospital and surrounding clinics in Uitenhage, an industrial town in the Eastern Cape province in South Africa, were short of doctors and their infrastructure and services were beginning to deteriorate due to constraints on government funding. Many of the hospital's fee-paying, insured patients had shifted to nearby private hospitals, and revenues had fallen considerably. At the same time, a large factory in the town was concerned about the large and rapidly increasing cost of providing health coverage for its employees and was seeking a less expensive, more sustainable health care package.

In response to these factors, a private group of local physicians approached the public hospital and proposed creating a partnership in which they would renovate one of the hospital's underused wards and provide services there for members of a new health plan. Under the arrangement developed by the physicians and the hospital, the physicians' group agreed to:

• renovate a 25-bed ward, including painting, repairing the bathroom, and providing bed linen;
• refer and treat members who required inpatient care, and private patients referred by other physicians, under other health plans;
• pay the standard Department of Health fee-per-service to the hospital, which passes it on to the government treasury;
• in addition, pay 30 percent of fees into a trust fund for improvements to the hospital and nearby public clinics;
• provide services at nearby public primary health care clinics associated with the hospital at no charge to the Department of Health;
• provide on-call coverage after hours for both private and public patients at the main community health center in the town.

Under the arrangement, the hospital agreed to provide nursing care, food, diagnostic and operating room services, maintenance and cleaning, and administration at the same level provided for public patients.

The group of physicians then approached the factory and offered them a health plan under which employees and dependents would receive comprehensive health care for a fixed monthly fee that was significantly lower than that of the other health plans offered by the employer. The employer offered to share the monthly fee with its employees on a 50/50 basis. The majority of employees joined the new plan.

Benefits

The public sector and the community both have benefitted from this partnership in the following ways:

• the public sector has recovered some of its costs and has been able to improve services for public patients;
• improved access for public patients to quality health care through local primary health care clinics;
• reduced pressure on hospital outpatient services;
• the establishment of a public Rape Crisis Center at the hospital.

The private sector has also benefitted by making a profit, and factory employees and their families have benefitted by having a more affordable health care plan.

Factors Contributing to Success of the Partnership
Several factors have led to the success of the partnership, including the ability of the physicians' group to invest in upgrading the ward, the large supply of potential health plan members, and the availability of skilled hospital administrative staff who could handle registration, records management, and billing for the physicians' group.

Built-in incentives to keep health care costs low. Because the plan's members pay a fixed monthly fee and do not pay for individual services, the physicians' group bears the financial risk for the care of the plan's members. This risk has provided an incentive for physicians to control costs by using low-cost preventive and ambulatory care, minimizing use of hospital inpatient services, limiting hospital stays where possible, and using lower cost public hospitals. Keeping costs low will help ensure that the monthly fee for the plan remains affordable.

Large number of potential members. The factory employees provided a ready supply of potential members for the health plan. The fact that the physicians were already well known in the community increased the employees' willingness to join the plan. Having a large number of members has provided the plan with an important financial base, which has allowed the group to spread the risk, recoup its initial investment, and keep administrative costs low.

Willingness of the physicians' group to invest in the partnership. The physicians' group was willing and able to invest in upgrading the hospital, a necessary step in providing services under the plan. Furthermore, the group had the management skills necessary to develop and implement its side of the partnership, including developing procedures for managing care, such as using an approved drug list, and controlling costs.

Existing skills and systems at the hospital. The expertise of the staff of the hospital's efficient patient registration and billing systems have contributed to recovering revenues in a timely and cost-efficient manner.

Willingness of the hospital union to participate. The hospital workers' trade union participated in joint discussions with the community and factory trade union representatives about the plan. The union's initial opposition was overcome when it became clear that the partnership's intention was to strengthen public services, not to privatize them, and that the community supported the initiative.

Leadership. The leaders of both the physicians' group and the local government health department trusted each other, were committed to the partnership concept, and were willing to take risks and be flexible.

Modeling the Partnership
The Uitenhage partnership is now serving as a model for the development of other partnerships in South Africa. Each new partnership is different, varying according to local circumstances, but they all seek to bring together complementary resources and to benefit public patients.

This working solution is a brief description of a partnership initiative of the South African Department of Health supported by the Equity Project, which is funded by USAID/South Africa and managed by Management Sciences for Health.