The Role of Regulation: Influencing Private Sector Activity Within Health Sector Reform

The increasing privatization of health care provision has been a central element of health sector reform in many countries. Regulation is often seen as a potential response to address the many problems which arise in the private production, financing and delivery of health services. It is seen as having a crucial and balancing role in the push towards privatization. Despite the existence of basic regulatory legislation in most developing countries, the degree to which regulations are enforced and effective is low. The review of experience suggests that the ability of regulatory mechanisms to influence private sector activity is limited. Regulation is not costless. It requires both staff and monetary resources in order to design, implement, monitor and enforce them. Thus privatization, partially in response to the government's poor performance and lack of resources, has led to greater demands for regulation, but regulation itself needs additional resources in order to be successfully implemented. We look at the appropriate role for regulation within this context. It is suggested that for poorer LMC, that there be minimal standards of health service provision laid out by legislation. However, beyond this non-regulatory interventions may be more appropriate for affecting private sector activity. In contrast, for wealthier LMC, we suggest that incentive-based regulatory schemes may be feasible, although this requires more policy-action research. © 1997 by John Wiley & Sons, Ltd.