04/09/2014 03:49 pm ET Updated Jun 09, 2014

Bankrupting a Nation -- Not the Best Way to Achieve Health Care

This week, as the spring meetings are hosted by the World Bank and International Monetary Fund in Washington, D.C., recent negligent and unaligned behavior from the World Bank's private lending arm, the International Finance Corporation, has garnered attention.

As a means to improving healthcare in Lesotho, the International Finance Corporation (IFC) marketed the Queen Mamohato Memorial Hospital, which opened in October 2011, as a cost-neutral model to replace Lesotho's old main public hospital, the Queen Elizabeth II Hospital, in the capital, Maseru. It was the first of its kind in Africa -- and indeed any low-income country -- because all the facilities were designed, built, financed, and operated under a public-private partnership that included delivery of all clinical services by a private sector partner.

Less than three years since it opened its doors, the PPP is already using more than half of the government's health budget and costs have escalated to $67 million a year. This is at least three times what the old public hospital would have cost today. And the private partner, Tsepong Ltd., is generating a 25 percent rate of return on equity. In fact, at the close of the Lesotho health contract with Tsepong in 2026, it is projected that Tsepong shareholders will have generated a total cash income 7.6 times higher than their original investment. Since the hospital is so expensive to operate, Lesotho has essentially focused the bulk of its state investment in urban care -- and poor people living in rural areas have been cut out of the bargain -- unless they can scratch together enough cash to pay for the journey into Maseru to get medical care.

At the same time, Lesotho has been forced to cut back on the state's agriculture and education investments. The Minister of Development Planning told Oxfam, "We may be able to treat people if they get ill, but we will not be able to ensure they have enough to eat."

The IFC should be held accountable for its poor advisory role to the government of Lesotho and for marketing this as a success internationally. It promised Lesotho more medical value from its flagship hospital without increasing the public cost - which plainly hasn't happened. The IFC is now advising on similar projects in Benin and Nigeria, and celebrating this plan as a new model for healthcare in Africa.

The outcome of this project seems to go against the World Bank stated goal of universal health coverage and its President's insistence on equity. If the World Bank Group truly wants to help rural people in Lesotho, which is their stated goal, they should instead implement their commitment to universal health coverage by prioritizing investment in primary health care, especially in rural areas.

On a broader level, this case is a flagrant example of how the World Bank does not work as one. Indeed while this public-private partnership got the government to spend half of the budget on a hospital in the city, the Bank's own advice to the government of Lesotho was to focus on rural areas. Hopefully Jim Kim's restructuring of the Bank and willingness for the World Bank Group to work as one will fix this and help the Bank avoid a repeat of such inconsistency and inefficiency in the future.

Oxfam recently published the case study "A Dangerous Diversion: Will the IFC's flagship health PPP bankrupt Lesotho's Ministry of Health?" Read the report here.