The role of the US-based Healthspot Franchise International (Healthspot) is to raise funds, establish medical protocols, set training guidelines and to recruit the national franchisers. The current model projects involving five full-time professionals in the parent organization along with a number of consultants in specialized fields in both the parent organization and for country adaptation of the overall guidelines, training, management information system (MIS), and evaluation materials.

The startup phase will have two National Franchise Organizations (NFO) created in countries with 50 clinics each. Initiation of the two projects will be staggered by six months, and the total number of 50 clinics in each country opened 12 months after start-up, 18 months after program initiation. Kenya and Tanzania are currently planned as locations for phase one programs.

In the second year, the operation expands rapidly, with staggered expansion in Kenya and Tanzania , and project initiation in Uganda . In year three, projects are initiated in Cameroon and Nigeria . In year four, Zambia and Malawi are added. In each case, 10% of the franchisees needed to cover one-third of the country are opened by the end of the first year of operations. By the end of the second year of operation in a country, 33% of the total estimated franchisees should be open, by year three 75%, and by year four 100% of the franchisees are projected to be open.

Cost Effectiveness

To cover one third of Kenya (1), 11 million people served by 525 franchises, an annual operating subsidy of $1,209,747 will be required, not yet including the costs for HIV testing and ARV delivery (2). This is equivalent to $74 for each cured TB patient and $5 for each HIV OI treated patient per year. The average cost per TB cure among the seven countries will be $96, compared to current national TB costs of between $228 and $2,250 per cured TB patient in sub-Saharan Africa (3). Country specific costs for both all programs are shown in Appendix A (Found in downloadable file).

Required Subsidy

A subsidy of $72.5 million over five years will be required to establish functioning franchises in 7 African countries with populations over 10 million. The franchises are estimated to cover a population of 82 million and, after five years, treat over one million people for TB and HIV-related opportunistic infections annually, including approximately 45,000people in year five receiving pre-ART and ART care. Once the operations are fully functional on a steady state basis, TB patients can be treated on average for $96 each and $7 for HIV OIs. ART costs per patient are projected to decline below $500/year on average among the seven countries.

National Franchise Organization (NFO)

The franchiser will charge franchisees for a number of different services, including:

At start-up, loans will be given to franchisees to cover up to 90% of the start-up costs (the Franchise Fee noted above is included in these start-up costs). Interest payments on those loans will be at market rates. This start up loan will cover equipment, furnishing, initial rent, inventory and other franchisee start up costs. Where possible, these loans will be extended by a micro-finance agency and not by the NFO.

No other source of income to the NFO is projected beyond those from franchisee payments. No payments from the NFO to Healthspot are planned.

Required subsidies from government or international donors will be required indefinitely, however these subsidies are lower, from both governmental and societal perspectives, than current subsidies by national TB programs or many AIDS programs targeting the same hard-to-reach populations.

One-time franchise set-up costs are anticipated to include initial brand creation, marketing, recruitment and costs of adaptation of clinical guidelines, training materials, and MIS systems to local standards, as well as baseline survey and analysis. This analysis will provide a basis to ascertain the effectiveness of the intervention at reaching target populations, its cost-effectiveness, and cure rates, and process monitoring to evaluate the franchise systems (e.g.: provider monitoring, contract design and enforcement, etc) in preparation for scaling up after the pilot period.

Additional administrative salaries, support, and overhead expenses are calculated using international salary staff or consulting staff estimates for support. These costs are included in the budget and in the cost/client treated. Additional oversight, strategic planning and evaluation services are budgeted for the start up phase of the program. These services will work with the donors and the franchisers to create and implement a scalable model of the program. These expenses are budgeted within the operation of the full-scaled program, but will make the initiation phase quite a bit more expensive on a cost per client basis than the steady state.

Detailed calculations of the franchise income are shown below in Appendix A.

Franchisee

For the franchise members, profit will be taken as the primary motivation for membership, however other less quantifiable benefits will also be addressed, with particular emphasis during the start-up phase. Franchisee motivation is discussed more fully above.

Income for the franchisees will come primarily in seven ways:

We expect that non-HIV/TB related consultations and care will provide the bulk of franchisee income, and that the subsidized TB, HIV, and AIDS care will be built on top of this core set of income-generating services. For TB and AIDS care, we refer to ‘fees charged’ to include fees that may be reimbursed by the NFO via vouchers or approved payments in lieu of client charges (4).

Using high burden areas of Kenya as an example, a clinic will cover a population of 20,000 with the national HIV+ prevalence rate of 8%, and TB incidence of 0.5%. It is therefore estimated that each franchisee clinic treats, on average, 19 TB clients and 213 HIV clients per year. This client base will generate $508 per year in TB revenue and $4,254 in HIV OI revenue. This revenue source is in addition to a base of revenue the clinic earns selling essential drugs and supplies, which are estimated to earn $4,875 per year in revenue, based on the experience of CFW Clinics in Kenya (5). In generating this $9,637 in revenue the clinic is estimated to incur $6,756 in expenses.

TB Diagnosis

TB diagnosis will be charged directly to patients at a set fee of $0.50 for each sputum test. For inconclusive results, a second test will be performed, again for a fee of $0.50. Franchisees may test, and be reimbursed by the NFO, up to 5% of their TB patients without fee to the client. Total estimated clinic income from TB diagnosis is $187 per year.

Treatment for TB will use the recommended regimen of the national DOTS program, assumed here to be a six-month course for first-time TB clients and an eight-month course for relapsed clients (6). All drugs will be free to patients, and all counseling costs paid at one time, in advance, at a cost of $4.00. No additional payments by patients for TB care will be required.

Upon verified completion of a full course of care and a negative sputum test or equivalent verification, patients will receive from the NFO, a ‘cure bonus’ payment of $4.00. At the same time, franchisees will receive a ‘cure bonus’ payment of $15.00.

HIV/AIDS

A range of treatments of opportunistic infections will be provided to franchisees at non-subsidized bulk-purchase MEDS/UNICEF rates, to be sold with a mark-up depending on market conditions, currently estimated at 100%. The mark-up rate will be fixed by the NFO in consultation with Healthspot. In addition, providers will be able to charge for consultations, at a set fee, and for consultation and treatment of non-franchised services. Fee schedules will be posted for these and all other franchised drugs, and regular evaluation using mystery clients and/or client exit-interviews will verify prices.

Given a target population of 20,000 for each member provider, we estimate that 60% of the HIV population base will be in Stage II or III of the disease and will seek treatment for opportunistic infections. We assume 75% will seek treatment, 50% will go to the private sector and 50% to the franchisee clinics in a given area. From the Center for Disease Control and World Bank data in Kenya, we conclude that patient shifting from private to public and vice-versa are equivalent in number, and the effect of in and out migration has therefore been ignored.

Markup on drugs to treat and prevent opportunistic infection will be 100%, and average monthly costs for consultation and care estimated at below $2/patient. The annual revenue from these drugs is expected to be $4,254 for each member.

Treatment for AIDS will include pre-ART and ART. All ARVs, both first and second line drugs (should the latter be eventually included) will be free to the clients in all circumstances. Clients will pay a consultation fee of $0.40 for each visit, to a maximum of $2 per month. A pre-approved voucher system will allow up to 10% of their clients to receive treatment without paying consultation fees, such fees to be reimbursed by the NFO.

General Healthcare Services

The majority of patients seen in franchisee consulting rooms are expected to be non-HIV, non-TB clients: the general population of health seekers. These will be treated as before franchise involvement, with consultations charged at set, posted, fees and drugs sold being those purchased from the franchise. We assume that TB and HIV patients will purchase other drugs, products and services beyond treatment of TB or prophylactic treatment due to HIV. We estimate, based on the CFW experience in Kenya , that the full array of general healthcare services provided by franchisees will generate average revenue of $4,875 for the franchisee based on 12-18 client visits per day.

TB Cure Bonus

A bonus will be paid by the franchiser to the franchisee for successful TB treatment. An incentive must be given to the provider, who will not have an income stream after diagnosis, and yet will still need to track patients’ use of medication, answer regular questions, and devote energy to these patients over the six or eight months of treatment. The franchiser will pay each provider $15 for every case of completed care, verified externally at start, midpoint of treatment, and by clean sputum test after six or eight months.

Financial Summary Tables

End Notes:

(1) We assume that we will be able to serve populations in the most densely settled 3 rd of each country, parts of which will be dense rural areas such as Nyanza province in Kenya.

(2) Full costs, including HIV testing, pre-ART care, and ART deliveries are detailed in the attached budget, Appendix A.

(3) "Cost and cost-effectiveness of increased community and primary care facility involvement in tuberculosis care in Lilongwe District, Malawi,” Floyd, et. al., 2003.; “Cost and cost-effectiveness of community-based care for tuberculosis patients in rural Uganda,” Okello, Floyd, et. al., 2003; “Cost and cost-effectiveness of increased community and primary care facility involvement in tuberculosis care in Machakos District , Kenya ,” Nganda, Floyd, et. al., 2003; Cost and cost-effectiveness of home-based care versus hospital care for chronically ill tuberculosis patients, Francistown , Bostwana,” Moalosi, Floyd, et. al., 2003.

(4) Fees for medical consultations will be set at the median to low end of current private fee rates: currently $0.20 to $0.50 per consultation in Kenya. Prices for drugs and commodities will be priced at the low end of local private rates. All drug, commodity, and consultation fee ranges will be posted within clinics. As described in the Drug Supply Chain Management section, no drugs or commodities may be sold by any franchisee that have not been supplied from the NFO. Doing so will be grounds for expulsion from the franchise.

(5) The CFW Clinics are operated by nurses. Their annual profit is estimated at $1,200. While they do not provide care for HIV or TB, we make a conservative assumption that some of their patients are HIV positive, diagnosed or not, and so the income from these clients are already accounted for in the $1,539 profit above. Note that ARV income is not included in any of these numbers due to uncertainties about pricing of inputs.

(6) As noted earlier, actual regimens used will be negotiated with national TB programs in each country.

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