Our Views

Building or upgrading hospitals, diagnostic centres, or primary care networks is expensive, slow, and risky. Many governments know exactly where new facilities are needed – but face tight public budgets and limited borrowing space. At the same time, relying entirely on private provision is rarely an option for essential health services.

This is where two concepts increasingly come together:

Public–Private Partnerships (PPPs) and blended finance.

• PPPs allow the private sector to design, build, finance and/or operate infrastructure and services under a long-term contract with the public sector.
• Blended finance mixes public or concessional capital with private investment to make socially important projects viable that would otherwise struggle to attract commercial finance.

In healthcare, combining these tools thoughtfully can be the difference between a project that stays on paper and one that actually delivers better care for patients.

What Does “Blended Finance” Really Mean in Healthcare?

The term can sound abstract, but the basic idea is simple:

Use public or concessional resources strategically to reduce risk or improve returns so that private capital can flow into health projects that generate social impact but may not be fully attractive on market terms.

Think of a regional hospital that is essential for universal coverage, but whose expected revenues are not high or stable enough to support 100% commercial financing. The government wants private participation for efficiency and innovation, but cannot simply raise user fees without harming access.

Blended finance can, for example:

• Cover part of the upfront investment with a capital grant, so the project needs less commercial debt.
• Include a concessional loan from a development bank at longer tenors and lower interest.
• Provide a partial guarantee that covers specific risks (such as delayed public payments).

The result, if well designed, is a financial structure that is bankable for investors while still affordable and sustainable for the health system and its users.

Why Healthcare PPPs Are So Hard to Finance

If PPPs were straightforward, we would see many more successful hospital projects in low- and middle-income countries. Three recurring issues make them particularly challenging:

1. Uncertain and policy-dependent revenues
   Demand for health services depends on demographics, epidemiological patterns, insurance coverage, and household income. On top of that, reimbursement rules, benefits packages, or public payment mechanisms can change over time – all of which affect cashflows.
2. High political and social sensitivity
   Hospitals are not toll roads. Choices on tariffs, co-payments, or which services are covered are politically sensitive and often constrained by equity considerations. This creates regulatory and political risk that pure commercial finance is often reluctant to bear.
3. Long time horizons
   Health infrastructure requires heavy upfront investment, with returns spread over 20–30 years. Not all lenders are comfortable combining such long tenors with sector and country risk.

Blended finance is not a magic wand, but a way to reallocate risks more intelligently and to align incentives between public authorities, financiers, and operators.

How Blended Finance Can Support Healthcare PPPs

There is no one-size-fits-all formula, but some patterns are common in projects that reach financial close and deliver results.

1. Using Public Funds to Close the “Viability Gap”

Sometimes the social case for a project is strong, but the expected revenues are not sufficient to cover full investment and operating costs at market financing terms. In those situations, Viability Gap Funding (VGF) or capital grants can bridge the difference.

In practice:

• A government or development partner provides a grant that reduces the total investment to be financed commercially.
• Private investors need less equity and less debt, improving the risk–return profile.
• The project can offer services at tariffs consistent with national health and equity objectives.

This is often key for hospitals and primary care networks in less affluent regions, where the social value is high but the purely financial returns are modest.

2. Development Bank Loans to Stretch the Time Horizon

Commercial banks are not always willing to lend for 20–25 years, which is often what health PPPs require. Development finance institutions (DFIs) can fill that gap with longer-tenor, sometimes concessional, loans.

Their participation typically:

• Lowers the overall cost of capital.
• Increases confidence among commercial lenders and investors.
• Allows repayment profiles to be aligned better with the project’s real cash generation and public payment capacity.

3. Guarantees for Specific, Hard-to-Manage Risks

In many markets, investors are less worried about clinical demand and more concerned about:

• Delayed public payments or budget cuts.
• Sudden regulatory changes affecting tariffs or service packages.
• Currency convertibility or transfer restrictions.

Instruments such as partial risk guarantees, political risk insurance, or credit enhancement from DFIs and guarantee facilities can cover some of these risks. That allows commercial lenders to focus on project performance rather than macro or policy shocks.

Three Simple Questions Before Designing a Blended PPP in Health

Beyond technical structures, a few straightforward questions can help governments and partners stay anchored:

1. What specific health problem are we solving?
   Is the priority hospital beds, diagnostic capacity, primary care outreach, telemedicine, or something else? The financial structure should follow the service logic, not the other way around.
2. Which risks should the public sector realistically retain?
   In health, it often makes sense for government to retain part of the demand and regulatory risk, while the private partner focuses on construction, operations, and efficiency. Pushing “uncontrollable” risks to the private side usually increases costs or discourages bidders.
3. Where exactly is the blockage for private finance?
   Is it low returns, short tenors, country risk, or policy volatility? Blended finance works best when used like a scalpel: targeted to the real bottleneck, rather than spread thinly across the capital structure.

What This Looks Like in Practice: Lessons from Our Work

At Aninver, we have supported different health-related initiatives where public objectives and private investment intersect. These are not marketing stories, but concrete examples of the questions and trade-offs that appear in real projects.

Reviewing a PPP Hospital Pre-Feasibility in Spain

In Spain, we advised a private group assessing the development of a new hospital (around 11,000 m²) and a 150-bed elderly care facility under a PPP scheme. Our role was largely to stress-test and refine the project’s financial and strategic assumptions:

• Analysing the catchment area and demand for healthcare services.
• Updating operational and financial parameters in the existing pre-feasibility study.
• Reviewing investment needs, revenue scenarios, and risk allocation.

The outcome was not a simple “go/no-go” recommendation, but a clearer picture of:

• Under which contract structure and public payment mechanism the project could be viable.
• When some form of public support or risk-sharing mechanism would be necessary to make it bankable without compromising affordability.

Positioning Health Services as an Investment and Export Sector

In another assignment, we contributed to the feasibility study of an investment and export promotion agency for health services. Instead of structuring a single PPP, the aim was to:

• Map opportunities in areas such as hospital services, specialised care, and medical tourism.
• Identify regulatory and institutional barriers to attracting quality investment.
• Propose an organisational model to coordinate government, private providers, and financiers.

This kind of work is essential for countries that want to develop a pipeline of investable health projects, making future PPPs or blended finance facilities more realistic.

Keep Exploring: PPPs, Health, and Financing Innovations

Blended finance in healthcare PPPs is not just about complex financial engineering. Done well, it is about making essential services happen sooner, better, and for more people, while using scarce public resources wisely.

If you are interested in going further, we invite you to explore some of our related work:

• Review of pre-feasibility study of a Health PPP project – assessing financial feasibility, demand, and risk allocation for a new hospital and elderly care facility.
• Feasibility study to create an Investment and Export Promotion Agency of Health services – designing an institutional vehicle to position health services as a strategic sector for investment and exports.

These and other projects are part of our broader work at the intersection of infrastructure, health, and innovative finance. If you are working on a health project that faces the classic question – “how do we finance this sustainably?” – we’d be glad to help translate PPPs and blended finance into practical, context-appropriate solutions.