Health PPPs
Improving Access & Quality of Care for the Public
Global Experience and Lessons
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
 Health care spending is the biggest component of GDP
globally (9% and rising);
 Governments are facing:
* increasing demand for health care services; and
* rising costs (medical technology, changing disease patterns).
 Governments are looking for new models to respond to
these challenges.
PPPs can mobilize private finance, increase access, introduce
efficiencies in the delivery of public health services, and
improve health outcomes
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
PPPs differ from traditional public procurement:
 Rather than buying buildings, equipment or supplies, PPPs are long-term
contracts for governments to buy a bundled service (facility, staff,
supplies, equipment)
 PPPs involve annual payments over long-term after facility commissioning
(no payment during construction)
 Payment is tied to performance not inputs/milestones
 Private party is typically responsible for all or part of the capital
financing
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
From 2005-2010, approx 150 hospital PPPs (est. $53 billion in capital
investment) have been tendered, awarded or closed (60% in Western
Europe)
Health PPPs by Region
% of Investment Value
3%
2% 1% 1%
3%
6%
11%
58%
15%
Western Europe
Australia/NZ/Japan
Eastern Europe and Central Asia
Middle Eastern and North Africa
South Asia
North America_Canada only
Latin America and the Caribbean
Sub-Saharan Africa
East Asia and Pacific
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Wide Range of Alternatives
• Under a PPP, a government or national health insurer contracts with a private
partner (for-profit or not-for-profit) for a health care service and/or facility
• Governments can select from a wide range of options depending on their needs
Design
&
Construction
Detailed designs
Building
construction
Medical equipment
Capital financing
Nonclinical
Services
IT equipment &
services
Maintenance
Food
Laundry
Cleaning
Billing
Primary
Care
Primary care
Public health
Vaccinations
Maternal & child
health
Clinical Specialized
Support
Clinical
Services
Services
Lab analysis
Diagnostic tests
Medical
equipment
maintenance
Ambulances
Dialysis
Radio- therapy
Day surgery
Other specialist
services
Hospital
Mgmt
Management
of entire
hospital or
network of
hospitals
and/or clinics
Nearly 70% of health PPPs (measured by cost) since 2003 have involved
hospital construction or expansion
0.6%
0.7%
6.7%
Hospital management
8.7%
Medical equipment services
Ancillary medical and
accommodation services block
14.1%
Clinical services
Clinic construction or
expansion
69.1%
Hospital construction or
expansion
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Health PPPs require particular attention to:
Issue
Comments
1
Does it address the
country’s health priorities ?
• Will the PPP include treatments/services which will improve health
outcomes for a broad population?
2
Is it affordable for
government & patients?
• Will patients pay a copayment?
• Is it affordable for the NHIF or MoH ?
3
How will patient care be
ensured ?
• Need to set, monitor and enforce performance targets re:
•Timeliness of care
•Overall hospital mortality rate
•Readmission rates
•Hospital infection rates
• Preferable to enforce accreditation and professional
licensing/certification
4
How will the PPP operator
be paid?
• per capita, per treatment/service, or global budget
5
How will the bids be
structured/evaluated?
• If technical bid – what should it include ? And how evaluated?
• How should the financial bid be structured/evaluated?
Method
When to Use
Per capita (e.g. X$ per
person per year)
• primary care
• health care network (hospital + clinics)
Per treatment/service
For services which are predictable and easy to cost,
such as:
•Lab tests
•Diagnostic imaging
•Dialysis
•Radiotherapy / chemotherapy
•Ambulance services
Global fixed budget (X$
per year)
•Secondary hospital
• Tertiary hospital, though may require supplementary
payments for higher cost treatments
IFC Assumption/Principle
1 PPPs are about outputs, not
inputs
2 Technical bids with equipment
lists, business plans, investment
commitments, etc are
• Subjective
• Not transparent
• Difficult to evaluate
• Frequently not implemented
IFC Approach
• Specify outputs/functional specs in draft PPP
contract
• Obtain bidders’ comments and finalize
• All bidders bid on same contract
• No advance prequalification
• Limit “technical bid” to experience criteria
related to operations/financing –
quantifiable/verifiable
• E.g at least X years operating an
accredited hospital treating at least Y
patients p.a.
• Has raised financing of at least $Z for
projects in last 3 years
• Assess on pass/fail basis (not points)
• Those bidders who pass proceed to financial
bid stage
IFC Assumption/Principle
IFC Approach
3 Financial bids should be
structured as a single number –
typically lowest cost to the
MoH/NHIF
• Bids are proposed cost to the
Government/MoH
• Lowest bid wins
• No financial model submitted or reviewed
4 No (or limited) post-award
negotiations
• Get bidders’ comments on draft PPP contract
before tender. Finalize and publish
• All bidders initial PPP contract as part of bid
• No conditional bids or post-award
negotiations
Private
Consortium
Ministry of Health or
National Health Insurer
$
Detailed designs
Capital financing
Construction
Medical supplies & equipment
Clinical services
Maintenance
Non-clinical services
Staffing
New
Hospital
$
Legal permits and authorization
Reimbursement for clinical and nonclinical services
Performance monitoring
Medical licensing & certification
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Public Entity
Direct Agreement (?)
Lender
Project/Concession
Agreement
Loan
Agreement
Construction
Subcontract
Construction
Contractor
PPP Project
Company
Services
Subcontract
Services (FM)
Contractor
Share
Capital/Sub
Debt
Holding
Company
Mgmt/Services
Subcontract
Healthcare
Provider
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Public Entity
Direct Agreement (?)
Lender
Project/Concession
Agreement
Loan
Agreement
Construction
Subcontract
Construction
Contractor
PPP Project
Company
Share
Capital/Sub
Debt
Holding
Company
Services
Subcontract
Services (FM)
Contractor
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Dialysis Centers (Romania)
Monitor Films: Improving Healthcare in Romania:
Contracting-Out Dialysis Services
http://www.youtube.com/watch?v=VCrN6jZXzKI
(7 minutes video)
Dialysis Centers (Romania)
Project
•PPPs for 8 dialysis centers covering 25% of the country’s
dialysis patients, to address unmet demand, aging facilities,
shortage of trained staff, and lack of national standards
Structure
•Operators receive per treatment payments, with full
responsibility over facilities, staff and treatment
•New best-practice national standards developed and
implemented
Results
• Improved service quality and facilities
• Private operators invested USD40m to upgrade facilities
• Nearly USD4.5m in savings created for the National Health
program
•% of clinics complying with national standards for running
diagnostic blood tests rose from 50–63% to 100%
Lesotho Hospital and Clinics
Project
A PPP for the construction, equipping, financing, and
management
( all clinical and non-clinical
services) of a new 420-bed hospital and
3 referral
clinics
Structure
* One of only a few hospital PPPs in emerging markets where
the
the operator is responsible for all services
* Under the performance-based contract, the Operator
“Thanks to the innovative PPP
structure, operating costs for the
receives an annual budget and must treat all patients
new hospital are roughly equivalent
to those at the existing facility.
The hospital includes a 30-bed private wing for private-paying Patients will have access to greatly
patients.
improved medical services and care,
but pay the same minimal charge
they currently do at any other public
Results
hospital in Lesotho.”
Honorable Timothy Thahane, Minister
The Government signed an agreement with Netcare, a large
of Finance
*
*
*
South African healthcare services group
Clinics opened in 2010. Hospital nearing completion and to be
opened shortly
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Improving quality:
Lesotho
Overburdened specialty hospital
Delays in obtaining medical care for patients
Severely ill patients Not receiving adequate care
28 – 29 September 2011
Vedic Village Spa Resort
National Shortage of trained healthcare professionals
Kolkata, India.
Improving quality:
Lesotho
New jobs
created
Promoted local economic development
High quality healthcare at an affordable
cost
Hospital to serve as major clinical teaching
facility
Integrated service delivery: Private partner responsible for all clinical
services,
equipment and pharmaceuticals at both hospital and clinics
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Nation’s main hospital was 100-year old
Clinics also in poor condition
& by passed by patients
Insufficient staff,
maintenance & supplies
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Construction of a new $100 million state-of-the-art
referral hospital with 425 beds
Hospital will serve 1/3 of population
Refurbishment and re-equipping of 3
primary care clinics
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Hospital do Suburbio (Brazil)
Project
New 280-bed emergency hospital serving one million
people in Salvador (state capital)
Structure
Construction financed by the Government
Tender was for 10-year PPP contract to equip and
operate (clinical and non-clinical) the hospital
Payment is linked to quantitative and qualitative
performance indicators.
First health PPP implemented in Brazil
Results
Successfully tendered and awarded in February, 2010. Opened Sept 2010
Total project cost: US$ 27 million construction (Bahia Government), US$ 32 million
equipping (private partner), of which US$ 23 million in 1st year
HOSPITAL SUBURBIO – Increasing access
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Investment of $32 million for medical equipment
First PPP in the health sector in Brazil
New business model for healthcare
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
Mother & Child Welfare
• Maternal Mortality Rate: 254 per 100,000 live births. About 20% of global burden.
• Infant Mortality Rate: 53 per 1000 live births
• %age Institutional Births: 32% national average. However, the average is 67% in Urban
centers and 24% in rural centers.
Affordability Issues
• Only 10% of population under the ambit of some form of medical insurance
• Among low-middle-income groups 80% of medical expenses are out-of-pocket
• A hospitalization event can throw a family into poverty
Workforce Shortages
• India is short of 600,000 Doctors; 1,000,000 nurses and 200,000 dental surgeons
• There are only 9 doctors and 12 nurses for every 10,000 Indians
• Only 12,000 post-graduate students pass out each year against need for 30,000
specialized doctors.
Specialty Care Shortages
• Residents of Tier-II, Tier-III and Rural India have to travel upwards of 90 km to access
specialty care
• 35% of total disease burden requires specialty care
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
26
26
Andhra Pradesh (India)
Project
PPPs for advanced diagnostic imaging centers in 4
government medical colleges/hospitals in Andhra
Pradesh
Structure
PPP contract involves comprehensive imaging services,
including refurbishment of existing facilities/new
construction, equipping, capital financing and
operation of imaging centers
Results
Awarded in June 2010 to Medall, a consortium of
imaging providers with GE as the equipment partner
Centers commenced operation in late 2010
IFC will also be implementing a similar transaction for
in-hospital lab services for the same hospitals
Meghalaya Medical College PPP (India)
Project
•
Ministry of Health, Meghalaya, retained IFC as lead transaction
advisor for a project to address lack of any medical college in the
state of Meghalaya and to address healthcare needs of lowincome & uninsured populace
Structure
•
The scope of the project was:
o
Greenfield teaching hospital of 650 beds (550 public, 100
private)
o
Greenfield Medical college to admit 100 MBBS students
each year
o
Design, construction, partial finance, full operation for 30
years with significant risk transfer to the Private Operator.
Results
• Project Transaction Structure has been approved by GoM. Bidding
procedure to commence in September/ October 2011.
•
Capex ~ USD 55 million. Government capital contribution of 40%
of capex.
•
•
Patients will get services at no additional cost as present.
First batch of MBBS students will be admitted in August 2013
1.
Use PPPs to expand service / improve quality
Not as means to simply finance new buildings/equipment
2.
Define services needed (not facilities)
Give operators/bidders flexibility on how to provide (location, size,
design, technology)
3.
Buy from existing private operators where feasible/economic
Not necessary to duplicate in public facilities
4.
Maximize private sector responsibility for greater benefits
PFIs are politically expedient, but “full” PPPs deliver more benefits
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
6.
Contract management capacity is essential
But often overlooked
7.
Long-term fiscal affordability is essential
But not reflected in “Value-for-Money” analysis
8.
PPPs will only help if part of a broader health sector
reform program
Health financing/insurance to promote competition and
efficiency
Provider payment reforms to spur efficiency
Accreditation to improve/ensure provider quality
Developing hospital management capacity
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.
We see several areas/themes emerging in the medium
term:

Contracting out public health insurance activities
(provider contracting, claims adjustment, payments)

Shift to defining PPPs in terms of services, not
facilities/equipment




Integrated care (networks)
More “full” PPPs, but possibly with limited risk sharing
Radiotherapy
Medical education
28 – 29 September 2011
Vedic Village Spa Resort
Kolkata, India.