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28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India.

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Presentation on theme: "28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India."— Presentation transcript:

1 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India.

2 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

3 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

4 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. From , approx 150 hospital PPPs (est. $53 billion in capital investment) have been tendered, awarded or closed (60% in Western Europe )

5 Primary care Public health Vaccinations Maternal & child health Management of entire hospital or network of hospitals and/or clinics Lab analysis Diagnostic tests Medical equipment maintenance Ambulances IT equipment & services Maintenance Food Laundry Cleaning Billing Hospital Mgmt Specialized Clinical Services Clinical Support Services Primary Care Non- clinical Services Design & Construction Detailed designs Building construction Medical equipment Capital financing Dialysis Radio- therapy Day surgery Other specialist services 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

6 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. Management of hospitals or networks of hospitals and/or clinics Country examples: Brazil Clinical Services Management Contracts Infrastructure PPP (PFI) Contracting out services such as dialysis, radiotherapy, day surgery etc. Country examples: Romania, Peru, UK Contracting a private provider to design, build and manage facilities Country examples: UK, Spain, Italy, Mexico, South Africa, France, Australia Non-clinical Services Contracting out works and services such as IT equipment and service, cleaning, catering, maintenance, etc. Country examples: global Contracting a private provider to design, build, and manage facilities as well as deliver clinical services Country examples: Portugal, Lesotho, Spain, Turks and Caicos Infrastructure and Services PPP Different solutions for different needs PPP in Health

7 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. Nearly 70% of health PPPs (measured by cost) since 2003 have involved hospital construction or expansion

8 IssueComments 1Does it address the country’s health priorities ? Will the PPP include treatments/services which will improve health outcomes for a broad population? 2Is it affordable for government & patients? Will patients pay a copayment? Is it affordable for the NHIF or MoH ? 3How 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 4How will the PPP operator be paid? per capita, per treatment/service, or global budget 5How will the bids be structured/evaluated? If technical bid – what should it include ? And how evaluated? How should the financial bid be structured/evaluated? Health PPPs require particular attention to:

9 MethodWhen to Use Per capita (e.g. X$ per person per year) primary care health care network (hospital + clinics) Per treatment/serviceFor 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

10 IFC Assumption/PrincipleIFC Approach 1 PPPs are about outputs, not inputs Specify outputs/functional specs in draft PPP contract Obtain bidders’ comments and finalize All bidders bid on same contract 2 Technical bids with equipment lists, business plans, investment commitments, etc are Subjective Not transparent Difficult to evaluate Frequently not implemented 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

11 IFC Assumption/PrincipleIFC Approach 3Financial 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 4No (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

12 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. New Hospital Detailed designs Capital financing Construction Medical supplies & equipment Clinical services Maintenance Non-clinical services Staffing Legal permits and authorization Reimbursement for clinical and non- clinical services Performance monitoring Medical licensing & certification $ $ Ministry of Health or National Health Insurer Private Consortium

13 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. Public Entity PPP Project Company Lender Holding Company Services (FM) Contractor Construction Contractor Direct Agreement (?) Loan Agreement Share Capital/Sub Debt Project/Concession Agreement Mgmt/Services Subcontract Construction Subcontract Services Subcontract Healthcare Provider

14 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. Public Entity PPP Project Company Lender Holding Company Services (FM) Contractor Construction Contractor Direct Agreement (?) Loan Agreement Share Capital/Sub Debt Project/Concession Agreement Services Subcontract Construction Subcontract

15 Monitor Films: Improving Healthcare in Romania: Contracting-Out Dialysis Services (7 minutes video) Dialysis Centers (Romania)

16 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 Dialysis Centers (Romania) 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%

17 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. 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 receives an annual budget and must treat all patients * The hospital includes a 30-bed private wing for private-paying patients. Results * The Government signed an agreement with Netcare, a large South African healthcare services group * Clinics opened in Hospital nearing completion and to be opened shortly Lesotho Hospital and Clinics “Thanks to the innovative PPP structure, operating costs for the new hospital are roughly equivalent to those at the existing facility. Patients will have access to greatly improved medical services and care, but pay the same minimal charge they currently do at any other public hospital in Lesotho.” Honorable Timothy Thahane, Minister of Finance

18 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. Overburdened specialty hospital National Shortage of trained healthcare professionals Delays in obtaining medical care for patients Severely ill patients Not receiving adequate care

19 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. New jobs created Integrated service delivery: Private partner responsible for all clinical services, equipment and pharmaceuticals at both hospital and clinics High quality healthcare at an affordable cost Promoted local economic development Hospital to serve as major clinical teaching facility

20 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. Nation’s main hospital was 100-year old Insufficient staff, maintenance & supplies Clinics also in poor condition & by passed by patients

21 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 Refurbishment and re-equipping of 3 primary care clinics Hospital will serve 1/3 of population

22 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, 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

23 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. HOSPITAL SUBURBIO – Increasing access

24 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India.

25 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. New business model for healthcare Investment of $32 million for medical equipment First PPP in the health sector in Brazil

26 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. 26 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

27 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

28 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 low- income & 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 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 Meghalaya Medical College PPP (India)

29 28 – 29 September 2011 Vedic Village Spa Resort Kolkata, India. 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

30 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

31 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


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