PPPs in Health - Emphasis on Egypt IFC Advisory Services in Public-Private Partnerships February 2012 Cairo, Egypt

2 The Health Sector  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).

3 The Health Sector in Egypt  Challenges becoming more pronounced in Egypt  Accelerated growth of age bracket population;  Government expenditure on healthcare is a mere 6% of GDP; (Households bear ≈97.7% of health expenditures out of their own pockets) Source: UN Population data, 2010  This translates into:  Poor public healthcare system, especially in rural areas;  Insufficient number of hospitals with proper service. PPPs can mobilize private finance, increase access, introduce efficiencies in the delivery of public health services, and improve health outcomes

4 PPP in Health 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 Ambulance services 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

5 Private vs. Public Sector Typical PPP Transaction Detailed designs Capital financing Construction Medical supplies & equipment Maintenance Non-clinical services Staffing Clinical services Legal permits and authorization Reimbursement for services Performance monitoring Define service package and standards Outline needs and strategy for sector $ $ Ministry of Health or National Health Insurer Private Partner

6 Health PPP Contract Structure 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

7 Health PFI Contract Structure 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

8 IFC Health PPPs in Egypt Project Two Greenfield specialized hospitals at Alexandria University, tendered using the PPP model. Structure Smouha, a 200-bed maternity hospital, including a Blood Bank and Mowassat, a 224-bed tertiary hospital with centers of excellence for neurosurgery and nephrology/urology; 20-year PPP contract for the design, financing, construction equipping, maintenance and facility management of the new hospitals; Alexandria University retains full responsibility for the clinical services, teaching functions and hospital management. Timeline 2 bids from local and international consortia received in October for each of the two hospitals; Commercial closing expected this FY. Alexandria University Hospitals

9 IFC Health PPPs in Egypt Project Structuring Foreign Exchange Protection  Affects tenure of Medical Equipment Services and maintenance; Setting equipment specifications vs. medical procedures / requirements; Financing Sizeable project; Local financing is available; however “Project Finance” concept is still novel to the market; Post-Closure Capacity of monitoring bodies; Support during operating years. Challenges

10 Contact: Malak Draz IFC Advisory Services in PPPs Tel:

11 BACK-UP SLIDES

12 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

13 IFC PPPs in Health Project PPP for construction, equipping, financing, and management (all clinical and non-clinical services) of a new 425 bed hospital and 3 comprehensive primary care clinics, creating a health network Structure One of only a few hospital PPPs in emerging markets where the operator is responsible for all services and teaching functions Under the 17 year performance-based contract the Operator receives an annual global budget and must treat all patients Results The Government signed an agreement in October 2008 with Netcare, a large international healthcare group, & local investors Clinics opened in Hospital nearing completion and to be opened in 2011 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

14 IFC Public Private Partnerships in Health Hospital do Suburbio (Brazil) Project New 298-bed emergency hospital serving a catchment area of one million people in Bahia, the state capital of Salvador Structure Hospital construction was financed by 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 Inaugurated on September, 13 th, 2010 Total project cost: US$ 27 million construction (Bahia Government), US$ 32 million equipping (private partner), of which US$ 23 million in 1st year

15 IFC Public Private Partnerships in Health Toluca Regional Hospital (Mexico) Project New 120 bed regional secondary hospital in Toluca, the state capital, for 6,000 inpatients and 20,000 outpatients annually Structure Operator will be responsible for construction, financing, equipping, facility management, non-clinical services, and dialysis under a 25 year contract The public sector will be responsible for most clinical services The private sector operator will receive a fixed payment and a variable payment which is performance dependant. Results Successfully tendered and awarded in September 2010 Winning bidder was Prodelmex The expected investment is estimated at $48m

16 IFC Transaction Experience Completed (16) 2 regional hospitals in Mexico National referral hospital and clinics network in Lesotho Urban emergency hospital in Brazil 4 diagnostic imaging centers in the state of Andhra Pradesh, India Romania  8 Dialysis centers  Imaging center in public hospital  Lab in public hospital  Private wing in maternity hospital Current Projects Egypt: two specialist hospitals India: teaching hospitals and medical colleges Brazil: network of 147 primary care centers in a major city Moldova: radiotherapy center and a diagnostic imaging center in major public hospitals Uzbekistan: medical diagnostic imaging centers in four cities