Shita Dewi DKI Jakarta Case

Outline of Session  Background  The creation of three private hospitals  Hospital performance after conversion  Challenges of converting public hospitals to private ownership  Discussion

Background  DKI Jakarta city owned 5 public hospitals (1 for each borough)  Rp 400 billion per year for operational cost  Problems  inefficiency in hospital management  poor services  huge investment for quality and services improvement but no significant improvements  Source of Problems  Hospitals had no financial authority  they got bulk budget from DKI Jakarta government, and all revenues went back to DKI Jakarta government revenue. Any changes in budget needed to be approved by DKI Jakarta Parliament.  Proposed solution  DKI Jakarta government wanted to give more financial authority to hospital and in turn expected improved quality and services.  They also wanted to re-allocate subsidy to the demand-side (more money to cover the poor).

The Creation of Three Private Hospitals PT Rumah Sakit Cenkareng 2000 – 2003 Built a new hospital to be operated by a limited company PT Rumah Sakit Pasar Rebo 2004 Converted one existing public hospitals to privately- owned and managed by a limited company PT Rumah Sakit Haji Jakarta 2004 Acquired not-for-profit private hospital (owned by religious-affiliated foundation) and converted its ownership to limited company

Capital Proportions in PT Rumah Sakit Haji Jakarta

The changes  Managed privately and delivered services to private patients and public patients  Increased effort in flexible planning management and operational efficiency measures  Introduced performance based HR management PT Rumah Sakit Cengkareng •Recruited new employees and health staffs PT Rumah Sakit Haji •Originally had private employees and health staffs PT Rumah Sakit Pasar Rebo •gave options to existing hospital employees •Retire from civil service and become private employees •Remain as civil servant and transfer to public hospital

The result  RS Cengkareng was considered a success  happy staff  more disciplined health staff (e.g. doctors were available according to their work schedule)  good/acceptable quality  staff and clients satisfied  RS Haji continued to operate well  shift in clientele to government supported (low-income) population has been successful  staff and population satisfied  RS Pasar Rebo continued to serve the poor  almost 80% of the patients are government-funded/subsidized

Issues RS Haji Ownership in Dispute Dispute between DKI Jakarta and Ministry of Religion High Court Revokes ability to Convert Public Hospitals to Private Ownership 2005, RS Pasar Rebo and RS Cengkareng Hospitals revert to government owned RS Pasar Rebo Conversion Collapses Hospital staff against conversion “liberalization” / “privatization” Petitioned for judicial review Against Labor Act

Current standings  Public Service Agency Act (2005)  enabled hospital to become Public Service Agency in order to give them more financial authority  All public hospitals in DKI Jakarta are now Public Service Agencies  Hospital Act (2009)  forbade government to convert government-owned hospital to private ownership  Public Service Act (2009)  Allowed corporation, or any other legal institution, manage and operate a public service institution, or provide public services.  PT Rumah Sakit Pasar Rebo and PT Rumah Sakit Cengkareng still exist  PT Rumah Sakit Haji taken over by Ministry of Health (for the time being)

Questions for discussion:  What went right? Why?  What went wrong? Why?  Do you anticipate that similar challenges might apply in your country/province/state/district as well? If so, how would you deal with them?  What are the key lessons from the case that are most relevant to your country?

Key Messages  Consider innovative ways to provide publicly funded health service products.  Pay attention to the required political process surrounding a policy.  Be sensitive to the human side of change.  A good policy/design of reform on paper might yield an unexpected outcome in the real world.