Document of The World Bank Report No. 13297-EE STAFF APPRAISAL REPORT ESTONIA HEALTH PROJECT JANUARY 19, 1995 Human Resources Operations Division Country Department IV Europe and Central Asia Region CURRENCY EQUIVALENTS Currency Unit EEK (Estonian Cro-') EEK 8 = DEM I (fixed rate since June 1992) EEK 13.4 USD I (at recent DEM/US cross rates) FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ALOS Average length of stay (in hospitals) CHIA Central Health Insurance Agency CPAR Country Procurement Assessment Report DALY Disability Adjusted Life Year DPT Diphtheria, Tetanus, Pertussis DSL Department of Standards and Licensing DRG Diagnostic Related Group EU-PHARE European Union - Pologne Hongrie Action pour la Reconversion Economique ECU European Currency Unit GDP Gross Domestic Product GP General Practitioner HPS Health Protection Services (San-Epid) HMIS Health Management Information System ICB International Competitive Bidding IPPF International Planned Parenthood Federation JEXIM Japan Export/Import Bank LCB Local Competitive Bidding MIS Management Information System MSA Ministry of Social Affairs NIS Newly Independent States PCU Project Coordination Unit PHC Primary Health Care PHRD Policy and Human Resources Development Fund (formerly Japanese Grant Facility) QA Quality assurance OECD Organization for Economic Cooperation and Development San-Epid Predecessor of Health Protection Service SOE Statement of Expenditure TOR Terms of Reference USAID US Agency for International Development WHO/EURO World Health Organization/Europe CONTENTS LOAN AND PROJECT SUMMARY ...................................... i BASIC DATA SHEET ............................................... v I. BACKGROUND AND ISSUES ...... ...................1.............. A. Background ....... ...............1......................... B. Key Sector Issues ........................ 2 (a) Issues Affecting the Users ................................. 3 (b) Issues Relating to Health System ............................. 4 (c) Health Financing Issues ................................... 7 C. Government Strategy ...... ................ 8 D. Role of Other Donors ....................... 9 E. Lessons Learned and Rationale for Bank Involvement .... ........ . 9 'l. THE PROJECT ....... ........................... 11 A. Project Objectives ......................................... 11 B. Main Project Features ....................................... 11 C. Description of Components .................................... 12 1II. PROJECT COST, FINANCING, PROCUREMENT AND DISBURSEMENTS ...... 22 A. Project Costs ............................................. 22 B. Incremental Recurrent Costs and Sustainability ........................ 23 C. Financing Plan ............................................ 25 D. Procurement ............................................. 25 E. Disbursements .28 F. Accounting and Auditing ..................................... 29 This report is based on the findings of four preparation missions and an appraisal mission which visited Estonia in the last nine months. Mr. Antonio Campos (Task Manager and mission leader) was assisted by several teams including consultants and Bank staff with expertise in health financing, public health, medical training, hospital efficiency and design and health service administration, including: Howard Barnum (PHNDR), Kathleen Di Tullio, (EXTPI); Toomas Palu and Antonio Lim (EC4HR). Consultants: Joana Godinho, Kaj Koskela, Lars Cernerud, Pieter Huitima, Adelino Bento, Richard Madeley, Nuno Grande, Frances Kanach, Jan-Fredrik Hogstedt, Juri Lepisk, Timothy Ensor, Richard Saltman, Olivier de Messieres, David Routenberg, Sture Sjolund, Jens Steensberg, and Joao Wemans. Nydia Maraviglia advised on operations and project procedures. Department Director: Basil Kavalsky, Division Chief: James Q. Harrison; Peer Reviewers: Alexander S. Preker (EC1/2HR), Robert Castadot (EC1/2HR), and Peter Heywood (PHNDR). IV. IMPLEMENTATION, MANAGEMENT, EVALUATION AND SUPERVISION ..... 30 A. Status of Project Preparation ................................... 30 B. Project Management and Implementation ........................... 31 C. Project Planning, Monitoring, and Evaluation ........................ 31 D. Bank Supervision Strategy .................................... 32 V. BENEFITS AND RISKS .34 VI. AGREEMENTS REACHED AND RECOMMENDATION ................... 36 ANNEXES Annex 1: Health Conditions, lHealth Care Systems and Reform Annex 2: Estonia's National Health Strategy Annex 3: Accreditation, Licensure and Quality Assurance Annex 4: University of Tartu's Biomedical Sciences Building Annex 5: The Health Financing System Annex 6: Project Implementation Plan Annex 7: Planned Procurement Package and Schedule Annex 8: Indicators for Project Monitoring and Evaluation Annex 9: Selected Project Cost Summary Tables Annex 10: Schedule of Disbursements Annex 11: Supervision Plan Annex 12: Selected Documents in Project Files TABLES IN TEXT 3.1: Project Cost Summary by Components ............ .. .................. 22 3.2: Project Cost Summary by Category of Expenditures ......... .. ............. 24 3.3: Summary of Proposed Procurement Arrangements ......................... 27 4. 1: Target Indicators for Health Promotion Programs in Estonia, 1992 - 1998 .......... 32 MAP: IBRD No. 26104 -i- ESTONIA HEALTH PROJECT STAFF APPRAISAL REPORT LOAN AND PROJECT SUMMARY Borrower: Republic of Estonia Implementing Agency: Ministry of Social Affairs (MSA) Beneficiaries: Ministry of Social Affairs, University of Tartu, central and local health insurance funds, county health officers, population at large Poverty: Not directly applicable. By improving the quality and availability of public health programs and primary health care, however, it is expected that the project will bring substantial benefits to low-income groups. Amount: US$ 18 million equivalent Terms: Fifteen years, including a five-year grace period, at the Bank standard variable interest rate Commitment: 0.75% on undisbursed loan balances, beginning 60 days after signing, less any waiver Project Objectives: The proposed project would support the health reform efforts initiated by the Government and would aim to improve the health of Estonia's people by: (a) emphasizing health promotion and disease prevention programs to increase awareness of healthy life styles, and enhancing the efficiency and quality of health services; (b) developing human resources for health by strengthening modern public health training, integrated pre-clinical medical training, and continuing education for public health doctors, family doctors, health insurance and hospital administrators, nurses and other health personnel; and (c) supporting the on-going health financing reform to ensure its sustainability, cost- effectiveness and equity through establishing sound cost, performance analysis and health management information systems. Project Description: The proposed project would provide technical assistance, fellowships, training, laboratory and teaching equipment, computer hardware and software, civil works and refurbishment of facilities, furniture and fixed equipment, and incremental recurrent costs for activities centered in the reform process. The project, which would be implemented over a four-year period by the MSA, the University of Tartu, and the Central Health Insurance Agency (CHIA), would consist of the following components: -.i- A. Health System Reorientation (US$6.2 million total cost). This component would support MSA's new national health strategy that includes: (a) institutional development and realignment in MSA; and (b) health promotion and disease prevention. The sub-component for Institutional Development and Realignment in MSA would strengthen the institutional capacity of the Ministry in four areas to facilitate health reform and improve efficiency. These include: (i) formulating health policy, performing economic analysis, and creating a health management information system; (ii) enhancing hospital efficiency; (iii) establishing quality assurance, accreditation of health facilities and licensing of professionals; and (iv) reorienting the health system towards integrated primary health care and health protection services. The sub-component for Health Promotion and Disease Prevention would finance national and local health promotion campaigns to reduce tobacco and alcohol consumption, provide information and services on women's reproductive health, update nutrition practices, introduce stricter road safety and environmental protection measures, and promote safety in the work place. B. Development of Human Resources for Health (US$23.1 million total cost). This component, to be implemented by the University of Tartu, would carry out programs for training and re-training health professionals and personnel, in the following manner: (a) strengthening of the recently established Department of Public Health at the Tartu Medical Faculty to train doctors and other health professionals, at pre-clinical, graduate and post-graduate levels, as well as hospital and health insurance administrators on health management, financing, and economics; (b) strengthening the newly created Department of Polyclinics and Family Medicine to train family doctors; (c) creating a Center for Continuing Education of health professionals in Tallinn (to be housed in an existing research institute with excess space available); and (d) constructing a Biomedical and Health Sciences complex at the University of Tartu for pre- clinical medical and public health training programs and to house MSA's National Pharmaceutical Agency and Tartu City Public Health Laboratories. C. Efficient Management of Financial Resources (US$4.4 million total cost). This component aims to improve the management capacity of the CHIA and the local health insurance funds and to help establish clear links between these funds and health care providers. The component would improve the Agency's capacity to collect, retrieve and analyze information needed for providers and the insurance administration. D. A Project Coordination Unit (PCU) (US$1.0 million total cost), already established in the Ministry of Social Affairs during project preparation, will oversee project implementation and management and will strengthen MSA's capacity to coordinate external assistance for health. The project Director at MSA is assisted by two coordinators, one at the University of Tartu and another at the Central Health Insurance Agency. In addition to its regular functions as project coordinating unit, the MSA PCU will manage studies, surveys, and technical assistance and will also undertake overall project monitoring and evaluation, consolidate project progress reports, undertake procurement and ensure timely auditing of project accounts. The PCU would receive policy guidance and act as the secretariat of a Health Reforn Coordinating Conmmittee chaired by the Minister of Social Affairs and comprising a representative designated by the Rector of the University of Tartu and the Director of the CHIA. Benefits: The project's support of health reform, training of lhealth personnel in modern public health and medicine and changes in financial management and evaluation would improve the health of Estonia's people and increase efficiency in health service delivery and cost containment. In the medium term, the emphasis on preventive measures and promotion of healthy lifestyles, added to the improvements in quality of health personnel and clinical treatments, would lower adult mortality and morbidity due to tobacco and alcohol consumption, unhealthy diets, and women's reproductive health problems. Improved tax collections and implementation of country-wide redistribution of health insurance funds intended to improve equity would benefit the low income population. The adoption of health promotion programs in family planning, anti-smoking, cardiovascular conditions and injury control could save 29,000 disability-adjusted life years (DALYs) between program start and the year 2004, accounting for direct and indirect savings of EEK328 million (US$25 million). Also, less costly health services would reduce the costs born by industry -- especially important in a growing economy with relatively scarce labor. In addition, Estonia's experience with health reform could serve as a reference for other countries under similar circumstances. Risks: The main risks are: (a) the difficulties involved in transforming a curative health system into one more focused on disease prevention and health promotion; (b) the complexities entailed in restructuring of institutions and in strengthening the management of the health insurance funds; (c) the Government may not remain committed to implement the agreed reforms; and (d) the Government's lack of experience in implementing Bank-financed projects. A positive factor that reduces the risks is the strong commitment of the Government regarding the proposed changes, evidenced by reforms already implemented. Moreover, the design includes features to attenuate risks, such as ensuring continued technical guidance and training for strengthening organizations and management practices. -iv- Estimated Project Costs Local Foreign TOTAL ------ $Million ---------- A. Health System Reorientation. 1. Institutional Development and Realignment in the MSA /a 0.5 3.2 3.7 2. Health Promotion and Disease Prevention 1.4 0.2 1.6 B. Human Resources Development 1. Strengthening the Departments of Public Health and Polyclinic and Family Medicine. 0.2 0.7 0.9 2. Creation of a Center for Continuing Health Education /b 0.5 0.3 0.8 3. Construction of the University of Tartu Biomedical Building 5.6 12.0 17.6 C. Efficient Management of Financial Resources 1. Local Provider/Health Insurance Interface 1.5 1.4 2.9 2. Central Health Insurance Agency Development 0.3 0.6 0.9 D. Proiect Coordination Unit 0.3 0.4 0.8 Total BASELINE COSTS 10.4 18.8 29.1 Physical Contingencies 1.0 1.9 2.9 Price Contingencies 1.4 1.1 2.5 Total PROJECT COSTS 12.7 21.8 34.5 Financing Plan: Government 11.3 3.2 14.5 Grants/c 0.0 2.0 2.0 IBRD 1.4 16.6 18.0 TOTAL 12.7 21.8 34.5 \a Ministry of Social Affairs \b The Institute of Experimental and Clinical Medicine under the scientific supervision of the Tartu Medical Faculty \c From Finland, Canada, Denmark and EU-PHARE Estimated Disbursement Timetable IBRD Fiscal year 1995 1996 1997 1998 1999 ---------------------------($ Million)--------------------------------- Annual 1.5 2.7 4.1 6.3 3.4 Cumulative 1.5 4.2 8.3 14.6 18.0 Cumulative as % of Total 8% 23% 46% 81% 100% ESTONIA BASIC DATA SHEET INDICATOR ESTONIA YEAR Country and Income Data Area ('000 sq. km) 45.2 1993 Population Density (pop. per sq. km) 34.8 1991 GNP per capita (US$) 2,750.0 1992 Population Indicators Population (millions) 1.60 1993 of which urban (percent) 71.4 1991 Population growth rate (percent) -1.32 1993 Population 15-64 years (percent) 66.1 1991 Crude birth rate (per 1,000 population) 10.1 1993 Crude death rate (per 1,000 population) 13.0 1992 Life expectancy at birth (years): Women 75.0 1991 Men 65.0 1991 Health Care Indicators Population per physician 275.0 1992 Population per nurse 125.0 1992 Hospital beds per 1,000 population 9.7 1992 Inmmunization (under 1 yr): % of age group Measles 82.0 1991 DPT 62.0 1991 Total Health Expenditures as% of GDP 4.3 1992 Reproductive Health Share of women of childbearing age 45.6 1991 Fertility rate (births per women) 2.1 1991 Contraceptive prevalence (percent of women in fertile age) 26.0 1991 Infant mortality rate (per 1,000 births) 15.4 1993 Maternal mortality rate (per 100,000 births) 30.6 1992 Health Financing Total health expenditures as a % of GDP 4.3 1992 -1- ESTONIA HEALTH PROJECT STAFF APPRAISAL REPORT I. BACKGROUND AND ISSUES A. Background 1.1 Estonia began the economic transition process earlier than the other Newly Independent States (NIS) and the pace of reform quickened during the last two years. A strong macroeconomic stabilization program was adopted in mid-1992 and the combination of tight monetary and fiscal policies, including wage restraint, along with the elimination of price controls in early 1992, has stabilized the economy. Inflation has leveled at 36% for the past year, budget expenditures are under control and the economy is expected to expand by 5 % this year (IMF projection). Additional information on the macroeconomic situation can be found in the Country Assistance Strategy for Estonia (September 1994). 1.2 A similar commitment exists in health care reform. Advances have been made on many fronts: all "parallel" health systems have been integrated into a public health care network; health insurance is in effect; the number of hospital beds has been reduced by 20%; there have been reductions in the average of annual outpatient consultations; admissions to medical school were also reduced; and modern public health concepts are being introduced as part of medical education. All these are excellent actions. Important advances in health status are noticeable, particularly in reducing mortality from infectious diseases. However less success was achieved in other areas: cardiovascular diseases, accidents and injuries have much higher death rates than in the neighbor countries. High tobacco and alcohol consumption, poorly balanced nutrition, traffic and occupational injuries, reduced quality and efficiency in service delivery, lack of training in modern public health, as well as sustainability and accountability problems in the health financing are significant determinants of these differentials. Estonia needs to reorient its public health services to health promotion and disease prevention programs, to improve efficiency and quality in the service's delivery, to train and retrain health professionals to support the health reform and to strengthen the management capacity of the system's organization and financing. The proposed health project will improve the health of Estonia's people, by emphasizing health promotion, enhancing efficiency and quality, developing human resources and by providing instruments for sustainability, cost-effectiveness and equity to the ongoing reforms. Status of Health System Reform 1.3 The old Soviet-style health system was highly centralized. While it covered 100% of the population at no charge to the patients, it was inefficient. The system placed an undue emphasis on curative services and this led to early specialization in medical education. The modern concepts of family medicine and public health prevalent in many Western countries in recent decades did not permeate into the old Soviet system. Moreover, the medical community endured a long period of scientific isolation from Western advances and, as a consequence, medical training programs fell far behind modern standards. -2- 1.4 The Ministry of Social Affairs (MSA) was created in 1992, bringing together social security, labor and health. The Health Insurance Law became effective in January 1992, changing the way health services are financed, from a centrally-managed system financed almost entirely from general government revenues, to a decentralized system financed by a wage-based social security tax administered through local insurance funds. In April 1994, this law was revised taking into account the experience of the first two years of implementation. In January 1994, Parliament approved a new Health Care Services Organization Law, which became effective in February 1994. This Law prescribes a new organization of health services which places responsibility for primary health care (PHC) services at the county (district) level and for specialized medical care (secondary/tertiary levels) at the hospitals. Another law currently being processed by Parliament is the Health Protection Law (based on already approved laws on preventive and promotion programs for children, passed in January 1993) expected to be approved in the Fall of 1994, to legislate the manner in which health promotion and preventive programs will be carried out. Other laws related to health protection and promotion being prepared deal with consumer protection, tobacco, food products, workplace, alcohol, mental health, and communicable diseases. (Annex 1 gives details on health conditions, structure of the health system and health reform.) B. Key Sector Issues 1.5 The health care system is experiencing a dynamic transition from centralized to decentralized administration and financing. This process is taking place through: (a) transfer of financing responsibilities from the central government to the health insurance scheme; and (b) delegation of most of the health administration tasks to the local authorities (county, community and town doctors). These reforms need to be accompanied by a transformation of the central health organization, now divested of its role as administrator of health services, into a policy-making, regulatory and evaluating body. 1.6 The issues affecting the health sector, discussed below, are presented in three main groups: (a) issues affecting the users; (b) issues regarding the health system infrastructure and human resources for health; and (c) health financing issues. In Estonia there are great disparities between the services offered and the needs of the users, i.e., discrepancies between the capacity, quality and priorities of the health system structure and human resources, and the health profile and needs of the users of the health system. Resources such as health staff, hospital beds, and polyclinics are still not used efficiently. As priorities, health service leaders and managers need retraining to emphasize family practice over medical specialization, community health over excessive clinical orientation, and modern public health over sanitarian-epidemiological inspections. Moreover, the new health financing system, aimed at supporting a universal mandatory health insurance system, is in its developmental phase and needs to strengthen financial management capacity, and establish operating procedures and a modern accounting system. Additionally, there are currently significant problems of health insurance payment arrears and under-reporting of incomes by both enterprises and the self-employed. Overall, the health system needs to improve geographic equity and ensure financial sustainability, cost-effectiveness and accountability. -3- (a) Issues Affecting the Users of the Health System A Crisis in Adult Male Health Conditions 1.7 The country has made important advances in health care, especially by reducing infant mortality and commnunicable diseases. However, less success was achieved in other areas. Life expectancy at birth has changed very little, from 64.3 years in 1960 to 64.7 in 1990 for men, and from 71.6 to 74.9 for women. This slow progress (0.4 years for men and 3.3 years for women) is similar to that experienced by other Eastern European countries, but compares poorly with advances in Western Europe."' The path followed by overall life expectancy at birth in Estonia since 1960 masks divergent trends in the health situation of infants and adults. While infant mortality is less than half of the 1960 level (15.4 now, compared to 31.1 per 1,000 in 1960 1') during the same period there have been almost no improvements in the health status of male adults and this has become the paramount health problem for Estonia. From 1960 to 1990 the life expectancy of men at age 30 decreased from 69.6% to 69.1 %, although that of women at age 30 increased from 75.6% to 79%. 1.8 During the same period there was a rise of 40% in deaths due to circulatory diseases and injuries, and of 15% in those due to cancer, while the death rates from respiratory diseases declined by 45% and deaths caused by infectious and parasitic diseases fell to one-tenth the 1960 values. In 1990, Estonian age-standardized death rates from diseases of circulatory system for males were 72% higher than in Finland, 83% higher than in Germany and more than twice those in Sweden. Similarly, male death rates caused by accidents, injury and poisoning were 60% higher than in Finland, 49% higher than in Germany, and twice as large as those in Sweden. 1.9 The increased threat from non-communicable diseases over the last 30 years reflects the importance of several well established risk factors, especially smoking, alcohol consumption, a high fat diet, lack of physical exercise, careless driving, health damaging occupational conditions and environmental pollution. Most of these factors are life-style associated and the health care system, as it now stands, is poorly prepared to deal with the problem. Emphasis on curative medicine and fragmentation of health care services, with little or no concern for disease prevention and health promotion has been a weak and ineffective strategy to deal with the major health problems affecting the population. Instead, a comprehensive policy -- already adopted by the Government -- based on health promotion and protection encompassing the entire health system, and on suitably reoriented health professionals and well equipped and managed health establishments, is needed. Improvements in life expectancy at birth in Western Europe between 1960 and the early 1990's were as follows: Norway 1.4 and 3.7; the Netherlands: 1.9 and 4.6; Sweden: 3.0 and 5.3; Finland: 5.3 and 6.3; and Portugal: 6.2 and 9.7 respectively, for men and women. Differences with Estonia are more marked taking into account that in 1960, all these countries (except Portugal) had life expectancies higher than Estonia. 2 In spite of the reduction in infant mortality, infant deaths are still 30 percent higher in Estonia than the OECD average. -4- Excessive Rates of Abortions and Inadequate Access to Contraception 1.10 Women's health, although better than in other NIS, is still behind Western European standards. Among the positive aspects, coverage and access to maternal and child health services is widespread. Pregnant women are seen by a doctor 10-12 times on average during the gestation period and almost all deliveries occur in a hospital. Percentages of deliveries by caesarean section (5 to 8%) and of deliveries using forceps are low. Since 1992 there has been further progress in the approach to pregnancy care and deliveries, with the adoption, by several hospitals, of family delivery and baby-friendly maternities. There is also a reasonable referral system. However, maternal mortality, due, to a large extent, to the excessive number of abortions is very high; indeed, the rate of 30.6 maternal deaths per 100,000 live births is still three times the European average and it is even double the WHO "Health for All" world-wide target of 15 per 100,000. 1.11 Abortion is still the most common method of birth control (1.58 abortions per live- birth in 1992), with less than 26% of women of reproductive age (15-49 years-old) using contraceptives (mainly IUDs and hormonal pills). Health professionals are aware of the need to prevent abortions through more widespread availability of several contraceptive methods. The CHIA adopted measures in early 1994 aimed to increase access to contraceptives and discourage abortions; these include requiring insured women to pay 50% of the cost of an abortion and using these funds to provide free contraceptives for at-risk women. Another favorable development is the creation of an Association for Family Planning affiliated to the International Planned Parenthood Federation (IPPF), expected to take place this year; the usual role of these associations is to encourage both public and private health providers (doctors and pharmacies) to prescribe and dispense contraceptives and to act as a catalyst in the introduction of family planning as a subject in medical and other health staff training curricula. In other areas of women's health, breast and cervix cancer incidence and mortality are not decreasing, and lung cancer mortality rates in women are clearly increasing. The incidence of venereal diseases (syphilis and gonorrhea) in the population is also rising. (b) Issues Relating to Health System Infrastructure and Human Resources Inefficient Use of Resources 1.12 Centrally directed inflexible rules regarding planning of facilities and personnel during the Soviet period left Estonia with serious inefficiencies in the health system infrastructure including too many hospital beds, inefficient buildings, lack of modern equipment, and weak maintenance systems. Before 1991, Estonia had an average of 12. 1 acute beds (short-term occupancy) per 1,000 population, compared to the average of 9.4 in WHO/EURO countries. 1' Nearly 4,000 acute beds were eliminated through closures and downsizing and, as of 1993, acute beds have been reduced to 9.5 per 1,000. There has also been some progress in reducing the average length of stay (ALOS) from 17.5 days in 1990, to 16.2 in 1992, although further reductions would be desirable to increase efficiency and reduce costs (in US the ALOS is 4 and in Denmark 9). Similarly, lowering the In 1992 there were 118 hospitals with 14,843 beds of which 30 were hospitals for tertiary care, with 5,500 beds. Several tertiary - and secondary-care hospitals are overcrowded, while some of the recently built secondary-level hospitals are less than 60 percent occupied. There are about 300 primary health care facilities (polyclinics, small hospitals and occupational health units). -5- number of beds to 7 per 1,000 would be a good target. However, these further steps could only be taken if excess hospital beds are converted into lower cost shelters; most elderly persons and chronic patients cannot be discharged early to their homes because of poor heating and inadequate living standards. When conditions improve in the future, it should be possible to lower occupancy rates in hospitals, vacate some of the most seriously impaired hospital buildings, and consolidate staff and equipment in the facilities that are in good state of repair, thus attaining a high level of utilization per square meter, and substantially reducing energy costs. State of Disrepair and Obsolescence of Health Facilities and Equipment 1.13 A recent study showed that the health facilities and equipment in Estonia are in such poor condition that they have reduced the overall quality of health care. Hospital facilities were designed with over-sized areas and unsuitable circulation patterns generating inefficiencies in maintenance, heating, lighting, cleaning and safety. Very little attention is given to traffic flow and service and patient areas are often placed in available space, without regard to functions and needs, thus creating serious inefficiencies. Heating costs represent between 25 and 30% of hospital running costs; this disproportionate burden is the result of inefficient construction and absence of heat meters to measure consumption. Specialized health training facilities, such as those for pre-clinical training at the University of Tartu, suffer from other kinds of problems: existing buildings are over 100 years old, scattered throughout the city, unsafe, and inadequate for modern medical and public health training. 1.14 Thus, modern concepts and techniques of facility planning, programming, design, construction and equipment are critically needed; initially external expertise would be needed to introduce these concepts, but this information needs to be transferred to the local professionals. The lack of suitable standards for planning, construction, safety and quality control of health facilities and medical equipment is a serious obstacle to meeting the urgent needs in rehabilitation and repairs. A country-wide assessment of hospital bed needs should be prepared taking into account the proportion of acute and chronic patients, as well as numbers of elderly without a proper shelter in winter. Moreover, before any new investments are made in construction of health facilities, designs should be carefully evaluated and revised and unfinished buildings such as the new Valga hospital and the old Parnu building should be redesigned for energy efficiency, traffic flow and need-adjusted capacity. In addition, technology assessment methodologies and medical equipment support systems, complemented by systems of accreditation, licensing, and hospital quality assurance (QA) would guarantee the overall quality of health care and user satisfaction. Distortions in Health Human Resources for Health 1.15 The Estonian health system inherited serious distortions in human resources for health due to an excessive number of specialized physicians and an almost complete lack of family doctors, 1' weakly managed health institutions, a lack of information, outdated medical and other health staff education, a curative rather than preventive and public health orientation, and an ineffective system of licensing for health professionals. The Government is beginning to correct these problems and significant changes are noticeable. These include the creation of new Departments of Public Health Name given to physicians in general practice of medicine: another common designation is general practitioners or GPs. -6- and Family Medicine in the Tartu Medical Faculty, whose respective functions are to train doctors in modern public health at graduate and post-graduate levels and to train doctors to become family physicians. In both instances, significant institutional support will be needed to help the university to adopt a problem-oriented training model that would contribute to change the pattern of medical culture, beginning with the early stages of medical training. 1.16 Another important issue is the reorientation of medical specialties: the number of physicians per 10,000 population has declined from 42 in 1991 to 34 in 1993, through emigration, repatriation and retirement. This number is still very high compared with other developed countries (in Sweden and Norway there are 22 physicians per 10,000 population, in UK 15; 22 would be a good target, according to accepted norms in Western countries. Also, many physicians are currently unemployed or under-employed; this leads to unnecessary patient visits or treatments by physicians. It also encourages needless surgical procedures and extended hospital stays. Responding to this problem, this year the University of Tartu reduced admissions, from almost 200 in previous years to 90. Present Government policy supports the need to change the mix of the medical commnunity, with more emphasis on family doctors and a better balance among specialties. Indeed, many of the current obstetrician-gynecologists, cardiologists, internal medicine specialists, pediatricians, and neurologists, should be re-trained as family doctors, as well as to become specialists in areas not sufficiently covered now, such as neo-natologists, gastroenterologists, anesthesiologists, clinical pathologists and nephrologists. 1.17 As a positive response to this problem, the Government has already decided to adopt and implement suitable re-training programs. A new Department of Family Medicine was created in the University and new curricula has been developed to re-train doctors into family medicine. The new curriculum includes public and environmental health, and updated medical training in pediatrics, women's health, as well as advice on prevention and treatment of most common adult chronic diseases. Family doctors are expected to become the backbone of primary health care of Estonia's 21 districts. To date, 65 family doctors have been already trained. 1.18 Other health professionals, not only doctors working in the clinical area, also need to update their skills. These include health service managers, hospital and medical care administrative staff, nurses and newly recruited health insurance managers, as well as the health protection service staff-- former San-Epid (earlier Health Protection Service) inspectors. Nursing education is a Government priority and new curricula has been introduced in several nursing schools, with Danish cooperation. The Government, in agreement with the University of Tartu, has decided to create a Center for Continuing Education of Health Professionals, to be located in Tallinn. Need for Accreditation and Licensing Procedures and for Quality Assurance 1.19 Accreditation of health facilities, licensing of health professionals and QA tools and systems are needed to improve overall quality and efficiency in the delivery of health care. Indeed, in a decentralized health system with a mix of public and private service providers, the Government, in cooperation with professional associations and other non-governmental organizations, will need to develop a strong capacity for regulatory and evaluation functions including quality assurance in hospitals, accreditation of health facilities and licensure of medical and other health personnel. Procedures including infection control, medical audits, utilization reviews, second opinion and routine autopsies should be part of the QA system. At the present time these systems are weak or non-existent. -7- (c) Health Financing Issues 1.20 A new health insurance system, financed through a 13% payroll tax5', was created in 1991 and by 1993 it covered 78% of total public health expenditures. The remainder is covered by local governments, since resources are no longer allocated from the national budget for health services. In 1992, public expenditures on health were estimated at about 4.3% of GDP, and this proportion may not be expected to increase. In April, 1994, Parliament amended the health insurance law to halt the drain of funds resulting from provider-induced demand for hospital care, and from investments by the most affluent insurance funds, in modern and expensive medical technology. Thus, the new legislation addresses these problems and creates conditions for the implementation of three suggestions made by Bank missions during project preparation: (a) central collection of funds and redistribution to local health insurance funds on a per capita basis; (b) incentives to mobilize a small fraction (around 1.5%) of the net collected amount to finance health promotion activities; and (c) cost-control measures based on more accurate information on expenditures and on caps for high-cost procedures (clinical budgeting). Also, among recently adopted health insurance decisions, capitation funding should, with some refinements, allow for a more equitable distribution of resources. However, several additional issues should be addressed to make the new system sustainable and cost-effective, accountable, equitable and more responsive to government health policy and strategy. 1.21 Need to develop capacity for forecasting income and expenditures. There is an urgent need for the introduction of sound actuarial principles and models for use by the insurance funds so that they will be able to forecast likely income and expenditures under different scenarios. Funds already collect data on use of health services by age and sex and so it should be possible to use these data to make basic forecasts and to develop more sophisticated models over time. 1.22 The payment collection system is very fragile and fraught with potential difficulties. As already planned, it would be more efficient to merge collection of health contributions with pension contributions, while keeping the two funds separately accountable. This would facilitate the development of procedures to verify level of magnitude of income for each type of employment. There is ample experience in other countries in design and implementation of suitable income verification systems that could prove useful. 1.23 Lack of basic accounting procedures for managing and auditing financial flows. Most hospitals lack systems of cost-accounting that would allow them to monitor and control expenditure and implement efficiency savings. For their part, health insurance funds have basic systems for controlling payments, but lack appropriate methods for filtering claims in a systematic way. 1.24 Lack of various kinds of expertise within health insurance funds. Local funds have neither the expertise nor the time to act as intelligent commissioners of services and to be able to Out of the 13%, 3% is retained by firms, at the source, to pay for maternity beniefits and sick-leave. T'he local funds retain a fixed amount per capita, to cover the population in their area; the surplus, if any, is transferred to the CHI for a pcr capita redistribution to areas with ilisufficient revenue. There are variations in the amounts collected by each local fund; those serving predominantly agricultural areas experience chronic deficits, while those in industrial areas may have excess funds. -8- specify which treatments they wish to purchase, at what price, from whom, and to which quality standards. The introduction of a suitable system requires that professionals with specific responsibility for service specification are recruited and trained by health insurance funds. The funds should also have access to a national database on clinical cost-effectiveness and expertise in protocol development. There is a need for a critical appraisal of the size and functions of local funds and for decisions on how to carry out the more sophisticated functions just described -- either by recruiting more staff, by passing some of the routine data processing to a central agency or by merging with other funds. 1.25 Lack of regulation of semi-autonomous health organizations (sick funds, hospitals and polyclinics) figures prominently among the issues affecting the health service providers. As a consequence of relatively little explicit regulation there is currently considerable potential for abuse. Relatively little control over high technology capital equipment has led to the purchase of much diagnostic equipment with little evaluation of whether it is necessary. At the same time, there is a substantial role for the development of certain technologies such as minimally invasive procedures that considerably lower hospital stays and allow much surgery to be done on a day case basis. Regulation and evaluation of medical technology is a feature of most health systems, even those with heavy reliance on the private sector, and a national strategy for evaluating the medical and economic value of these technologies is required to prevent waste and promote efficient techniques. 1.26 How to achieve more efficiency and quality through competition. Private health care services are growing very slowly, although their rate of growth can be expected to rise with improvements in the economy. Private sector regulation is needed so that it can compete in efficiency and quality with the public sector; competition would also generate awareness on the advantages of modern management within the entire health sector. The current payment structure is full of perverse incentives that lead to provision of unnecessary or ineffective health care. Financial incentives should be designed to allow for a reliable and competitive health care private market. Contracting out of specialized services should be adopted in hospitals and other health care services, on a competitive basis. Public hospitals and services should be open to the private management initiative. 1.27 Need for information systems and other tools responsive to modern managers. A decentralized health system, accountable to the county administration and to insurers, has to use comprehensive and flexible data systems and management information tools. Several of the requirements are readily identifiable: (a) health services utilization data, associated with routine health statistics; (b) cost-accounting standardized instruments for hospitals and polyclinics; (c) standardized patient's billing systems; (d) computer-assisted data bases and data communication systems, to facilitate direct liaison between providers and health insurance funds; and (d) methods for analyzing health expenditures at the national level. C. Government Strategy 1.28 Advances in the Government's health strategy have been made on many fronts: all "parallel" health systems have been integrated into the public health care network; health insurance is already in effect; hospital beds have been reduced by 20% in less than two years; a public health unit was established in the MSA and a new Department of Public Health was created at the University of Tartu, following the Government's decision to discontinue training in sanitary -9- epidemiology at Moscow and St. Petersburg; candidates for medical schools were reduced from 200 per year to 90; the first group of family doctors was recently trained and a school of nursing for advanced degrees was recently created at Tartu University. 1.29 A health policy paper setting priorities for health reform was prepared and adopted by MSA as a basis for such reforms (Annex 2). Regarding legislation related to health reform, the following are recent new developments: (a) the new law on organization of health care stressing the role of county doctors as local coordinators of preventive and curative care was passed in Parliament in February 1994; (b) recent legislation on road safety was passed strengthening enforcement of use of seatbelts and banning driving under the influence of alcohol; (c) the amendment of the health insurance law was prepared and approved as scheduled by Parliament in April 1994; (d) there is a bill in Parliament containing restrictive regulations on tobacco advertising in mass media and on smoking in public places; and (e) new legislation on the integration of Health Protection Services (former San-epid) was prepared by Government and will soon be sent to Parliament. D. Role of Other Donors 1.30 The Policy and Human Resources Development Fund (PHRD) sponsored by the Government of Japan provided US$550,000 for project preparation. Several bilateral organizations have also shown interest in contributing through parallel finance for the project. EU-PHARE (European Union - Pologne Hongrie Action pour la Reconversion Economique) already provided 500,000 ECU's (European Currency Unit) for technical assistance in health financing, under terms of reference (TOR) prepared by the Bank, as part of project preparation. Moreover, EU-PHARE is in the final steps of the approval of 1 million ECUs (European Currency Unit) to support technical assistance needed for project implementation on its program for 1995. Additionally, international development institutions from Sweden, Denmark, Finland, Canada and Germany have been directly contacted and invited to contribute with financing to cover specific technical assistance and foreign training costs. A list of technical assistance activities and respective terms of reference were prepared and used by the Government in contacts with donors, at a meeting held in Tallinn on April 15, 1994 and as attachment to their formal requests for financing to donors. Government has expressed the following preferences: Danish cooperation is sought for quality assurance, accreditation, equipment maintenance, public health and nursing training; Finland, for the development of the health promotion program and for fellowships on health administration; Canada for the support of health financing component and institutional support for the project coordination unit; Sweden for assisting, through a hospital partnership program, in strengthening hospital administration and WHO, for development of tools for policy analysis. In response to a Government request, the Bank assisted in securing financing from the various donors. Results are reflected in the financing plan (para 3.6). Formal agreements between the respective donors and the Government of Estonia are being prepared. E. Lessons Learned and Rationale for Bank Involvement 1.31 This is the first lending operation for the health sector in Estonia. Valuable lessons have been drawn from similar Bank projects in other countries -- particularly Eastern European countries -- as well as from the experience of other donors. The most frequently encountered problems that would be relevant to this operation include coordination problems among institutions -10- participating in the project, government inexperience with Bank procedures, initial weak implementation capacity, and resistance to accept external technical assistance. Project preparation and design takes into account these findings, through a strong government role in project preparation, detailed briefings on the Bank project cycle, careful planning and establishment of a Project Coordination Unit (PCU) before appraisal and detailed definition of technical assistance and training programs. 1.32 The Bank's experience in Estonia dates only from 1992. A rehabilitation loan of US$30 million approved in October, 1992, has a health component of US$3.5 million for pharmaceutical products and small medical equipment. The Bank also facilitated co-financing by JEXIM (US$20 million, of which US$4.6 million was devoted to health-related imports). The Bank's overall country strategy for Estonia emphasizes strengthening and streamlining the social safety net and improving the accessibility and quality of basic health services. Support to health sector reform and increased efficiency would be congruent with the Bank's overall strategy. In addition to its specific objectives, the proposed operation would contribute to strengthening public sector management, emphasizing maintenance and energy conservation and supporting cost recovery and sustainable financing of health services. Bank involvement has already encouraged other donors to enter the sector. -11- II. THE PROJECT A. Project Objectives 2.1 The proposed project would support the health reform efforts initiated by the Government and would aim to improve the health of Estonia's people by: (a) emphasizing health promotion and disease prevention programs to increase awareness of healthy life styles, and enhancing efficiency and quality of health services; (b) developing human resources by strengthening modern public health training, integrated pre-clinical medical training, and continuing education for public health doctors, family doctors, health insurance and hospital administrators, nurses and other health personnel; and (c) supporting the on-going health financing reform to ensure its sustainability, cost-effectiveness and equity through establishing sound cost, performance analysis and health management information systems. B. Main Project Features 2.2 The proposed project would provide technical assistance, fellowships, training, laboratory and teaching equipment, computer hardware and software, civil works and refurbishment of facilities, furniture and fixed equipment, and incremental recurrent costs for activities centered in the reform process. The project, which would be implemented over a four-year period by the MSA, the University of Tartu, and the CHIA, would consist of the following components: (a) Health System Reorientation Component will contain the following sub-components: (i) Institutional Development and Realignment in MSA would strengthen the institutional capacity of the Ministry in four areas to facilitate health reform and improve efficiency: 1) health policy and economic analysis, and health management information system; 2) hospital efficiency enhancement, including: (i) facility planning and re-design, (ii) hospital management development, and (iii) medical equipment support; 3) quality assurance, and accreditation of health facilities, and licensing of health professionals; and 4) primary health care and health protection service reorientation -- including redefined functions for family doctors, county doctors, community and town physicians, and health protection staff. (ii) Health Promotion and Disease Prevention consists of two main activities: 1) annual funding of health promotion programs in support of local initiatives; and 2) national campaigns on promotion and prevention related to five priority areas: anti-smoking, cardiovascular and heart disease prevention, injury control, women's health and family planning. (b) Human Resources Development to be implemented by the University of Tartu, would support the following sub-components: -12- (i) Strengthening the recently established Departments of Public Health and of Polyclinics and Family Medicine, reinforcing public health and family medicine training for doctors and other health professionals at pre-clinical, clinical and post-graduate levels at Tartu Medical Faculty; (ii) Creating a center for continuing education of health professionals in Tallinn, under the academic guidance of Tartu Medical Faculty; and (iii) Designing, constructing and equipping a new building for Biomedical and Health Sciences at the University of Tartu. (c) Efficient Management of Financial Resources aimed at strengthening the capacity of the CHIA and the Local Health Insurance Funds to collect, retrieve and analyze information needed for providers and insurance administration through improved accounting and management information procedures, health insurance enrollment and collection, and reimbursement methods; it would also help establish electronic links between these funds and health care providers. (d) Project Administration consists of an already established PCU in MSA and coordinators -- one each in the University of Tartu and in the Central Health Insurance Agency (CHIA) -- and appointment of a Health Reform Implementation Committee. C. Description of Components Component A: Health System Reorientation (US$5.4 million or 19% of total base cost) 2.3 This component, to be implemented by MSA, will reorient the present health system structure and functioning to meet the actual requirements of the users more effectively. This will be done through major thrusts in the institutional development of MSA, focusing on improving its role in policy making, economic and cost analysis, and standard-setting, and in encouraging effective promotion of healthy lifestyles and integrated (preventive and curative) delivery of primary health care. Sub-component A.1: Institutional Development and Realignment of MSA (US$3.8 million base cost) 2.4 This sub-component would assist implementation of the Government policy to decentralize the health system and change MSA's role from administration of health services to leadership in setting sector policies, priorities and norms. The project would accomplish this by supporting the Government on the new mission of MSA in health, and on its specific functions, staffing profiles, and schedule of the institutional changes, ensuring that the following functions for MSA are included in the reform: (a) health policy and economic analysis, and Health Management Information System (HMIS); (b) hospital efficiency enhancement (including management, technology assessment and enhancement, equipment maintenance and facility redesigning); and (c) quality assurance, accreditation of health facilities and licensing of health professionals. A policy document describing the reorientation of the health system and the proposed obiectives and functions of a reoriented MSA has already been presented to the Bank. (Annex 2). The sub-component would finance 26 person-months of foreign and 53 person-months of local technical assistance, 2 long- -13- term fellowships, short-term visits abroad for 54 persons, and local training for 17 participants, testing equipment for demonstrations, computers and software, office furniture and incremental recurrent costs to assist in implementation of reform. (a) Health Policy and Economic Analysis 2.5 MSA would develop capacity to define and adopt policies, strategies and priorities that would be followed by the local health services. The main principles underlying these policies include integrated health care services in a cost-effective manner, through a sustainable, accountable, and equitable health financing system. This aim should be accomplished through the creation of a health policy and economic analysis unit, located in the office of the chancellor -- an optimal location within MSA to achieve effective coordination. The Unit Director would report directly to the Chancellor. The Policy and Economic Analysis Unit in MSA would receive inputs from the existing Living Standards Unit, the Informatics Unit, the Finance and Budgeting Unit, the Medical and Social Statistics Bureau, and other appropriate data sources; it would work in close cooperation with the Medical Care and Public Health units, which undertake policy issues identification and analysis. The economic and policy analysis unit would develop, through technical assistance and training, capacity to organize and use periodic surveys of private sector activities and household health expenditures. 2.6 This unit would also direct the design of a HMIS. The HMIS would provide information for policy and management decisions, feedback to service providers and managers, and for monitoring and evaluating the network of public health institutions, through the county health offices. It would include modules to handle accreditation and quality assurance data. The HMIS would also be used for disseminating findings regarding data on prevalence of smoking, living conditions and communicable diseases and injuries, to enable county health officers and family doctors to reorganize activities and programs and implement and evaluate decisions according to the identified health needs. The HMIS would be designed according to the requirements of the policy level, as well as the management and operational needs at the local level. The project would finance consultancy services to assist in the design of the HMIS, and cover the cost of fellowships, training, computer hardware and software, office equipment and furniture and incremental recurrent costs. As a condition of loan effectiveness, the Government would appoint the Director of the Policy and Economic Analysis Unit. (b) Hospital Efficiency Enhancement 2.7 This component includes development of a master plan for hospitals and other health facilities, a hospital management development program, and a medical equipment support program. These activities are intended to attain savings and increase efficiency in hospital care by easing constraints affecting the hospital system in Estonia including unutilized capacity, long lengths of stay, deficiencies in management, budget and accounting, facility design, and equipment purchase and maintenance. 2.8 For preparation of the master plan for hospitals and other health facilities, MSA's Physical Planning Department would designate a working group formed by central and county staff, assisted by external consultants. The plan would include provisions that could modify the present hospital network regarding, inter alia, utilization of performance indicators, bed reduction, and better integration of specialized outpatient care with hospital services. A first step would consist -14- of a nationwide chronic and acute hospital bed inventory and an assessment of hospital bed use by elderly people as shelte; in winter (the latter is needed to identify needs for conversion of some hospitals or wings, to nursing home facilities). There would be then a review of all plans and designs for new health facility construction and remodeling currently underway in the country, in order to advise on suitability and suggest revisions. Reviews of architectural designs would be done by national architects, assisted by foreign experts in hospital and health facility construction. In order to build competence in the field of health facilities planning and in hospital design and construction, the project would include technical assistance (which would consist of organization of seniinars for local architects), and short-term visits to neighboring countries. Any suggestions for architectural re-design, construction or remodeling that may be suggested by the master plan would not be financed by this project, but would be used in future remodeling and construction of health facilities. 2.9 Hospital management development is a priority for achieving increased efficiency. Hospital and department heads would receive management training to lead the process of change in adopting new approaches to administration, budgeting, cost control, incentives and staff motivation, procurement of goods and of subsidiary services (laundry, food, laboratory), and introduction of modern information systems, as well as quality assurance and performance evaluation. Management development would be implemented through a Sweden/Estonia hospital partnership program that would be undertaken with financing from the Swedish Government; the project would complement this assistance by financing training (to be implemented by the Center for Continuing Education -- para 2.20), equipment, facility redesign, incremental recurrent costs, and technical assistance. 2.10 A medical equipment support program, to be implemented by the Department of Standards and Licensing (DSL) would lead to improved selection, maintenance, utilization, and safety assurance of medical equipment. DSL would organize a Committee of Medical Technologies to assess, together with municipal officials, countrywide equipment requirements in medical facilities, particularly focusing on effective coordination in the acquisition of expensive high- technology equipment (such as CT-scanners, MRIs, litotriptors and nuclear medicine equipment). To facilitate equipment maintenance, DSL would develop a database on make, type, location, cost, condition, and date of installation. It would also adopt international standards on safety and quality control and functioning requirements. A small group of staff in DSL would become qualified to conduct market reviews and comparative evaluation reports of equipment and to provide support to county health and hospital administrators on procurement of medical equipment and introduce quality control, maintenance and safety procedures. The project would provide technical assistance, local and foreign training and workshops, testing equipment, computers and software. 2.11 As a condition of loan effectiveness. the Government would appoint a national working group and a coordinator for the hospital and health facilities master plan and a Committee on Medical Technologies under terms of reference satisfactory to the Bank. (c) Accreditation of Health Facilities, Licensing of Health Professionals and Quality Assurance 2.12 Improving medical care services will need the support of the medical cofimmunity in assuring the efficient use of resources. Decentralization of management of the health services and introduction of private service providers make it imperative to establish systems of (i) accreditation; (ii) licensing; and (iii) quality assurance (details in Annex 3). Regarding hospitals, the existing accreditation system does not set out definitions, standards or administrative procedures; recently -15- MSA's Department of Standards and Licensing undertook a first round of hospital accreditation as a baseline, using procedures and standards applied in other countries, adapted to Estonia's conditions. Concerning licensing of health professionals, currently there is only a one-time permission to practice medicine and other allied health professions, consisting of successful completion of qualifying university exams. In addition, all physicians are registered with MSA and this registry records the professional experiences required for three Categories of Medical Practice. However, 40% of currently registered physicians have no category rating. Further to the existing inventories and base-line information collected, a first step in the program to improve health services efficiency and quality will be to refine the parameters, standards and procedures for accreditation and licensure. 2.13 The project would support technical assistance to MSA to define the following: (a) refinement of the processes required for developing standard setting and accreditation of health care institutions and licensing of various categories of health personnel; and (b) location and organizational arrangements for accreditation of health facilities and licensure of health personnel and for quality assurance. The schedule for development of the systems would be as follows: review of refinement of procedures and standards (first year); testing regarding systems for licensing physicians and accrediting acute hospitals and testing of licensing and accreditation of nursing and ambulatory facilities (second year); and testing of licensing and accreditation of technical health staff and long-term care facilities (third year). Nation-wide expansion of licensing and accreditation procedures would take place, for each group, after tests are evaluated and revised. The project would provide financing for technical assistance, training and incremental recurrent costs to develop and test the accreditation, licensure and quality assurance systems. At the project's conclusion, the three systems should be ready to function concurrently on a nation-wide basis. Durinz negotiations, assurances were obtained from the Government that it would submit a report on status of development of the accreditation, licensure and quality assurance systems with recommendations for nation-wide application, no later than February 15, 1996. (d) Primary Health Care and Health Protection Service Reorientation 2.14 This sub-component aims to redefine functions for family doctors, county doctors, community and town physicians, and health protection staff. The recently approved Health Care Organization Law states a new structure for the health services based at county and city levels and various options for remuneration to family doctors and other physicians, including capitation, contracts, and private practice. The county doctors are civil servants paid by local governments; their main functions are to organize and monitor the health care service network and to ensure health surveillance and protection. Specific functions include: (a) organizing preventive and medical care service delivery; (b) monitoring the quality of care and the financial management and performance of the public health care institutions and of private doctors who have contracts with health funds; (c) ensuring appropriate data collection and analysis of the epidemiological situation and environmental conditions in the community; (d) registering and notifying as necessary cases of infectious diseases, as well as taking preventive measures; and (e) monitoring and implementing appropriate measures against damaging environmental conditions. 2.15 New legislation that modifies the present Health Protection Service (HPS) specifies functions for health protection staff (now working directly under the county health authorities) to deal with environmental hazards including food and water-born infectious diseases, air pollution, accidents and disasters and attention to social and physical living conditions. To perform these -16- functions with an integrated public health approach, family doctors, county doctors and health protection staff will be re-trained following programs to be developed by the Center for Continuing Education (para 2.21). This component would supplement current MSA actions to decentralize health services, integrate curative and preventive programs, and diversify ownership. It would be implemented by MSA's office of the Chancellor and the local health services and would finance study tours for the above mentioned professionals, training, as well as technical assistance, equipment and materials for county and family doctors. Sub-component A. 2: Health Promotion and Disease Prevention (US$1.6 million base cost) 2.16 This component, to be financed through a grant from the Government of Finland and supported by technical expertise from that countryA', would support a major thrust in promoting healthy lifestyles to reduce the prevalence of preventable diseases and injuries. The leading causes of mortality and morbidity would be kept at the forefront of national debates on reforms in public health, health training, health care delivery and health care financing. This would form the basis for a new national public health strategy including revised national nutrition guidelines, the gradual elimination of smoking from public places, the enforcement of stricter regulations on road safety, protection of the environment and safe workplaces, and family planning. The government share of this component would be allocated annually in the regular budget, as other government contributions to the project, although MSA plans to obtain these funds from a transfer from the CHIA, consisting of a top-sliced percentage of the health insurance collections. 2.17 The component would support five major national Health Prevention Programs, to be implemented by the Health Promotion and Prevention group in MSA, using Estonia-specific approaches to primary prevention on smoking, injury control, coronary heart diseases, and family planning. The project would also implement community-based programs and campaigns for adult and women's disease prevention and health promotion using funds that could be accessed, on a competitive basis, in accordance with pre-established criteria, by municipalities, health organizations, health promotion/education centers, schools, hospitals, polyclinics, universities, voluntary organizations, and the mass media. Proposals for specific programs would be submitted for approval to MSA and they would be evaluated by ad-hoc health promotion committees consisting of professionals selected on the basis of the expertise required for assessing the respective proposals. Standard formats and instructions for submitting proposals would be made available to institutions wishing to submit health promotion proposals. The sub-component would provide three person- months of technical assistance, 29 short-term visits of health promotion professionals to Finland, training of 150 persons, computer hardware and software, office equipment and furniture, development and broadcasting of 100 mass-media programs, training materials and incremental recurrent costs. During negotiations the Governmnent provided assurance that no later than JuIY 1, 1995, MSA would present the program for health promotion and disease prevention with operational rules, procedures, financing and selection criteria satisfactory to the Bank. As a conditioni of loan effectiveness, the Government would reach a formal understanding with CHIA for the annual transfer of an appropriate percentage of health insurance tax proceeds to MSA for financinl. health promotion and disease prevention programs. 6 Formal agreement between Estonia and Finland regarding this component is expected to be signed by December 1994 for the fiscal year 1995. If this agreement is not signed before project effectiveness, the Government would increase its financing to cover any shortfall. -17- Component B: Human Resources Development -- University of Tartu (US$19.1 or 66% of total base cost) 2.18 This component would support modern public health and general medical practice training, updated curricula and facilities for pre-clinical medical training, and continuing education programs for health professionals, to bring up the health manpower in Estonia to the standard of Western countries. Training would respond to health human resource development needs of a variety of project activities related to reorientation of the health sector and implementation of new health financing approaches. There are two sub-components: (i) public health training (under the Department of Public Health) and family medicine training (under the Department of Polyclinics and Family Medicine); and (ii) continuing education of health professionals (academically under the Tartu Medical Faculty, although located at Tallinn, in the Institute for Clinical and Experimental Medicine). The component would also finance the construction and equipment of a new building for pre-clinical and public health training at the University of Tartu. The existing building is 100 years old, crowded, unsafe from a health perspective and outdated for the training and research needs of biomedical and public health sciences. Because the facility has to adjoin other classroom buildings and dormitories used by the same students, it must be on the Tartu University campus. There are no buildings available that could be adapted to the requirements of the identified training needs. The building will also serve as the location for the Pharmaceutical Regulatory agency. A Project Coordinator appointed by the University of Tartu, working in close cooperation with MSA's Project Implementation Unit, would be responsible for monitoring this component. A Memorandum of Agreement between the MSA and the Ministry of Education agreeing to make the University of Tartu the implementing institution of this component and the MSA the coordinating agency was signed by the respective Ministers on June 17, 1994; a signed copy of the Memorandum was made available to the Bank during project appraisal. Sub-component B.1: Strengthening the Departments of Public Health and Policlinic and Family Medicine (US$0.9 million base cost) 2.19 This sub-component would support reoriented and updated training for (a) physicians, both at under-graduate and post-graduate levels, it would also support the reorientation of medical faculty curricula, both at pre-clinical and clinical levels, in an integrated preventive and curative approach using problem-oriented training methodologies. These training programs would be housed in Tartu's Biomedical and Health Sciences building -- Sub-component B.3. The project would enable strengthening these departments by creating full professorship positions and recruiting qualified teaching staff in the fields of health promotion, health economics, health management, epidemiology, health promotion, and family medicine and developing such staff through long and short-term studies abroad and in Estonia. Teaching staff would also be involved in research, connected, inter alia, with health reforms and the priority health promotion and disease prevention programs. Both departments would share the services of a computer specialist and electronic links for internal as well as international communications with other universities. It would finance 3 person-months of foreign and 42 person-months of local technical assistance, 3 person-months of short-term training, 10 one-year fellowships, short-term visits by 16 faculty members to other countries, computers and software, training equipment and materials and incremental recurrent costs. -18- Sub-component B.2: Creating a Center for Continuing Education of Health Professionals (US$0.8 million base cost) 2.20 This sub-component will be implemented in Tallinn's Institute for Clinical and Experimental Medicine and will be administered by MSA under academic guidance of Tartu University's Medical Faculty. It would support updated continuing education for: (a) family doctors by Tartu University's Department of Polyclinics and Family Medicine, in cooperation with the Estonian Association of Family Practitioners, on a continuing education basis; (b) county doctors on public health planning and management; (c) hospital and health insurance managers on health management, health financing and health economics; and (d) nurses and other allied professionals, on modern public health and health administration topics. The project would finance refurbishing of training facilities, curricula development, 1 person-month of technical assistance, local training for 900 health professionals, computer and software, training equipment and materials, and incremental recurrent costs. Sub-component B.3: Building for University of Tartu's Biomedical and Health Sciences Complex (US$17.4 million base cost) 2.21 This new facility will accommodate the Public Health and the Polyclinics and Family Medicine Departments, the Pre-clinical Program of the Tartu Medical Faculty, MSA's National Pharmaceutical Agency, and Tartu City Public Health Laboratories. It will replace scattered and inadequate facilities currently being used for the above purposes and is expected to contribute to a major reorientation and modernization of medical and other health training. Provision of new facilities and equipment for the National Pharmaceutical Agency and City Public Health laboratories would reinforce the objectives of the first project component relating to implementation of new procedures and standards for quality assurance of medical practice and health services. Building design will take into account practical programming of space in accordance with the anticipated functions of the building, while ensuring energy efficiency. Construction supervision consultants would be engaged for overseeing civil works implementation (details in Annex 4). 2.22 The Government would finance retroactively the initial stages of building design (para 3.16 on project financing) in order to enable construction to proceed on schedule. Criteria for pre- qualification and procedures for pre-selection of architectural firms, as well as a draft contract for building design, a detailed architectural brief, and additional relevant information were reviewed at appraisal and found satisfactory. A Letter of Invitation to a short-list of pre-selected architectural firms requesting proposals for design of the biomedical and health sciences complex were sent by the PCU at the beginning of August 1994 and proposals were received by October 1994. Selection of the firm to produce the architectural design and detail drawings for the building was conducted in accordance with criteria satisfactory to the Bank. Sample bidding documents for construction would need to be satisfactorv to the Bank. Component C: Efficient Management of Financial Resources (US$3.4 million or 12% of total base cost) 2.23 This component will be implemented by the local health insurance funds and the CHIA. The overall objective is to enable the system to use limited financial resources more effectively. Specific objectives consist of improving the technical efficiency of the processes currently being applied by the health insurance funds through, inter alia, introducing more -19- sophisticated accounting and revenue collection methods, as well as strengthening the allocative efficiency of the system through improved contracting and reimbursement methods, to enable these agencies to do direct funding in a more effective manner (details in Annex 5). Two sub-components would address these objectives by supporting the ongoing health insurance reforms at two levels: (1) the Local Health Insurance Funds and Providers; and (2) the Central Health Insurance Agency. A Project Coordinator in the Central Agency, working in close cooperation with MSA's Project Coordination Unit (para 2.31 - 2.33) would be responsible for monitoring execution of this component. The CHIA coordinator will oe assisted by an administrator to plan and control activity, and a secretary. Prior to negotiations, the Government appointed a financial component coordinator in CHIA with qualifications and experience satisfactory to the Bank. Sub-component C.1: Local Provider/ Health Insurance Interface (US$2.7 million base cost) 2.24 Financial Management. Many local insurance funds and providers currently lack systems for financial management and accounting. This sub-component is aimed at increasing the efficiency and financial basis of local funds and providers by developing basic financial management capacity, and establishing operating procedures and a modern accounting system. As a first step, foreign and local technical experts would undertake an assessment and would prepare recommendations for implementation, as appropriate, of an EU-PHARE pre-project exercise in Parnu County that is currently reviewing possibilities for a local fund and hospital accounting systems to enable improved financial management of insurance claims and reimbursements. Based on this assessment and the Government's decision on the system to be adopted, the sub-component would develop a local capability to provide on-going training for insurance funds and providers. The project would support technical assistance to help develop and document accounting policy and procedures for their use, as well as for developing curricula for local training courses for providers and local fund managers. 2.25 The Center for Continuing Education would conduct, for the entire health financing component, training-of-trainers (for 15 trainers to be selected from local agencies) and start-up courses in financial management, accountancy practiccs and operational procedures including contract methods for about 600 staff from provider units and local funds. These participants would subsequently receive annual follow up and refresher training at the local level, for a total of 1,500 course attendants. In all, 13 person-months of foreign technical assistance will be provided for training as well as for expert advise on topics described throughout this sub-component. About 170 computers and software would be financed for those providers still without suitable computer support. Procurement, configuring, testing and installation of computers will begin soon after project launching to test new accounting and other systems. During negotiations assurances were obtained from the Government that by May 31. 1995 CHIA shall appoint consultants to review the results of the EU-PHARE exercise in Parnu County and that no later than JulY 31, 1995 it wvould decide on and adopt financial management and accounting systems for the local insurance funds and providers, satisfactory to the Bank. 2.26 Health Insurance Revenue Collection. There are currently significant problems of health insurance payment arrears and under-reporting of incomes by both enterprises and the self- employed. This is an issue faced by many other countries and there is substantial expertise built up in this area. Technical assistance of a revenue collection specialist will be provided to analyze existing enrollment practices and define alternative procedures, as well as to develop methods for screening under-reporting enterprises and recommend organization and procedures for establishing -20- an inspectorate to find these enterprises and enforce payment. Furthermore, a public information specialist will assist in developing a capacity to inform employees and enterprise owners of their obligations to register employees and accurately report wages to the authorities. Similar methods will be developed for the self-employed. In the second year of the project, improvements in the collection system will include the design of measures for validating individual income assessments based on international experience in tax collection methods. As a final major step, an automated enterprise fee reporting system to enable computer reporting of employees and size of payroll will be established in the third year. During negotiations. assurances were obtained from the Government that by July 31. 1995 CHIA shall recruit a revenue collection specialist and a public information expert and that by November 30, 1995 it shall submit to the Bank an action plan for implementing recommendations on financial management and accounting systems for local insurance funds and providers for the improvement of revenue collection and on a public information program for employees and enterprise owners. Sub-component C.2. Institutional Support to Central Health Insurance Agency (US$0.7 million base cost) 2.27 This sub-component would enhance the capacity of the health insurance agency to design, implement and monitor planning and operation systems more efficiently. There would be two clusters of activities to strengthen CHIA: (a) improvement of basic systems on operational procedures, budget planning process and basic quality control measures; and (b) development and use of models for actuarial planning, to analyze existing and anticipated insurance expenditures in relation to service demand, revenue collection and expected patterns of service delivery. For this sub-component the project would finance 23.2 person-months of foreign technical assistance, 2 short-term (3 months) fellowships, two short-term visits, 16 computer systems and software, office refurbishing, equipment and supplies and incremental recurrent costs. 2.28 Regarding the first cluster, in the first year advice would focus on improving basic systems such as accounting and auditing methods' development, particularly concentrating on curricula development, and training of agency staff in collaboration with the Center for Continuing Education. Topics to be covered include basic accounting principles such as double entry book- keeping, accrual accounting and depreciation of assets. Starting in the second year, technical experts would undertake an overall assessment of the operations of the insurance system and would recommend basic quality control measures, as well as technical advice on the management of fund reserves to sharpen current procedures on auditing. 2.29 The second cluster would include activities and technical assistance to develop CHIA's capability in actuarial analysis needed for the agency to become financially self-sufficient. This sub- component would finance an initial actuarial analysis of the insurance scheme and assess the information available to calculate risk factors for different population groups. Support would be given to develop models to predict expenditure both at national and local levels. Technical assistance will also be available to use the results of the actuarial analysis and combine it with current data on service demand, assumptions about revenue collection and present and expected patterns of service delivery. The resulting models will enable the agency to measure the expected impact on revenue and health service expenditure under different operating scenarios. In the last two years, further support would be provided to appraise the performance of the models and update and refine them, as well as training and advisory assistance for the continued use and development of these models. -21- 2.30 Planning capability should not be limited to the prediction of future financial flows. It should also enable the insurance agency to prioritize a purchasing plan for health services that can be implemented through contracts with providers. Currently, contracts between providers and insurance funds are based solely on a global limit on expenditure and regulations determined by a provider's service capacity. The agency needs tools to decide which services it wishes to purchase, formulate priorities, embody these in a purchasing plan and use them as a basis of contracts with providers. The project will provide expertise to demonstrate how international databases could be used to access data on clinical effectiveness and cost-effectiveness and it would provide advise on how these data could be incorporated into protocols that would be part of provider contracts; these would also include price and volume information and indicators to monitor quality of the care provided. TOR for technical assistance in this cluster would require experts to conduct seminars for staff and help the agency develop a purchasing and contracting plan to guide the local insurance funds. At the local level, the expert would help develop training in contract specification and negotiation in collaboration with the Center for Continuing Education. Component D. Project Coordination Unit (US$0.8 million or 3% of total base cost) 2.31 The project coordination team consists of the PCU at MSA and the coordinators from University of Tartu and the CHIA. The PCU is responsible for overall project management and technical and financial management of the project. It would also contribute to strengthening MSA's capacity to coordinate other donors' assistance in the health sector. The PCU receives guidance and act as the secretariat of a Health Reform Coordinating Committee which is chaired by the Minister of Social Affairs and comprises a representative designated by the Rector of the University of Tartu and the Director of the CHIA. This committee will monitor progress of health sector reform. During the early phases of implementation, project management consultants will help MSA adopt modern management tools; this implies using critical path analysis, monitoring resource utilization, overseeing day-to-day operations, evaluating progress, resolving bottlenecks, preparing periodic progress reports, and ensuring the timely execution of tasks. 2.32 Consultants will provide expert support to the PCU and to the other two coordinators as follows: (a) ensuring that funds (loans, grants, parallel financing and local counterpart funds), resources (human, physical and information), and management support are made available to the project when required through appropriate budgeting and planning; (b) managing special accounts established for the project; (c) processing and/or expediting loan/grant fund withdrawal applications and draw-downs; (d) consolidating and preparing progress and evaluation reports, financial records, statements of expenditure, and audits; (e) coordinating implementation of various activities to ensure that project objectives are met, and that the required actions are executed in an efficient and timely manner in accordance with the planned project processing and implementation schedule; and (f) procuring consulting services, goods and civil works for the project. Such support will help to standardize processes and aim to achieve economies of scale through bulk procurement. 2.33 By the end of the project, the functions of this unit would have been institutionalized in MSA, University of Tartu and the CHIA. For the PCU, the project will provide 18 person- months of foreign and 8 person-months of local technical assistance for procurement, 6 computers and software, office equipment and materials, 2 vehicles and incremental recurrent costs to enable it to operate effectively. Before negotiations, the Government presented to the Bank formal evidence that it has officially established the Health Reform Coordinating Committee and appointed the procurement and the accounting specialists and coordinators at the University of Tartu and Central Health Insurance Agency. -22- III. PROJECT COST, FINANCING, PROCUREMENT AND DISBURSEMENTS A. Project Costs 3.1 The total project cost, net of taxes and duties and including US$5.4 million in physical and price contingencies, is estimated at US$34.5 million, of which US$21.8 million (or 63%) would be foreign exchange. Investment costs amount to 93% of base costs and incremental recurrent costs, to 7%. Project costs were estimated at June, 1994 price levels and include 10% for physical contingencies. Price contingencies for local costs were calculated at 8% for 1995, 3% for 1996 and 2.7% per year for 1997 and 1998. For foreign costs, price contingency rates were 2, 2.5, 2.7 and 2.5 percent for 1995 to 1998, respectively. The tables below present project costs by project component and by item of expenditures. Table 3.1 Project Cost Summary by Components. % % Totbl (EEK Million) (US$ Million) Foreign Base Local Foreign Totbl Local Foreign Total Exchange Costs A. Health System Reorientation 1. Institutional Development and Realignment in the MSA /a 6.50 43.37 49.87 0.49 3.24 3.72 87 13 2. Health Promotion and Disease Prevention 18.86 2.28 21.15 1.41 0.17 1.58 11 5 Subtotal 25.37 45.65 71.02 1.89 3.41 5.30 64 18 B. Human Resources Development 1. Strengthening the Departments of Public and Polyclinic and Family Medicine 2.62 9.81 12.43 0.20 0.73 0.93 79 3 2. Creation of a Center for Continuing Health Education /b 6.38 3.86 10.25 0.48 0.29 0.76 38 3 3. Construction of the University of Tartu Biomedicum Building 75.70 160.17 235.87 5.65 11.95 17.60 68 60 Subtotal 84.70 173.84 258.54 6.32 12.97 19.29 67 _6 C. Efficient Management of Financial Resources 1. Local Provider/Health Insurance Interface 19.69 18.89 38.57 1.47 1.41 2.88 49 10 2. Central Health Insurance Agency Development 4.00 7.76 11.76 0.30 0.58 0.88 66 3 Subtotal 23.68 26.65 50.33 1.77 1.99 3.76 53 13 D. Project Coordination Unit 4.26 5.82 10.09 0.32 0.43 0.75 58 3 Total BASELINE COSTS 138.01 251.97 389.98 10.30 18.80 29.10 65 IW Physical Contingencies 13.80 25.20 39.00 1.03 1.88 2.91 65 10 Price Contingencies 18.51 14.88 33.39 1.38 1.11 2.49 45 9 Total PROJECT COSTS 170.33 292.04 462.37 12.71 21.79 34.51 63 119 \a Ministry ot Social Affairs \b The Institute of Experimental and Clinical Medicine under the scientific supervision of the Tartu Medical Faculty. -23- 3.2 Estimated costs to construct the Tartu Biomedical Sciences building are based on unit prices derived from current contracts and cost analyses for similar standards of construction in Tallinn and Tartu. Estimated unit costs of medical, laboratory and office equipment are based on prices quoted in recent international competitive bids in other countries. Estimates for technical assistance and studies are based on current rates for foreign experts. Cost estimates for training, travel allowances, salary for staff undergoing training, and other operating costs are based on current costs or costing standards provided by MSA (selected cost tables are shown in Annex 9). B. Incremental Recurrent Costs and Sustainability 3.3 The incremental recurrent costs that the project would collectively add to the budget of the implementing agencies during its execution in the first year (1995) account for 2% of the Government health budget. The annual incremental costs in the last year of the project (in percentage terms of the estimated 1998 budget in 1994 prices) would amount to 1 % of the projected budget. These incremental recurrent costs would be generated by: (a) additional (discounting for reassigned) staff to run the HMIS in MSA and the management information system in CHIA; (b) maintenance of medical and office equipment acquired under the project; and (c) operating expenses related to project coordination and implementation and, once the project is completed, to institutionalize new MSA functions (discounting for staff reassignment or substitution). Incremental recurrent costs during project implementation would be assigned as a Government contribution. 3.4 Any increases in recurrent costs should be assessed against the magnitude of the institutional building intended in this project; in addition, significant savings are expected to result from health promotion and disease prevention programs, restructuring of the health institutions, improved management, and increases in efficiency. Indeed, one of the main objectives of the proposed project is to strengthen the financial position of the CHIA by rationalizing expenditures and reimbursements for medical services, and improving collections, accounting and financial controls. Further, the structural changes that the project would support are expected to bring major financial (as well as qualitative) benefits to the health system, which are expected to continue well beyond the project period. C. Financing Plan 3.5 The proposed loan of US$18 million would finance 52.2% of project costs, net of taxes and duties. The loan would finance 76% of foreign exchange expenditures (US$16.6 million out of US$21.8 million) and 11 % of local expenditures (US$1.4 million out of US$12.7 million). The Government would finance US$14.5 million to contribute to the cost of construction, office equipment, training and local health promotion programs, and would finance 100% of recurrent costs. Donors would finance US$2 million for technical assistance, training and fellowships. -24- Table 3.2 Project Cost Summary by Category of Expenditures. % % Total (EEK Million) (US$ Million) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs I. Investment Costs A. Civil Works 1. Design 1.69 9.57 11.26 0.13 0.71 0.84 85 3 2. Construction 65.69 96.64 162.33 4.90 7.21 12.11 60 42 3. Supervision 0.94 1.20 2.14 0.07 0.09 0.16 56 1 Subtotal 68.32 107.41 175.73 5.10 8.02 13.11 61 45 B. Equipment 1. Office Equipment & Furniture /a 7.48 9.67 17.15 0.56 0.72 1.28 56 4 2. Computer Hardware & Software - 31.32 31.32 - 2.34 2.34 100 8 3. Laboratory Equipment 2.47 46.85 49.31 0.18 3.50 3.68 95 13 4. Testing Instruments - 8.44 8.44 - 0.63 0.63 100 2 5. Medical Kits for GPs - 8.71 8.71 - 0.65 0.65 100 2 Subtotal 9.94 104.99 114.93 0.74 7.83 8.58 91 29 C. Teaching Materials /b 1.23 1.88 3.11 0.09 0.14 0.23 61 1 D. Technical Assistance 1. Foreign TA - 21.83 21.83 - 1.63 1.63 100 6 2. Local TA 2.46 - 2.46 0.18 - 0.18 - 1 Subtotal 2.46 21.83 24.29 0.18 1.63 1.81 90 6 E. Training /c 14.74 7.80 22.54 1.10 0.58 1.68 35 6 F. Fellowships - 8.06 8.06 - 0.60 0.60 100 2 G. Local Health Promotion Programmes /d 14.98 - 14.98 1.12 - 1.12 - 4 Total Investment Costs 111.67 251.97 363.64 8.33 18.80 27.14 69 93 II. Recurrent Costs A. Staff Salaries /e 13.62 - 13.62 1.02 - 1.02 - 3 B. Miscellaneous Costs /f 5.91 = 5.91 0.44 _ 0.44 _ 2 C. Maintenance /g 6.81 - 6.81 0.51 - 0.51 - 2 Total Recurrent Costs 26.34 _ 26.34 1.97 _ 1.97 _ 7 Total BASELINE COSTS 138.01 251.97 389.98 10.30 18.80 29.10 65 100 Physical Contingencies 13.80 25.20 39.00 1.03 1.88 2.91 65 10 Price Contingencies 18.51 14.88 33.39 1.38 1.11 2.49 45 9 Total PROJECT COSTS 170.33 292.04 462.37 12.71 21.79 34.51 63 119 \a Includes training and audio-visual equipment \b Books, journals, and mass media materials. \c Short-term visits, foreign and local training, workshops, and seminars. \d Competititve awards given to community-based groups for health programs. \e Includes staff salaries while on short-term visits, training, and fellowships. \f Various costs needed for project implementation. \g Includes maintenance of equipment and infrastructures. -25- Financing Plan Local Foreign TOTAL Government 11.3 3.2 14.5 Other Donors* 0.0 2.0 2.0 IBRD 1.4 16.6 18.0 TOTAL 12.7 21.8 34.5 * confirmed 3.6 Foreign donors are prepared to finance a large part of the technical assistance and fellowships; firm commitments for 1995 were made as follows: Denmark: US$40,000; Finland: US$100,000; Canada: US$600,000; EU-PHARE: US$1,260,000. A similar amount is expected in the following years, and other countries -- Sweden, Germany -- are also considering the possibility of providing bilateral support, which will be deducted from the Government's contribution for 1996 onwards. The Government's annual commitments would be reviewed as part of regular Bank supervision and monitored through annual reports provided by the PCU as well as during the mid- term review by November 1996. Schedules of disbursements for IBRD and the Government are presented in Annex 10. D. Procurement 3.7 Major procurement categories are building design and construction, refurbishing, equipment, teaching materials, technical assistance and fellowships. Procurement for civil works, goods and services would be done in accordance with Guidelines for Procurement Under IBRD Loans and IDA Credits (May 1992). Procurement arrangements are presented in Table 3.3. Annex 7 presents planned procurement packages and planned schedule. 3.8 Civil Works. Construction contracts of US$300,000 or above will be awarded using ICB. Bank's standard biding documents (June 1994) for small works will be used for ICB contracts. Bidders for works under ICB will be pre-qualified in accordance with 2.10 of the Bank Guidelines (May 1992). 3.9 Equipment. Major categories include office equipment and furniture, computers and software, medical, laboratory and testing instruments, and teaching materials. For packages of US$300,000 and over, contracts would be awarded using ICB (for office equipment and computers) and LIB will be used where there are limited number of suppliers (this is the case of medical, testing and laboratory equipment). Local shopping (LS) will be used for furniture, provided that furniture packages would be below US$50,000. Equipment amounting to US$3.3 million will be procured through ICB (copiers, telephone and fax machines, computers and office equipment); equipment worth of US$5.0 million will be procured through LIB (medical, testing and laboratory equipment); US$0.30 million will be used for the procurement of furniture through LS; and US$0.20 million for teaching materials (books, journals and special training packages) through direct contracting (DC) (for details see Annex 7). LS will be through three price quotations from qualified local suppliers. For all ICB contracts, Bank's standard bidding documents for goods (May 1994) will be used. In comparisons of bids for goods to be procured through ICB, domestic manufacturers proposing goods meeting all advertised specifications and with a value added in the country of the Borrower equal to at least 20% of the ex-factory bid price of such goods, would be allowed a -26- margin of preference equal to the amount of custom duties and other import taxes a non-exempt importer would have to pay, or 15% of the lowest c.i.f. bid price of such goods, whichever is lower. 3.10 Technical Assistance. Firms to produce the architectural design of the Tartu Biomedical building for an approximate value of US$0.95 million have already been short-listed and invitations sent. TA on construction supervision, at an estimated cost of US$0.2 million will also be procured using selection from short-listed finns. TA worth US$2.0 is expected to be provided by bilateral cooperation, if not, from Government's own resources. In the latter case, it is expected to spend an aggregate amount of US$0.5 million on short-term assignments to individual consultants and US$1.5 million on contracts with consulting firms. Selection and appointment of individual consultants and consulting firms for technical assistance, would be consistent with the August 1981 Guidelines for the Use of Consultants by World Bank Borrowers. Individual consultant contracts above US$50,000 and contracts with firms above US$100,000 would require Bank's prior review. The Bank also pre-reviews Terms of Reference for all consulting assignments. For large time-based contracts, such as the architectural design, the Bank's standard contract will be used. Other activities that are to be financed by the Bank include fellowships (US$0.33 million), training in the Departments of Public Health and Polyclinic and Family Medicine at the University of Tartu, and in the Center for Continuing Education of Health Professionals, Tallinn (US$0. 11 million), and competitive awards for health promotion programs (US$0.53 million, for details, see Annex 2 on Health Promotion and Prevention, available on request). 3.11 All procurement would be carried out by the PCU at MSA. Since this agency has very little experience with procurement, five PCU members participated in a training seminar organized by Bank staff during project preparation in Tallinn. Technical assistance on procurement of civil works and goods was also provided to the PCU by international consultants during project preparation. In addition, the MSA has agreed to hire a procurement officer and an internationally recruited procurement consultant familiar with Bank procedures to be employed in the PCU, the second one through bilateral technical assistance from Canada. -27- Table 3.3 Summarv of Proposed Procurement ArranLements (US $ million) Procurement Method ICB Other N.B.F. Total Construction 14.45 - 0.11 14.56 (7.08) - - (7.08) Equipment 3.3 5.9 0.01 9.20 (3.3) (5.0)/a - (8.3) Furniture - 0.3 0.5 0.8 - (0.3)/b - (0.3) Teaching Materials - 0.20 0.07 0.27 - (0.2)/c - (0.2) Technical Assistance - 1.15 2.06 3.21 - (1.15)/d - (1.15) Fellowships & train. - 0.44 2.26 2.70 - (0.44)/e - (0.44) Health Promotion - 1.36 - 1.36 - (0.53)/f - (0.53) Incremental costs - - 2.40 2.40 Total 17.75 9.35 7.40 34.50 (10.38) (7.62) - (18.00) Note: Figures in parenthesis are the respective amounts financed by IBRD. Other methods include LIB, LS and DC. /a Medical equipment, testing instruments, laboratory equipment (LIB) /b Local Shopping (LS) /c Direct contracting (DC) /d The remaining TA to be provided by bilaterals and GOE /e Not involving procurement; disbursements for these activities will be made after approval of these programs by the Bank. /f Competitive awards for health promotion programs 3.12 Prior Review. All bidding documents, bid evaluation reports and contract awards for all ICB and LIB and direct contracting purchases, as well as the first LCB for civil works and contracts for studies with consultants over US$50,000 for individuals and US$100,000 for firms would be subject to prior review by the Bank. The Bank also pre-reviews terms of reference for all consulting assignments. Ex-post review of contracts disbursed against Statement of Expenditures (SOEs) would be conducted during field supervision on the basis of random sampling. All expenditures will be disbursed according to procedures acceptable to the Bank. The Bank will also review master lists of equipment, packaging of bids and up-dated cost estimates. 3.13 Country Procurement Assessment Report (CPAR). As other countries of the former Soviet Union and Eastern Europe, Estonia does not have a long tradition of competitive procurement procedures. The Government has requested the Bank assistance in the development of a national procurement law with the supporting regulations and bid documents required to institute such a system and work is already underway. A CPAR is planned for FY96. -28- 3.14 Procurement Monitoring and Reporting. The Government will keep the Bank informed about the progress of the procurement schedule through the submission of regular quarterly progress reports on procurement activities. 3.15 During ne_otiations. the above procurement arrangements were confirmed with the Borrower. including the use of the Bank's standard bidding documents and consultant contract formats. E. Disbursements 3.16 'rhe date of project completion would be January 1, 1999 and the closing date, July 1, 1999. Disbursements from the proceeds of the loan over a four-year period (presented in Annex 10) will be for: (a) civil works (US$7.5 million): 100% of foreign expenditures; 60% for local expenditures for other items procured locally; (b) supplies and equipment (US$7.5 million): 100% of foreign expenditures; 100% of local expenditures (ex-factory); 80% of local expenditures for other items procured locally; (c) training, fellowships, local programs and consultant's services (US$1.0 million): 100% of foreign expenditures; 50% of local expenditures; (d) unallocated (US$2.0 million). 3.17 Payments for project costs would be administered by the PCU. Contracts for goods and works above US$300,000 are subject to prior review by the Bank. Proceeds of the proposed loan would be disbursed against withdrawal applications to be fully documented for contracts valued at more than US$100,000 for goods and civil works. Contracts below this amount would be disbursed against presentation of SOEs, for which the supporting documentation would be retained by the PCU for periodic inspection by the Bank and by external auditors. The minimum size of the application for direct payment and the issuance of the Special Commitment is US$50,000. To allow start-up project activities related to the construction of the Biomedical and Health Sciences building to proceed immediately, the Government would provide retroactive financing of up to US$ 270,000 for expenditures incurred on or after July 1, 1994 (including architectural consultant services for building design). 3.18 Special Account. To facilitate project implementation, the Borrower would establish a Special Account (SA) in a reputable commercial bank on terms and conditions satisfactory to the IBRD, to cover the IBRD's share of expenditures. The authorized allocation would be US$500,000 representing about four months of average expenditures effected through the Special Account. Applications for replenishment of the Special Account would be submitted monthly or when one- third of the amount has been withdrawn, whichever occurs earlier. Documentation requirements for replenishment would follow standard Bank procedures. In addition, monthly bank statements of the Special Account, which have been reconciled by the Borrower, would accompany all replenishment applications. -29- F. Accounting and Auditing 3.19 In addition to the general project accounts in the Central Bank, the Project Coordination Unit would maintain a separate accounting of expenditures for each project component and would prepare and provide to the Bank semi-annual reports on implementation progress along with a financial statement of project expenditures. Accounting for all Special Account transaction and for all other project-related accounts will be maintained in accordance with international accounting standards. Project accounts, including the Special Account, would be maintained by the PCU and audited annually in accordance with the Bank's "Guidelines for Financial Reporting and Auditing of Projects Financed by the World Bank", dated March 1982. Audits will also be carried out, at the same time and for corresponding periods in accordance with the Bank's guidelines, for SOEs against which disbursements have been made or are due to be made from the loan and SOEs which will be included in the audit reports accompanying the financial statements. The audited financial statements for the Special Account, project accounts, and SOEs of the preceding fiscal year and the resulting audit report in such scope and detail as the Bank may reasonably request, including a separate opinion by the auditor on disbursements made against certified statements of expenditure, would be sent to the Bank within six months of the end of the Government's fiscal year. It is recommended that the Government retain the same auditors to review the accounting systems and supporting internal procedures and practices for the Special and Project Accounts and SOEs, and recommend any needed changes. -30- IV. IMPLEMENTATION, MANAGEMENT, EVALUATION AND SUPERVISION A. Status of Project Preparation 4.1 The project was prepared over a nine-month period by Estonian working groups designated by MSA, assisted by consultants funded by the Japanese PHRD and Bank managed bilateral trust funds. Several Bank preparation missions staffed with expertise relevant to the topics of the project components had detailed discussions with the working groups on project design and contents. Preparatory work included completion of a detailed functional program (both room-by- room and equipment planning) for the Tartu Biomedical Building by consultants financed with PHRD funds; this document was used in a Letter of Invitation that the Government sent in early August, 1994, to short-listed architectural firms, requesting proposals for building design. National priorities and evolving health policies were frequent subjects of discussions with the Governmnent during preparation missions and were addressed throughout the project development process. Specific activities were defined for each of the three components, and the respective roles and responsibilities of the implementing agencies were assessed and described. Government commitment to the project was evident during this process; moreover, the Government agreed to prepare a health policy document that was discussed in draft form with the Bank at appraisal and will be officially submitted before negotiations. The implementing agencies received several technical papers prepared by consultants (available in the project document files and listed in Annex 12) and adopted many on their recommendations during policy and project development. To assist the early start expected to be made on some works, it is recommended that retroactive financing for up to US$270. 000 equivalent would be provided for expenditures incurred from July 20, 1994, covering initial expenditures of the architectural designs of the Tartu Biomedical Building. 4.2 Several of the studies needed as a basis for each of the components and financed by various agencies and bilateral donors, are completed or under way (for example, pre-investment studies on health financing with EU-PHARE funds are to be completed by May 1995; a study on cost-effectiveness of health promotion programs was finalized by negotiations. A draft version was available by August 1994. A study on restructuring the Health Protection Service, with WHO/EURO and Japan's PHRD financing was completed in June, 1994). All reports and final recommendations needed to start the project will be available by project launching. Sample bidding documents for the main construction were reviewed at negotiations (para 2.22). The project phasing over the four years has been planned taking into account implementation capacity and the average time needed for the tasks proposed. For effective implementation in 1995, the Government was requested to include project expenditures in the annual budget of the respective agencies, under their investment and recurrent budgets. As a condition of loan effectiveness, evidence shall be provided that the provision of EEK 4.5 million in the budget for 1995, combined with other sources of flnancing. are adequate to fund the implementation of the project in that year. The annual report prepared bv the PCU by November 30 of each year the proiect would include similar evidence of adequate budget allocations for annual project implementation in the following year, as well as contributions secured from other sources. -31- B. Project Management and Implementation 4.3 The make-up of PCU is presented in Section 11 as part of the project description. The team consists of the Project Coordination Unit at MSA with professional staff for administration, accounting and procurement, and the coordinators from the University of Tartu and the Central Health Insurance Agency. The PCU would be responsible for technical and financial management of the project and would contribute to strengthening MSA's capacity to coordinate other donors' assistance in the health sector. The Unit would receive policy guidance and act as the secretariat of a Health Reform Coordinating Committee chaired by the Minister of Social Affairs and comprising a representative designated by the Rector of the University of Tartu and the Director of the Central Health Insurance Agency. This committee will monitor the progress of health sector reform. During the early phases of implementation, project management consultants will help MSA adopt modern management tools such as project control using critical path analysis, monitoring resource utilization, overseeing day-to-day operations, evaluating progress, resolving bottlenecks, preparing periodic progress reports, and ensuring the timely execution of tasks. In addition, an internationally recruited procurement consultant will provide advice and on-the-job training for a local procurement specialist. C. Project Planning, Monitoring, and Evaluation 4.4 The project is expected to be implemented in four years, beginning in March, 1995, with completion in January, 1999. The PCU would be responsible for monitoring project tasks as defined in the project implementation plan (the plan defined at appraisal is presented in Annex 6). Day-to-day planning and follow-up of activities will be an on-going function of the PCU and of each implementing agency or department responsible for specific components. The PCU would also keep track of key indicators to assess project progress and impact in relation to specific objectives (Annex 8 presents, in detail, indicators for each project component). Two types of indicators have been defined: process indicators to measure progress in project implementation and impact indicators to evaluate improvements in the health system and in the health status of the population. For example, in the component on integration of primary health care and health protection, the impact of project activities would be gauged by selecting tracer counties and determining through special inquiries whether epidemiological profiles are being produced, family doctors are applying new protocols and equipment and health protection agents have been retrained and are operating in accordance with modified approaches. Regarding improvements in health conditions, there is provision in the Health Promotion and Disease Prevention component for tracking indicators using data from existing periodic National Health Behavior Studies, and national disease specific statistics and registers. Table 4.1 presents some illustrative indicators that could be used in this project as a partial measure of impact (only partial effects may be finally attributed to the project since other factors will affect the indicators as well): -32- Table 4.1 Target Indicators for Health Promotion Programs in Estonia, 1992 - 1998 Indicators Year Targets Prevalence of Daily Smokers 1992 Male 49% Female 20% 1998 45% 19% Passive Smoking 1992 Male 81% Female 50% 1998 50% 30% Age-standard Ischemic Heart 1990 99 per 100,000 Disease Death Rate (0-64 Years) 1998 80 per 100,000 Abortion Rate 1993 157.7 per 100 births 1998 125.0 per 100 births Breast Feeding 1992 27.3% 1998 50.0% Male Mortality due to Injury 1992 117.2 per 100,000 1998 105.0 per 100,000 4.5 Other ways to evaluate project progress and impact on the health system will include reviews of hospital accreditation and licensure of professionals, surveys on maintenance of equipment, peer reviews of quality of public health and family medicine departments'studies and programs, and evaluation of training courses. 4.6 Annual progress reports would be prepared for each of the components by the respective implementing agencies or divisions and would be consolidated by the PCU into an annual report highlighting problems encountered, achievements in relation to project implementation plan and goals, the status of procurement and construction, technical assistance accomplishments, expenditures by category (committed and made), disbursements and implementation plan for the following year. The implementation plan would include, for Bank review, a list of the bidding packages proposed for procurement and a list of the technical assistance to be obtained, by donor. This report would be sent to the Bank each year, prior to arrival of a Bank review mission. 4.7 Mid-term Review. During negotiations it was agreed that a mid-term review, to be conducted in November 1996. It would ensure that the direction and contents of the project continue to respond to stated objectives. D. Bank Supervision Strategy 4.8 This project would require 22 staff-weeks of supervision in the first, 18 in the third and last years and 24 in the second year, to allow for mid-term review (a supervision plan is included as Annex 11). Supervision missions would be semi-annual and the team would be a combination of Bank staff and consultants with specialties in public health, health promotion, medical education, management information and health care financing. Emphasis should be placed on ensuring continuity of team leadership. One mission would be timed at November each year, -33- to review implementation accomplishments using as a basis the Government's annual progress report (para 4.7) and plan for the next year's activities. Sufficient time should be allowed between this annual review and the preparation of the Government budget, in order to ensure that project costs and Government counterpart funds are included in the national budget. The other semi-annual mission would focus on selected technical topics agreed in advance with the PCU, and it would be staffed accordingly. Additional short supervisory visits by building engineers and architects would be sent as required, during the design and construction phases of the Biomedical and Health Sciences building in Tartu. Also, the Loan Department would occasionally send one staff member, as part of a multi-country mission, to review a sample of statements of expenditures and to assist the PCU with disbursement issues. -34- V. BENEFITS AND RISKS 5.1 The project's support of key institutional health reforms, training of health personnel in modern public health and medicine, and changes in financial management and evaluation would, in the short-term, increase efficiency in the delivery of health services and contain costs. In the medium- term, the emphasis on preventive measures and promotion of healthy lifestyles, added to the improved quality of health personnel and clinical treatments, would lower adult mortality and morbidity due to causes related to tobacco and alcohol consumption, unhealthy diets, injuries and women's reproductive health problems. 5.2 Benefits. Improvements in efficiency are likely to stem from two sources: (a) technical, from improving the effectiveness of existing practices; and (b) allocative, from reallocating resources and achieving more cost-effective health care. Technical efficiency gains would derive from improving accounting, revenue collection and payment mechanisms; moreover, unnecessary hospitals and beds would be eliminated and shorter lengths of stay would be achieved and this would lead to decreases in staffing and maintenance costs. In addition, a system of family doctors with a stronger referral system, particularly if doctor remuneration is based on capitation, should reduce unneeded outpatient visits. These changes, together with a more effective payment screening procedure, should reduce health cost inflationary pressures. However, there is a danger that this could increase the number of referrals to higher levels of the health care system and this should be addressed through audits of physician referral behavior. Improvements in medical protocols for treatment of specific conditions would also increase the effectiveness of medical care and it would release resources currently spent on ineffective procedures. The project places a major emphasis on capacity building in medical training, both for managers and health professionals, through technical assistance, visits to other countries and fellowships abroad. This investment should result in stronger national medical and health training and the possibility of exporting this training to other countries in the region. Allocative efficiency would be obtained by shifting resources to more efficient uses. Current perverse incentives to keep hospital patients longer than necessary and to over-prescribe will be reversed, due to changes to be introduced in payment systems that are episode or group-related. Also, improved assessment of medical technology should ensure that financial resources are applied to more efficient equipment, for example, such as that used in less invasive day surgery. 5.3 There may be also several types of indirect impacts inside and outside the health sector, on medical, social and financial costs. In the first instance, increased effectiveness and emphasis on prevention in the health sector should decrease medical expenditures, reduce the number of work-days lost due to disability, as well as add years of productive life, and raise productivity. Also, less costly medical procedures and shorter hospitalizations would reduce the costs born by the state and industry; this may be particularly important in a growing economy with relatively scarce labor. Using the burden-of-disease approach recommended by the World Bank's 1993 World Development Report, Investing on Health, a cost-effectiveness study done during project preparation suggests that the implementation of disease prevention programs could save in Estonia over 29,000 disability-adjusted life-years (DALYs) by the year 2004. The study analyzed the potential cost-effectiveness of four preventive programs included in the project, against seven selected problems: (a) abortion and abortion complications; (b) smoking; (c) chronic obstructive pulmonary disease; (d) lung cancer; (e) upper digestive cancer; (f) cardiovascular conditions, including myocardial infarction, instable angor and stable angor pectoris; and (g) traffic accidents. The study estimated that a total amount of EEK328 million (around US$25 million) could be saved -35- between now and the year 2004, representing savings of EEK36 for each EEK invested on prevention, at a cost of EEK314 per DALY. 5.4 As a third instance of indirect impact, Estonia's health reform could serve as a model for other countries in similar circumstances. Both successes and failures could be applied as references for reorganizing health systems in other NIS. 5.5 The main risks of this project are: (a) the difficulties involved in transforming a curative health system into one more focused on disease prevention and health promotion; (b) the complexities attached to restructuring institutions and strengthening the management of the health insurance funds; (c) a new government may not be as commited as the current and the previous ones to implement agreed reforms; and (d) the lack of experience of the Government in implementing Bank financed projects. A positive factor that should reduce the risks is the Government's strong commitment to the entire project which is considered a key instrument to support the ongoing health reform. Moreover, design includes features to reduce risks, such as ensuring continued technical guidance and training for strengthening organizations and management practices. -36- VI. AGREEMENTS REACHED AND RECOMMENDATION 6.1 The following conditions were obtained before negotiations: (a) present formal evidence that Ministry of Social Affairs (MSA) has officially established the Health Reform Coordinating Committee and appointed procurement and accounting specialists, as well as a financial component coordinator in Central Health Insurance Agency (CHIA) (para 2.23), and a coordinator at the University of Tartu, all with qualifications and experience satisfactory to the Bank (para 2.33); (b) sample bidding documents for the main construction acceptable to the Bank (para 2.22 and 4.2); and (c) evidence of inclusion EEK 4.5 million of project incremental expenditures in the 1995 Government budget (para. 4.2). 6.2 During Negotiations, the following assurances were obtained from the Government: (a) by May 31, 1995 CHIA shall appoint consultants to review the results of the EU- PHARE exercise in Parnu County and no later than July 31, 1995 it shall decide and adopt financial management and accounting systems addressed to the local insurance funds and providers, satisfactory to the Bank (para 2.25);; (b) by July 1, 1995 MSA shall furnish the Bank a program for health promotion and disease prevention with operational rules, procedures, financing and selection criteria satisfactory to the Bank (para 2.17); (c) by July 31, 1995 CHIA shall recruit a revenue collection specialist and a public information expert, and by November 30, 1995 it shall submit to the Bank an action plan for implementing recommendations on financial management and acconting systems for local insurance funds and providers, improvement of revenue collection and on a public information program for employees and enterprise owners (para 2.26); (d) by February 15, 1996 MSA shall submit to the Bank a report on the status of development of the accreditation, licensure and quality assurance systems with recommendations for nation-wide application (para 2.13). (e) by November 30 of each year, annual progress reports would be prepared for each of the project components consolidated by the PCU into an annual report and an implementation plan for the following year, including, for Bank review, a list of the technical assistance to be obtained, by donor (para 4.6); (f) by November 30, 1996 a mid-term review shall be carried out, jointly, by the Borrower and the Bank, according to terms of reference acceptable to the Bank (para 4.7). -37- 6.3 As conditions of loan effectiveness the Govermment would cause: (a) MSA to appoint the Director of the Policy and Economic Analysis Unit (para. 2.6); (b) MSA and CHIA to reach a formal agreement acceptable to the Bank on the annual transfer of an appropriate percentage of health insurance tax proceeds to MSA for financing health pro'motion and disease prevention programs (para. 2.17); c) MSA to appoint a national working group and a coordinator for the hospital and health facilities master plan and a committee on medical technologies, under terms of reference satisfactory to the Bank (para 2.11); d) The Borrower to provide evidence satisfactory to the Bank that provisions in the budget for 1995, combined with other sources of financing, are adequate to fund the contribution of the Borrower for the implementation of the Project in that year (para 4.2). 6.4 Recommendation. Subject to the above conditions and assurances, the project would constitute a suitable basis for a Bank loan of US$18 million equivalent to the Republic of Estonia for the term of 15 years including a grace period of 5 years, at the Bank standard variable interest rate. ESTONIA HEALTH PROJECT ANNEXES -38- ANNEX 1 ESTONIA HEALTH PROJECT HEALTH CONDITIONS, HEALTH CARE SYSTEM AND REFORM A. DEMOGRAPHIC SITUATION AND HEALTH STATUS. 1. Demographic Data. In recent years, increased mortality, declining birth rates, and migra- tion have contributed to the negative population growth. The population of Estonia dropped from 1,572 million in 1990 to 1,506 million in 1993; from 1992-1993 population fell 1.32%. The crude birth-rate (live births per 1,000 population) has declined from 14.1 in 1990 to 10. 1 in 1993, at the same time as the standardised death rate has increased from 12.3 in 1990 to 13.0 in 1993. The population has been aging slightly: the proportion of elderly (men over 60, and women over 55 years of age) has increased from 19.3% in 1980 to 20.5% in 1991. 2. The urban areas hold 71.6% of the population; the overall average density of population is 34.8 persons per square km. Tallinn, the capital, has 473,432 inhabitants. Based on 1993 data, other major cities contain the following: 109,133 in Tartu; 84, 377 in Narva; 70,849 in Kohtla-Jarve. 3. Estonians belong to the Baltic-Finnish group of the Finno-Ugric peoples. Due to immigration, the ethnic composition of the population changed significantly after World War II. Estonians now make up 61 % of the population; minorities and other ethnic groups defined by the Government include Russians (30%), Ukrainians (3%), Byelorussians (2%) and others (2%). The non-Estonian population is dominant in the northeastern industrial regions. 4. Health Status. The health of adult Estonians is poor: Basic health indicators show a significant gap between Estonia and Western European countries in the same climatic and geographical area. However, the trends are similar to those in the other formerly socialist economies of northern Europe (Latvia, Lithuania, Russia and Poland). 5. In 1990, average life expectancy at birth was 64.7 years for men and 75 for women in 1990 (Table I)--the average being 4.9 years below the European average (WHO/Euro) and 6.4 years below that of OECD (Organisation of Economic Cooperation and Development) countries. Further, the gap widened over the last three decades. Life expectancy at age 30 improved only 3.4 years for women but declined 0.5 years for men. The same indicator in several OECD countries showed improvements for both sexes: Life expectancy at age 30 improved 1.4 and 3.7 years for men and women, respectively in Norway; 1.9 and 4.6 in the Netherlands; 3.0 and 5.3 in Sweden; 5.3 and 6.3 in Finland; and 6.2 and 9.7 in Portugal. About 80% of the present gap is caused by a higher mortality in the cohorts of under 65 years of age. 6. Overall mortality has risen over the last three decades. While deaths from communicable diseases declined consistently (those from respiratory diseases dropped by 45%, and mortality from infectious diseases is one-tenth the initial figure), this success was offset by failures in other areas. Noncommunicable diseases account for about 85% of total mortality and 55% of disability (Figure 1). 7. In 1990, age-standardized death rates for males due to cardiovascular diseases (CVD) in Estonia were 72% higher than in Finland, 82% higher than in Germany and 100% higher than in -39- ANNEX 1 Sweden; rates for accidents, injuries and poisoning were 60%, 50% and 100% higher than in Finland, Germany and Sweden, respectively. 8. The main causes of death in 1992 were CVD, which comprised 57.8% of all cases, tumors (16.7%), and injuries, poisonings and suicides (11.7%) (Table II). The incidence of CVD was 14.2 per 1,000 population in 1988 and 14.3 in 1990. In 1990, there were 12,574 CVD cases per 100,000 population registered at health care institutions. CVD mortality is very high, particularly due to ischemic heart disease for the 0-64 age group. Further, standardized death rates are nearly twice as high as the Western European average for the age group below 65 for ischemic heart disease. CVD mortality showed a slight decrease from 752.3 per 100,000 population in 1988 to 722.8 in 1989, but it increased again to 752.5 in 1992. The same indicator in 1991 was 461.4 in Denmark and 460.1 in Sweden. The situation in Estonia today is similar to that in the North Karelia region in Finland two decades ago. 9. There has been an alarming increase in the number of injuries and poisoning (including suicides), especially among men. There were 2,350 accidental deaths in Estonia in 1992 (2,210 deaths in 1991). The male death rates from accidents, injuries and poisoning were 60% higher than in Finland, 49% higher than in Germany and twice as high as in Sweden. The suicide mortality rate is twice the European average (Table III). 10. Infant mortality declined from 31.1 (1960) to 15.2 per 1,000 live-births (1993); but, despite the relative improvement, it is still 30% higher than in the western European countries. The lowest level in infant mortality, 12.4, was recorded in 1990; the increase is partly due to the adoption of WHO's statistical recording standards in 1992. 11. Maternal mortality fell from 36.5 (1970) to 30.6 (1992) per 100,000 live-births. However, maternal mortality increased from 1980-91, and achieved the 1980 level again only in 1992. The current mortality rate is still two times the WHO "Health for All" target of 15 per 100,000 live- births. Abortion is still the main birth control method (Table V). In 1992, there were 28,403 abortions performed, for a ratio of 157.7 per 100 live births. By comparison, the average for the Nordic countries was about 20 per 100 live births in 1993. Prevalence of breast-feeding is low: 27.3 % of babies are being breast-fed up to four months, and 14.9% up to six months (1992). 12. Nevertheless, the country has made important progress in maternal and child health care. The level of coverage and access to maternal and child health services is high: The number of visits by pregnant women is high (about 12 each until 1991, and 10.5 in 1992). Almost 100% of deliveries occur in hospitals. The percentage of caesarean section deliveries (5%-8%) and of forceps deliveries is low. During 1992, several delivery departments switched to family delivery and to baby-friendly maternities. 13. Adult morbidity equalled 981.6 illness episodes per 1,000 adults in 1990. Respiratory and cardio-vascular diseases represented 28.1 % and 14.3 % of overall adult morbidity. Others included injuries and poisonings (9.9%), nervous system (8.1%), musculo-skeletal system (8.6%), and digestive system (4.3%) diseases. -40- ANNEX 1 14. Respiratory diseases are the most numerous (61.3 %) with regard to childhood morbidity. Others include disorders of the nervous system (9.3%), digestive system (5.2%), injuries and poisonings (4.8%), and skin and subcutaneous tissue diseases (4.0%). Immunization coverage varies between 70%- 80% (see Table V). B. HEALTH DETERMINANTS. 15. The causes of the gap between the former socialist economies (including Estonia) and the western European countries are estimated by one study as the following: 30% due to differences in wealth and associated socio-economic factors; 50% due to life-style risk factors; 5% to environmental pollution; and, 15% to deficiencies in curative health care services'. 16. Another study listed a set of risk factors that contributed to the levels and specific trends of adult mortality. These include: (a) alcohol, (b) smoking, (c) cohort effect, (d) diet, (e) pollution, (f) occupational exposures, (g) the health system and (h) the totalitarian system. Researchers concluded that 37% of the excess deaths are possibly associated with smoking, alcohol is at least related to acute intoxication and associated risk of injury, poisoning or suicide, and dietary practices could explain some of the CVD. They also concluded that the causes of the excess mortality rates are likely multifactorial. 17. Individual Risk Factors. Smoking is a major problem. In 1992, 49% of males and 19.7% of females smoked daily (a 5% increase from 1990) (Table IV). Studies suggest that smokers have 70% higher coronary disease death rates than non-smokers, and two-four times as great an incidence of coronary disease. The lung cancer rate, at 26.54 per 10,000 in 1991, is high and rising. Also, it is estimated that 27% of men and 15% of women are exposed to passive smoking at work-sites, public facilities and home. 18. Diet is also an important risk factor for CVD in Estonia: More than 1/3 of all food energy is in the form of saturated fat. The salt intake is high (15-20 g/day), while consumption of fibre and vitamins is low. 19. Alcohol consumption was 7.8 liter per capita in 1991. Alcohol intoxication deaths have dramatically increased since 1988. Also, epidemiological research indicates that 2% of the population have alcohol-related mental health problems. In 1992, there were 1,849 accidental deaths, 227 of which were traffic accidents, and 80 deaths occurred at work-sites. There were 489 suicides in 1992 compared to 388 in 1988 (Table VI). 20. AIDS and Sexually Transmitted Diseases. Sexually transmitted diseases (STD) are on the rise: The incidence of syphilis rose from 3.6 per 100,000 population in 1989 to 11.4 in 1992. For gonorrhoea the figures were 127.9 and 180.7, respectively. However, the AIDS situation is better than 1/ A. S. Preker and R. Feachem, 'Searching for the Silver Bullet: Market Mechanisms in the Health Sector in Central and Eastern Europe," presented during the Conference on Health Care Reform Strategies in Central Europe, Prague, November 10-12, 1993. 2/ C.G.L. Murray and J.L Bobadilla, "Epidemiological Transitions in the Former Socialist Economies: Divergent Patterns of Mortality and Causes of Death," (Draft), 1994. -41- ANNEX 1 in most western European countries. By January 1993, altogether 34 HIV positive persons had been identified (29 of whom are residing in Estonia today), and two deaths had been attributed to AIDS-related diseases. 21. Environmental health. Well-researched data about the relationship between health and environmental conditions are relatively scarce in Estonia. Regional differences in respiratory diseases, CVD, pregnancy related anaemia and premature births, and some cancers suggest the high level of pollution in the northeast is causing increased morbidity and mortality. Drinking water and air pollution are serious problems: In 1990, about 14% of water samples did not meet national standards. The estimated annual emission from stationary sources is 600,000 tons of air pollutants. Exhaust gases contribute an additional 500,000 tons of yearly air pollutants. Moreover, the Health Protection Service estimates 90,000 workers are exposed to health risks, ranging from radiation to carbon monoxide. Houses in Kohtla-Jarve and Narva are mostly located in areas affected by industrial air pollution. Housing (which is usually low-cost) is generally of low quality. In winter, houses with central heating are now colder than in the past, as heating costs have jumped 8-10 times. 22. Socio-economic conditions. The transformation of the economy is proving to be a hardship for many: For example, in 1992, 50% of those surveyed reported being more depressed than before. Income distribution is uneven, with the elderly and families with children the most vulnerable groups of the society. In the first quarter of 1994 the official cost of minimum food basket was estimated at 298 EEK per family member per month, and the minimum expenses on other essential consumption were estimated at 204.5 EEK per family member per month. The distribution of income per family member for the same period is presented in Figure 2. According to these data about 1/3 of the population is living under the subsistence income level. 23. In conclusion, it is likely that thousands of premature deaths and disability occur due to the interaction of multiple unfavourable factors. Health has been given low priority in the country's economic and social policies, as it is not considered a value either on the individual or societal level. However, poor health and high mortality of working-age people are an economic burden due to lost productivity, lost investment in human capital, and medical expenditures that decrease the country's economic competitiveness. C. HEALTH CARE SYSTEM. 24. Health Services. The health care system inherited the former Soviet health care model with its excess institutional capacity, distorted human resources, curative-care specialized services, redundant public health services, and ineffective management practices. 25. Public Health Services. The public health service network, or Health Protection Services (HPS), is still strongly influenced by the former Soviet model of sanitary and epidemiological control. The model was structured vertically and concentrated almost exclusively on environmental problems and infectious diseases. Moreover, uniform procedural rules for the whole Soviet Union did little to address varying public health needs. Estonian epidemiologic profile (prevalence of non-communicable diseases) requires the inclusion of modern public health approach to the public health services. To be effective, this vertically organized network of health protection services needs to be integrated into a modern and decentralized health care administration. -42- ANNEX 1 26. The HPS reports to the Vice-Chancellor of the Ministry of Social Affairs (MSA) (Figure 3). The structure and functions of the Health Protection Center and its 25 county and town health protection offices generally follow the pattern of the former sanitary-epidemiological service. However, the number of full-time positions has been gradually reduced to 767 from 890 in 1992, which includes the number of health protection doctors (from 238 to 210). The HPS has mainly dealt with traditional environmental health fields such as food hygiene, occupational health, communal hygiene (water, soil, and air quality and noise), and institutional hygiene. Epidemiologists typically deal with communicable diseases. Microbiologists are responsible for laboratory tests, and more sophisticated analyses are performed in a few regional laboratories. The Health Protection Center in Tallinn operates the central bacteriological and chemical laboratories, serving as a referral center for the lower levels (to perform quality control with inter-calibration exercises) and offering postgraduate training for laboratory technicians and doctors. Reorganizing the HPS into a modern public health service will require substantial investment in human resource development and structural adjustment. 27. Primary Health Care. Although 371 outpatient care units operated in 1990, primary care has not been clearly developed, and has remained largely undifferentiated from secondary care. Most ambulatory care is provided through polyclinics and occupational health units in factories. Patients could not exercise choice and they were assigned to a physician according to their place of residence or work. The lack of proper equipment, and lack of incentives to deal with health problems in outpatient settings favoured quick referrals to specialist services in the hospitals In fact, emergency services are often used as primary care services: An estimated 70% of individuals taken to medical facilities by ambulance are treated as outpatients; however, this is an expensive way to provide the service. Rural ambulatory care units typically include a pediatrician, midwife, dentist and perhaps a pharmacist. The health services utilisation patterns indicate that there are differences with regard to access between urban and rural areas. In 1992 there were 5.6 outpatient visits per capita in urban, and 3.2 visits per capita in rural areas. The data about the utilisation of ambulatory services are presented in Table VIII). 28. Hospital Sector. The hospital sector is characterized by excess bed capacity, inefficient case management, an expensive referral system, and adverse incentives. There seems to be little concern for cost-effective decision-making. 29. A comparison of Estonia's hospital bed supply with that of the industrial OECD countries, or with its neighbouring Nordic countries, shows a substantially greater capacity than expected for a population of 1.5 million people. Under the input-orientated and centrally planned Soviet system, Estonia's hospital network evolved to include 127 hospitals and approximately 16,000 beds. The result-- 11 beds per 1,000--was substantially more than three of the five Nordic countries. For example, in 1990, Norway, Denmark, and Sweden had 4.7, 5.7, and 6.1 beds per 1,000 respectively3; moreover, even with this limited bed capacity, occupancy rates for all were below 85%, compared to the 1992 average occupancy rate of 76.5% for Estonia. While historical differences may explain the disparity, achieving a similar level in Estonia would mean reducing capacity to 6,800-8,900 beds. 30. The hospital network consists of regionally-based tertiary care institutions, county-based secondary care services, and local primary and social care services. Fifteen hospitals specialize exclusively in psychiatry, infectious diseases or tuberculosis, and are regionally-based so as to serve large geographic areas (e.g. psychiatric hospitals are located in Tallinn, Kohtla-Jarve, Tartu, Saare, Valga and 3/ Yearbook of Nordic Statistics, 1992. -43- ANNEX 1 Viljandi). Tertiary care centers, serving the northern and southern sectors of the country respectively, are located in Tallinn and Tartu (e.g. hospitals specializing in dermatology, pulmonary disease, cancer, etc.). Other highly specialized tertiary hospitals (e.g. trauma and burn centers) provide complementary services. A typical county-based network consists of one secondary hospital offering a mixture of acute and ambulatory care services, and a variable number of village hospitals, of more limited capacity, dispersed throughout the county. While the levels of service are not directly comparable in all instances to the clusters by bed complement described in Table X, county hospitals generally have 100-300 beds, whereas village hospitals have less than 100 beds, with most having less than 50. Many of these village facilities function as observation or stabilization units in lieu of home-care services, which are unavailable; and, during the winter, they also serve as shelters or social care homes, especially for the elderly who may live alone and on limited pensions. 31. Most tertiary care hospitals have more than 300 beds. The bi-polar tertiary hospitals in Tartu and Tallinn are the largest, containing 932 and 1,281 beds, respectively. The fact that more than 10% of all hospitals are for tertiary care is particularly noteworthy since such facilities generally imply a concentration of highly specialized professional staff using proportionately more expensive technologies and treatments. 32. Following the 1990 decree requiring the licensing of all health care facilities, the Ministry of Social Affairs began to assess bed needs. As a result, almost 4,000 beds were eliminated from 1991 through the first three quarters of 1993. In addition, during 1992, the MSA revoked the licenses of 18 hospitals, 12 of which had less than 25 beds, and two of which had 100 or more, which eliminated another 684 beds. Further, hospitals were closed in nine of the country's 15 counties. Only the city of Tallinn had more than two hospitals closed, while one was closed in each of four counties. Of the six where no hospitals were closed, two were in the south (P6lvamaa and V6rumaa), two were the island counties (Hiiumaa and Saaremaa), along with Raplamaa, in the west, and Laane-Virumaa, in the northeast. 33. Public ownership, central management, and lack of incentives have not encouraged efficiency. In 1992, the average inpatient stay was 16.2 days; the average occupancy rate was 76.6%, the respective figures for 1991 were 17.1 and 73.8% (Table IX). However, hospital utilization patterns have been very uneven: Some tertiary and secondary care hospitals are overcrowded, and badly need repair and renovation, while other facilities, mainly the recently built secondary level hospitals, have occupancy rates less than 60%. It is common to see over-bedding of rooms (with implications for the spread of nosocomial and cross-infections), as well as poor hospital design and space management (large unused spaces, traffic flows). 34. Facilities and Eguipment. A recent study showed that health facilities and equipment are in such poor condition that it has affected the quality of health care. Hospital facilities were poorly designed, which led to inefficient maintenance, heating, lighting and cleaning and safety problems. Very little attention has been given to traffic flow and service, and patient areas are often placed where there is available space, without regard to functions and needs. Heating costs represent 25%-30% of hospitals' recurrent costs; this disproportionate burden is the result of inefficient construction and the lack of heat meters to measure consumption. 35. Estonia inherited a relatively low-tech health care system. For example, at the time independence was restored in 1991, it had only one functional CT-scanner. Since then, however, as -44- ANNEX 1 regulations were relaxed and alternative financing sources became available, health institutions have acquired expensive medical technology, generally without properly evaluating the cost-effectiveness, marginal benefits, recurring cost implications or maintenance needs of the equipment. The examples include extra-corporeal lithotripsy, several CT-scanners, and magnetic resonance imaging equipment (MRIs). Thus, technology assessment methodologies and medical equipment support systems are needed to guarantee the overall quality of care and patient satisfaction. 36. Accreditation Procedures and Quality Assurance (OA). QA tools and systems are needed to improve overall quality and efficiency in the delivery of health care. Indeed, in a decentralized health system with a mix of public and private service providers, the Government, in cooperation with professional associations and other non-governmental organizations, will need to develop a strong capacity for regulatory and evaluation functions including quality assurance in hospitals, accreditation of health facilities and licensure of medical and other health personnel. Procedures including infection control, medical audits, utilization reviews, second opinions and routine autopsies should be part of the QA system. At present, these systems are weak or non-existent. In addition to recent revisions in the use and capacity of hospitals and other health facilities, a new and more comprehensive reassessment of hospital bed needs should be conducted and new standards in building design, construction and quality control of health facilities and equipment, as well as for energy efficiency and safety, should be established. 37. The Pharmaceutical Subsector. In the Former Soviet Union (FSU), the pharmaceutical supplier was a state monopoly, and no private initiative was allowed. In spite of large numbers of pharmaceutical production units, more than 50% of the supply was imported, mostly from former Eastern Block countries like Hungary, Poland, GDR, Bulgaria and Yugoslavia; also, some Western companies were in the market. The relatively large share of imports was due to the country's out-of-date drug technology and know-how: For example, not one production unit in the country met the Good Manufacturing Practice (GMP) requirements. 38. The Estonian Center on Medicines (ECM), a drug regulatory authority, was created at the then Ministry of Health in May 1991 (before independence was officially restored and recognized) and later converted into the State Agency of Medicines (SAM). The initiative was supported by the Nordic Council on Medicines (NLN), an umbrella organization for the Nordic national regulatory authorities. Through NLN, an educational project supported by the Nordic Council of Ministers, was launched to educate ECM staff. The Center has two departments: registration and information in Tartu, and quality control and inspection, with labs in Tartu and Tallinn. The latest models of computer-guided technology for dissolution, spectrophotometry, viscosimetry and polarimetry are routinely used for quality control and registration support. 39. All pharmaceutical activities are licensed by a national board, in the MSA. Registration applications are directly submitted to the SAM and final decisions are made by the Minister. SAM duties include (a) registering pharmaceuticals; (b) performing quality and safety control; (c) conducting clinical trials; (d) inspecting manufacturers, wholesalers and pharmacies; (e) controlling narcotic drugs according to international conventions; (f) issuing import and export licenses for all pharmaceuticals; (g) approving labels of pharmaceuticals and semi-medicinal products manufactured in Estonia; (h) monitoring side effects; and, (i) providing drug information for health professionals. -45- ANNEX 1 40. Before independence, there was only one pharmaceutical manufacturer in the country (the state-owned Tallinn Chemical Pharmaceutical Plant), that produced ointments, tablets and ampoules. The quality of the products was relatively low and, according to GMP standards, the plant should have not been operating. However, it still provides several cheap drugs for the local market, and has started necessary restructuring to meet GMP standards. Most of its products are still exported to other FSU countries. As a first step towards privatization, a state-owned shareholder company was formed to run the factory (it was able to sell 49% of shares). Negotiations with potential foreign investors are under way, and it is hoped the foreign investment will mean improve the quality of the products. Also, since 1992, three new production units meeting the GMP standards have been set up in Estonia: (a) Nycomed SEFA, a subsidiary of the Nycomed Hafslund Group, Denmark, is located in Polva, in the southern part of Estonia; (b) AS GEA Eesti, another Danish-Estonian venture, is a very small tablet producing unit near Tallinn; (c) a modern model packaging plant for tablets that was given as a gift from Sweden to the state enterprise, Vagos. This has allowed the country to import active substances in bulk that can then be packed according to GMP guidelines, and thus supply the Estonian market with more than 100 essential drugs at lower cost. All production units in Estonia are regularly inspected by GMP inspectors of the SAM. The inspectors were recently qualified in Sweden and acquired the necessary field experience. Estonia intends to join the international Pharmaceutical Inspection Convention (PIC) as soon as possible. 41. Human Resources. In the last two years, the number of physicians per 10,000 population declined from 42 to 34, mainly through natural attrition, repatriation and emigration. This ratio is still high compared with other developed countries, for example, 22 in Sweden and Norway, and 15 in UK. Looming unemployment and underemployment encourages unnecessary appointments, treatments, and prolonged hospital stays. In an attempt to address the manpower surplus, the University of Tartu has reduced annual admissions to the Faculty of Medicine from 200 to 90. However, the impact of reduced training capacity will have only medium-and long-term effects. 42. Government policy now supports the need to change the structure of the medical profession through retraining programmes. The emphasis is put on general practice and on balanced, need-based and quality-assured specialty training. The excess supply of obstetrician-gynecologists (OB- GYN), internists, pediatricians, neurologists, anesthesiologists and clinical pathologists will have to be retrained as general practitioners (GPs), as well as specialists in areas not sufficiently covered now, such as neo-natologists, cardiologists, gastroenterologists and nephrologists. A curriculum has been developed at the University of Tartu to retrain doctors into GPs which includes public health and environmental health, and it updates the training in pediatrics and women's health. Also, it focuses on preventive measures and treatment of the most common adult chronic diseases. GPs are expected to become the backbone of the country's primary health care system. To date 65 GPs have been trained; overall, the country needs about 750. 43. Most of the physicians work in public hospitals and polyclinics, and about 50 are in private practice; however, the trend toward private practice may be limited by the low number of people who are potentially able to afford private health insurance. Nevertheless, in order to promote efficiency and quality through competition, private practice should be encouraged. Other members of the health team--including nurses, health insurance managers, hospital administrators, planners and policy analysts-- are essential for a well-balanced health system. The country's requirement for these professionals needs to be analyzed; it will also be necessary to revise their respective functions and standards in order to develop appropriate curricula for retraining. -46- ANNEX 1 44. The nurse/physician ratio is 2.0 with obvious implications on the quality of nursing. Nurses' low social prestige and quality of training add to the problems. However, standards could be raised, the training curriculum improved, the admission age and basic education requirements for applicants raised, and the social status of the profession promoted. 45. A particular feature of Estonian medical training is that all physicians and higher level nurses are trained in a single institution--the Faculty of Medicine at the University of Tartu. Thus, any changes to this institution would affect these health professionals. As much of the preclinical training is done in facilities that date back to the beginning of 19th century, the Government has made upgrading the teaching facilities a priority issue--which should improve the training. 46. Financing the Health Care Sector. The health care system is moving from a centralized system of financing and administration to a decentralized one. This is being done by: (a) transferring the financing responsibilities from the central government to a health insurance scheme, managed at the county level; and (b) delegating most health administration tasks to county-based health authorities, health insurance agencies and health care services, hospitals and polyclinics. 47. Estonia spent about 4.3% of its GNP on health care in 1993. About 82% of total health care expenditure (HCE) came from payroll taxes, 9% were from the Government budget, and the rest were out-of-pocket payments for drugs and fees. Given the constraints imposed by society's economic restructuring, currently the financial resources available for day-to-day running of health care services are about 45 EEK/month/per capita. 48. The financing reform was initiated by the 1991 Mandatory Health Insurance Act (MHIA). The law and its amendments from 1994 charge the Central Insurance Agency to collect a 13% payroll tax from employers, and allocate the resources on per capita basis among regional insurance funds that, in turn, purchase health care services for their populations from providers. MHIA has effectively established a split between providers and purchasers--a prerequisite for a competitive environment. 49. The Estonian population of 1.5 million is served by 22 insurance funds; on average, each sickness fund covers 70,000 people. However, since Tallinn's 473,000 inhabitants are covered by one insurance fund, the average population for others drops to 49,000. Thus, authorities should determine what level of services a sickness fund could support without the need to pool resources and risks. Oncology, end-stage renal disease, critical coronary care, accidents with catastrophic health consequences are a few examples of risk pooling needs. The administrative efficiency of managing small insurance funds needs also to be assessed. 50. The tax base is constrained because after the collective farms were dissolved and favourable privatization policies were introduced, the number who were self-employed in agricultural and small-businesses has increased significantly. And, the income of the self-employed is difficult to assess because: (a) they tend to vary depending on the amount of work available, or in the case of agriculture, on crop yields, prices of produce etc.; (b) personal and business income can be confused; (c) they have strong incentives to understate their incomes because these are taxed; (d) agricultural incomes tend to be distributed unevenly over the year. The methodology has to be developed for the basis of tax collection from self-employed to ensure that everybody contributes a fair share towards health insurance. -47- ANNEX 1 51. The system can be exploited by "free riders" for two reasons: (a) the state and local authorities lack the control mechanisms to make all employers and self-employed actually pay the tax; (b) the state has failed to provide incentives for people to contribute to the insurance fund because they are not asked for proof that they contributed when they obtain health care. The enforcement mechanisms and/or incentives have to be developed to achieve high compliance rates. 52. The reimbursement system for health services has been controversial and carries some inherent and serious weaknesses. Providers are reimbursed according to a government-set per diem and item-of-service fee schedule. The purchaser-provider relationship is determined by annual contracts which specify the range of services to be reimbursed, and give some broad quality guidelines. 53. The system has effectively been left open-ended, the only cost containment measure being the government-set universal fee schedule. But, fees do not reflect the real costs of services. Although some progress has been made in setting more realistic fees, the implementation of the schedule is being hindered by the insufficient resources to cover the current volume of services based on new fee-schedule. Cost-accounting methods will have to be introduced to enable the determination of the real costs of service together with cost-containment measures to control the volume and cost-inflation. 54. The system of financing providers offers adverse incentives with regard to efficient patient management: Open-ended contracts do not impose any constraints on volume of services for providers, and make it difficult to plan the use of limited resources. Thus, there are many unnecessary procedures and long stays. 55. Further development of the financial reforms is being hindered by a lack of expertise for overall planning, system design, actuarial analysis and contracting practices, hospital management, and by insufficient information collection and processing capacity. D. HEALTH SECTOR REFORM. 56. The health system disparities are being addressed through health care reform that aim to: (a) reorient the system by focusing on primary care, and by introducing health promotion and disease prevention programmes; (b) improving human resources; and (3) completing the ongoing changes to the system's financing and organization. Government objectives include: (a) creating a new structure for public health in administration and in academic institutions; (b) creating a new health code; (c) creating a health insurance system; (d) re-structuring educational programs; (e) allowing individuals to choose physicians; (f) introducing a county health administration; (g) creating family doctors; and (h) establishing 3-4 focal points and resource centers for public health and health promotion. 57. Accomplishments in structural changes and developing human resources include: (a) all parallel health systems were integrated into the public health care network; (b) health insurance was introduced; (c) hospital beds were reduced by 20% in less than two years; (d) the Ministry of Health has been merged with the Ministry of Social Affairs with the organisation of the Ministry showing the new priorities set for the health system (Figure 3) (Department of Public Health, Licenses and Standards, Central Health insurance Agency); (e) at the Tartu University Medical School enrollment was reduced from 200 per year to 90; the first groups of family doctors were recently trained, a nursing school for advanced degrees was created, and the Department of Public Health was established. -48- ANNEX 1 58. Legislation. The 1994 Health Services Organisation Act (HSOA) regulates the organization and ownership of the health care services. HSOA delegates a substantive share of administrative functions and ownership to the counties. Municipalities and counties organize primary care, outpatient specialist services and wide range of secondary inpatient care. Also, it stresses the importance of county doctors as general coordinators of preventive and curative care (they will become the major administrators who will merge most of the former Health Protection Service functions with the care provided by polyclinics and hospitals). The County Doctors' need for institutional support and for updating their knowledge and capabilities will shape the training needs (Figure 4). 59. The Health Insurance Act was amended in April 1994 so as to introduce measures to counter provider-induced demand for hospital care and to regulate investments into modern and expensive medical technology. The new law creates the conditions for implementing three suggestions made by Bank missions during project preparation: (a) Creating the Central Health Insurance Fund to collect centrally the payroll tax and redistribute the revenues on a per capita basis; (b) a small fraction (around 0.5%) of the collected amounts should be used to finance health promotion activities; and (c) more accurate information about expenditures should be obtained on which to base cost-control measures and to determine caps for high-cost procedures (Figure 4). 60. Other legislative initiatives. The Department of Public Health is participating in drafting of a consumer protection act, tobacco act, food products act, health protection act, health care organisation at the work-place act, alcohol act, mental health act, communicable diseases act, and a health care services organisation act. A child protection act was approved by parliament that provides an incentive structure for pregnant women to use preventive maternity and child services. 61. Health Promotion and Disease Prevention Programmes. Estonia has joined the WHO/EURO-sponsored Countrywide Integrated Noncommunicable Diseases Intervention (CINDI) Programme. The DPH is currently working on national programs on man's heart, mental health, traumatism and accidents, healthy schools, AIDS and family planning. The first anti-smoking clinic opened in Tallinn. Cost-sharing has been introduced for abortions where women wishing to terminate their pregnancies have to pay a fixed sum of 150 EEK [about a third of the cost] for the procedure. The proceeds are intended to be used to provide free contraceptives. 62. Problems still to be resolved. It is unlikely the system will get more resources in the near- to-medium term. Thus, existing resources must be managed efficiently. Some success was achieved when serious inefficiencies in the health system infrastructure (such as too many beds, lack of modern equipment, inefficient buildings, and weak overall maintenance systems) were addressed: The number of beds was reduced from 12.1 to 9.5 per 1,000 in 1993, the average length of stay (ALOS) was reduced from 17.5 in 1990, to 16.1 in 1992. 63. Further reductions are needed to increase efficiency even more and reduce costs (in the US, the ALOS is 4 and in Denmark 9). Similarly, lowering the number of beds to 7 per 1,000 would be a good target. However, these steps can only be taken if excess hospital beds are converted into lower cost shelters. At present, most of the elderly and chronic patients cannot be discharged early to their homes because of poor heating and inadequate living standards. When conditions improve, it should be possible to lower hospital occupancy rates, vacate some of the most seriously impaired buildings, and consolidate staff and equipment in the facilities that are in good states of repair, thus attaining a high level of utilization per square meter, and substantially reducing energy costs. -49- ANNEX 1 64. Various efforts are required, such as modern techniques for planning, programming, designing, constructing and equipping facilities. Initially external expertise will be essential, to introduce them, but the know-how should be transferred to local professionals. Also, the lack of suitable standards for the planning, construction, safety and quality control of health facilities and medical equipment severely hinders urgently needed rehabilitation and repairs. Thus, developing these standards should be given a high priority. Further, a country-wide assessment of hospital beds that considers the proportion of acute and chronic patients must be made, as well as the elderly without proper shelter in the winter. Moreover, before any further investments are made to construct health facilities, designs should be carefully evaluated and revised, and unfinished buildings such as the Valga and Parnu hospitals should be redesigned for energy efficiency, traffic flow and need-adjusted capacity. 65. Improvements and modifications for the insurance system are critically needed to: (a) guarantee financial sustainability; (b) provide universal coverage of some kind of basic benefits package; (c) improve administrative, technical and allocative efficiency, including cost-control; (d) ensure accountability to the contributors and beneficiaries; and (e) promote equity in the distribution of resources. 66. Efficient incentive structure could be introduced into the new health financing scheme in several ways. First, primary care providers (or family physicians in group practices) could be given incentives to reduce hospital care in favor of outpatient care drawing on experience of budget holding GPs in UK. Alternatively, the health insurance funds could be responsible for purchasing health care services from the lowest cost provider; they would work closely with county health administrators. Third, the present scheme could be developed further, whereby the health insurance controls prices through the points system, by providing incentives to limit and control the number and length of health treatments. This last option, however, still risks increasing the medicalization of the system and of paying less than needed attention to primary care needs. 67. The allocation of resources among regions is done on a per capita basis. However, the formula does not consider different needs of different age groups, gender, and cost implications of urban or rural populations, thus raising equity concerns. To develop a more equitable allocation formula, authorities will need more epidemiologic information and a demographic profile of population. -50- ANNEX 1 TABLES AND FIGURES TABLE I Trends in life expectancy at birth, by gender. TABLE II Main causes of death 1988-1993. TABLE III Mortality from injuries and poisonings (including suicides) per 100,000 population in 1988- 1992. TABLE IV Smoking and alcohol intake in 1990, several countries. TABLE V Abortions and contraception 1991-1992. TABLE VI Discharges by groups of disease, 1992. TABLE VII External causes of deaths per 100,000 population. TABLE VIII Indicators of ambulatory care utilisation in 1988-1992 per inhabitant. TABLE IX Health services utilisation data, comparative, 1990, 1992. TABLE X Number of hospital facilities clustered according to the size of bed complement. TABLE XI Geographical distribution of selected health care resources in 1992. FIGURE 1 Mortality trends over time. FIGURE 2 The income distribution per family member in month grouped in deciles of the population. FIGURE 3 Organisation chart of the Ministry of Social Affairs. FIGURE 4 The administrative organisation and financial flows in Estonia health care system. -51- ANNEX 1 TABLE I Trends in life expectancy at birth, by gender. Source: Estonia Medical Statistics Bureau, 1994. Year 1959 1970 1979 1986 1989 1990 Male 64.3 65.3 64.2 65.5 66.2 64.7 Female 71.6 74.4 74.4 74.9 75.0 75.0 TABLE II Main causes of death 1988-1993 (percent). Source: Swedish Institute of Health Services Development, 1994. Cause/Disease 1988 1989 1990 1992 1993 Cardiovascular 63.9 61.5 60.5 57.8 56.5 Tumours 16.9 17.8 16.3 16.7 16.2 External causes 8.6 9.3 10.5 11.7 13.0 Respiratory 2.3 2.6 2.5 5.3 2.5 Digestive 2.3 2.4 2.4 2.1 2.4 Infectious 0.7 0.7 0.7 0.7 0.8 Other 5.3 5.6 7.1 8.7 8.6 TABLE III Mortality from injuries and poisonings (including suicides) per 100,000 population in 1988-1992. Source: Estonia Medical Statistics Bureau. 1988 1989 1990 1991 1992 Men 72.8 80.6 98.1 107.3 117.2 Women 31.2 30.2 31.7 33.9 35.0 Total 104.0 110.8 129.8 141.2 152.2 -52- ANNEX 1 TABLE IV Smoking and alcohol intake in 1990, several countries. Source: OECD Health Data (Credes); Lipand. A. Health Behaviour among Estonian adult population, 1993. Smoking (%) Country Female Male Alcohol (liters) Estonia 19.7a 49a 7.8c Denmark 40.3 47.1 11.6 Finland 21 36 9.5 Netherlands 31 39 9.9 Norway 34 37 5.0 Portugal job 417_ 13.1_ Sweden 25.9 25.8 6.4 United Kingdom 29 31 n/a United States 22.8 28.4 n/a a 1992; b 1985; C 1991 TABLE V Abortions and contraception 1991-1992. Source: Estonia Medical Statistics Bureau, 1993. Micro- Abortions per Women with Women on hormonal Year abortions 1,000 live Abortions* IUD * contraception * births 1991 29,406 1522.0 77.2 196.8 39.1 1992 28,403 1578.9 75.2 204.7 38.1 * per 1,000 fertile women -53- ANNEX 1 TABLE VI Discharges by groups of disease, 1992. Source: Estonia Medical Statistics Bureau, 1994. Discharges per 1,000 population Diseases Adults Children Infectious and Parasitic 5.6 11.4 Neoplasms 11.6 2.2 Mental Disorders 10.1 4.0 Nervous System 9.1 14.2 Cardio-vascular 30.2 1.2 Respiratory System 13.9 39.0 Digestive System 18.3 11.7 Genito-urinary System 17.1 5.9 Pregnancy, childbirth, puerperium complications 37.6 0.1 Musculo-skeletal 13.0 2.5 Other 9.7 34.4 Total 189.5 126.6 TABLE VII External causes of deaths per 100,000 population (1993 figures are preliminary). Source: Swedish Institute for Health Services Development. Cause\Year 1988 1989 1990 1991 1992 1993 Alcohol intoxication 8.72 8.29 10.44 13.15 16.51 19.98 Suicide 24.49 25.56 27.05 27.01 32.19 38.19 Violence 5.96 7.84 11.01 10.79 19.56 25.79 Traffic accidents 22.95 27.79 35.64. 37.86 23.77 27.31 Total 61.12 69.48 84.14 88.41 92.03 111.27 -54- ANNEX 1 TABLE VIII Indicators of ambulatory care utilisation in 1988-1992 per inhabitant. Source: Estonia Medical Statistics Bureau. Indicator\Year 1988 1989 1990 199 1992 Ambulatory visit ... 8.3 7.7 7.0 6.6 4.8 ... of which due to illness [%] 68.1 66.4 72.0 71.0 74.3 Home visits 0.8 0.7 0.7 0.6 0.5 Dental visits 1.8 1.7 1.7 1.7 1.4 TABLE IX Health services utilisation data, 1990. Source: OECD Health Data (Credes); Estonia Medical Statistics Bureau, 1993.. Ambulatory Hospital Bed Country care; office admissions ALOS Bed days per occupancy and home per 100 capita rate (%) visits inhabitants Estonia' 5.3 17.75 16.2 2.88 76.6 Denmark n/a 21.2 8.0 1.30 82.2 Finland 3.3 n/a 18.2 1.10 n/a Germany n/a 20.9 16.5 2.40 86.5 Netherlar-ds 5.5 10.9 34.1 1.20 88.5 Norway n/a n/a n/a 1.10 n/a Portugal n/a 10.8 10.8 0.90 69.4 Spain n/a n/a n/a 0.90 n/a Sweden 2.8 19.5 18.0 1.20 84.2 U.K. n/a n/at n /a 0.90 n/a USA 5.5 13.7 9.1 0.90 69.5 " 1992 -55- ANNEX 1 TABLE X Number of hospital facilities clustered according to the size of bed complement. Source: World Bank Mission Data. Range of bed complement Number of hospitals More than 450 8 300 -- 450 6 150-- 299 22 100-- 149 11 75-- 99 5 50-- 74 13 Less than 50 *62 Total 127 [*] 40 of the 62 have 25 or fewer beds. -56- ANNEX I TABLE XI Geographical distribution of selected health care resources in 1992. Source: Medical Statistics Bureau, 1993. County/Town Population Population per Beds per 1,000 Physician population Tallinn 492.430 230.9 108.0 Kohtla-Jarve 89,383 331.1 130.7 Narva 86,850 343.0 89.7 Parnu 57,060 280.5 94.0 Sillamae 21,130 330.0 97.7 Tartu 113,410 135.2 172.9 Harjumaa 107,150 541.0 68.1 Hiiumaa 11.660 562.7 63.5 Ida-Virumaa 23,375 796.3 35.8 J6gevamaa 42,630 482.4 53.0 Jarvamaa 43,759 560.7 42.3 Laanemaa 33.870 450.4 96.0 Laane-Virumaa 79,308 549.0 57.5 Polvamaa 36,076 412.1 70.3 Parnumaa 43,006 1085.9 50.7 Raplamaa 39,913 587.9 82.6 Saaremaa 40,548 414.2 81.6 Tartumaa' 49,287 534.7 41.2 Valgamaa 41,050 466.5 83.8 Viljandimaa 64,879 381.7 183.4 V6rumaa 45,221 394.3 92.3 - 57- ANNEX 1 FIGURE 1. Mortality trends over time. Source: Estonia Medical Statistics Bureau. Death Rates by Cause (per 1 00,000 population) 1400 1200 * __ g Infectious Diseases * Malignant Tumours -1000 Circulatory Diseases 100.0 _-_ * Respiratory Diseases * Injuries/Accidents 800 * Other 600 400 200 1960 1970 1980 1985 1990 1991 1992 Year -58- ANNEX I FIG( RE 2 The income distribution per family member in month grouped in deciles of the population. First quarter, 1994. Source: Estonia Statistics Bureau. Income per family member (EEK/month) 3,000.0 [ 1st Decile 2,500.0 * 2nd Decile ] 3rd Docile 2,000.0 * 4th Decile * 5th Decile * 6th Docile 1,500.0 1,426.0 *7th Docile *8th Docile 1,108.18 F] 9th Decile 1,000.0 915.9 10hDcl 640.E 500.0 - 444.CA 209.7j 0.0 Deciles of Population -59- ANNEX I FIGURE 3 Organisation chart of the Miniscry of Social Affairs (PCU- Project Coordination Unit). MINISTRY OF SOCLAL AFFAIRS MINISTER Coucior q LCELLOR An oeancellery LCgal Dcpl rsonnei Bureau Informiaics Dpt Pf7J ~~~PR Officer Fo-reign Relations Dpt Ciiizens' affairs Educational Dpt. . ~~~~~~~Accounig DpL Administrative DpL Financial Dpt. Healthroection Bureau for Coxhntoni Agencyr of Vice-ChaceUor Medical aid Socw H lurae and oo |Statistics BurcaE__ elar Services Dpt of Social Soenurityj Dpt of Standards Ehau oses oI-and Licenses I Labour Inspection_ Ageny_Bra of Technology _ Vi e-Chancellor| IEDmployeIment_ !C:M;C:U:t~ ~ Dpt. of ELmplo met Dpt. of L-iving Standad lSocio-Economaic Azlss Social SecurityL Agency _ A Vce-Chancellor| CnrlHealth Lnurnc Fund_ -60- ANNEX 1 FIGURE 4 The administrative organisation and financial flows in Estonia health care system. The broken lines represent administrative coordination, dotted lines represent cash flows. HEALTH PROTECTION ADVISORY COUNCIL MSA AGENCY CENTRAL HEALTH, C INSURANCE FUND COUNTY DPT. OF HEALTH AND SOCIAL SERVICES ADVISORY COUNCIL Medical Officer VOLUNTARY ASSOCIATION OF MUNICIPALITIES MUNICIPALITY REGIONAL HEALTH INSURANCE FUND ~~~~~~~~~~Medical Officer INSURANCE FUND TERTIARY CARE SECONDARY CARE PRIMARY CARE PROVIDER PROVIDER PROVIDER -61- ANNEX 2 ESTONIA HEALTH PROJECT ESTONIA'S NATIONAL HEALTH STRATEGY Introduction 1. This report is to provide a brief overview of the Ministry of Social Affairs' current health policy and of its strategy to improve the efficiency, effectiveness, and responsiveness to patients of Estonia's health system over the next one to three year period. The report is divided into four linked sections: 1. Strategic Objectives; 2. Major Initiatives Presently Underway; 3. Initiatives which should be undertaken in the Near Term; and 4. Issues yet to be Resolved. Each of these sections will, in turn, deal with four key health system topics: a) Public Health, b) Health Services and Health System Organization, c) Human Resources, and d) Financial Resources. Strategic Objectives 2. The central objective of Estonian health policy is to improve the health of the entire population through the design and implementation of a primary care-based system which emphasizes health promotion, disease prevention, and health protection. This objective reflects a recognition that health is an important value in society, and that, therefore, health policy should move beyond curative medical services if it is to meet the full need of the citizenry. Health and health care services also ought to be viewed as an investment in the creation of human capital, through the production of specific services in an economically defined environment. 3. Consistent with the Health For All strategy devised by the World Health Organization's European Regional Office, Estonia is in the process of devising a service delivery system which emphasizes the prevention of avoidable morta'Witv and substantial reductions in current rates of morbidity. Consistent with the health policy objectives ou;lined in 1992 by the Organization for Economic Cooperation and Development (OECD), the Estonian government seeks to achieve these health-related objectives through development of a financing system which attains the following six organizational standards: a) universal access; b) income protection; c) macro efficiency of the entire health system; d) micro efficiency at the individual provider level; e) patient choice of provider; and d) reasonable levels of physician autonomy. 4. Specific tasks to be accomplished reflect the measures necessary to transform the medical system which Estonia inherited at independence in 1991 to meet the above objectives. * In Public Health: establish an organizational infrastructure for health promotion and disease prevention in priority areas such as maternal and child health (including contraception and famiiy planning services), non-communicable diseases such as cardiovascular diseases and cancer (including reductions in behavioral risk factors in diet, smoking, and alcohol consumption, and increase in exercise), and accidents (including traffic, industrial, and home-related), as well as restructuring the Health Protection Services, enhancing environmental health, and controlling infectious diseases. -62- ANNEX 2 * In Health Services and Health System Organization: the reorganization and reorientation of the hospital system including the closing of unneeded beds and hospitals as well as decentralization of ownership of most hospitals to the municipalities; the introduction of a family doctor system which can transform the existing outpatient polyclinics into a well- functioning primary health care system; the de-institutionalization of most mental patients and reducing the number of beds in large mental hospitals; reshaping small hospitals into a suitable system of nursing homes; the establishment of an appropriate home care and district nursing system; and the implementation of a system of county and municipal physicians to coordinate services across all sub-sectors of the health care system. * In Human Resources: a reduction in the number of health care personnel; a retraining program for redundant hospital personnel for employment in nursing homes and home care; a continuing education program for existing hospital physicians, nurses, and auxiliary staff; a re-orientation of medical education including the number and types of internships and residencies; strengthening medical education to include public health and health economics modules; continuing training in public health for personnel inside and also beyond the health care system; accelerated retraining of specialists (particularly pediatricians) for positions as family doctors; and introducing two new curriculum lines a) to train health protection doctors, and b) to train medical, economics and law graduates in public administration and health management. - In Financial Resources: the financial and organizational stabilization of the new health insurance system; the consolidation of national regulation and accreditation of health providers; the establishment of effective financial management inside and between health insurance funds and hospitals; the development of provider payment systems that reward performance and quality of care; and the creation of a permanent financing structure to carry out public health activities. Additionally, as noted in WHO's Health for All strategy, it is important to stimulate inter-sectoral cooperation in the pursuit of health promotion and disease prevention objectives, including collaborative measures in the areas of housing, nutrition, social protection, and employment. Similarly, it is essential to stimulate community level activities to help achieve both health-related and inter-sectoral policy objectives. Major Initiatives Currently Underway 5. Estonia has begun a number of major initiatives that contribute to the transformation and reorientation of its health care system. They include the following: * In Public Health: a new Department of Public Health has been established in The Ministry of Social Affairs. a new Department of Public Health has been established at the University of Tartu. -63- ANNEX 2 a Health Protection Law has been drafted, which provides a new organization for Health Promotion, Disease Prevention, and Health Protection based on their integration in the public health service network. legislation has been passed making seat belt use compulsorv, and banning driving while under the influence of alcohol. legislation is being prepared before Parliament to prohibit sales of liquor to children under 18, and sales in certain public places like hospitals and schools. an innovative financing arrangement for contraceptives has been introduced, which requires women to pay 50% of the cost of an abortion, and then uses these fund almost entirely to pay for free distribution of birth control devices. a ncw national center for health education and health promotion has been established, and has created a network of physicians to carry out health promotion activities. legislation has been passed that prohibits advertising of tobacco and places restrictions on the advertisement of alcohol. * In Health Services and Health System Organization: 1994 legislation transferred ownership of about 85% of hospitals to the municipalities, created a county doctor system to coordinate all health services at the regional level, and established a system of head doctors at the municipal level with responsibilities for all health-related activities. - nearly 4000 beds have been eliminated, and 18 small hospitals have been closed, closing nearly 700 more beds. - almost 50 remaining hospitals with less than 50 beds are scheduled to be transformed into nursing homes. - an accreditation process has been introduced for hospitals, stipulating level of services and facilities. - physicians are entitled to establish private practice and to receive partial payments under certain conditions from the health insurance funds. - an explicit national formulary has been established to control the importation of pharmaceuticals. * In Human Resources: - a new general practitioner training curriculum has been developed at the University of Tartu. - 65 general practitioners have already completed training - a new school of nursing for advanced degrees has been established at the University of Tartu. - medical school admissions per year will be reduced from almost 200 to 90. - a public health module has been introduced into the medical school curriculum. - a small number of young Estonian doctors have been sent to the United Kingdom for education in health economics and management. -64- ANNEX 2 - cooperation has been established with the Nordic School of Public Health for training of public health doctors and health management, with Swedish and Finnish universities for general practitioners training, and with Denmark to create a new curriculum for nursing schools. - a computerized national database has been established containing personal and professional information on all physicians in Estonia. * iln Financial Resources: - a health insurance system has been put in place and is currently providing 82 % of the revenues for the hospital sector. - 1994 amendments to the Health Insurance Law have strengthened the ability of the Ministry of Social Affairs to regulate the central and local health insurance funds, and also established Health Insurance Boards, made up of representatives of employers, employees, providers, and municipalities to whom the health insurance funds will be held accountable. - In order to equalize moneys across the 21 local health insurance funds, all health insurance premiums are collected by the central health insurance fund, and then redistributed to the local health insurance funds on the same per-capita formula. - 1994 Amendments introduce initial cost control mechanisms which seek to establish budget caps for hospital expenditures. - an extra payment is made from state budget to maternity departments for each delivery, to guarantee service for all pregnant women. - special support is provided from state budget for emergency transporiation services - special support is provided for extremely expensive lifesaving procedures and drugs. - a supplementary budget has been passed to provide state support for hospital heating, energy and water supply. Initiatives Which Should be Undertaken in Near Termn 6. A wide variety of measures are currently under discussion and/or planned for introduction in the next 12 to 18 months. These reflect a consensus at the Ministry level of the next steps to be taken in the transformation and re-orientation of the Estonian health system. * In Public Health: - setting priorities in family planning, cardiovascular prevention and accident prevention - finish setting baselines and establish national targets in priority areas including nutrition - strengthen action programs to reach national targets - building capacity for health promotion and protection in institutions, in networks of institutions, and in training systems - financing health promotion through either the national budget, top-slicing the health insurance funds, and/or some other mechanism, and expand the application -65- ANNEX 2 of cost effectiveness analyses to decisions about funding public health activities decentralizing and re-orienting the Health Protection Service (San-epid.) toward disease prevention and health promotion work out regulations and norms regarding environmental health and infectious disease strengthen the technical capacity of the Health Protection Service, particularly in the area of laboratory equipment expanding existing health education programs in priority areas including maternal and child health, school health education, nutrition, alcohol and tobacco, mental health, and occupational health strengthen existing legislation to ensure safety and proper labeling of food and other imported products, and to ensure enforcement of these regulations including preventing importation of foodstuffs with expired dates * In Health Services and Health System Organization: re-structure and re-organize health care services according to a clear definition of functions for primary, secondary, and tertiary level institutions, prioritize primary health care and family doctor services as a system of prevention, and introduce the role of family doctor as gatekeeper - coordinate care across hospital, primary care, and home care boundaries through the new role of the country doctor - refine measurements to accredit hospitals and develop measures to accredit and license primary health care providers and also nursing homes - link existing municipally paid district nurses to the new regional structure of county doctors - continue to consolidate secondary level hospitals and to close unneeded capacity - finalize the change in ownership of most state hospitals by the municipalities - develop community-based programs for mentally ill individuals and begin to phase out large mental hospitals * In Human Resources: - accelerate retaining of specialists into general practitioners - strengthen and re-orient existing medical education, and introduce training in new areas like quality assurance - require systematic continuing education for medical and public health professionals - retain redundant personnel for work in nursing home and home care sectors - accelerate efforts to establish an appropriate balance between the number of hospital beds and the number of doctors and nurses - develop a new group of county doctors and health insurance and hospital managers trained in management and economics - implement European standard for post graduate medical education, extending internships and residencies from 3 to 5 years total - introducing a new education line to train specialists in health protection - train county doctors on the epidemiological analysis of medical statistics -66- ANNEX 2 * In Financial Resources: i) Several initiatives should be pursued with regard to the structure of Health Care Financing, including: - organize financing structure in a stable and sustainable manner based on some mix of resources collected by health insurance fund, state and municipalities. - strengthen state regulation of health insurance funds, including establishing minimum reserve levels. ii) A number of initiatives are needed in the area of Financial Management of Budgeting, including: - establish financial management systems for hospitals and health insurance funds. - develop real budgets in hospitals, with monthly breakdowns in real costs, according to recognized accounting techniques. - develop expenditure forecasting systems to enable hospitals and health insurance funds to predict their future expenditures. - develop standard public accounting capacity to audit hospital and health insurance fund books. iii) Initiatives are also important in the area of cost control and cost containnment, including: ensure that contracts issued by local health insurance funds are consistent with list of services for which hospitals are accredited. hold enterprises/companies financially accountable for the number of health insurance cards they distribute, and require them to pay health insurance premiums on all workers with cards, despite their non-bank cash-based business methods. - require providers to demonstrate that services were delivered to the insurance board's rightful owner. - develop differentiated fee schedule for different types of hospitals (secondary, tertiary, state), and consider replacement of the current per diem structure with some type of per-case or per-episode payment. - build up the analytic and decision-making capacity based on epidemiological analysis of county government and of the county doctor's team to provide an overview of health sector expenditures. - establish cost-related accounting inside hospitals for pharmaceuticals. Issues Yet to be Resolved 7. Although Estonia has made substantial progress in the health sector over the last three years, and although a number of additional initiatives are planned, there remain a variety of issues that have not yet been resolved. Some of these are issues that have not yet been discussed due to shortage -67- ANNEX 2 of time and personnel in the Ministry of Social Affairs. Others are issues that involve important and even controversial areas of government policy, which will require careful consideration before a decision is taken. Among such issues are the following: * In Public Health: whether to impose meaningful taxes on alcohol and cigarettes, using a price policy like Sweden, Norway, and Finland to reduce health-damaging consumption and also to provide financial resources to help pay for treatment of alcohol and smoking related medical conditions. * In Health Services and Health System Organization: - to carefuily consider both the advantages and disadvantages of allowing municipally owned hospitals to be managed by or sold to the private sector. - how to enhance quality of care in hospitals through such measures as medical audit, infection control, utilization review, second opinions, and routine autopsies. - whether home care services should be included in services which general practitioners are required to furnish to patients from the patient capitation fee. - if privatization of hospitals is adopted, should a special regime for specifically hospital privatization be designed? - how should patient rights be protected, including rights to privacy and right to be protected against medical negligence. - how should a system to discipline physicians for unethical or negligent behavior be designed and introduced. * In Human Services: how to utilize the existing national system of manpower registration for planning purposes, and to link those plans to the number of internship and residency positions that are authorized. * In Financial Resources: - consider the advisability of supplemental voluntary insurance, and develop a strategy for its organization a.ad regulation. - develop a strategy regarding the appropriateness of patient co-payments. - consider whether employees should be required to contribute to payments of insurance premiums, and, if so, at what percent of total? - consider whether municipal tax levels should be adjusted higher and state levels adjusted lower to enable municipalities to assume a greater level of hospital operating costs. - consider whether health insurance funds should be consolidated into a handful of regional bodies. - consider strengthening the state permit system for large capital equipment (over 1 million EEK), basing it on technology assessment, with permits linked to -68- ANNEX 3 ESTONIA HEALTH PROJECT ACCREDITATION, LICENSURE AND QUALITY ASSURANCE Introduction 1. The new model of health services decentralizes the management and financing to the county and municipal levels; the changes could affect these services in dramatically different ways. (a) Quality could improve as a by-product of other changes, such as greater responsiveness to local needs through delegation of decision-making to county and municipal levels; competition could develop, resulting from the provider-purchaser split; obsolete facilities could be closed, the remaining ones could be re-equipped, training of health personnel could improve, and continuity of care could be achieved, due to the comprehensive primary health care approach; (b) Quality could worsen because of relaxed regulations and because of the market forces released by the reform; indeed some providers may have an economic incentive to provide inadequate services by compromising on quality (lucrative services could prevail over non-lucrative but essential services, such as immunizations); also, it could suffer because of the lack of practice codes for the newly defined specialties. 2. To successfully implement the new model, it will be essential to retrain the clinical and administrative professionals, redefine standards and protocols for services, and establish professionally strong accreditation, licensing and quality assurance systems. These functions will not only provide tools to control adverse outcomes, but will also pave the way for further quality improvements. The Government has indicated its willingness to establish relevant systems to ensure the quality of health services and this project provides resources for getting new systems started. Background 3. Accreditation of health facilities. Under the Soviet model, where the facilities were owned and operated by the state, no formal accreditation process was deemed necessary. Now, within the framework of health care reform, the Government has set up a Department of Standards and Licensing (DSL) with two divisions: Bureau of Licenses, and Bureau of Technology (see Annex 1). With assistance from Denmark, the Department conducted a review of bed needs in 1992 that led to the first wave of reductions in hospital beds: 18 hospitals were closed and 4,000 beds were eliminated. 4. Rapid inflation of health costs led to a fiscal crisis of the health care system in the first quarter of 1994; scarce funding for hospitals made MSA aware of the need to pay close attention to the cost-effectiveness of the services provided. The DSL proceeded to a formal accreditation process in June 1994 for which the evaluation criteria were developed by Tartu University. The criteria included requirements for staff qualifications and staff availability, facility conditions, and basic services. Two hospitals out of 111 were denied licenses, and 22 were issued operating licenses until December 31, 1994; subsequently, these will be converted into the long-term care institutions. This conversion will create change in the source of financing, since long- term care is funded from the municipalities' social -69- ANNEX 3 budgets. The remaining hospitals were issued temporary licenses valid until June 30, 1995, which indicated the tasks and responsibilities for which they would be responsible. This first experience with accreditation revealed an urgent need to further develop a comprehensive set of accreditation criteria. 5. Licensing health professionals. At present, formal licenses (issued by DSL) for health professionals are required only for private practice. A medical degree from the University of Tartu and completion of internship are enough to practice in publicly-owned and financed health care organizations. Specialist qualifications, developed by specialty committees appointed by MSA, are conferred by the Ministry, based on reviews of applicants' records and their medical practice. However, specialist standards fall far short of European standards, resulting in a disproportionate number of mediocre specialists. The medical specialty associations are currently developing new training requirements and standards for medical specialists; but, it is still unclear to what extent the specialist associations will be able to perform as self-regulating and licensing bodies. 6. Quality assurance. The main forms of quality assurance (QA) under the Soviet health care model consisted of local health departments' reviews, citizen's complaints, and special peer reviews. Annual performance reviews of the health care institutions were conducted by local health departments and the Ministry of Health (MOH) (which was replaced in 1992 by the MSA). These reviews were based on routinely reported data regarding immediate results, including hospital mortality rates. average lengths of stay (ALOS), and bed occupancy rates. There were also reviews, by MOH-appointed conmmittees and by peers from specialty associations, of critical events revealed by autopsies and clinical complications. In addition, the San-Epid Service monitored hygienic conditions in health establishments. 7. QA had a retrospective and reactive nature, and was largely adverse outcome and/or normative orientated. But, as the regulations were relaxed after the demise of the Soviet system, the QA measures were weakened even more: For example, the number of autopsies has declined, and there has been no improvement in in vivo diagnosing capability. The San-Epid service is under the reorganization and has not kept up with inspections of health institutions. Moreover, very little attention has been paid to other QA tools applied in various Western countries such as: (a) assessments through special evaluation studies; (b) use of performance-based indicators; (c) patient evaluations of health care quality; and (d) assessments through community surveys on health status, health-related behavior, and the quality of care. 8. Physicians interested in QA recommend that existing routine data should continue to be used to assess the health services while comprehensive QA systems are created. The Government has established a working group to develop Estonia's QA policies. In the meantimie, as a non-governimental initiative, an independent organization "Medaudit" was established by a group of physicians, and one of the health insurance funds commissionied this organization to evaluate the quality of the medical treatment for six tracer diagnoses in eight hospitals. Although only partial results are available, prelimiinlary conclusions are that in four hospitals on a tracer diagnosis of pneumonia, treatmenit was delayed in 43 %- 53% of cases, the hospital stay was too long in 12%-50% of cases, and unniecessaiy diagnostic tests were performed. On a tracer diagnosis of rnyocardial infarction, 34 % -44 ' of patients were holspital ized during the first six hours of the onset, hospital stays were too long in 41 ' -70¶', of the cases, and some diagnostic tests and treatment modalities were not used when indicated.' TI rends in hospital mortality rates are presented in Table 1. 1/ J. Gross, A. Ellamaa and R. Zupping, "Assessment ot Quality' ot Ga-c in Patients with Pneumiioniia and Myocardial Infarction in Estonia," Institute of Medical Audit, Estonia, (nld.). -70- ANNEX 3 Table I Trend in Hospital Mortality 1988-1992 (Psychiatric and Tuberclosis Beds Excluded). Source: Estonia Mecical Statistics Bureau. Mortality (%) Year 1988 1989 1990 1991 1992 Hospital Mortality 1.8 2.0 2.2 2.3 2.5 Key Issues 9. The following are critical issues that need to be addressed in accreditation, licensing and quality assurance (QA): a. Institutional design of the respective areas, including long-term financial sustainability considerations; b. Level of standards (minimum, optimum, maximum) and priorities in standard setting; c. Development of standards, tools to assess quality, and practice guidelines, taking into account international experience and local conditions, simplicity and costs; d. Routine data used for accreditation, licensing and QA purposes, as a module of the national health information system; e. The capacity to perform accreditation, licensing and QA procedures, which will involve training of evaluators and monitoring the internal performance of respective bodies; f. The quality criteria that need to be included into the contracts of purchasing health services are urgently needed in the current competitive environment; g. An incentive structure for health care organizations to improve the quality of care; h. Consumer satisfaction. Institutional Design 10. Although the MSA is taking initiative in developing these systems, there are several alternatives for their institutionalisation. The Government has to make a strategic decision whether to perform all the functions by themselves, or to delegate some of the responsibilities to professional and/or non-governmental organizations (NGOs). 11. Arguments for the Government-run organisations are: (a) secure funding; and, (b) small size of the country (makes centralised structure feasible). The disadvantages for the Government role are: (a) Government's sensibility to political changes; and, (b) a tendency to focus on the inspection and protection role rather than on consultation and education functions. -71- ANNEX 3 12. The advantages of turning the tasks over to an NGO are that the Government can then concentrate on policy functions; also, the NGOs carry more credibility among health care providers as they are perceived as professional, independent, impartial and professional observers. The disadvantage of an NGO performing QA accreditation and licensing functions is the difficult issue of financial sustainability. Thus, the market for such services has to be evaluated before any final decisions are taken. 13. Depending on the extent to which the professional organizations develop in the next two or three years, and assuming they are strengthened and increase their implementing capacity, some kind of mix would be preferable for the execution stage: The Government could provide the overall regulatory framework (licensing laws, codes of quality control of drugs, safety regulations for health care facilities, etc.) and delegate the implementing responsibility to the NGOs. Setting Standards' Levels 14. The strategic decision about the right level of standards has to be taken first. It is in the Government's interest to ensure the meeting of national minimum standards of health care providers, whereas the providers and purchasers would find it more beneficial to achieve optimum standards given the available resources. It has been proposed that optimum performance standard could be the performance level of the top 25% of providers. These could then be regarded as goals towards which the counties, districts, and providers should work to become centers of excellence. Optimum and maximum standards are more detailed and demanding than minimum standards, and define various levels of compliance. Developing Standards and Guidelines 15. Health care providers should be evaluated in terms of their compliance with standards based on scientific evidence of effectiveness, historical conditions, current capabilities, and international experience. Explicit and applicable standards need to be developed by groups composed of clinicians and managers who would assess existing services and develop new protocols as necessary. The next step would be to agree on the scoring and weighing of various indicators. Inputs from all the parties involved and consensus regarding outcomes are essential to ensure the acceptability and credibility of the new standards. The sets of standards, once developed, would need to be tested in a few sites, before they were submitted for final approval. Given limited resources, it is essential that priorities for standard development be based on political considerations, as well as on the perception about the problems where gain from implementing accreditation, licensing and QA would yield greatest results in terms of service quality improvement and cost-effectiveness. In Estonia the likely priorities where the standards need to be developed fast, are family medicine, acute hospital care, and health promotion and disease prevention programs that address the risk factors of cardio-vascular disease, and mortality and disability from external causes. 16. The accreditation standards have to be developed for a variety of providers: ambulatory care organizations (private practitioners, polyclinics, surgery centers, dental offices); acute care hospitals; home care services (personal care and support services, nursing services at home); and long-term care (nursing homes and long-term care providers), mental health providers (hospitals, institutions for the mentally retarded and developmentally disabled). -72- ANNEX 3 17. The development of practice guidelines or protocols for medical treatment should involve the active participation of specialist societies and relevant departments of Tartu University's Medical Faculty. The development of those for family practice would need to be created in coordination with the project's primary health care and health protection service reorientation component. 18. Indicators of quality should take into account the following: (a) relevance to the objectives of national health policy; (b) validity, i.e. that they really measure what they are intended to measure; (c) simplicity and attention to the cost of obtaining the information; and (d) the ability to differentiate between persons or groups receiving a high or low quality health care to allow the design and implementation of targeted policy tools. 19. The set of standards should include criteria addressing all different aspects of service provision: (a) structure (structures with important functions - management and administration, medical and nursing staff, facilities, equipment); (b) process (care of the patient including treatments and procedures, coordination of care; organizational functions - leadership, management information, infection surveillance, prevention and control, continuous quality improvement, etc.); and, (c) outcome (immediate service results, patient satisfaction, etc). Data Collection 20. Minimum sets of quality indicators will have to be built into the regular health information system. Measurable indicators have been detined in the frames cf WHO/EURO Health for All Strategy to enable to compare a country profile with a wider European context. These indicators may form the core of routinely collected quality indicators. In this respect, there is a need to coordinate between the Bank project's other components that are intended to develop a health management information system and an information system for health insurance (components A. (a) and C.2 respectively as described in the SAR). Development of a national database on clinical effectiveness data, and expertise in protocol development will also be required. Creating Capacity to Perform QA, Accreditation, and Licensing 21. It will be necessary to train evaluators in the use of evaluation tools and in analysis of results. This issue is of particular importance because currently the responsibility on QA is placed at the county level where there is very little or no capacity to evaluate quality. This requirement should be linked with the Bank project's Center for Continuing Education component. A conference could be an option for disseminating information about quality assurance among health professionals. Part of the funding for such activity would be included in the project, with additional contributions from other donors. -73- ANNEX 3 Tools for Purchasers 22. The contracts between the Insurance Funds and health service providers need to include quality measures such as: (a) guarantees of adherence to legal requirements and national codes of practice or medical protocols (not yet developed); (b) systems to assure quality (such as clinical audit and patient satisfaction reviews); (c) specific standards of performance indicators on matters of general or local concern (outcome measurements for specific clinical conditions); (d) "common law" standards which would generally be expected from services operating in a modern medical environment. This issue has to be addressed in coordination with the health financing study that deals with the contracting procedures. Incentives 23. These should be created to encourage health care providers to improve their quality. A number of measures for this purpose could be considered: differentiated reimbursement based on meeting certain quality targets, publishing regularly the quality indicators of different providers, encouragement of social control and responsibility by developing health committees, involving government authorities, members of legislative bodies, and consumer groups. Such incentives would facilitate the establishment of continuous quality improvement management systems in hospitals. Also, consumer satisfaction should be measured on a regular basis through patient and household surveys. Description of Project Sub-component A. (c) Accreditation of Health Facilities, Licensure of Professionals and Quality Assurance 24. Implementing responsibility for this sub-component will be with the MSA's Chancellor. The objective of this component is to support the Government in developing accreditation, licensure and quality assurance systems for the health services by providing the resources for: (a) developing policies, standards, and assessment tools and subsequently testing them; (b) to creating domestic capacity to promote the polices, standards and tools once they are established, and educate the users on how to interpret and encourage their use. 25. As part of the proposed Bank project, MSA's Department of Standards and Licenses will introduce these concepts in two counties. The project would support technical assistance to MSA to define the following: (a) processes required for developing standards and protocols for health care institutions and various categories of health personnel; (b) organizational arrangements for accreditation of health facilities and licensure of health personnel; and (c) processes for initiating a supportive quality assurance system in a few hospitals, with full involvement of hospital clinical and managerial staff. 26. Thle sub-component will provide the MSA and pilot sites with: (a) necessary hard and software for their specific tasks, communications, and efficient administration; (b) relevant periodicals and handbooks; local and foreign technical assistance for development of standards, evaluation procedures, curricula for training evaluators; arid, incremental recurrent costs during the project implementation period. The estimated base cost for this sub-component is [JS $306, 100 with expected US $178,500 (including TA and short-term visits) provided through bilateral assistance. Implementation of the pilots could be done through contracting local NGOs. The detailed costs are described in the cost tables. -74- ANNEX 3 27. Project implementation 1995 - Year one. Foreign technical assistance for 4 person/months and local technical assistance for 5 person-months to assist the Government in choosing a feasible institutional design, in developing the evaluation criteria and standards, and in designing the pilot studies, in the development of training curriculum for QA. Development of support infrastructure will include the procurement of office equipment, and computers hard and software. The needs for professional periodic literature and handbooks will be defined and orders placed. 28. Project implementation 1996 - Year two. Training the evaluators (jointly with the Center of Continuing Education in Public Health sub-component). Activities in the two pilot counties: testing the accreditation and QA procedures for acute care hospitals in the two pilot counties; (b) testing the practice protocols and performance criteria for the family physicians; (c) using quality indicators for contracting practices; (d) introducing incentives for high quality performance for providers. Development of professional standards for specialists will continue during this period. These activities will be supported by 2 months of foreign TA, 6 months of local TA, and 2 short-term visits. Development of support infrastructure will entail the procurement of 3 computers with software for the MSA designated institutions. 29. Project implementation 1997 - Year three. Evaluation of the results of testing pilot cites, modification of procedures and, and subsequent re-evaluation in the pilot sites. Continuing training in quality assurance. An international workshop will be organised for professional exchange on QA experience. The activities will be supported by 2.5 months of TA, 6 months for local TA, and 2 short- term visits. 30. Project implementation 1998 - Year four. National implementation of accreditation, ;icensing and QA procedures. Co-funding a conference with other donors on the impact of the implementing the national strategy for accreditation, licensure and QA systems on the quality and cost- effectiveness of health services. The activities will be supported by 6 months of local TA. 31. Monitoring and evaluation. The process indicators for the process evaluation will be: (a) the Government's report on national strategy on accreditation, licensure and QA no later than February 15, 1996; (b) procurement and installment the office equipment, computers; (c) timely initiation of testing in pilot sites. The outcome indicators will be: (a) approved standard sets and evaluation tools; (b) number and quality of trained evaluators; (c) reliable evidence of improved quality of medical services. -75- ANNEX 4 ESTONIA HEALTH PROJECT UNIVERSITY OF TARTU BIOMEDICAL SCIENCES BUILDING Introduction 1. One of the World Bank Estonia Health Project objectives is to develop human resources through the reinforcement of modern public health training, integrated pre-clinical medical training and continuing education for public health doctors, family doctors, health insurance administrators and other health personnel. 2. The Ministry of Social Affairs and the Ministry of Education have agreed on the construction and equipment of a new biomedical sciences building (Biomedicum) at the Tartu University as a priority issue. The Biomedicum will accommodate the Pre-clinical Program and Public Health Department of the Tartu Medical Faculty, MSA's National Pharmaceutical Agency, and the Tartu Public Health Laboratories. The Biomedicum is perceived to be an integral part of the Government's strategy to develop health system's human resources by providing infrastructure for upgrading the quality of preclinical training of medical students, and for developing the Department of Public Health. It will also support the ongoing health reforms by providing infrastructure for the State Agency of Medicines, and the municipal public health laboratories. Background. 3. The Tartu University was founded in 1632, and medicine was one of the six specialties taught at that time. The Faculty of Medicine has strong traditions of excellence in research and teaching, and has been associated with a number of internationally renowned scholars: A. Rauber in anatomy; K.E. von Baer in embryology; K. Z. von Manteuffel, N. Pirogov, L. Puusepp in surgery; etc. It is only an unfortunate fact that the infrastructure for teaching and research has largely remained the same as it was when the above mentioned figures were active in the 19th and early 20th century, e.g. the Departments of Anatomy, Pharmacology, Pathology are located in the building built in 1802-1810 which has not undergone any major renovation. Dilapidated buildings, lack of up-to-date technology, compromises with safety regulations in the laboratories -- all are having negative impact on the quality of teaching preclinical subjects, performing laboratory testing, and conducting research. 4. Further, the preclinical departmenits are scattered around the town, often having divisions located in different buildings, e.g. divisions of the Department of Pathology are located in three buildings physically separated from each other by considerable distances. 5. Training in Public Health takes place in the Department of Public Health (formerly the Department of Hygiene and Health Care Organisation) which is located in the Zoology Museum. Until recently, teaching was based on the Soviet concept of hygiene, socialised medicine, and health care organisation. In line with the Government's health reform, the Department of Public Health is realigning itself to accommodate for the changed training needs. The adjustment will involve the introduction of new items in the curriculum, and expanding the faculty by four professorships with academic and administrative support. -76- ANNEX 4 6. The State Agency of Medicines is a recent creation as a response to reorienting Estonia towards world pharmaceuticals' market after the collapse of the supply from the former Soviet Union. The development of the agency requires the development of quality control laboratories that has been constrained by the lack of appropriate infrastructure. 7. The Tartu Municipal Public Health Laboratory under the authority of the Health Protection Agency serves as a regional centre for the southern parts of Estonia. It also serves as a training facility for students in public health. Structural readjustment and upgrading of the Health Protection Service is a strategic issue in the Government's health system reform. Key Issues. 8. The main rationale for the Biomedicum is its potential impact on the quality of future medical profession, since the Tartu University is the sole institution where physicians, high level nurses, and public health professionals are trained. Other key issues related are the following: a. the old age and state of disrepair of buildings accommodating the preclinical departments generate high costs for maintenance and renovation; b. potential economies of scale to be gained in a single building through several departments exploiting common equipment (e.g. electron microscopes, centrifuges, sterilisation and disinfection equipment, automatic substance analyzers, computers, etc.); c. safety regulations for modern laboratory techniques and equipment are difficult, if not impossible, to implement in the current facilities; d. long distances between the departments and divisions imply high time costs for students and faculty; the disintegrated structure has a negative impact on interdepartmental collaboration; Project Description. 9. The Biomedicum will accommodate the following .unctional entities: a. Department of Pathology (divisions of Pathological Anatomy, Pathophysiology, Forensic Pathology; affiliated Division of Clinical Diagnostics and Autopsy (of University Hospitals) and the Bureau of Forensic Medicine Examination (regional center for the whole South-Estonia). The department carries out research and educates under- and postgraduate medical students in pathological anatomy, surgical pathology, forensic pathology, and autopsy course; b. Department of Human Biology and Genetics is teaching under and postgraduate medical students in general biology, human and medical genetics; c. Department of Biochemistry (Divisions of General Biochemistry and Medical Biochemistry). These divisions deal with the research in the field of biochemistry -77- ANNEX 4 and educate under- and postgraduate students in bioorganic chemistry, general biochemistry, clinical biochemistry, stomatological and pharmaceutical biochemistry. d. Department of Anatomy (Divisions of Normal Anatomy, Clinical Anatomy, Histology and Embryology, and Cytology). The Department is teaching medical students normal anatomy, clinical anatomy, histology, embryology, and cytology. e. Department of Pharmacology trains medical students in pharmacology, toxicology, and clinical pathology. f. Department of Public Health (Divisions of Health Promotion, Biometrics and Epidemniology, Health Management, Environmental and Occupational Health, History of Medicine, Medical Sociology). The department trains medical students, nurses, and is a base for training and research of postgraduate advanced degrees in public health. g. Department of Immunology. Trains medical students in basic and clinical immunology. h. Department of Microbiology (divisions of Bacteriology, Virology and Clinical Microbiology). Trains medical students in general and specific microbiology and clinical microbiology. For the needs of student training and training of specialists in clinical microbiology, the department provides diagnostic services for Tartu University Hospital. i. Tartu City Public Health Laboratories. j. Multi-Departmental Divisions of Electronic Microscopy, Isotope Laboratory, Centrifugation Laboratory, Vivarium. k. Administration and common areas. 10. The total costs for the Biomedicum complex are estimated at US$ 20.9 million. 11. The project will finance: architectural services, civil works, supervision of construction, office and scientific equipment and furniture, and technical assistance. Procurement of these services will have to ensure that the proceeds from the loan are used only for the purpose for which the loan was granted, with due attention to considerations of economy and efficiency and without regard to political or other non-economic influences or considerations, (Guidelines, Procurement under IBRD Loans and IDA Credits, para. 1.2), as required of the World Bank by its Articles of Agreement . -78- ANNEX 4 12. The human and material resources requi-ed include: (a) civil works (design, construction and supervision); (b) equipment (office and scientific equipment); (c) furniture; (d) training (in planning, procurement, accounting, and functional programming and supervision of construction); and (e) administration (Project Coordination Unit - PCU). The architectural brief has been prepared by consultants describing the infrastructure to be procured, civil works and equipment, as a set to be implemented in a coherent manner, consistent with specified norms and criteria. 13. Civil Works. The Architectural Brief specifies the TOR for the architectural and engineering services needed for site planning, building design, specification of building equipment, cost estimates, architectural supervision, and evaluation. The site proposed appears to be of adequate dimensions and shape, and is reported to be owned by the University of Tartu. The MSA will provide the Bank with a topographical and property survey and a confirmation of ownership before signing of the contract for Architectural Services. The Government has indicated its intention to propose retroactive financing for the architectural and engineering services, pending on the effective date of the proposed loan. 14. Equipment. The Brief includes the preliminary lists of office and scientific equipment, which would be procured separately from the civil works. PCU equipment and supplies would be pre- financed under the PHRD grant. The Government has indicated for retroactive financing for PCU office renovation and operating costs. 15. Furniture. The Brief includes criteria to guide the architect in the design, costing and specification of furniture.Furniture would be financed under the project. PCU furniture would be financed under the PHRD grant. 16. Training. Project staff has been identified to fulfill four functions that are critical to the implementation of this project component. These functions include: (a) management of the project implementation schedule; (b) procurement; (c) computerized accounting; and (d) functional programming and supervision of construction. Because the staff have had no experience with projects of this scope and complexity, the Government has requested that a training program be financed under the project to improve their skills through short-term training, and on-site guidance. The training of the accounting/computer specialist, and of the supervising engineer would be included in the independent auditing and the construction supervision contracts, respectively. The training program has been incorporated into the project's critical path management plan. 17. Administration. The administrative responsibility on the project lies with the Director of the central PCU in the MSA. He is assisted by the Tartu University coordinator, a bilingual secretary, a project planner, a supervising engineer (residing in Tartu), a procurement specialist, an accountant/computer specialist, and the health finances coordinator. 18. Procurement plan. The plan defines the following procurement procedures: (a) mobilization (drafting TOR, appointing of project staff and specialists, familiarity with the World Bank procurement guidelines, scheduling, cost estimating, drafting procurement documents, recruiting consultants, and architectural services); (b) acquisition of resources (preparation, producing the general procurement notice, deciding on the modes of procurement, inviting to bid, evaluating bids, awarding contracts); and (c) delivery of procured services (reception, training and maintenance). -79- ANNEX 4 19. Mobilization. The Government is using the time between the project preparation mission and loan effectiveness to complete the preliminary tasks. MSA expects that the architectural services will be contracted under retroactive financing, and that the main design phase will be completed and approved, before loan effectiveness. TOR for the staff of the PCU have been drafted by the PCU director and favorably reviewed by the Bank. Key staff and specialists have been identified, and their qualifications have been confirmed by the Bank as consistent with their TOR. 20. Copies of the latest World Bank Guidelines for procurement of civil works and goods, for the recruitment of consultants, for auditing, and for disbursement have been given to the PCU director to enable that all appropriate staff become familiar with them. 21. Scheduling the critical path was completed during the appraisal mission and reviewed with the PCU director and the project planner, who were briefed by mission members on the use of critical path software. The objective is to control the timing of events so that they occur in a coordinated manner. The PCU project planner is responsible for managing the project critical path, and identifying potential obstacles so that the director may remove them before they impede the project's progress. 22. Cost estimates of the Biomedicum were scrutinized during appraisal with few changes made. The construction unit cost was raised; the gross area was reduced, and the furniture was estimated as a separate budget item. It was agreed with the Government that daft procurement documents for civil works, goods, and consultants will be prepared by the PCU procurement specialist, assisted and trained by an experienced consultant, for the Bank review before negotiations. 23. The recruitment of consultants was initiated with the pre-qualification procedures for architectural services. Estonian firms (several were visited by the mission in Tartu and Tallinn) and foreign firms from 19 countries (through embassies, by fax and by letter) were invited to submit their qualifications. The evaluation committee, nominated by the Minister of Social Affairs, submitted a short list of seven firms from six countries to the World Bank for approval. Several candidates are joint ventures with Estonian firms. A Letter of Invitation has been issued to the firms included in the short list, together with the following documents: TOR and architectural brief, supplementary information for consultants (including a suggested format of curriculum vitae), and a draft of the contract, which would be negotiated with the successful candidate, and under which the architectural services would be performed, following the Bank's non-objection notification. 24. Architectural services include architectural and engineering services for the design and supervision of the site, the building(s) and the furniture are scheduled to start in November 1994 after signing the contract. 25. The architectural brief. This document defines the architectural services, and provides the architect with the necessary data to proceed with these services. The data include site information, functional programs and lists of fixed equipment, accommodation area schedules, budgets, implementation schedules, and preventive maintenance objectives. For reterence, the brief includes detailed lists of office and scientific equipment, with their spatial and technical characteristics. The specification of furniture, which would be bid separately from civil works or equipment, would be included in the architectural services -80- ANNEX 4 26. Phasing of the architectural services. The architectural services would be implemented in four successive phases: (a) schematic phase; (b) main design phase; (c) construction documents phase; and, (d) architectural supervision phase. The written approval of one phase by the PCU director would be the authority needed to proceed with the next. The approval of the schematics phase is particularly critical for designated users who should be invited to participate actively in needed periodic reviews of the architects conceptual work as it progresses. 27. Construction. During construction, both the services of the architects and those of a construction supervision firm would be provided. Architects would make periodic visits and a construction supervision firm (CS) would be responsible for continuous inspection and record-keeping on behalf of the PCU. Critical steps involve inspecting the foundations before back-filling, testing of structural materials, such as concrete, and training of designated Estonian counterparts. The CS would be independent from the architect or contractor; the three roles would be defined in all contracts. 28. Acguisition of the resources. Procurement for civil works and supplies would be done in accord with the May 1992 Guidelines, Procurement under IBRD Loans and IDA Credits, and, for consultant services, in accord with the August 1981 Guidelines, Use of Consultants by World Bank Borrowers and by The World Bank as Executing A-gency. All procurement would be carried out by the PCU at the MSA, which is assembling and training its procurement team, expected to be completed and operational in September 1994. 29. Resources would be recruited or procured, in a logical sequence, in order to achieve the initial sub-component objective (the economic and cost-effective construction of the Biomedicum). Implementation calls for initial recruitment and training of PCU staff and specialists to manage procurement procedures, secure services for a complex architectural contract and produce draft bid documents acceptable to the Bank. The next step would be managing the preparation of the contract documents for the construction. The third step would be the procurement and supervision of the civil works, equipment and furniture contracts. The component will be completed when the building is built and furnished, the project is evaluated and personnel are hired to operate and maintain the building and equipment. 30. The PCU director will submit to the Bank the General Procurement Notice in March 1995, at least 60 days before the first bidding documents for civil works or goods are made available to the public. 31. The modes of procurement would be as follows: (a) civil works (US$ 15.6 million): international competitive bidding (ICB); (b) office and scientific equipment (US$4.9 million): ICB, unless otherwise agreed by the Bank. To the feasible extent the procurement would be done by grouping the various items in bid packages estimated to cost the equivalent of US$ 250,000 or more to encourage greater supplier interest. Contracts valued at less than US $50,000 and not exceeding US $ 500,000 in aggregate would be awarded on the basis of comparing price quotations obtained from at least three eligible suppliers; (c) furniture (US $ 920,000: local competitive bidding (LCB). Contracts not exceeding US $ 200,000 in aggregate would be awarded on the basis of comparison of price quotations obtained from at least three eligible suppliers; (d) architectural services (US $ 970,000) and construction supervision (US $ 210,000): selection from a short list. The selection process will be consistent with the August 1991 Guidelines. Use of Consultants by World Bank Borrowers and by the World Bank. The principal factors in choosing a firm will be the competence and experience and the personnel to be -81- ANNEX 4 assigned, the quality of the proposal, and the client/consultant relationship. The Government has sent a letter of invitation to a short list of architectural firms, after consultation with the Bank; (e) training: short-term consultants to train and assist PCU specialists, and PCU specialists financed under the project, would be selected from a list submitted by the Government, on the basis of a comparison between curricula vitae and agreed TOR. The cost of training the PCU procurement specialist and helping to prepare procuremenit documenits for civil works, office and scientific equipment, furniture, and consultants (a short-term visit and 7 months of consulting services) is estimated at US$ 150,000. 32. Procurement Procedures: Consulting services would be preceded by the preparation of a detailed training program. Delivery of goods would be preceded by training of staff in inventory management, operations and preventive maintenance. The method and timing of delivery would be specified in TOR and contracts (which would designate qualified counterparts, adequate storage facilities and the management of the project's critical path). Monitoring 33. Evaluation procedures and indicators would be publicized in all instructions to bidders and performanice targets would be specified as contractual obligations. Task assignment would be screened through pre-qualification and guided by a competitive process, unless otherwise agreed by the Bank. The PCU director, assisted by designate] specialists and consultants, would monitor the selection and performance of agencies implementing the Biomedicum. The account of the on-going evaluation and any resulting actions would be disseminated through periodic reports. 34. Expectations. Project objectives, tasks, required training, and pre-agreed performance indicators would be written into all agreements as part of each TOR, with references to standards (of quality, quantity, economy, maintenance and security), criteria (government norms, World Bank procurement guidelines and professional criteria) and goals (project objectives, schedules and budgets). 35. TOR have been drafted for the PCU director, the project planner, the procurement specialist, the short-term procurement consultant, the accounting/computer specialist, the short-term accounting consultant, and the architect. TOR would be written for the project planning consultant, the University of Tartu coordinator, the PCU supervising engineer, and the construction supervision firm. All TOR, completed with particular attention to indicators, and approved by the PCU director, would be faxed to the World Bank before negotiations. Study visits to World Bank projects, to be programned by training consultants, have been planned to up-grade PCU skills in management, procurement, planning and accounting. 36. The architectural brief for the Biomedicum, to be attached to the architect's contract, includes quantitative and qualitative standards for the architecture, for fixed building equipment and for office and scientific equipment. Furniture standards would be defined by the architect as a main design phase task. The MSA has agreed to complete, before negotiations, a survey of Estonian furniture manufacturers (reviewing performance, quality, cost, and production rate of furniture made using local labor and materials) and of available storage facilities. Copies of the guidelines for the procurement of goods and civil works prepared by the World Bank have been issued to PCU staff. Targets (schedules and budgets), reviewed and revised by the appraisal mission and the PCU director, have been included in the Staff Appraisal report. -82- ANNEX 4 37. Im=lementing agencies, such as the PCU, Tartu University, architects, the construction supervision firm, equipment and furniture suppliers, civil works contractors, procurement and accounting consultants and their counterparts, trainers and trainees, would continue to be identified through a process of pre-qualification. Awards would be proposed through procurement processes, governed by World Bank guidelines, which would compare pre-qualifications with tasks. 38. Evaluation. Performance would be measured through the use of indicators which are being specified in TORs and contracts. On-going verification of quality and quantity (against contracts and TORs) would proceed with specific evaluation milestones at mid-project review, before reception and at the completion of project. Implementation and disbursement schedules would be compared to agreed targets, and analyzed as inter-related activities of the project critical path. 39. A reliable information-sharing system is being prepared by the PCU director for a realistic management of the project critical path, with particular attention given to the Tartu-Tallinn linkage. The quarterly progress reports (QPR), to be prepared by the PCU director, would compare the progress of Biomedicum implementation to the agreed targets specified in the project Staff Appraisal Report. Each QPR would include an evaluation of status, with particular attention to traiuing and procurement performance, as well as a forecast of possible obstacles and timely proposals for corrective measures, when called for. The results of all evaluation activities would be recorded in a manner which would facilitate retrieval for future selection tasks. -83- ANNEX 5 ESTONIA HEALTH PROJECT THE HEALTH FINANCING SYSTEM Background I . The modern system of health insurance in Estonia was created in January 1992 to replace the integrated Soviet model where funding was allocated to providers on the basis of bed norms and historic throughput of patients. Twenty two sickness funds (now called health insurance funds) were created; one for each county and each of the major towns, and one for seamen. Revenue for the fund is derived from a 13 % payroll tax levied on enterprises and the self-employed. These funds cover about 78% of total expenditures, while the remainder comes from locai and central government, which own most the health facilities, are responsible for maintenance and development of the buildings, and cover some large equipment purchases. A small amount of revenue is generated from user charges and renting facilities to medical groups and for other commercial purposes. 2. County health insurance funds were given substantial autonomy over their administration although they had to return 50% of the revenue collected to the central Association of Sickness Funds (now replaced by the Central Health Insurance Agency -- CHIA) for redistribution among the counties according to needs. Nevertheless, significant inequalities in funding persisted. Under the 1992 health insurance act, coverage is provided for medical treatment in public and private facilities with which the local fund has a contract. It also covers dental care and some family planning for women who have recently had abortions or a birth. In an effort to stem the high incidence of abortion, women must now pay 50% of the cost. Small clharges are also made for in-patient and out-patient care although they barely cover the administration cost. In addition to patient care, the insurance fund must also cover statutory maternity and sickness pay and accident benefits. Enterprises deduct these amounts from their contributions to the fund, although in the future, the fund will be expected to make these payments. 3. Funding for health facilities is based on a fee-for- service point system set by the Ministry of Social Affairs (MSA). All procedures are assigned a number of points and the value of the poinit, which is updated periodically, determines the level of remuneration. In-patient stays are remunerated on a daily basis. Although the daily payment declines after three days and then again at 15 days, an incentive exits to keep patients in hospital beyond what is clinically necessary. Out-patient services are also covered according to a point system; again, an incentive exits for the provider to request too many follow up visits. The point value is determined through negotiations with doctors and managers and has been increased several times since fall 1993. The result was that between March 1993-March 1994, bills to insurance funds almost doubled without any overall increase in patient visits. 4. Some debate arises about whether local insurance funds have the right to negotiate different prices for services with local providers. Some appear to see the price tariff as a maximum, while others view it as a fixed reimbursement. The CHIA regards the tariff as a maximum and allows funds to negotiate lower prices with providers. -84- ANNEX 5 Recent Changes 5. In February 1994, the CHIA was created to replace the Central Association of Sick Funds with a much stronger mandate to implement health insurance reform and regulate the income and expenditure of local funds. In April 1994, a law was passed that gave all counties a budget based on the resident population (capitation). it also gave the CHIA power to cap the funds' expenditures in an effort to stem the considerable cost escalation arising from the point system and from an increase in point value. The new law also made health care a right for those under 16 years of age and for full time students; previously it depended on parental entitlement for all but children under three. These changes provoked considerable controversy since they were seen as a way to centralize power. Thus, there are moves in parliament to reverse the law although there is no evidence they will successful. 6. The CHIA retains about 1 .7% of insurance revenue for its own administration while local administration costs a further 0.8% . A health fund is to be established that will release 0.5% of revenue for health promotion activities. In addition, it retains about 4.4% for national emergencies and epidemics, estate development and large medical equipment. Expenditure for transplants and prostheses is provided as a separate line item to counties by capitation but merging with general medical expenditure is not permitted. The remainder is allocated to counties. The CHIA has projected expenditures to 1997, although these are based on Ministry of Finance estimates of inflation which may underestimate both general inflation and, more important, medical inflation which often increases at a faster rate. However, under-estimates may be offset by future rises in real wages, which would increase contributions. Conversely, a recession would depress them and make further government subsidy necessary. County Capitation Budgets 7. The shift to a system based on capitation replaces both the Soviet system, that based allocations on historic patterns of use and budgetary norms fixed according to capacity, and, more recently, budgets based on local revenue. This was a radical step towards a system based on need rather than utilisation determined largely by existing supply. The change occurred within one month and resulted in significant shifts in the distribution of resources: For example, Tallinn now has to give up almost 25 % of the revenue it derives from workers while all other areas, with the exception of Harjumaa, gain from the redistribution. As in capital cities elsewhere in the world, a reduction in the allocation to Tallinn caused a particularly vociferous protest. The problem is intensified since the current payment system is passive, and only attempts to meet current utilisation, albeit with some recently introduced measures to check escalating cost. Hiowever, If the local funds are to be able to target resources to meet needs more effectively, they will require additional tools to increase the effectiveness of their contracts with providers. -85- ANNEX 5 8. Although need is a rather imprecise concept, most definitions recognise that population numbers alone are not the only determinants. Rather, age and sex distribution are critical factors. Females during the fertile years require significantly more medical care than males, and those above 65 of both sexes generally have a much higher hospitalisation rate than younger people. In addition, many other factors contribute to differing health status between counties and a desire to rectify variations may translate into larger allocations to certain counties. The selection of variables is a matter for debate but the final system should be both simple and transparent so that counties are able to understand how their allocation is determined. For example, for some years, the UK has used standardised mortality rates to ascertain the general level of health using them to weight the final allocation; other countries are considering using infant mortality rates in a similar way. Revenue Collection 9. Each county is given a revenue collection target based on the number of enterprises located in it (based on Ministry of Finance records obtained from registrations of enterprises at county level). This target is adjusted for anticipated shortfalls in income through defaulters based upon the national average. Where targets exceed the budget, the balance is returned to the central fund; where they fall short of targets, the budget is supplemented from the center. Also, if collections fall short of targets, an amount is deducted from the county budget; if they exceed them, the county may retain the excess. This system encourages greater efforts in revenue collection, but also penalises counties that have an abnormally high proportion of defaulters. 10. The size of the enterprise contribution is determined by its overall payroll. It must declare its total wages and number of employees to the fund (although it is not necessary to list those employed). If an enterprise's contributions are up-to-date, the fund provides it with cards to distribute to employees. In theory, an enterprise should cancel a card when a worker leaves employment and entitlement expires two months later. In practice, it is thought this is often not done. Nationally, the proportion of enterprises defaulting on their health insurance obligations is about 18% since January 1992. Recently, however, arrears have been falling as insurance funds have been refusing to register people from companies not paying their contributions. Moreover, the amended law now states that enterprises are obliged to pay for health care if they fail to pay the premiums. 11. A related issue is collecting premiums from the self employed. Although the new entitlement-based system increases the incentive to register, there is still the problem that many under- declare their income, using the minimum wage, and verification is not easy. This issue is likely to grow as the labour market relies more on small private businesses and self-employment. Local Fund as Purchaser of Health Care 12. Although the county fund only receives revenue from those in employment, it must provide benefits for dependant of all those insured, which includes all children, the elderly, the disabled, pregnant women and the unemployed up to six months (this time the unemployed person has no automatic entitlement to insurance). Although municipal authorities are expected to cover the cost of care of those with low incomes, in practice this appears to vary. The fund receives no subsidy from general government revenues for those not contributing and, as a result, it is vulnerable to unemployment rises. In such an eventuality, the local funds are not able to act independently and raise the contribution from -86- ANNEX 5 those in employment to meet revenue shortfall. Neither would this be particularly desirable since it would represent a further tax on employment in a recession hit economy. 13. County funds may contract with both public and private providers. Where patients receive treatment from providers in counties other than where they live, the new law permits direct reimbursement from the inhabitants' own counties: previously payment was made first from the provider's county, with the request that it ran the danger of not being reimbursed. County health insurance funds negotiate their own contracts with these providers; and, some funds are beginning to become more sophisticated in the way they deal with hospitals, requiring them to present their wares at specially convened meetings. The large charges of a few local hospitals, however, have highlighted the inability of most health insurance funds to specify contracts in any detail beyond a global limit on expenditure in order to contain costs. 14. An area where some progress appears to have been made with negotiated contracts is for surgery requiring protheses. Budgets for protheses are included by the Central Agency as a separate line item; and, while the procedures are part of the national tariff, the protheses are not. This has motivated some local funds to look more closely at the price hospitals charge for these procedures. Parnu county, for example, now purchases hip-joint replacement operations from a hospital in Tallinn which uses cheaper but effective protheses imported from Denmark, rather than purchasing locally (Patients may go to another hospital but must pay the difference between the price charged at the local and Tallinn hospital themselves). Elaboration of this type of preferred provider contract could become the model for some other contracts in the future. 15. The rise in the value of the point in late 1993 and early 1994 caused a rapid inflation in fund expenditure that was only stopped when emergency measures were introduced to prevent cost escalation. These basically consisted of placing a maximum on the monthly amount to be paid to providers in the contracts with the county funds; nevertheless, providers continue to work beyond these limits but the insurance funds hold the bills until they are able to pay them. The system does not really allow any prioritizing in the contracting process and no reserves are built up to service future obligations. At present, although local funds are expected to service obligations and absorb fluctuations in income on their own, they do not operate any models that forecast expected income and expenditure. Alternative Mechanism 16. A number of options are available when developing the insurance role of the central and county funds. For example, local funds could become subsidiaries of the central fund, acting as payment offices to control local allocations but relying on the central fund for guidance on pricing and contracting. Alternatively, they could act independently to contract for services. Recent legislation giving the central organisation more control over the funds suggests a tendency towards the first course, yet the role of the funds is still far from clear. However, the current financial position is fragile; they have no reserves, little control over expenditures and a lack of knowledge about future liabilities. And, if they are to be subordinate to the CHIA, they must develop basic accounting procedures so they can audit transactions effectively and control reserves. 17. In order for local funds to balance present and future expenditures with income, a basic actuarial model for predicting future flows will need to be developed and introduced at the local level. This will help funds to plan not only for the inevitable seasonal fluctuation in utilisation, but also for -87- ANNEX 5 longer-term trends such as a shift in the age structure, change in the payment system or growth in unemployment or self-employment. It should also help funds determine the size reserves they should maintain to cover unexpected demands on resources beyond the limited support the central fund provides. One result of this process may be to determine whether the size of some of smaller funds is really large enough to pool risks without having to maintain excessive risk reserves. 18. Insurance funds generally appear to be well equipped with suitable hardware and have basic database systems for processing payment claims. Provider claims for compensation are checked by doctors to ensure that the providers are properly qualified and that the treatments given are appropriate for the diagnosis. Each doctor workload is substantial and it is doubtful whether the procedure would reveal more than the most blatant inconsistency. No checks are done by computer beyond verifying the total bill. Providers of Health Care 19. The recent changes to the insurance law have had a significant impact on providers, particularly in Tallinn where budgets have been cut by about 25%. Some continue to provide services without being paid while others are beginning to stick to their contracted expenditure. In the medium term, this may lead to some reduction in capacity but, without a clear plan that detail which services should be cut back, reductions are likely to be random and potentially damaging. 20. Hospitals possess a high degree of autonomy and, although still owned by the state or local authorities, are free to recruit staff and manage capital development. No restriction is placed on the amount of surplus they may earn, and they are permitted to borrow money which may be spent on equipment or salary supplements. They are also permitted to rent part of the properties to private companies, such as private dentists, opticians and dermatologists, and non medical services. While income from medical-related services may be obtained tax free, they are taxed on income from non- medical services. Also, they do not pay tax on any surplus earned, but must pay VAT on non-medical recurrent expenditures such as food and fuel. Besides selling services to health insurance funds, hospitals may also sell diagnostic and laboratory services to each other. 21. The private sector is currently very small and is dominated by self-employed dentists, who often rent facilities from polyclinics or hospitals, and provide services for patients covered by the local funds. Private practitioners may charge more than the national tariff but the difference is paid by the patient (this option is not open to public practitioners). Recently, a private gynaecological and obstetric hospital opened in Tallinn using the facilities of a former public hospital; however, the demand for such services is quite small although inevitably it will increase if the economy continues to grow rapidly and pressures on the expenditure of the health insurance fund remain. -88- ANNEX 5 22. Financial management at the hospital level is largely associated with preparing invoices for reimbursement under the insurance system. There are a few examples of simple cost accounting although most lack such a system. Where it does exist, depreciation of the site and land value is not included since it is owned by the State, which makes no charge for its use. Many hospitals still appear to base their budgets upon the old Soviet normative and historic patterns despite the change in the structure of their income. The ceiling on expenditures for each hospital has, in the view of some providers, re-established the integrated model of centralised budgets since they view it as target expenditure rather than a maximum. A lack of specification about what hospitals should provide perpetuates this view. 23. All hospitals have a system for reporting illnesses and hospital activities to the national statistics office. Also, many now have rudimentary systems for rendering invoices and a few have computerised systems for controlling drug stocks and patient information. All these systems are separate although some are attempting to integrate the information generated. Some health insurance funds and providers are presently employing computer firms to develop these systems which highlight the importance of developing national standards to prevent money being wasted on incompatible systems. 24. The government has committed itself to a system of family doctors and a ministerial working group is considering the options for funding single or team practices in polyclinics. Establishing a strong referral system, together with a system of incentives that encourages a greater emphasis on prevention and health promotion, would appear to be vital both to control system costs and use resources more effectively. The present system of self referral and an open ended fee-for-service system is both costly to monitor and inefficient. The Provider Payment System 25. The present payment system contains many perverse incentives --such as those described earlier-- to provide ineffective or cost-ineffective treatment. Although a reformed points system could give considerably more central control over incentives, there may be considerable scope for enhancing the contracting process between funds and providers; this would allow for a more precise specification of services required and could also rationalise the work of local offices by providing, for example, block budgets for a population group for the delivery of defined services such as specialist out-patient or emergency care. More sophisticated contracts might specify the volume and cost of services, with quality indicators such as waiting times; they would allow local offices and providers to negotiate different prices from those set in the national tariff. The training of family doctors, funded in a different way from the present point system, is a another way in which contracts for services may develop. 26. Such developments will require training both at the central agency to set priorities and develop a purchasing plan and then at the local level to conduct training in the development and negotiation of contracts. It will also require some reorganisation of local funds and automating of mundane processes to create time for funds to participate in the contracting process. It might also be necessary to merge some funds in order to make purchasing more efficient. It may be useful to examine the recent experience of countries such as Netherlands, Sweden and the UK in designing purchasing contracts. -89- ANNEX 5 Role of Competition 27. It is the aim of the government to promote competition among health care providers as a means of improving efficiency. However, Strengthening the purchasing role of insurance funds should not be confused with the introduction of managed or internal market competition. While the purchasing plans are required for competition, significant advantages might also be gained from having services to be provided specified more precisely, thus making priorities more explicit. Competition may be introduced but it should be noted there is little evidence that it improves efficiency, particularly among hospitals, or that it contains costs. Evidence in the US on the effectiveness of health maintenance organisations (HMOs) is inconclusive and it is too early to evaluate experiments in managed competition across Europe. Competition among primary or first level health facilities may be easier to develop although this strongly depends on a payment system that includes appropriate incentives. 28. Estonia's small size, relative ease of travel and large supply of providers suggest that competition among providers may increase. However, the danger of competition is that providers will compete on the basis of price or quality of facilities or the availability of popular technology such as MRI scanning equipment unless the patients' representatives, the insurance funds, can develop their purchasing capabilities. The weakness of the purchaser may prove a major constraint to cost containment and to prioritising services. Patients currently have no choices about which insurance fund to use and expansion of purchasing competition is unlikely to be feasible in such a small country. Thus, the funds must be strengthened so they can represent their resident population more effectively. Key Issues 29. The Estonian health care financing system has already undergone profound change and considerable advances have been achieved. Capitation funding should, with some refinements allow a more equitable distribution of resources. Also, there are many examples of innovative practice, with providers and funds developing management systems with few resources. However if the present financing structure is to be more efficient and responsive to the government health strategy, several issues must be addressed. a. There is an urgent need to introduce some actuarial principles and models for use by the insurance funds so they can forecast likely income and expenditure under different scenarios. Funds already collect data on the use of health services by age and sex and it should therefore be possible to use these data to make basic forecasts. More sophisticated models might be introduced over time. b. The payment collection system is fragile and fraught with potential difficulties. However, authorities plan to merge the collection of health with pension contributions and this transition should help the develop an effective system. Procedures for verifying income are required that will allow checks to be made between declared income and expected income for different types of employment. The experience of other countries in designing and implementing such systems could prove useful. -90- ANNEX 5 c. There is a lack of basic accounting procedures to manage and audit financial flows. For example, most hospitals cost-accounting systems do not allow them to monitor and control expenditure and implement efficiency savings. For their part, funds have basic systems for controlling payments, but lack appropriate methods for filtering claims in a systematic way. d. Local funds have neither the expertise nor the time to specify which treatments they wish to purchase, at what price, from whom and to what quality standards. Thus, the funds must recruit and train people with responsibilities for these decisions. Sufficient support structures will also need to be in place, such as a national database on clinical effectiveness and cost-effectiveness, as well as expertise in protocol development. Inevitably, the local funds' authorities may need to appraise the size and function of local funds; also, to develop more sophisticated functions funds must either recruit more staff, pass some of the mundane data processing to a central agency, or merge with other funds. e. The payment structure is full of perverse incentives to provide unnecessary or ineffective care. In-patient stays are long and lack a referral system; this means hospitals rely excessively on secondary specialties to teach common conditions. 30. In addition to the main operational changes needed by the health insurance funds and with regard to insurance-provider relation, strategic thinking is urgently needed at the national level to develop a model health policy. Some of the issues are as follows: a. The status and regulation of semi-autonomous health organisations such as health insurance funds, hospitals and polyclinics. Because of relatively little explicit regulation, there is considerable potential for abuse. b. Relatively little control over high technology diagnostic equipment has led to its purchase with little evaluation of whether it is necessary. At the same time, certain minimally invasive procedures could be developed that considerably lower hospital stays and allow much surgery to be done on an out-patient basis. Regulation and evaluation of medical technology is a feature of most health systems (even those that rely heavily on the private sector) and a national strategy for evaluating the medical and economic value of these technologies is required to prevent waste and promote efficient techniques. c. The present system for resource allocation does not account for factors such as age and low health status and those that may lead to differential costs such as higher transport or building costs. d. As with many other countries, Estonia appears to have a surplus of medical staff such as doctors. However, the role of doctors is changing through the introduction of family doctors. Also, new training is needed in less invasive surgery and the possibility for nurse substitution. This suggests a need to evaluate human resource requirements and develop capacity to plan effectively. -91- ANNEX 5 31. Most of these are wider policy issues that are outside the scope of the health insurance system but may be addressed as part of the work of the new policy and health economics unit in the Ministry of Social Affairs (see Annex 2). The objective of the project's finance component is to provide insurance funds with methods for increasing the efficiency of the health care system. Part of the support will improve the technical efficiency of existing processes by introducing more sophisticated accounting and revenue collection methods. Also, it will improve the allocative efficiency of the system by developing tools such as contracting methods that will enable insurance funds to direct funding in a more effective way. The overall objective is to enable the system to use limited resources in a more effectively. A project description is presented in the SAR under Component C. Details on the component are available in a document available in project files entitled: Estonia's health Financing System. -92- ANNEX 6 ESTONIA HEALTH PROJECT PROJECT IMPLEMENTATION PLAN 1. The Project Implementation Plan was prepared during appraisal and agreed with the Ministry of Social Affairs (MSA) and the Project Implementation Unit (PIU). Indicators defined at appraisal and agreed upon with the MSA and the PCU as a basis for project monitoring and for measuring project impact are presented in Annex 8. A Bank project supervision plan (including a Government/donors/Bank mid-term review in 1997) is in Annex 11. This Annex presents a brief description of the implementing departments and agencies, following the order of the project description in p. 11 of the Staff Appraisal report. It also presents a schedule of project activities for each component, indicating critical steps. 2. During appraisal and using PHRD preparation funds, the PCU was provided with computers and software (including Microsoft PROJECT 6.0) and training that will enable them to undertake project monitoring on a continued basis. The Planning Specialist in the PCU is responsible for this task and for coordinating monitoring with the other two implementing agencies -- University of Tartu and Central Health Insurance Agency (CHIA). The implementation schedule presented in this annex identifies main tasks and milestones in project implementation; however, it is only a general indicative plan for the four years of the project that was necessary for planning and budgeting activities and inputs. A day-to-day schedule will need to be developed by the respective implementing departments and agencies, and used by the implementors and the PCU as a dynamic tool for following up project execution. Responsibilities for Project Administration and Implementation 3. The project is described in detail in the SAR, pages 11 to 22. The departments and agencies responsible for the respective components and sub-components are presented below. A. Health System Reorientation Component: To be implemented by several departments of the MSA as follows: (a) Institutional Development and realignment in MSA would strengthen the institutional capacity of the Ministry in four areas to facilitate health reform and improve efficiency; the following departments/units will implement the sub-components: (i) Health Policy and Economic Analysis Unit to be created under MSA's Chancellor; the Director of the Unit to be appointed as a condition of loan effectiveness; (ii) Hospital efficiency enhancement, to be coordinated by the Office of the Chancellor and implemented by the following Department/Bureau: (1) Physical Planning Department for facility planning and re-design and preparation of a Masterplan for hospitals and health facilities; (2) the Health Care and Institution Department for hospital management development; Committee of Medical Technologies for medical equipment technology and for equipment support; (3) Department of Standards and Licenses for Quality assurance, and accreditation of health professionals and facilities; and (4) the Health Promotion and Prevention Group and the Health Protection Service for Primary health care (PHC) and health protection service -93- ANNEX 6 reorientation -- including redefined functions for general practitioners, county doctors, community and town physicians, and health protection staff. (iii) Health Promotion and Disease Prevention to be implemented by MSA's Department of Public Health, comprises two main activities: 1) annual funding for community- based health promotion programs; and 2) national campaigns on promotion and prevention related to five priority areas: anti-smoking, cardiovascular and heart disease prevention, injury control, women's health and family planning, and communication management. B. Human Resources Development Component will be implemented by the University of Tartu, under the general organization of the Project Coordinator; responsibilities for implementation will be as follows: (iv) Tartu's Departments of Public Health would be the implementors of strengthened training of doctors and other health professionals in Public Health at pre-clinical, clinical and post-graduate levels and the Department of Policlinic and Family Medicine would implement a recently developed program of re-training doctors family medicine (general practice); (v) The Department of Public Health in the Tartu Medical Faculty would be responsible for establishing a new Center for Continuing Education of health professionals in Tallinn, at the Institute for Clinical and Experimental Medicine; the project would support a Director and administrative staff; training programs would be developed by relevant Departments at Tartu Medical Faculty in consultation with other agencies (e.g., CHIA, MSA's bureaus); (vi) Under the direction of the PCU at MSA, through the Tartu Project Coordinator, the Department of Engineering of the University of Tartu will oversee the design, construction and equipping of a new building for Biomedical Health Sciences at the University of Tartu. Execution of design will be undertaken by a consultant firm, construction will be done by a construction company, and detailed supervision of construction, by an owner's representative firm, all to be contracted and financed under the project, under procurement arrangements satisfactory to the Bank. C. The Central Health Insurance Agency and the Local Health Insurance Funds will implement the component on Efficient Management of Financial Resources, under the general direction of the Health Financing Coordinator, who will report to the PCU Director. This component will improve the technical efficiency of the processes currently being applied by the health insurance offices regarding accounting, revenue collection, contracting with health service providers, and reimbursement methods. D. The Project Coordinating Unit in MSA and coordinators -- one each in University of Tartu and in the Central Health Insurance Agency -- will be responsible for directing and monitoring overall project implementation; a Health Reform Implementation Committee chaired by the Minister of Health will provide policy guidance to the PCU. -94- ANNEX 6 0,n a r4~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4 0G .. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . C5 0~~~~~~~~~~~~~~~~~~~~~~~~~~ a ~ ~ 0f 0 IM W >I M~~~~~~~~~~~~~~~~~~~~~~~~~~4 S S IA a-~ u- * I -' 2 1996 1996 1997 1998 1999 ID Task Name Start -tu Otr 2Qtr3tTQr3Qtrr Oltr 1 |Qlr 2 3Qtr 3 Ir 41Qtr 2Qtr3|Qr t Qlr t 2r3 2|01r4 tQtr X Olr 1 |Qtr 2|Qtr 3 23 Begin tasks on Masterplan for hospfals - 24 MSA groups reviews Masterplan 6/26/95 25 Implemrnt Masterplan for hospitals 7/10/95 26 OrganIze local trainng for archRects 6/2/95 3 27 Carny otA training of architects 7/Y95 23 (11) Hosptal mnnagemnent developmnent 3111/1 I , 29 Prepare seminars In hospital adm. 3/1/95 30 5/16196 36 Undertake seminars In hosp. adm.- 1995 5/15/95 37 5/15/96 31 5/15197 U. 39 5/15/96 40 Study visis to Nordic Country - 7 persons 4/1 596 41 Study visits to Nordic country -8 persons 4/1 S96 42 Prepare syllabus for later publishing 6/15/96 43 44 (lll1 Medical equipmnent support -f1/2/S6 I 45 Prepare contract for cons. In equip. matnt 1/2/95 46 Bidding docs. and proc. of testing equtp. 1/2/95 47 Id. from 1996 1/2196 48 Id. for 1997 1/2t97 _ 49 Id. for 1998 1/2/98 m Task Summary _ Roled Up Progress Project Estonia Health Project Progress Rolled Up Task Date: 8/9/94 Milestone Roled Up Mlestone K Page 2 3 1996 1996 1997 199t 1999 ID Task Name Start tlr 1 Qt 2lQtr3Gr G1tr 1' Gltr 2Gtr 3Qtr4GOtr ¶Gtr2 Gtr3 3Gtr 4Gtr 1 Gtr 2Gtr3 G1tr 4Gtr 1Glor 2 Gtr31 60 Coosuhtant in country 3/1195 1 61 Undertake woi'kshop319...| 62 Identlt & conlradt training for equip.malnl. 1/1295 _... 63 Run four one-week workshops - 1995S19 | 6U Id.tor 1996 519 66 id.f/a 1997*S19. . 66.. 67 (c) Quality Assursnce and Accreditatlon1/69':. 69 Meeting of Cormmitee on Accredit. and QA 11/5*11 69 Prep./for2cons.:1 for hosp. accred., 1 for licensing 1/16/9S5lli 60 Two cons, on hosp. and phys. Ilcencing start 31/5 ll. 61 One short-term visIt abroad te. accred.ibcenslng 4115 [ 62 Prep. for 1 cons. on GA-Acute hospitals 519 63 One cons, on QA - Acute hospitals starts 6/5/95 | 64 Standard Settng Revisions - lIcensing/accred. 7/3/95 l1 66 Legisiation and procedures review by MSA 1/1/96 66 Testing new procedures for accred. in 2 hospitalh * 3/15S96. 63 Prep. Ior 2cons. on accredAki. of nursing & outpat. 2/15/96 | 69 Two cons. on accred.Aki. of nursing a outpat. visit 3/30/96 . 1 70 One 3-pers. visit abroad re. nursing and outpat 5/15/96 .3 71 Reiin of standard setUn for nurses and outpat. 4/30/96 _Z r Task __Summary Roiled Up Progress a' Prject; Estonib Health Project Progress Rolled Up Task _ Milestone *Rolffed U)p Milestone Page 3 4 1996 1996 1997 1998 1999 ID Task Narne Start t 1 lQtr 2Qtr 3Qtr 4Qtr I lQtr 2Qtr 3Qtr 4Qtr lQr 2Qtr r 31ttr 41Q'r r2r tr4Qr 1 [tr 2tr 3 72 Testing of new procedures - selected facilitles/prof. 11/11/96 73 74 Revisons and extending new proc. to other hosps. 1/15/97 - 76 One con. on QA visis country 3115/97 . 76 Further expanulon -Accred. and QA 7/16/97 - 77 Second vlst -QA consultant 8/1/97 . 78 79 ConsolIkation fo accred/Uc/QA systems - Revislons 1/15158 - so Two can. on aocred. QA vsfsX the courntry 5/1/98 .*. g* Peer revlew of Accred.QA systems by Indep. group 9/1/98 B2 Final report on accred. and QA system 9/22/98 .*y .v B4 (d) Prinary Health Care and Health Protect. Services 3116/96 . I I 86 Fellowship se/awarding , GPs and HPS (1995) 4/1/95 86 Fellowship selection and awarding (1996) 41/96 I7 Fellowship selectlon and awarding (1997) 4/1/97 Is FellowshIp selction and awarding (1998) 4/1/98 39 Short-T. vis. GPs and HPS to oth. countries, 1995 8/15/95 so Short-term visits, 1996 8/15/96 S1 Short-term vislts,1997 8/15/97 . 92 Short-term visits 1998 8/15/98 . 93 Prepare T.A. on PH administration 8/1/95 Task Summary _ Rolled Up Progress Projec1- Estonla Health Project Progress Rolled Up Task Dale. 8/9/94 PrgesRle pTs Milestone Roded Up Milestone K Page 4 5 ID Task Name Start ~ ~~~~~~~ ~~196 1996 1997 11993 1999 ID Task Narne _ Start Inr 1 lOtr 2Otlr 3Qtlr 4|atr 1 lol, Qr2Qatr3Qar 4|QIr 1 Qtr, 2Otrf 3II ir4rQtr 1O lr2tr4 OtIr 4|tr 1 r210tr 3 14 PH administration cons. In country. 1995 11120/95 S5 Id. for 1996 1 1R0/96 Se Id for 1997 111097 3 I sr 20% of offCe equip for CDs and GPs procured and Instalie 6/1I95 S6 Id. for an additonal 60% of equipment 1/15t96 S5 Id. for remaining 20% of equipment 1/15197 - 100 KIts for GPa Procured and deliyered - 20% 3/15195 101 Id. for additonal 25% of kIts 3Y15196 102 Id. for additional 35% of kits 3/15197 - 103 Id. for remaining 20% of kits 3/15/98 - 104 105 A.2. Health Prorolion and Disease Prevention 112/96 r _ 106 Establish HealKh Promotion Committee 1/3195 * 130 107 Appoint staff to assist committee (1 secretary) 2/11/95 103 Funding management PC-software tested 2/1i 95 109 Equipment Installed 2/15195 110 Announce and Launch Campaigns 1/2/95 111 Prepare application form 2/1/95 112 Focal areas ror grants accepted 211195 113 Granis announcement made and proposals Invited 6/1/95 114 Due date for submission of proposals 9/1t95 . 116 Selection of applicants 9/2195 ON Task Summary _ Rolled Up Progress Project Estonia Health Project Progress Rolled Up Task Date 819194 Milestone Roied Up Milestone 3 Page 5 6 1996 1996 1997 1998 1999 ID Task Name Start Otr Qtr 21Qlr 3 Qtr 4 Qtr 1 Olr 2|Qtr 3 Qlr 4Qlr 1 Qr 2tr 31tr4Qlr trtr3 rtr l |Qr201r3 116 Short-term visits completed (2 trips x 2 persons x 2weeks) 12/15/95 I 117 Plan for allocation or grants comrpleted 12/31/95 6131 113 Agreements reached and agreemnrt forms prepared 111/S6 119 Fst final repors, report forms prepared 1/11/97 t l/ 120 121 Prrep ppaca ton rom 21/96 122 Focl areas forgr nbt accepted 2/196 123 Grants announcm t made and propoas kwted 611/96 124 Due date for submission of proposals 9t1/96 125 Seectlon of applicants 9/29 126 Short-term v1si completed (2 trips x 2 persons x 2weeks) 12/15/96 | 127 Plan for allocaion of gris completed 1V31/96 * 12t31 123 Agreernents reached arnd agreement forms prepared 1/1/97 129 Fk-st rfn reports, report forms prepared 111/98 +1 130 131 Prepare application form 2V1/97 132 Focal areas for grants accepted 2V1/97 133 Grants announcement made and proposals kvwted 6/11/97 134 Due date for submIssIon of proposals 9/1/97 136 SelectIon of applicants 9/2/97 136 Short-term visits completed (2 trips x 2 persons x 2weeks) 12/15197 137 Plan for allocation of grants completed 12131t97 12131 Task Summary Rolled Up Progress Project: Estonia Heafth Project Progress Rolled Up Task Nate 8/9/94 Milestone Rolled Up Milestone 9 Page 6 7 1996 1996 1997 1996 1999 ID Tatk Narne Starr ~~~~~~~~~~~~~~~~~~Qlr 11 10tr 210tr 310tr 4 ttr I10|Qr 210lr 3|QIr 41t lr Qtr_210(r 310tr 41Qlr I |IrC |I 1l lrt|l |l ID Task Namne Start 9nQrQrOrOr t2t3QrOn t2l3t4t QrQr t4ttOrOi 136 Agreements reached and agreement forms prepared 1/1/98 139 Firt final reports, report forms prepared 111198 *1/1 140 141 Prepare appation form 2/1/98 142 Focal areas for grants accepted 2/1/98 | 143 Grants announceent mnade and proposals hwlted 6/1/98 144 Due date for submission of propoals 9/1/98 146 Selection of applicants 92/98 14U Short-term vIsits compkted (2 ttips x 2 persons x 2weeks) 1 15/98 147 Plan for alocation of grants cornpleted 12/31/98 121 14S Agreements reached and agreement forms prepared 1/1/99 o 14J First rinal reports, report forms prepared 1/1W/99 1/1 160 161_ 162 B. HUMAN RESOt " ES COMPONENT 1/2/95 163 164 B.1 Strengthening Department of Public Heahth 1/2/96 I 165 Select Ion among quallfied candidates 1/2195 166 Prepare actions for appointments at Tartu's PH Dept. 2/27/95 167 Appointment of Chair In Health Economis 3/27/95 163 Appoint lecturers In heaKh economics 3/27/95 Z 169 Appointment of lecturer In health management 3/27/95 Task Summary Rolled Up Progress Project: Estonia Health Project Progress Rolled Up Task Date: 8/9/094 Milestone Rolled Up Milestone Page 7 5. C C C U W ~C ( I S o~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~c 1A ~~ ~ ~ ~ ~ 9 a 0~~~~~~~...................................................... ....... ,~~~~~~~~~~~~~~~~~~~~~ a'~~~~~~~~~~~~~~~~~~~~~~~~~~~~- a. ft~~~~~~~~~~~~~~~~~~~~~~~~~~ & ~ ~ ~ ~ ~ ~ ~ L ....... ..... ..... .................................... fl C ~~~~~~~~~~~~~~~~~~~~~~~~~..................-................... 4' 'II; 'Ii'' iii~~~~~~ 0~ cn 0 0 C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 U~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~L 4'~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~~~ ~~~~~~~~~~~~~~~~~~~~j; ft ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.~~~~~~~L .. .. . .. . .. . .. . .. . .. . . . .. . .. . . . . . . . .. .. . .. . . . . .. . . . . . . . . . .. . .. . .. . .. . . . . . . . .. . 9 XHNNV~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I. -102- ANNEX 6 0 - ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ .. .. ... .. ..... ...... . . . . . . .. . 00 CY o~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t D I- -~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 00~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~6- a~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~t 0 - ~~~~~~~ 0 0L-nF - (n~~~~~~~~~~~~~~~~~~2t E, Cb r-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 CA C4 C4 Jc~I "7m m o e ~~~~~~~~~~~~~~~~~~~0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ -t t o 10 1995 1996 1997 1998 | 1999 ID Task Name Start n |Qr2Qtr3Qtr 4|Qtr I l|Qr2t tr 41tr I lQtr 2Qtr 3|Qtr 4OQtr 1r2Qr Qt4!tr I |lr21t, 3 204 Prepare for 3-mordh study programs (topics below) 5/11597 206 Undertake one-three-month study prog - epidemilogy 8/1/97 206 Id.for health care managerment 7/1 5/97 207 Prepare for one-week study tours (hi topics beklw) 6/1/97 203 Undertake I two-week study progr. -epiUmig 8/1 Y97 209 Id. for envronmerta health 8/15/97 210 Id. for healh promtIon 8/15Y97 211 Fourth Year 1/2/95 212 Prepare for two MPH fellowshps 411/98 213 Unxertake MPH studies - 9/1/98 214 Prepare for three-month study progams - Topics below Y1/98 216 Undertake3-mordh study program on occ. health 81/98 51o 216 Id. for health education 8/17/98 217 Prepare for two-week study progrs - topics below 4/15/98 213 Undertake 2-week study progr. -PH curricula dev. 8/1598 219 Id. for heafth management 8/17/98 220 Id. for Health Education 8/17/98 221 Three-week T.A. to faciliate further developments 6/15/98 222 Equipment and textbook procuremrent 1/2195 223 Equlpment procurement - 1995 415/956 224 Text-book purchase, joumalssubscriptions - 1995 4/17/95 > 226 Equlpment purchase - 1996 2/25/96 Task Summary ~ Rolled Up Progress Project Estonla Health Project Progress Rolled Up Task Dale: 8/9/94 Milestone Rotled Up Milestone 0 Page 10 11 1995 1996 1997 199S 1999 ID Task Name Start r I10tr 210tr 3Qtr4 Qtr I10tr 21Qtr 3 4ttr4!,|r 2|QIr 3|Qtr 4trQtr 1|Qtr 20tr 3|Qtr tr 101r 210tr3 226 Text-book purchase, ournats'subscriptions - 1996 2/26/96 227 EquIpment purchase - 1997 2/15/97 228 Text-book purchase. jurnalssubscriptlons- 1997 2/17/97 228 Equipment purchase -1998 215/98 230 Text-book purchase, ,umals'subscrptlons - 1998 216/916 231 232 B.2. Center for Continuing Education 112135 233 Center Director Selected and In posiion 1/2/95 234 AdministnrUve staff selected and In position 1/2/95 236 Contract cons. for ptanning refurbishing 1/2/95 236 Consultant In positon 2/15/95 237 Undertake and complete refurbishing 4/1195 _ _ _0. , : o 238 Training courses for heanh prof (1995: 7%) 9/1/95 239 Id. (19: 36% of courses completed) 3/1/96 240 Id. (1996 - second part) 9115/96 241 Id. 1997, 40% of courses completed -first part 311/97 242 Id. 1997 - 55% of courses completed- second part 9/15/97 243 Id.1998 - 87% of courses compieted - first part 331/98 244 Id. 1998 - 100% of courses completed 5/98 246 ....' 246 B.3. Construct Tartu Blomedicurn Building 1a2 247 PCU staff and procurement specs. in position 1t2/95 Task Summary M Rolled Up Progress Project. Estonia Heath Project Progress Rolled Up Task Dale: 8/994 Milestone Rolled Up Milestone Page I1 so -4o rn~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~U 5 W a -41 a a~~~~~~ r c 0 c o m 1 a .- w CT c c ~ 2. gCaE 10. ~ ~ ~ ~ ~ U .................................... ......................................... .................. .................... Q * ii -.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~O ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~! ................................ ...................... .....................................U..... -m m~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~- 2 K> - 12~~~~~~~~~~~~~~~~~~ .................. ....................................................... II I.I!.~~~~~~~~~~~~~~~~~~~ 9 X3NEl U-~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~4- r- 0 ~ 0 m~~ U C 0~~~~~~~ j m~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ m~~~~ 0 C') -U~~~~~~~t U~~~~~~~~~~~~~~~~U -rn Ca 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~i !-< ~ ~ ~ ~ ~ 0 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 0~ ,C.) C~C- TI .. .. . . . .. . . . .. . .. .. . .. . .. . .. . .. . .. .. .. . . . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . - 4J 0 9 XaNxv -901- 8:38 AM 8/94 1 1995 1996 1997 1998 1999 ID Task Narne |I |I r | Ir t r I tr | Ir t r t r | Ir tr |tr tr I r | Ir r|I trI |r Ir |I r r|I _ _ _HLTHFIN.MPP_ I I Central Health Insurance Agency & Component Management Support 2 1.1 Component Startup and Organizatlon Fumfture,Vehicies,Central Insurance Computers & Softwa ra,Central Ins Equl 3 1.2 Component Coordination & Operation Vehick Maint & O 4 1.3 Computer Maintenance Computer Mainte -6 . C a 2 Health Finance Comnponent. Sub Component #C2, insitutional Support for Central Insurance Agency _ 7 2.1 Technical Assistance 6 2.1.1 Actuarial Planning _ 2.1.2 Yr I Actuarial Planning (Conduct Initlal Actuarial Analysis & Develop Models) Actuary TA 10 2.1.3 Yr. 2 Actuarial Planning (Assist Annual Assessment & Capacity Building) 11...' 12 2.1.4 Health Finance System Planning 13 2.1.4.1 Yr. 1 Systems Planning (Combine Service Delivery, Service Demnand & Revenue Models) iealth Pla ner 14 2.1.4.2 Yr2 Systems Planning (Update and Rerne Planning and Performance Analysis Models) Health Planner 16 2.1.4.3 Yr3 Systems Planning (Llmited T alnlng and Advisory Support) * Health Planner 16 2.1.6 Financlal Management IT 2.1.5.1 Yr. I Financial Managemient (Central Program Operational Policy and Procedures) 13 2.1.5.2 Yr I Health Insurance Operatonal Assessment & Quality Control inanclal Opns Spec 13 2.1.6 Revenue Collection 20 2.1.6.1 Yr 1 Revenue Colleclion Organization Development 21 2.1.6.2 Yr. 2 Revenue Collection Organization Development (Follow up Appraisal and System En I C 1i ctlon Spec[O.671 22 2.1.6.3 Yr I Revenue Collction Systems (Elementary Systems Development) I lectlon pec 0tz 23 2.1.6.4 Yr. 2 Revenue Collection Systems (Systems Enhancement) C, II tction Spec[0 71 24 Task Summary IVRolled Up Progress Project: Progress Rolled Up Task Dale: 8/9/94 Milestone Rolled Up Milestone C Pae 1 8,38 AM 8/9i94 2 1996 1996 1997 1998 1999 10 TaskName itr IrtItr tr lr I lI trter ir ir i r tir irItr ir; I irIr It 26 2.1.7 Accounting Methods Development 26 21.7.1 Yr. I Accounting and Auditn Tralnin & Methods Deveopment r ounl S 27 2.1.7.2 Out Yr Accounting & Audding Systems Trainin Curriculum Enhancement _ | ounting Spec 2t 2.2 Short Term Fellowships (34 Month) 29 2.2.1 Fhical Maagement FelbwshIp hip 30 2.2.2 Ac-tuaral Planni Fellowship (Donor Iem) Fe p 31 2.3 Short Term Study Tours 32 2.3.1 Insaumnce Fund Managefrent Tour 33 2.3.2 Fucal Mawgemenr Tour Study 1ur 34 2.3.3 Revenue Colction Management Tour St Tot r 36 2.3.4 Relmbursement Systems Tour Study Tour 36 2.4 Central Health Fund Management CapacIy hiprovement PON 37 2.4.1 National Sickness Fund Budget Planning and Execution Managemenvt Capacity * I anclal p1 is Spec 38 2-4.2 National (Centralized) Sickness Fund Reserve Asset Management Support * Res rve Fund TA 39 2-4.3 NatIonal Health Service Purchasing Polley & Procedure Develpment talth Economlst - 40 - 41 42 3 Health Finance Component, Subcomponent #3, Local Provider 4-ealth Insurance Interface 43 3.1 kiiplemewnt Accounting & Management Systefms 44 3.1.1 Health Fund Management and AccounUng Policy and Procedure Docunentation Dca Fun nalydl2l 46 3.1.2 Heafth Fund Managemnent & Acctg Trainin Program Design and Develpment Local Fu Analyst,Course Developer 46 3A1.3 Conduct Local Fund Management and Accouring ConcepA Trainin Local FL I Awlyd,Course Developer 47 3.1.4 Semi Annual Atumun Trainig I * Reg Followup,Cenler for Continulng Education Reb 43 3.1.5 Sermi Annual Autumnn Traini 2 *Reg Follow up21,Center for Contilnul rX 49 3.1.6 Semi Annual Autumn Training 3 * Reg Followup[21.Ce a Task Summary Roled Up Progress Project Progress Rolled UpTask Date: /9/94 Milestone Rolled Up Milestone ) Page 2 8 38 AM 8/9/94 3 199C 1996 ] 1997 19987_ ID Task Name tr Tr r | I r I tr | Ir tr Ir ir |tIr Ir | Ir | Ir |Ir JIr|IIr EL r 60 3.1.7 Acquire Local Fund Computers 61 3.1.7.1 Procure Comptiers qulpnle nalyst[0.26JProcurement Anslyst[0.61.Local Fund Computers 12 3.1.7.2 Conrigure and Test Computers qulpre Analyst 13 31.7.3 Install Computers rt 64 3.1.7.4 TraIn Users to Operate Computers User S pport 66 3.1.1 hirplement Comfputerized Local Fund Managemnent Systern 66 3.1.8.1 Local Fund Automated Financial Management System Training Development ao rse Dev loper 67 31.9 Ongoing Local Fund Management System User Support _ User Supporl(0.21,L 60 3.1.10 Relmbursement Management Developrnent 61 3.1.10.1 Yr 1 Reimbursement Management Healt Svc Rehnburse Spec 40 3.1 .10.2 Yr 2 Reimbursement Management * Health Svc Reimbure Spec 41 3.1.10.3 Intal Electronic Enrollment Validation Support System (for Providers) Provider Opna AnaiystProvider Analyst 62 63 64 3.1.11 Heath Finance and Management Training intitute Development & Operation 5 66 3.1.1 1.1 Acquire Training Facildies - 2 66 3.1 11.2 Acquire Training Equipment (conduct procurements) Procu cmnt Analydt Equipment Analyst,Training Equipmnent 67 3. 1. 11.3 Acquire Training Program Technical Assistance (locate and contract) lrocure ent Analyst[0.751,Cornponent Coordinator(O) It 3.1. 1 1.4 Training Program Development TA ( Building Training Program Staff Skills) urn tulurn Dev.10.61J,Course Developer[41 es 3.1 11.5 Ongoing Training Program Staff Support (Estonian) Course Developer[4] 70 3.2 Local Fund -Provider Service Contract Negotiation Support System Development & Training 71 3.2.1 Develop Local Fund Contract Negotiation Support System ealth Economist . 72 3.2.2 Develop and Conduct Training on Contract Negotiatlon System Health Economlst[0.71,Course Developerq2j z 73 3.2.3 Provider Facility & Operations Management knprovement Support (Install PHARE syste *_ 74 3.2.3.1 Define Provider Demand /Need flo PHARE Developed Management System r vi er Analysis TA[0C.1,Provider Analyst Task Summary Rolled Up Progress DatPe:o /9/94 Progress Rolled Up Task Milestone Rolled Up Milestone Page 3 8 38 AM 89/94 4 1996 1996 199T 1998 1999 ID Task Name _ r i[ r | Ir | Ir | tr |r I| {r | Ir | Ir | Ir | Ir | Ir | Ir | Ir | Ir | Ir | Ir | Ir | Ir | Ir 75 3.2.3.2 Plan and Schedule Management System Installation der Analysis TAJ0.25j,ProvIder Analyst Ti 3.2.3.3 Conrduct Managenwent System Installation and Training Provider Analys&[21 77 3.2.4 Provider Operations Analysis and Management Assessmnent Procedure Documentatlon(l To 3.2.4.1 Local Staff Provider Operatlons Analysis & Procedure Documentation (If not done by PH Di er Analysql1S15 is 3.2.4.2 Provider Operations Analysis TA (Assess PHARE Piklt and support Tralning & Installatio o hr Analysis TA1O.671 s0 3.2.5 ProMkder Operations Analpis and Management Assessment Training Development r r ulum Dev.t1.31 81 3.2.6 Ongoing Managemrent System User Support (By Central Support Group) User Support,Loc .,..,121..... Task Summary Rolled Up Progress Project Proress Rolled Up Task__ Date: U9/94 Miestonre Roled Up Milestone ) Page 4 838 AM U/94 5 1996 1996 199t 1998 1999 ID Task Name tr t r r t " | " i tr |t tr r i t | ,. | Ir | , t4 4 C1(b) Enhance Revenue Collection 38 4.1 Sickness Fund Enrollmewnt System Enhancement I6 4.1.1 Develop Program Public Information Capacity * ublic Infor TA IT 4,1.2 Publish New Enterprke Flnance and Accounting Record Retention Law ii ntor Spec Is 4.1.3 Support Develop of Integrated Local Social Insurance Register Local Fund AnslystrB161 Is 4.1.4 Emnployer Registration System Refinemenvt ColcIon Spec[O.21 90 4.2 Local Fund Collection Support Sytern_ 31 4.2.1 Under- reporting Enterprise Screening System Collection Spec[O.081 t2 4.2.2 Enterprise Financil Record Inspectorate Program Establishment ollecbn Spec 6o.6 93 4.2.3 Self-Employed Regisotlaon Management System Collctlon specrO.171 t4 4.2.4 Automated Enterprie Fee Reporting System Collectlion Spec[O 041 16 4.3 Provider Financial Management trnprovernent Support _ * 1e 4.3.1 Develop Financial Management and Accounting Policy and Procedure Documentation A ounting Spec[1.61 97 4.3.2 Acquire Financial Management & Accounting System Training Technical Assistance ounting Spec St 4.3.3 Financial Management and Accounting System Training Program Development Curriculum Dev. 55 4.3.4 Initial Group Startup Trainhg Reg nal Training,Staff Time Lost for Educ. 100 4.3.5 Second Group Startup Tralning * Regional Tralning,Statf Tine Lost for Educ. 101 4.3.6 Ongoing Support of Provider Usems Provider Suppt 1[31 102 103 4.3.7 Computerized Provider Accounting Systern tmpleremntatlon _ I 104 4.3.7.1 Regional Training of Computerized Financial Management System Users 106 4.3.7.2 Computerized Financlal Management System Installation se'r Support[2l X 106 4.3.7.3 Ongoing FIancW Management System User Support (Hot Line Support) eUser Support' 107 103 4.3.1.4 Acquire HospItal and Clinic Computers Task Surmary Roled Up Progress Proect: Progress Rokd Up Task Date: 8/j9/4UpTa Miestone * Roled Up Milestone 0C) Page 5 8 38 AM 8/9t94 6 1996 1996 1997 1998 1999 ID Task Name tr tr 1 Ir tr tr I tr r Ir t r Ir tr I t I tr r r I t tr 109 4.3.7.4.1 Procure Computers ocurement Analystlo.51.Equlpment Analyst[O.261 110 4.3.7.4.2 Conrigure end Test Computers Equipment Analystl31 111 4.3.7.4.3 Instal Hospdtal & Clnc Computers Equipment Anaiysl[21.Installation Contractorl2J.HospItal & Clinic 112 4.3.7.4.4 Train Users to Operate Computers mUer Support!1.6I Task Summary _ Roled Up Progress Dae: 8/994 Progress Roled Up Task MLesone Roled Up Milestone > Pae 6 -113- ANNEX 7 ESTONIA HEALTH PROJECT PLANNED PROCUREMENT PACKAGES AND SCHEDULES | Milestone Dates Amount Procurement Packages ($ million) Method' Tender Awarding Delvery Completion (Base Costs) WORKS 12. I 1. Tartu Biomed., Construction 12.1 ICB 4/96 11/96 10/98 12/98 EQUIPMENT 8.81 1. Office Equipment 1.51 Xerox, fax, telephones and other 0.48 ICB 6/95 10/95 12/95 3/96 communications equipment Office Equipment 0.5 ICB 6/96 10196 12/96 4/97 Teaching Materials 0.23 DC 5/95 7/95 8/95 2/96 Fumiture: six packages of 0.3 LS 1/97 3/97 5/97 8/97 US$50,000 2. Computers and Software 2.34 First Batch 1.24 ICB 8/95 1/96 3/96 5/96 Second Batch 1.1 ICB 8/96 1/97 3/97 5/97 3. Med. Test and Lab. Equipment 4.96 Medical Equipment 0.65 LIB 10/95 2/96 4/96 7/96 Testing Equipment 0.63 LIB 7/97 11/97 1/98 4/98 Laboratory Equipment 3.68 LIB 10/96 12/96 2/97 4/97 TECHNICAL ASSISTANCE 2.81 Building Design 0.84 SL 7/94 01/95 5/95 7/95 Construction Supervision 0.16 SL 7/95 10/95 12/95 10/98 Technical Assistance2 1.81 SL 5/95 7/95 9/95 1/96 ICB = Intemational Competitive Bidding SL = Selection from short-listed firms DC = Direct Contact LIB = Limited Intemational Bidding LS = Local Shopping 2/ To be provided by bilaterals and the Govemment. -114- ANNEX 8 ESTONIA HEALTH PROJECT INDICATORS FOR PROJECT MONITORING AND EVALUATION 1. It is important to measure project implementation progress and effective utilization of the resources to be provided through the loan. Moreover, one of the project objectives is to improve the quality of the health services. It is therefore appropriate to develop mechanisms to monitor and evaluate progress toward better health conditions. The project would support both efforts: (a) project monitoring and evaluation; and (b) establishing the basis for improved measurement of the health situation. Process indicators are proposed for evaluating project implementation. Tracers for evaluating the effect of preventive programs and improvements in health service delivery are also suggested. Project monitoring indicators are milestones extracted from the project implementation plan. The Project Coordination Unit will be responsible for monitoring project activities on a day-to-day basis and for maintaining the monitoring system for the project. It will also assist relevant units of the MSA in conducting or commissioning data collection and studies to evaluate health prevention programs. -1 15- ANNEX 8 ESTONIA HEALTH PROJECT ACHIEVEMENT OF KEY AND ROUTINE ACTIVlTIES, FOR EACH PROJECT COMPONENT AND COMPONENT-SPECIFIC INDICATORS OF PROJECT PROGRESS AND IMPACT ComponenV Indicator Measurement % of Date or Type Subcomponent Goal frequency P,I Key activities: Fulfillment of key _No. of key activities xx Quaterly P each component activities (%) scheduled for initiation (starting date) within the period. %initiated within proposing starting date 90 % Progressing 80 satisfactorily Achievement of _No. of key activities xx Quarterly P key activities (%) scheduled for completion (completion date with the period -%completed as planned 80 Routine activities: Achievement of _Total number of routine xx Quarterly P each component routine activities activities scheduled for (starting date) initiation during the period % initiated within the 80 proposed date _% progressing 75 satisfactorily Achievement of No. of routine activities Quarterly P routine activities scheduled for completion (completion date) during the period xx %completed as planned 75 Total Activities Total Production _Total No. of products per Quarterly P component xx -%proceeding 80 satisfactorily IBRO Loan Disbursements _° disbursed over over Quarterly P Execution planned 80% -1 16- ANNEX 8 Component/ Indicator Measurement % of Date or Type Subcomponent Goal frequency P,I A. Heatth system reorientation: Al. SA Institutional Dev. and Realignment A.. (a) Health Unit staff Copies of appointment 100% 30-Jun-95 P policy and recruited letters sent to Bank economic analysis First annual Letter from MSA to Bank 100% Dec., 1995 P consolidated health budget approved Study on health Satisfactory completionof 100% 31-Mar-96 P national priorities study using burden of diseases methodology . A. 1.(b) Hospital Two training Training evaluation results favora Before P efficiency programs: for 15 ble Dec.1, enhancement administrators 1995 and 15 architects on hospital planning/ physical functional programming _~~~~~~~~~~~~~~~~ Medical As inspected by Under Before equipment well independent survey 10%fai July 1997 maintained lures -1 17- ANNEX 8 A.1.(c) Quality Hospitals Accreditatlon review by 50% Before I assurance and accredited independent experts of July 31, accreditation folowing hospit 1997 internationally als recognized standards Component/ Indicator Measurement % of Date or Type Subcomponent Goal frequency P,l Health Licensure reviewed by 50% Before Professionals independent experts of Dec. 15, licenced h.prof. 1997 following internationally recognized standards Quality Results of testing in at Before P assurance least 5 hospitals Dec. 15, system tested 1997 A1. (d) PHC and Counties Tracers: Counties' 50% Before Health Protection functioning epidemiological profiles of Dec.15, Services efficiently under completed, GPs with new counti 1996 Reorientation new health kits, HP agents retrained es administration meeti system ng 80% of tracer A.2. Health Nutrition Formal approval by MSA 100% Dec.,1995 P Promotion and guidelines Disease completed Prevention Pilot HProm./Ed. Anti-smoking/Family 1 00% Dec. 1995 P Centers Planning Pilot Centers established established, first two, one in Tallinn, one in Tartu _ -l118- ANNEX 8 Age and sex Using data from Natlonal M 45 1998 I prevalence of Health Behavior Study, % F everyday compare with 1992 rates: 19% smokers Males, 49%, Females, 20% PassTve smoking Comparisons with 1992 M 50 1998 l data: males 819%, females % F 50% 30% Age-standardized Using data from Natlonal 80 per 1998 ischaemic heart Mortality Stat. Infarction disease death register, compare with rate, 0-64 years 1990 rate of 99 per 100,000 pop. Component/ Indicator Measurement % of Date or Type Subcomponent Goal frequency P,/ Daily salt intake Using data from National 13-15 1998 Nutrition Prioritizing gr. Survey, compare with 15- 20 gr. In 1990 Daily diet fat 39 to 43% of energy In 35- 1998 I intake 1990 39% Daily 16 mg. in 1990 25 1998I consumption of mg. fiber I _ _ _ _ _ _ _ _ _ __ _ _ _ _ _ _ _ _ Abortion rate 157.7 per 100 live births in 125 1998 1993 per Contraceptive 23% in 1992 (data from 35% 1998 rate Family and Fertility Study) X Breast feeding up 27.3% in 1992 (National 50% 1998 I to 4 months Statistics) Immunization 70-80% in 1992 (National 80- 1998 T coverage Statistics) 90% -119- ANNEX 8 Mortality due to M 117.2 per 100,000 pop, 105/ 1998 injuries and F 35.0 (from Trauma 31 polsoning Register) (including sulcides) B. Human Resource Development B.1. Creation of new Number of positions filled 95:6 Impl.Plan P Strengthening positions and '96:4 the Dept. of appointment of '97:2 Public Health lecturers made '98:1 according to implementation' plan ComponentV Indicator Measurement % of Date or Type Subcomponent Goal hrequency P,J Peer review of Assessment of quality of Specd 1997 PH Dept. studies and nature and Ic quality of collaboration goals with national and county TBD authorities (review by peer PH Dept. in Nordic C Country) B.2. Center for %satisfactory in Evaluation forms for each At 1996, P Continuing courses' course least 1997, Education evaluation 80% 1998 B.3. %disbursements Actual disbursement 60% 1997 P Construction of performance 100% 1998 Biomedicum Building Critical Path Status of critical path 100% Bi-yearly P managed on a included in bi-yearly continued basis reports to Bank -120- ANNEX 8 C. Efficient % patients wlth Using health funds'data, 25% 1995 P nanagement of invaild health compare with 1994 % 15% 1996 financial enrollment docs. 10% 1998 resources % enterprises Using health funds' data, 85% 1995 P and self- compare wlth 1994 % 95% 1996 employed 98% 1997 registered Install provider Accounting system 15% 1995 P accounting functioning In Local Funds 60% 1996 system 95% 1997 %of Providers Staff of Local Funds 15% 1995 trained trained In satisfactory 85% 1996 manner 90% 1997 % of Users Staff from health service 15% 1995 trained units (hospitals,etc) trained 60% 1996 in a satisfactory manner 95% 1997 ANNEX 9 ESTONIA HEALTH PROJECT Selected Project Cost Summary Tables -1 21- ANNEX 2 Page 1 of 9 ESIQONA HEALTH PROJECT Expenditure Accounts Project Cost Summary % % Total (EEK Million) (USS Million) Foreign Base Local Foreign Total Local Foreign Total Exchange Costs I. Investment Costs A. Civil Works 1. Design 1.69 9.57 11.26 0.13 0.71 0.84 85 3 2. Construction 65.69 96.64 162.33 4.90 7.21 12.11 60 42 3. Supervision 0.94 1.20 2.14 0.07 0.09 0.16 56 1 Subtotal Civil Works 68.32 107.41 175.73 5.10 8.02 13.11 61 45 B. Equipment 1. Office Equipment & Fumiture/a 7.48 9.67 17.15 0.56 0.72 1.28 56 4 2. Computer Hardware & Software - 31.32 31.32 - 2.34 2.34 100 8 3. Laboratory Equipment 2.47 46.85 49.31 0.18 3.50 3.68 95 13 4. Testing Instruments - 8.44 8.44 - 0.63 0.63 100 2 5. Medical Kits for GPs - 8.71 8.71 - 0.65 0.65 100 2 Subtotal Equipment 9.94 104.99 114.93 0.74 7.83 8.58 91 29 C. Teaching Materials /b 1.23 1.88 3.11 0.09 0.14 0.23 61 1 D. Technical Assistance 1. Foreign TA - 21.83 21.83 - 1.63 1.63 100 6 2. Local TA 2.46 - 2.46 0.18 - 0.18 - 1 Subtotal Technical Assistance 2.46 21.83 24.29 0.18 1.63 1.81 90 6 E. Training Ic 14.74 7.80 22.54 1.10 0.58 1.68 35 6 F. Fellowships - 8.06 8.06 - 0.60 0.60 100 2 G. Local Health Promotion Programmes /d 14.98 - 14.98 1.12 - 1.12 - 4 Total Investment Costs 111.67 251.97 363.64 8.33 18.80 27.14 69 93 It. Recurrent Costs A. Staff Salaries/e 13.62 - 13.62 1.02 - 1.02 - 3 B. Miscellaneous Costs/f 5.91 - 5.91 0.44 - 0.44 - 2 C. Maintenance /g 6.81 - 6.81 0.51 - 0.51 - 2 Total Recurrent Costs 26.34 - 26.34 1.97 - 1.97 - 7 Total BASELINE COSTS 138.01 251.97 389.98 10.30 18.80 29.10 65 100 Physical Contingences 13.80 25.20 39.00 1.03 1.88 2.91 65 10 Price Contingencies 18.51 14.88 33.39 1.38 1.11 2.49 45 9 Total PROJECT COSTS 170.33 292.04 462.37 12.71 21.79 34.51 63 119 \a Includes training and audio-visual equipment \b Books, journals, and mass media materials \c Short-term visits, foreign and local training, workshops, and seminars \d Competititve awards given to community-based groups for health programs. \e Includes staff salaries while on short-term visits, training, and fellowships \f Various costs needed for project implementation. \g Includes maintenance of equipment and infrastructures ESTONIA HgALTH fROJEI ExpendAture Accounts by Components - Base Costs (USS Million) Humnm Resources Dvelopmnent Strengthening Health System the Efficient Managerent of Reorientation Departments Creation Financial Resources Institutional Health of Public of a Construction of Central Development Promotion Health and Canteror " the University Local Health and and Polyclinic Continuing of Provider/Health Insurance Project Physical Realignment Disease and Family Health Tartul8lomedtcum Insurance Agency Coordination Contingencies in the USA Prevention Miedcine Education BuIlding Interface Development Unit Total % Amount 1. Investment Costs A. Civil Works I Design - - 0.84 - - 0.84 100 008 2 Construcion - - - 0.09 1202 1211 100 1 21 3 Supervsions - A016 - - 0.16 100 002 SubtotalaCiviWorks - - - 009 1302 - - 1311 100 131 B. Equipment 1 Ofice Equipmrent &Furnitre la 034 0.02 0-04 0 09 - 0.66 0.07 0 02 0.04 1 28 10 0 013 2 Cornputer Hardware & Software 0.54 005 0.15 0.20 0.20 1.09 0 08 0 04 2 34 10 0 0 23 3 Laboratory Equtpment - - - - 3.68 - - - 368 100 0 37 4 Testirg Instnrments 0.63 - - - - - - 063 100 0,06 S Medical iKs for GPs 065 - - - - - 065 10 0 0 07 SubtotalEquizpment 215 007 0.18 0.29 4.53 1.16 010 008 858 100 086 C. Teaching Materials lb 0.03 0.08 0.08 0.04 - - - - 023 10.0 0 02 D. Technical Assistance 1 ForeignTA 0.51 - 0.05 0.02 004 0.25 043 032 163 100 016 2 LocalTA 006 003 0.05 - - 001 001 001 018 100 002 Subiotal Technic Assistance 0 58 0 03 010 0 02 0.04 0.27 045 0 33 1 81 10 0 018 E. Training/c 0.57 013 0.06 0.26 0.01 0.56 0.03 005 168 100 017 F. Fellowships 0.23 0.35 - - - 0 02 - 0 60 10 0 0 06 G. Local Health Promotion PrograwsId - 112 -- - - - 112 10.0 0.11 Total InvestmentCosts 356 1.44 078 0.70 1760 1.98 061 047 2714 100 2 71 11. Recurrent Costs A SlaitSabanes/e 0.15 004 0.15 0.07 0.00 0.41 0.04 017 102 100 0.10 B M'scellanecous Cosis f - 0.10 - - - 0 04 0 21 010 0 44 10 0 0 04 C Mantenance /g 0.01 - - - 045 0 03 0 02 0 51 10 0 005 Total RecurrentCosts 016 014 015 007 000 090 027 029 197 100 020 Total BASELINE COSTS 3.72 1 58 0 93 0 76 17.60 2 88 0 88 0 75 2910 10 0 291 Physical Contingencies 0.37 0.16 0.09 0.08 1.76 0 29 0 09 0 08 2.91 Pnce Contingencies 0.19 017 0.06 006 1.72 0 20 0 04 004 249 91 0 23 Total PROJECT COSTS 4.29 190 108 0.91 21.08 3.37 101 087 3451 91 314 OQ Taxes Foreign Exchange 370 019 084 0.33 14.04 1.57 0.65 049 2179 91 198 g t 0 O t-n \a includes traning and audio-visual equipment lb Books. jotrnals. and mass media materials vc Short4erm visits, (oreign and local trainiq, workshops. ard seminwrs id Competitive awards grven to community-based groups for heath programs b IncJudes statf salaries whiie on short-term visits, raining, and fellowships \I Various cosis needed tor project inplemenlatlion \g Includes maintenance ol equipmenl and intrastrucLes STONIA HEALTH PROJECT Expenditure Accounts by Componenis - Totals Including Contingencies (USS Million) Human Resources Development Strengthening Health System the Efficient Management of Reorientaton Departments Creatlon Financial Resources Institutional Health of Pubilc of a Construction of Central Development Promotion Health and Center for the University Local Health and and Polyclinic Continuing of Provider/Health Insurance Project Realignment Disease and Family Health Tartu/Blomedicum Insurance Agency Coordination In the MSA Prevention Medicine Educatdon Building Interface Development Unit Total I. Investment Costs A. Civil Works 1. Design - - - 0.95 - - - 0.95 2. Construction - - 011 14.44 - - 1455 3 Supervision - 0.19 0.19 Subtotal Civil Works - - - 011 15.59 - - - 15 70 B. Equipment 1. Office Equipment & Fumnure /a 0.38 0.03 0.04 0.10 0.82 0.08 0.03 005 1.52 2. Computer Hardware & Sottware 0.61 0 06 0.16 023 0.23 1.21 009 0.05 2 63 3 Laboratory Equipnent - - 4.39 -4.39 4. Testing Instrumnents 0.73 - - - - 0 73 5 Medical Kts for GPs 0.75 - - - - - - - 075 Subtotal Equipment 2.47 008 0.21 0.33 5.44 1 29 012 009 1002 C. Teaching Materials lb 0.04 0.10 0.09 0.05 - - - 00277 D. Technical Assistance 1. Foreign TA 0.58 - 0.06 0 02 0.04 0.28 0 48 0.36 183 2. Local TA 0 08 0.04 0.06 - - 0 02 0 02 0 01 0 22 Subtotal Technical Assistance 066 0 04 0.12 0 02 0.04 0.30 0 50 0 37 2 06 E. Training Ic 067 0.15 0.07 0.32 0.01 0.69 0.04 0.06 201 F. Fellowships 0.26 - 0.40 - - - 0 03 - 0 69 G. Local Health Promotion Programmes Id - 1.36 - - - - - 1 36 Total Investment Costs 4.09 1 73 0.90 0.83 21.08 2 27 0.68 0 52 32.10 II. Recurrent Costs A. Staff Salanes/e 0.18 0.05 0.18 0,08 0.00 0.50 0.04 0.21 1 24 B Miscellaneous Costs n - 0.12 - - - 0.05 0 25 012 0 54 C. Maintenance /9 0 01 - - - 0.56 0.03 0 02 0 63 i Total Recufrent Costs 0.20 0.17 018 0.08 0.00 1.10 0.33 035 240 ° 2 Total PROJECT COSTS 4.29 1.90 1.08 0.91 21.08 3.37 1.01 0.87 34.51 Taxes - - - - 0 Foreign Exchange 3.70 0.19 0.84 0.33 14.04 1.57 0.65 0.49 21.79 \a Includes training and audio-visual equipment \b Books, joumals, and mass media materials vc Shon-temm visits, foreign and local training, workshops, and seminars vd Competiitve awards given to community-based groups for health programs. ve Includes staff salanes while on short-term visits, training, and fellowships V Various costs needed for project implementation. \g Includes maintenance of equipment and infrastructures ESTON HEALTH PROJEO Expendiure Acouts by Components - Base Costs (EEK Million) Human Resources Development Strengthening Health System the Efficient Managoemnt of Reonentation Departments Creation Financial Resources Institutional Health of Public of a Construction of Central Development Promotion Health and Canter fr the University Local Health and and Polycilnic Continuing of ProviderfHeaith Insurance Project Physical Realignment Disease and Family Health TaitutBiomedicum Insurance Agency Coordination Contingencies In the MSA Prevention Medicine Education Building Interface Development Unit Total % Amount 1. Investmnnt Costs A. Civil Woris 1 D)esign - - 11.26 .1126 100 113 2 Construction - - 1.26 161.07 - 162-33 10 0 16 23 3. Supervision - 2.14 - - 214 10.0 021 Subtotal Civg Vorks - - - 126 174.47 - - - 17573 10 0 17 57 B. Equipment 1. Office Equipment a Fursturola 4.52 031 0.51 119 880 094 0.32 055 17.15 10.0 1.71 1 2. Computer Hardweafe& Sottware 7.20 0.68 1.96 2.63 2.63 14.57 1.07 0.58 31.32 10 0 313 3 Laboratory Equipmernt - - - 49.31 - - - 49.31 10 0 493 t; 4 Testin instnnermts 844 - - - - - - - 8 44 10 0 0 84 5 Medica Kils for GPs 8.71 - - - - - - 8 71 10 0 0 87 SuDtotal Equipment 2887 099 2.47 3.82 60.75 1551 139 113 11493 100 11.49 C. Teaching Materials/b 0.41 1.09 1.07 0.54 - - - - 3.11 100 0.31 D. Technical Assistance I Foreign TA 687 - 0 72 0.24 0,48 3,38 5,79 4 34 21.83 10 0 218 2 LocalTA 085 042 068 - - 0.19 019 013 246 100 025 Subtotal Technical Assistance 773 042 1.40 0.24 0.48 3.57 598 447 2429 100 243 E Training/c 766 1,79 0.86 3.50 0.16 7.49 043 064 22.54 10.0 225 F. Fellowships 3.05 - 4 69 - - 0.32 8 06 100 0 81 G. Local Heaith Promotion Programmes Id - 1498 - - - - - - 1498 100 1.50 Total Investmetnt Costs 47.72 1927 10.48 9.37 235.86 2657 812 625 36364 100 3636 II. Recurrent Costs A. Staff Saliares / 2.01 0.54 1.94 0.88 0 01 5.48 0.47 228 13.62 10,0 1.36 8 Miscellaneous Costs I - 1.34 - - - 0.50 2 79 1.29 591 10 0 0.59 C Mahuenance ig 014 - - - - 6 03 0 38 0 27 6 81 100 0 68 Total Recurrent Costa 215 1.88 194 088 001 1200 364 384 2634 100 263 Total BASELINE COSTS 4987 21.15 1243 10.25 23587 3857 11.76 1009 38998 100 3900 Physical Contngencies 4.99 211 1.24 1.02 2359 3.86 118 1.01 39 00 - -i' Price Contingencies 2.61 2.22 0.74 0.87 23 06 2.70 060 0 60 33 39 91 3 04 r Total PROJECT COSTS 57.47 2548 14.41 12 14 282.51 4513 13.53 1169 46237 91 4203 09 Z Taxes - - - - - - - - - - P Foreign Exchange 4955 2.57 11.20 4.42 18810 2100 868 6.53 292.04 9.1 26.55 ' 0 \a inckJudes trawig and audio-visual equipment tb Books, journals, and mass media materials ic Short-ermm vit5s, foreign and local training, worksuops. and seminars \d Competaivtve awards given to community-based groups for health programs \a Includes staff salares whil on shod-term visits, training. and feliowships V Various costs needed for project implementation ig hincldes maintenrance of equipment and antrastrucdures ESTONIA HEALTH PROJECT Expendture AccoOnts by Components - Totals Including Contingencies (EEK Million) Human Resourees Development Strengthening Health System the Efficlent Management of Reorientation Departments Creation Financial Resources Institutional Health of Public of a ConstrucUon of Central Development Promotion Health and Center for the University Local Health and and Polyclinic Continuing of Provider/Health Insurance Project Realignment Disease and Family Health Tarta/Blomedicum Insurance Agency Coordination In the MSA Prevention Medicine Education Building Interface Development Unit Total I. Investment Costs A. Clvil Works 1. Design - - - - 12.77 - - - 12.77 2. Construction - - 1.45 193.56 - - - 195.01 3. Supervision - - 2.57 - - - 2.57 Subtotal CMi Works - 1.45 208.90 - - - 210.35 B. Equipment 1. Office Equiprnent & Furniture /a 5.08 0.34 0.57 1.36 10.95 1.04 0.36 0.62 20.32 2.CornputerHardware&Software 8.18 0.77 2.20 3.02 3.11 16.19 1.19 0.65 3530 3. Laboratory Equipmenlt - - - 58.80 - - - 58 80 4. Testing instruments 9.84 - - - - - 9.84 5. Medica Kits for GPs 10.00 - - - - - - - 10 °° Subtotal Equipment 33.10 1.11 2.77 4.38 72.86 17.23 1.55 1.27 13427 C. Teaching Materials /b 0.48 1.33 1.24 0.62 - - - 366 D. Technical Assistance 1. Foreign TA 7.80 - 0.83 0.27 0.56 3.76 6.49 4.86 24.56 2. Locai TA 1.03 0.50 0.83 - - 0.23 0 23 0.16 2.99 Subtotal Technical Assistance 8.83 0.50 1.66 0.27 0.56 4.00 6.72 5.02 27.55 E. Training /c 8.99 2.05 0.99 4.35 0.18 9.19 0.48 0.74 26.96 F. Fellowships 3.45 - 5.38 - - - 0.36 - 9.18 G. Local Health Promotion Programmes Id - 18.22 - - - - 1822 Total Investment Costs 54.85 23.20 12.03 11.06 282.50 30.42 9.11 7.03 43020 I1. Recurrent Costs A. Staff Salaries / 2.45 0.65 2.38 1.08 0.01 6.63 0.57 2.78 16.55 i. Miscellaneous Costs/f - 1.63 - - - 0.61 3.39 1.56 7.19 C. Maintenance lg 0.17 - - - - 7.48 0.46 0.33 8.43 Total Recurrent Costs 2.62 2.28 2.38 1.08 0.01 14.72 4.42 4.67 32.17 Total PROJECT COSTS 57.47 25.48 14.41 12.14 282.51 45.13 13.53 11.69 462.37 , D Taxes - - - - - - O Foreign Exdiwge 49.55 2.57 11.20 4.42 188.10 21.00 8.68 6.53 292.04 m 0 \a Inckudes training and audio-visual equipment \b Books, journals, and mnass m edia materials %c Short-renrt visits, foreignand ka Itraining. workshops, ands seminrs vd Competitve awards given to convuity-based groups for health programs. ve Includes staff salaries wIiMe on shotd-term visits, training, and fellowships V Various costs needed for projet imnpknentation. \g includes maintenance of equipnent and intrastnucures ESTONIA HEALTH PROJECT Project Components by Year - Base Costs Base Cost (EEK Million) Base Cost (USS Million) 1995 1996 1997 1998 Total 1995 1996 1997 1998 Total A. Health System Reorientation 1 Institutional Development and Realignment in the MSA/a 13.10 19.03 11.47 6.27 49.87 0.98 1,42 0.86 0.47 3.72 2. Health Promotion and Disease Prevention 6.30 5.51 4.61 4.72 21.15 0.47 0.41 034 0.35 1.58 Subtotal Health System Reorientation 19.41 24.54 16.08 10.99 71.02 1.45 1.83 1.20 0.82 5,30 B. Human Resources Development 1. Strengthening the Departments of Public Health and Polyclinic and Family Medicine 4.13 3.33 2.56 2.41 12.43 0.31 0.25 0.19 0.18 0.93 2. Creation of a Center for Continuing Health Education /b 3.15 2.39 2.79 1.92 10.25 0.23 0.18 0.21 0.14 0.76 3 Construction of the University of Tartu Biomedicum Building 8.23 25.93 97.18 104.52 235.87 0.61 1.94 7.25 7.80 17.60 Subtotal Human Resources Development 15.51 31.66 102.53 108.85 258.54 1.16 2.36 7.65 8.12 19.29 C. Efficient Management of Financial Resources 1. Local Provider/Health Insurance Interface 21.01 6.52 5.68 5.37 38.57 1.57 0.49 0.42 0.40 2.88 2 Central Health Insurance Agency Development 6.82 2.77 1.20 0.96 11.76 0.51 0 21 0 09 0.07 0.88 Subtotal Efficient Management of Financial Resources 27.83 9.29 6.88 6.33 50.33 2 08 0.69 0.51 0 47 3 76 D. Project Coordination Unit 5.18 2.60 1.15 1.15 10.09 039 019 0 09 0 09 0.75 N Total BASELINE COSTS 67.93 68.08 126.64 127.32 389.98 5.07 5.08 9 45 9.50 29.10 Physical Contingencies 6.79 6.81 12.66 12.73 39.00 0.51 0.51 0.95 0.95 2.91 Price Contingencies 1.25 4.29 12.10 15.76 33.39 0.09 0.32 090 1.18 2.49 Total PROJECT COSTS 75.98 79.17 151.41 155.82 462.37 5.67 5.91 11.30 11.63 34.51 Taxes Foreign Exchange 58.64 47.46 88.32 97.62 292.04 4.38 3.54 6.59 7.29 21.79 \a Ministry of Social Affairs \b The Institute of Experimental and Clinical Medicine under the scientific supervision of the Tartu Medical Faculty. ID rrl 0' rt9 ESTONIA HEALTH PROJECT Project Components by Year - Totals Including Contingencies Totals Including Contingencies (EEK Totals Including Contingencies (USS Million) Million) 1995 1996 1997 1998 Total 1995 1996 1997 1998 Total A. Health System Reorientation 1 Institutional Development and Realignment in the MSA /a 14.60 21.75 13.51 7.61 57.47 1.09 1.62 1.01 0.57 4.29 2. Health Promotion and Disease Prevention 7.16 6.60 5.72 6.00 25.48 0.53 0.49 0.43 0.45 1.90 Subtotal Health System Reorientation 21.76 28.34 19.24 13.61 82,95 1.62 2.12 1.44 1.02 6.19 B. Human Resources Development 1. Strengthening the Departments of Public Health and Polyclinic and Family Medicine 4.60 3.83 3.04 2.94 14.41 0.34 0.29 0.23 0.22 1.08 2. Creation ofa Center for Continuing Health Education lb 3.58 2.78 3.35 2.43 12.14 0.27 0.21 0.25 0.18 0.91 3. Construction of the University of Tartu Biomedicum Building 9.19 30.16 115.85 127.31 282.51 0.69 2.25 8.65 9.50 21.08 Subtotal Human Resources Development 17.37 36.77 122.24 132.69 309.06 1.30 2.74 9.12 9.90 23.06 C. Efficient Management of Financial Resources 1 Local ProviderlHealth Insurance Interface 23.43 7.83 7.04 6.84 45.13 1.75 0.58 0.53 0.51 3.37 2 Central Health Insurance Agency Development 7.62 3.21 1.48 1.23 13.53 0.57 0.24 0.11 0.09 1.01 Subtotal Efficient Management of Financial Resources 31.05 11.04 8.52 8.06 58.66 2.32 0.82 0.64 0.60 4.38 T D. Project Coordination Unit 5.80 3.02 1.42 1.46 11.69 0.43 0.23 0.11 0.11 0.87 Total PROJECT COSTS 75.98 79.17 151.41 155.82 462.37 5.67 5.91 11.30 11.63 34.51 \a Miistry of Social Affairs \b The Institute of Experimental and Clinical Medicine under the scientific supervision of the Tartu Medical Faculty. OQZ _ A 0 ESTONI HEALTH PROJECT Expenditure Accounts by Years -- Base Costs Base Cost (EEK Million) Base Cost (USS Million) Foreign Exchange 1995 1996 1997 1998 Total 1995 1996 1997 1998 Total % Amount I. Investment Costs A. Civil Works 1. Design 7.88 1.13 1.13 1.13 11.26 0.59 0.08 0.08 0.08 0.84 85.0 0.71 2 Construction 1.26 24.16 80.53 56.37 162.33 0.09 1.80 6.01 4,21 12.11 59.5 7 21 3 Supervision - 0 64 0.75 0.75 2,14 - 0.05 0.06 0.06 0.16 56 0 0 09 Subtotal Civil Works 9.14 25.93 82.41 58.25 175,73 0.68 1.94 6.15 4 35 13 11 61.1 8 02 B. Equipment 1 Office Equipment & Furniture /a 6.03 2.32 1.76 7.05 17.15 0.45 0.17 0.13 0.53 1.28 56.4 0.72 2. Computer Hardware & Software 19.25 6.52 4.09 1.46 31.32 1.44 0.49 0.31 0.11 2.34 1000 2.34 3. Laboratory Equipment - 11.79 37.52 49.31 - 0.88 2.80 3 68 950 3 50 4 Testing Instruments - 2.81 2.81 2.81 8.44 - 0.21 0.21 0.21 0 63 100 0 0 63 5 Medical Kits for GPs 2.01 2.68 2.68 1.34 8.71 015 020 020 010 065 1000 065 Subtotal Equipment 27.29 14.33 23.13 50.18 114.93 2.04 1.07 1.73 374 858 91 3 7.83 C. Teaching Materials lb 0.55 1.14 0.75 068 3.11 0.04 0.08 0.06 0.05 0.23 60.6 0.14 D. Technical Assistance 1 Foreign TA 13 27 6.03 1.81 0.72 21.83 0 99 0.45 0.14 0 05 1 63 100 0 1 63 2 LocalTA 0.52 074 0.69 0.51 2 46 0 04 0.06 0 05 0.04 0 18 - - - Subtotal Technical Assislance 13.79 6.77 2.50 1.24 24.29 1.03 0.51 0.19 0.09 1 81 89 9 1 63 N) E. Training /c 5 62 6 01 5.45 5.45 22.54 0.42 0.45 0.41 0 41 1 68 34.6 0.58 F. Fellowships 2.95 2.63 1.55 0.94 8.06 0.22 0.20 0.12 007 0.60 100 0 0 60 G. Local Health Promotion Programmes /d 3.75 3.75 3.75 3.75 14.98 0 28 028 0.28 0.28 1 12 - Total Investment Costs 63.08 6055 119.53 120.48 363.64 4.71 4.52 892 899 27 14 693 1880 II. Recurrent Costs A Staff Salanes /e 3.25 3.82 3.41 3.14 13.62 0.24 028 0.25 0.23 1.02 - B Miscellaneous Costs /f 1.45 1.49 1.49 1.49 591 011 0.11 0.11 011 0A44 C. Maintenance/g 0,16 2.22 2.22 2.22 6.81 0.01 0.17 017 0.17 0 51 Total Recurrent Costs 4 85 7 52 7.12 6.85 - 2634 0.36 0.56 0 53 0.51 1 97 - - Total BASELINE COSTS 67.93 68.08 126.64 127.32 389.98 5.07 5.08 9 45 9.50 29 10 64 6 18 80 Physical Contingencies 6.79 6.81 12.66 12.73 39.00 0.51 0.51 0.95 0.95 2.91 64 6 1.88 Price Contingencies 1.25 4.29 12.10 15.76 33.39 0.09 0.32 0.90 1.18 249 44.6 1.11 Total PROJECT COSTS 75.98 79.17 151.41 155.82 462.37 5.67 5.91 11.30 11.63 3451 632 21.79 Taxes - - - - - - - Foreign Exchange 58.64 47.46 88.32 97.62 292.04 4.38 3.54 6.59 7.29 21.79 - - t X _ v~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~o \a Includes training and audio-visual equipment 0 \b Books, joumals, and mnass media materials \c Short-term visits, foreign and local training, workshops, and seminars \d Competititve awards given to community-based groups for health programs. \e Includes staff salanes while on short-term visits, training, and fellowships \f Various costs needed for project implementation. \g Includes maintenance of equipment and infrastructures ESTONIA HEALTH PROJECT Expenditure Accounts by Years - Totals Including Contingencies Totals Including Contingencies (EEK Totals Including Contingencies (US$ Million) Million) 1995 1996 1997 1998 Total 1995 1996 1997 1998 Total I. Investment Costs A. Civil Works 1. Design 8.79 1.29 1.32 1.36 12.77 0.66 0.10 0.10 0.10 0.95 2. Construction 1.45 28.12 96.27 69.17 195.01 0.11 2.10 7.18 5.16 14.55 3. Supervision - 0.75 0.90 0.92 2.57 - 0.06 0.07 0.07 0.19 Subtotal Civil Works 10.24 30.16 98.49 71.45 210.35 0.76 2.25 7.35 5.33 15.70 B. Equipment 1. Office Equipment & Furniture /a 6.74 2.63 2.14 8.81 20.32 0.50 0.20 0.16 0.66 1.52 2. Computer Hardware & Software 21.39 7.41 4.76 1.74 35.30 1.60 0.55 0.36 0.13 2.63 3. Laboratory Equipment - - 13.79 45.01 58.80 - - 1.03 3.36 4.39 4. Testing Instruments - 3.20 3.28 3.37 9.84 - 0.24 0.24 0 25 0.73 5. Medical Kits for GPs 2.23 3.04 3.12 1.60 10.00 0.17 0.23 0.23 0.12 075 Subtotal Equipment 30.36 16.28 27.09 60.54 134.27 2.27 1.22 2.02 4.52 10.02 C. Teaching Materials lb 0.62 1.32 0.89 0.83 3.66 0.05 0.10 0.07 0.06 0.27 D. Technical Assistance 1. Foreign TA 14.74 6.85 2.11 0.87 24.56 1.10 051 0.16 0.06 1.83 2. Local TA 0 59 0 89 0.85 - 0.65 2.99 0.04 0.07 0.06 0 05 0 22 Subtotal Technical Assistance 15.33 7.74 2.96 1.52 27.55 1.14 0.58 0.22 0.11 2 06 E. Training ic 6.31 7.10 6.69 6.86 26.96 0.47 0.53 0.50 0.51 2.01 F. Fellowships 3.28 2.98 1.80 1.12 9.18 0.24 0.22 0.13 0.08 0.69 G. Local Health Promotion Programmes id 4.28 4.52 4.64 4.77 18.22 0.32 0.34 0.35 0.36 1.36 Total Investment Costs 70.42 70.10 142.58 147.09 430.20 5.26 5.23 10.64 10.98 32.10 II. Recurrent Costs A. Staff Salaries /e 3.72 4.60 4.23 4.00 16.55 0.28 0.34 0.32 0.30 1.24 B. Miscellaneous Costs /f 1.66 1.79 1.84 1.89 7.19 0.12 0.13 0.14 0.14 0.54 C. Maintenance /g 0.18 2.68 2.75 2.83 8.43 0.01 0.20 0.21 0.21 0.63 Total Recurrent Costs 5.55 9.07 8.83 8.72 32.17 0.41 0.68 0.66 0.65 2.40 Total PROJECT COSTS 75.98 79.17 151.41 155.82 462.37 5.67 5.91 11.30 11.63 34.51 ib a Includes training and audio-visual equipment O°Q \b Books, journals, and mass media materials X \c Short-term visits, foreign and local training, workshops, and seminars \d Competilitve awards given to community-based groups for health programs. 0 \e Includes staff salaries while on short-term visits, training, and fellowships 0 Vf Various costs needed for project implementation. \g Includes maintenance of equipment and infrastructures -130- ANNEX 10 ESTONIA HEALTH PROJECT ESTIMATED LOAN DISBURSEMENT SCHEDULE Amount (US$ Million) Bank Cumulation Disbursement FY Semester Absolute Cumulative as % of Total Profile Estonia' 1995 2 1.5 1.5 8 1996 1 1.5 3.0 17 2 1.2 4.2 23 1997 1 1.2 5.4 30 2 2.9 8.3 46 1998 1 2.9 11.2 62 2 3.4 14.6 81 1999 1 3.4 18.0 100 1/ This is the first human resource investment loan to Estonia and the Standard Disbursement Profile for human resource sector projects is not available. -131- ANNEX 11 ESTONIA HEALTH PROJECT SUPERVISION PLAN Timing Staff Weeks Staffing FY95 22' -Task manager (8 weeks) -Health financing (4 weeks) -Management development (2 weeks) -Procurement (2 weeks) -Architect (4 weeks) -Public Health Spec. (2 weeks) FY96 242 -Task Manager (8 weeks) -Health financing (4 weeks) -Medical education (2 weeks) -Health policy (2 weeks) -Health promotion (4 weeks) -Public health (4 weeks) FY97 18 -Task manager (8 weeks) -Management Development (4 weeks) -Information Systems (2 weeks) -Architect (4 weeks) FY98 18 -Task manager (8 weeks) -Health financing (4 weeks) -Medical education (2 weeks) -Public Health (2 weeks) -Others3 (2 weeks) I/ Bank resources 15 weeks, supplementary resources from Trust Funds 7 weeks. 2/ Additional 6 weeks for mid-term review. 3/ Others --to be identified according to project implementation requirements. -132- ANNEX 12 ESTONIA HEALTH PROJECT LIST OF SELECTED DOCUMENTS IN PROJECT FILES Previous Annexes 1. Instruments for Health Policy and Economic Analysis (available on request). 2. Health Promotion and Prevention (available on request). 3. Training in Public Health and Family Medicine and Continuing Education of Health Professionals (available on request). 4. Project Coordination Unit (available on request). 5. Detailed Cost Tables Other Documents 1. Barnum, H. Status of the Health Financing component. Consultant report. 1994. 2. Bento, A. Health Facilities and Medical Equipment in Estonia. Consultant report. 1993. 3. Bento, A. Medical Equipment Support System. Consultant report. 1994. 4. Cernerud, L. Human Resources Development. Consultant report. 1993. 5. Costa, C., V. Ramos. A Cost-Effectiveness Analysis of Prevention in the Estonia Health Proiect. Draft. 1994. 6. De Messieres, 0. The Biomedical Sciences Building for the University of Tartu. Consultant report. 1994. 7. DiTullio, K. Health Sector Note: Public Expenditures. Draft. 1993. 8. Godinho, J. Family Planning, Maternal and Child Health in Estonia. Consultant report. 1993. 9. Grande, N.R., R. Madeley. Human Resources Development Component. Consultant report. 1994. 10. Ensor, T. Proiect Support for the Health Financing System. Consultant report. 1994. -133- ANNEX 12 11. Estonian Medical Statistics Bureau. Latvian Medical Statistics Bureau. Lithuania Health Information Centre. Health in Baltic Countries. 1993. 12. Huitima, P. Hospitals and Health Services' Efficiency. Consultant report. 1993. 13. Hogstedt, J.F. Finishing the Plans for the Hospitals in Val-ga and Parnu. Training in Hospital Facility Planning. Establishing an Information Service Unit for Hospital Facility Planning. Consultant report. 1994. 14. Kanach, F.A. Acute Hospital Bed Requirement Analysis and Recommended Guidelines. Consultant report. 1994. 15. Kanach, F.A. Health Services Efficiency and Quality Improvement. Consultant report. 1994. 16. Kappos, A. Environmental Health Services in Europe: Estonia. WHO/Euro Report. 1993. 17. Koskela, K. Health Promotion and Disease Prevention in Estonia. Consultant report. 1994. 18. Lepisk, J. Health Status and Health Services in Estonia. Consultant Report. 1994. 19. MSA/UNISEF Terve Laps (Healthy Child) Estonian Child Health Promotion Program. Proposal Draft. 1993. 20. Ministry of Social Affairs of Estonia. Architectural Brief for the University of Tartu Biomedical Sciences Building. 1994. 21. Palu, T. Troubleshooting Estonian Health Care Reforms. Draft. 1993. 22. Republic of Estonia. The Health Insurance Law. Translation. 1994. 23. Republic of Estonia. Law on the Organization of Health Care. Translation. 1994. 24. Routenberg, D. Proiect Coordination Unit. Functions and Proposed Organization. Consultant report. 1994. 25. Rago, L. Current Situation of Pharmaceutical Sector and Drug Regulatory Authorities in the Republic of Estonia. State Agency of Medicines Director General Report. 26. Saava, A., M. Tammik. Centre for Continuing Education on Public Health. Department of Public Health, University of Tartu. 1994. 27. Saltman, R. Estonia's National Health Strategy: A Brief Overview. 1994. 28. Sjolund, S. Framework for Technical Assistance to Estonia. Consultant report. 1994. 29. Sjolund, S. Hospital Efficiency. Consultant report. 1994. -134- ANNEX 12 30. Steensberg, J. Health Protection and Public Health in Estonia. Report on a WHO/World Bank mission. Draft. 1994. 31. Wemans, J. Biomedical Sciences Building Technical Systems. Architectural Brief. 1994. 32. WHO/Euro Estonia Health Sector Review Report. 1992. - FINLAND /. SWEDEN E S T O N I A Talinn > MAIN ROADS HEALTH PROJECT PORTS Pgtn ESTNIA RUSIANRAILROADS 4-AIRPORTS S a E, FED COUNNY BOADS W MINISTRY OF SOCIAL AFFAIRS * HEALTH INSURANCE AGENCIES T OWNS _,- ^} EEL - - COUNTY BOUNDARIES U CENTRAL HEALTH INSURANCE AGENCY UNIVERSITY OF TARTU BIOMEDICAL BUILDING TD INTERNATIONAL A AND DEPARTMENTS OF PUBLIC HEALTH ® COUNTY SEATS ATVIA - ~~~~~~~~BOUNDARIES CENTER FOR CONTINUING EDUCATION AND FAMILY MEDICINE NATIONAL CAPITAL L A T V I A < Jo LITHUANIA G Noissr27 Prongli GuIf of Fin ord- LITHUANIA GufofFnln Noissoor . FED~ RUSSIAN 2 J' BELARUS * Maa,udu \ i ( Kohtla- POLAND Pk ____________________________________________ P. ldisli A a~- * KrdI.L* ^AA Et A> .4 ....... " H IILIM A A *\ Hoapsolo~ ~~~~~~H ~' * . 0 t 1 ; AI D A V I R U M A A| 9 t ( = W () ~~~~~ *s- gy.RS / -> 5 !% L ~~~~A A ; * A ARE ML A AA V I R U M A A Soard j HI UMAA X H~~~~~~~oar