Public-Private Partnership Stories Moldova: Radiology and Diagnostic Imaging Center Photo © Bojan Fatur/iStockphoto Moldova’s government has been reforming and modernizing its health care system, which suffers from insufficient funding and outdated equipment. To address these problems, the Moldovan Ministry of Health turned to IFC to attract private sector investors through public-private partnerships (PPPs) in the health sector. Its first health PPP transaction will modernize diagnostic imaging and radiology services for public patients at the Republican Hospital in Chisinau, thereby addressing an important gap in existing healthcare services. Magnific, a Moldovan healthcare services provider, won the 12-year concession to renovate, construct, equip and operate a new diagnostic imaging and radiology center. The transaction mobilized $7 million in private sector investment and is expected to benefit over 100,000 people annually. The concession, Moldova’s first PPP, lays the groundwork for further private sector participation in the health sector and other public services. The agreement was signed in November 2011. This series provides an overview of public-private partnership stories in various infrastructure sectors, The Republican Hospital in Chisinau will be able to provide where IFC was the lead advisor. IFC Advisory Services in modern and efficient diagnostic imaging services which will Public-Private Partnerships 2121 Pennsylvania Ave. NW benefit over 100,000 patients annually. Washington D.C. 20433 ifc.org/ppp BACKGROUND radiology services. Complex radiology services (MRI and CT) will be Moldova, a small country of 4.2 million with a per capita gross domestic directly contracted and reimbursed by the NHIF. The operator will: product of $1,100, has struggled since the breakup of the Soviet Union in 1991. Although it is one of Europe’s poorest countries, it has made • Renovate and construct the new center. serious efforts to improve health care for its citizens. Moldova’s Ministry • Provide state-of-the art equipment, including CT scan, of Health has implemented several key reforms in recent years, including MRI, and digital x-ray machines. the introduction of national health insurance and reducing surplus • Provide all clinical services and operate the facility. hospital capacity. However, it’s health system remains underfunded, underequipped, and poorly managed. In 2010, for example, there were only three centers in the country providing MRI scan services; only one The operator will receive reimbursement from the NHIF and the hospital of these uses the latest generation of equipment. for each service rendered to public inpatients and outpatients within yearly fixed volume contracts. The provider can also provide services to With few financial resources available for further modernization, the private patients at market rates. Moldovan Ministry of Health looked to the private sector to address gaps in existing healthcare equipment and services for public patients. The winning bidder was required to meet minimum technical bid This effort complements a World Bank loan program to upgrade requirements. These included two years’ experience operating radiology/ hospital infrastructure. diagnostic imaging facilities with minimum testing volumes for specific testing methods. Bidders were required to have operational experience with the PACS filmless radiology system and demonstrate that they had IFC’S ROLE managed healthcare financing of at least €5 million. Moldova’s Ministry of Health asked IFC to identify potential public- private partnerships (PPPs) in the health sector. After a thorough The financial bid price was expressed as a fixed percentage discount from assessment, IFC concluded that one of the most attractive options the contracted level of tariffs for each service provided. Payment will be for private sector investors would be to modernize the radiology and made as annual lump sum to the hospital. diagnostic imaging center at the Republican Hospital in Chisinau. The objective was to find a private-sector partner to provide high-quality BIDDING medical services to public patients while operating within Moldova’s Under the bidding rules, the contract was awarded to the bidder offering existing healthcare system. Although the Republican Hospital was state the highest percentage discount from among those meeting minimum owned, its diagnostic imaging and radiology center would be renovated, technical requirements. Nine bidders registered and participated in equipped, and operated by a private firm—a new model for providing discussions on the tender documents. One valid bid was received from healthcare services in the country that would not strain public finances. Magnific, a Moldovan health services company. IFC’s project team worked closely with the Ministry throughout the Magnific’s offer provided for five percent of revenues to be paid to the project, which spanned several election cycles and changes in government hospital and proposed more sophisticated equipment than was required counterparts. The team started by identifying the clinical services and in the bidding documents. The agreement was signed in November 2011. equipment needed to provide high-quality healthcare services and reviewing relevant legislation. The team also built financial models to EXPECTED POST-TENDER RESULTS forcast operational and capital costs, determining how much revenue • This was the first PPP executed in Moldova. It would be required for the center to operate. This revealed a key issue will serve as a model for further private sector —tarrifs paid by the National Health Insurance Fund (NHIF) were too participation in the country’s health sector. low to support a modern diagnostic imaging center, which would make it unattractive to potential investors. To tackle this, IFC worked with • The Republican Hospital in Chisinau will be able government to increase tariffs to a economic level that would properly to provide modern and efficient diagnostic imaging reflect efficient capital and operating costs. services which will benefit over 100,000 patients annually. The IFC team also assisted the government in reaching out to potential investors with a solid track record in health care service delivery. It • The operator will return five per cent of annual worked through the details of key provisions, such as contract duration, revenues to the Republican Hospital, with an scope of services, pyament issues, and performance obligations. These estimated annual value of $50,000. were reflected in tender documents and draft agreements. • The PPP mobilized $7 million in private sector Finally, IFC assisted the Ministry in the competitive bidding process, investment. including the procedures for tendering, evaluating and awarding the bid. 02/2012 TRANSACTION STRUCTURE IFC proposed a 12-year concession to build, equip, and operate the facility with the possibility of a 12-year extension. The hospital will provide the facilities, refer patients, and pay for the costs of basic