The World Bank Peru Integrated Health Networks (P163255) REPORT NO.: RES41022 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF PERU INTEGRATED HEALTH NETWORKS APPROVED ON JANUARY 31, 2019 TO THE REPUBLIC OF PERU HEALTH, NUTRITION & POPULATION LATIN AMERICA AND CARIBBEAN Regional Vice President: Carlos Felipe Jaramillo Country Director: Marianne Fay Regional Director: Luis Benveniste Practice Manager/Manager: Michele Gragnolati Task Team Leaders: Marcelo Bortman, Malva Baskovich The World Bank Peru Integrated Health Networks (P163255) ABBREVIATIONS AND ACRONYMS IADB Inter-American Development Bank IOARR Optimization, Marginal Expansion, Replacement and Rehabilitation Investments (Inversiones de Optimización, Ampliación Marginal, Reposición y Rehabilitación) IP Implementation Progress MEF Ministry of Finance (Ministerio de Economia y Finanzas) MINSA Ministry of Health (Ministerio de Salud - MINSA) PDO Project Development Objective PRONIS National Program for Investments in Health (Programa Nacional de Inversiones en Salud) RIS Health Networks (Red Integrada de Salud) RIS PMT Project Management Team WB World Bank The World Bank Peru Integrated Health Networks (P163255) BASIC DATA Product Information Project ID Financing Instrument P163255 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 31-Jan-2019 31-Jan-2024 Organizations Borrower Responsible Agency Republic of Peru Ministry of Health Project Development Objective (PDO) Original PDO The objectives of this Project are to (i) improve the resolutive capacity and quality of public First-Level Health Services in Lima Metropolitan Area and Prioritized Regions; and (ii) increase the capacity of the Single Health Information System and the public sector’s pharmaceutical products and medical supplies provision system. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-89200 31-Jan-2019 13-Mar-2019 04-Jun-2019 31-Jan-2024 125.00 1.05 123.95 Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No The World Bank Peru Integrated Health Networks (P163255) I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING 1. This restructuring paper seeks approval from the Country Director to carry out a level II restructuring of the Peru Integrated Health Networks Project. The Project was approved on January 31, 2019 and declared effective on June 4, 2019. The Project is implemented by the National Program for Investments in Health (Programa Nacional de Inversiones en Salud -PRONIS). A Project Implementation Unit (PIU) was set up and staffed between July and September 2019. The Project includes four components: Component 1: “Improving the Organization and Supply of Health Services Using an Integrated Health Networks Model in Lima Metropolitan Area and Prioritized Regions“; Component 2: “Improving the Capacity of the Single Health Information System at the National Level”; Component 3: “Improving the Management of Pharmaceutical Products and Medical Supplies in Lima Metropolitan Area and Prioritized Regions”; and Component 4: “Project Management”. While the Project has advanced on concept definitions and operational strategy related to the implementation of the Health Networks (Red Integrada de Salud - RIS), implementation has not progressed according to what was planned during the 24-month implementation period since effectiveness declaration. As a result, ratings toward achieving the Project Development Objective (PDO) and Implementation Progress were downgraded in the June 2021 Implementation Status Report (ISR) to Moderately Unsatisfactory. Several factors contributed to this lack of progress, namely the COVID-19 pandemic has changed national priorities and focus of the Ministry of Health (Ministerio de Salud - MINSA) and the Government as a whole. At the same time, since the project was approved, MINSA’s authorities and the PIU have experienced a high turnover of staff, thus creating delays for new authorities to focus and support the project and reducing the PIU implementation capacity. 2. In addition, the National Health Investment Program (Programa Nacional de Inversiones en Salud – PRONIS) role relates to the development and execution of new construction works in the health sector, does not fit with the current project implementation approach focused on rehabilitation and equipment. During appraisal it was supposed that PRONIS was able to adjust to include other activities, but PRONIS is heavily focused on achieving its own mandate, specifically related to the COVID-19 pandemic; thus, it has been difficult for the Project Management Team (RIS PMT) to navigate requirements of a project that exceeds its expertise and implementation bandwidth. Furthermore, the Project involves multiple user areas within MINSA, with which it must interact regularly. These areas have also faced increasing demand from COVID-19-related needs and have not been able to dedicate necessary attention to the project. MINSA through the Ministry of Finance (Ministerio de Economia y Finanzas - MEF) has requested to change the Project’s institutional arrangements to a newly created PIU within the existing RIS PMT. This proposed change will remove current bottlenecks, expedite project implementation and allow the RIS PMT to implement the administrative steps by themselves and closer to the multiple MINSA technical areas involved in the project. MINSA has also agreed to enact an urgency decree for updating the project implementation strategy through a new procedure to accelerate investment: IOARR (Inversiones de Optimización, Ampliación Marginal, Reposición y Rehabilitación) and to institutionalize a project roadmap for promoting smooth government transition while preventing delays in the implementation of the planned activities. 3. The safeguards category, and safeguards policies remain unchanged. The World Bank Peru Integrated Health Networks (P163255) II. DESCRIPTION OF PROPOSED CHANGES 4. This proposed Level II restructuring will: (i) update the Project Institutional Arrangements; (ii) revise the ratings of the systematic operations risk-rating tool to better reflect current risks; and (iii) revise the disbursement estimates. 5. Updated Institutional arrangements. MINSA will remain in charge of the implementation and oversight of the World Bank Project. MINSA has agreed with the MEF to create a new PIU based on the existing RIS PMT within MINSA and based on the existing RIS PMT structure. Similar changes in the institutional arrangement will be implemented by the Inter-American Development Bank (IADB) project that is co-financing the Government Project. The new PIU will be responsible for Project management of the entire Government Project (World Bank (WB), IADB and counterpart funds) under the direct supervision of the Vice Minister for Health Services and Health Insurance. The fiduciary staff currently involved in project implementation will remain in the RIS PMT, and will maintain similar structure than the one defined in the Project Appraisal Document (PAD) (Figure 1). FIGURE 1. PROPOSED STRUCTURE OF THE RIS PROGRAM MANAGEMENT TEAM 6. Update the ratings of the systematic operations risk-rating tool. As reflected in the last ISR, the Political and Governance risk has been increased from substantial to high in view of the recent elections (June 6, 2021). Sector Strategies and Policies has been rated as moderate because the Vice Minister of Service Delivery and Health Insurance has clearly defined the National Plan for Implementation of Health Integrated Networks 2021-2023 under which the project is aligned. In addition, concept definitions and operational strategy for implementing component 1 has been set up. These definitions and strategy will be supported by changes in norms (urgency decree for IOARR) and changes to the proposed Project institutional arrangements. The World Bank Peru Integrated Health Networks (P163255) 7. Disbursements Estimates. An updated estimate is included below. III. SUMMARY OF CHANGES Changed Not Changed Disbursement Estimates ✔ Overall Risk Rating ✔ Institutional Arrangements ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ Results Framework ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Financial Management ✔ Procurement ✔ Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) The World Bank Peru Integrated Health Networks (P163255) OPS_DETAILEDCHANGES_DISBURSEMENT_TABLE DISBURSEMENT ESTIMATES Change in Disbursement Estimates Yes Year Current Proposed 2019 1,610,500.00 0.00 2020 9,156,250.00 1,046,267.00 2021 14,515,500.00 0.00 2022 29,277,500.00 50,000,000.00 2023 43,676,125.00 35,807,466.00 2024 26,764,125.00 37,096,267.00 OPS_DETAILEDCHANGES_SORT_TABLE SYSTEMATIC OPERATIONS RISK-RATING TOOL (SORT) Risk Category Rating at Approval Current Rating Political and Governance  Substantial  High Macroeconomic  Moderate  Moderate Sector Strategies and Policies  Substantial  Substantial Technical Design of Project or Program  Substantial  Moderate Institutional Capacity for Implementation and  Substantial  Substantial Sustainability Fiduciary  Substantial  Moderate Environment and Social  Moderate  Moderate Stakeholders  Moderate  Moderate Other Overall  Substantial  Substantial .