Issue #3 80653 handshake IFC’s quarterly journal on public-private partnerships In this issue integrated health systems: Lesotho’s pioneering model access to healthcare for the poor: Lessons from Ghana, India, and Mexico cost efficiency: Singapore’s secret to healthcare PPPs in Health Healthcare PPPs In partnership with Australia • Austria • Brazil • Canada • Catalonia (Spain) • Flanders (Belgium) • France • Ireland • Italy • Japan • Kuwait • Netherlands • Norway • Sweden • Switzerland • United Kingdom • United States • Public-Private Infrastructure Advisory Facility (PPIAF) • Global Partnership for Output-Based Aid (GPOBA) • Private Infrastructure Development Group (PIDG) • African Development Bank • Asian Development Bank • Brazilian Development Bank (BNDES) • Caribbean Development Bank • Central American Bank for Economic Integration • European Investment Bank • European Bank for Reconstruction and Development • Inter-American Development Bank • Infrastructure Consortium for Africa • Islamic Development Bank Issue #3 – October 2011 IFC Advisory Services in Public-Private Partnerships 2121 Pennsylvania Avenue, NW • Washington, D.C. 20433, USA • +1 (202) 458 5326/7 • ifc.org/ppp Editorial Tanya Scobie Oliveira • Alison Buckholtz Art & Design Jeanine Delay • Victoria Adams-Kotsch Disclaimer This journal was commissioned by IFC, a member of the World Bank Group, through its Advisory Services in Public-Private Partnerships department, which helps governments improve access to basic public services through public-private partnerships in infrastructure, health and education. The conclusions and judgments contained in this report should not be attributed to, and do not necessarily represent the views of, IFC or its Board of Directors or the World Bank or its Executive Directors, or the countries they represent. IFC and the World Bank do not guarantee the accuracy of the data in this publication and accept no responsibility for any consequences of their use. Cover photo © Dr. Heinz Linke/istockphoto Letter from IFC It is impossible to overstate the importance of healthcare —after all, worldwide economic growth and development depend on it—but governments’ ability to provide affordable, quality healthcare dwindles every year. The challenge is now to engage private partners to deliver public benefits. Innovative, forward-looking public-private partnerships in healthcare do this, giving businesses an unparalleled opportunity to do well while doing good. This issue of Handshake delves into the details of healthcare PPPs that work, pushing past the numbers to ask why they succeed and how they can be replicated. We look at projects from multiple angles, in one case examining an initiative from the perspective of the client, the private network provider’s Chief Operating Officer, and the IFC team that shepherded the initiative to completion. The overview demonstrates how differ- ing priorities evolved into a coherent solution to serve a large number of people for many years into the future. Although there are many different approaches to crafting healthcare PPPs, some as unique as the countries behind them, we can extract lessons to generate creative ideas. From these lessons, lives will benefit. Laurence Carter, Director Tanya Scobie Oliveira, Editor IFC Advisory Services in Public-Private Partnerships Features Expanding access to healthcare 31 38 Vouchers for safer pregnancy | 38 HealthStore Foundation | 42 Afghanistan’s health sector evolves | 44 Integrated health Earthquake spurs healthcare revitalization | 48 systems Improving healthcare in Ghana | 52 Lesotho Hospital PPP Protecting the uninsured | 58 A pioneering healthcare transaction | 26 Insuring Andhra Pradesh’s poor| 60 The private partner | 30 Hospital do Subúrbio PPP | 64 The government’s perspective | 34 In this issue 2 | handshake 64 Columns PERSPECTIVE Insights & opinions The healthcare challenge | 06 MONEY TALKS Financing & funding PPPs PPP basics | 14 COMPASS Trends 8 key trends | 18 LEGALEASE Contract management Managing healthcare PPPs | 20 Cost Efficiency Singapore’s secret to healthcare | 68 Healthcare spend & life expectancy | 73 IFC | 3 Contributors 68 Meng-Kin Lim is Associate Professor of Health Policy and Man- agement at the Yong Loo Lin School of Medicine, National University of Singapore; he was also Chief Executive Officer of the Health Corpora- tion of Singapore. 46 Nathaniel Otoo is the Director of Administration and General Counsel of 20 the National Health Insurance Authority in Ghana. Rui Monteiro is a Senior Public-Private Partnerships Specialist at the World Bank Institute. 52 4 | handshake Wajiha Ahmed Matthias Loening is a consultant for GPOBA based in Washington, is an advisor to IFC on healthcare PPPs. DC. Claudia Macias Calvin Armstrong is a Senior Operations Officer at the World Bank is a consultant for GPOBA based in Uganda. who works on healthcare and education initiatives in the Dominican Republic and Mexico. Tekabe Belay is Senior Economist, Health, Nutrition and Tayyeb Masud Population, in the South Asia Region of the is a Health Specialist at the South Asia Region World Bank. of the World Bank, working on health programs in Pakistan. Alison Buckholtz is a communications consultant in IFC’s Advisory Catherine O’Farrell Services in Public-Private Partnerships and a is a Senior Investment Officer in IFC’s Advisory Handshake writer and editor. Services in Public-Private Partnerships, based in Washington, DC. Carla M.N. Faustino Coelho is an Investment Officer in IFC’s Advisory Naoko Ohno Services in Public-Private Partnerships, based is Operations Officer at the South Asia Region in Johannesburg, South Africa. of the World Bank, working on health, education, and social protection programs in India and Inaam ul Haq Pakistan. is a Senior Health Specialist at the South Asia Region of the World Bank, working on health Ghulam Dastagir Sayed programs in Afghanistan and Pakistan. is a senior health specialist with the World Bank, based in Kabul, Afghanistan. Mohammad Tawab Hashemi is a health specialist with the World Bank, Lindsay Stowell based in Kabul, Afghanistan. is a finance specialist and a consultant in IFC’s Advisory Services in Public-Private Partnerships. Kees Kostermans is Lead Public Health Specialist, South Asia Robert Taylor Region, at the World Bank, working on health is Principal Financial Analyst in IFC’s Advisory programs in Afghanistan, Pakistan, and Sri Lanka. Services in Public-Private Partnerships. IFC | 5 By Robert Taylor Healthcare is now the greatest challenge facing governments 6 | handshake Photo © Jason Florio Perspective Healthcare spending represents about 10 percent of GDP globally, and in the U.S. that number reaches nearly 20 percent, or $7,000 per person per year. This fig- ure is rising faster than any other expense due to a variety of factors, including eco- nomic growth (which increases demand for treatment), changing demographics and epidemiological trends (aging popu- lations and more chronic diseases), and advances in medical technology (leading to more expensive equipment and tests). Governments worldwide are strug- gling to meet these demands and chal- lenges within their limited fiscal space, but simply lack the resources to provide healthcare to their citizens. This issue of Handshake explores innovative and successful approaches by governments that are tapping the private sector for healthcare infrastructure, service delivery, and insurance to meet these pressing demands. IFC | 7 PPPs for healthcare as cost-shifting (where the provider shifts higher- cost patients to other facilities). Rui Monteiro’s infrastructure and services article outlines how governments can convert Many governments are turning to public-private challenges in PPP contract management into partnerships (PPPs) to provide healthcare opportunities for improving policymaking and services and/or infrastructure for their citizens. healthcare delivery. Several OECD and middle income countries In some cases, governments can mitigate risks have used the PFI model to finance, build, and in contract design by bundling a PPP to cover maintain new health infrastructure, especially a network, rather than single facility, thereby hospitals, while leaving the core health services encouraging the provider to manage treatment within the public sector. At the same time, we and referrals at the most cost-effective level. see governments in emerging economies adopt Handshake’s interviews with Lesotho’s Minister PPPs involving full service delivery by the private of Finance and with the COO of Netcare (the sector. This approach is particularly important provider awarded the Lesotho PPP contract) because in many emerging markets, the problem shed light on the process from two different, isn’t simply the lack of modern equipment or though complementary, points of view. facilities, it is the lack of sufficient medical staff and hospital managers. Handshake’s article on Brazil’s new Hospital Innovative healthcare PPPs can play a do Subúrbio depicts the progression of a PPP that vital role in quickly upgrading health will maximize the benefits infrastructure and services in regions from private sector delivery of core health services. scarred by natural disasters or wars. But transferring responsibil- ity and risk to the private sector creates new challenges within contract Innovative healthcare PPPs can play a par- management. Most governments have experience ticularly vital role in quickly upgrading health managing infrastructure PPPs and concessions, infrastructure and services in regions scarred by often through independent regulators. There natural disasters or wars. Naoko Ohno’s article is no ready equivalent in health, even though on the revitalization of Pakistan’s primary health- health PPPs, like all PPPs, inevitably face chal- care services following the 2005 earthquake lenges during implementation—challenges often describes how a district government successfully related to unforeseen increases in demand as well contracted with an NGO to deliver basic 8 | handshake healthcare to the affected population. Also of great relevance to the region, Tekabe Belay Growing global demand and his Kabul-based colleagues explain how for more and improved Afghanistan implemented country-wide contracting of NGOs for delivery of primary healthcare...will require and secondary care. governments to tap The Fiscal Challenge the private sector for Affordability and sustainability remain the major healthcare financing hurdles for governments. After all, PPPs cost money in the form of availability and/or service and delivery. payments by governments or public insurers. The incremental cost may be minimal if the PPP may be what is most needed, but this is often involves replacement of an older, outdated, and overlooked as governments focus PPPs on more costly public facility with a modern, more effi- costly tertiary care. cient (and often smaller) PPP facility. Typically, In most countries, sustainable and adequate a modern hospital of 300 beds can treat more funding will need to be developed through patients than an outdated hospital of 600 beds a broad national insurance program (with through a more efficient layout, much greater employer/employee contributions), combined use of outpatient care and day surgery, and with patient deductibles and copayments where more efficient hospital management. feasible. A rapid increase of population cov- But new services and facilities for underserved erage under national insurance plans has been areas or populations will have a fiscal cost and achieved in several countries, highlighted here governments should not embark on PPP projects in the article by Nathaniel Otoo, Ghana’s without a good idea in advance of the fiscal Director of Administration and General Counsel impact. To aid this process, this issue includes of the National Health Insurance Authority, “PPP basics,” an affordability analysis intended and in Claudia Macias’ snapshot of Mexico’s to guide government officials who are consider- Seguro Popular. ing partnerships. Another remarkable example is Andhra Pradesh One way for governments to maximize value is in India, where the state government intro- to select projects with the greatest reach for the duced a low-cost catastrophic health insurance money and to allow the private sector to be cre- plan that now covers 80 million poor people. ative and flexible in providing solutions. In many Srikant Nagulapalli, CEO of Aarogyasri Health countries, improved primary and outpatient care Care Trust, the government body in charge of IFC | 9 implementing the insurance program in Andhra separate PPP payment would not be necessary. Pradesh, speaks candidly to Handshake about his In lower-income countries, however, it will be company’s outreach to the poorest populations in difficult to immediately establish fully cost- India through village-wide health “camps.” reflective rates. Some reimbursement premium Meng Kin Lim of the National University of may also be needed to attract providers to more Singapore also shares lessons on how to custom- remote and rural areas. ize outreach and implementation to a specific Growing global demand for more and improved population and culture. In “Singapore’s secret to healthcare, coupled with ever-increasing cost healthcare,” he describes that country’s unique pressures, will require governments to tap the healthcare system and how it achieves enviably private sector to a much greater degree for high health outcomes at a fraction of the cost healthcare financing and delivery. Countries of most developed economies. which effectively integrate their systems through large-scale contracting will provide Transforming governments their citizens with the greatest choice and quality standards. PPPs are a transitional step in the transformation of government from provider to purchaser. This shift involves three major elements: • Definition of standard services or packages of services; • Setting of standard reimbursement rates, regardless of provider (public or private); and • An accreditation mechanism allowing only accredited providers to be eligible for contracts. Under this system, all accredited providers would be treated equally and be eligible for reim- bursement by the government or public insurer. Providers would be free to choose their location, which market forces would dictate, and facility size, which is subject to accreditation require- ments. Reimbursement would in principle be sufficient to amortize capital costs, so that a 10 | handshake Life expectancy in low income countries is 23 years lower than in high income ones Country income Low income 57 Lower-middle 67 Upper-middle 71 High income 80 = 2 years of life = 2 years of death Many years of active life are lost due to disease or premature death Country income Low income 59% Lower-middle 27% Upper-middle 6% High income 8% = full health (2%) = years lost to disease/premature death (2%) Low income countries spend substantially less on health as percentage of GDP Low income 5% Lower-middle 4% Upper-middle 6% High income 11% Source: WHO IFC | 11 Fast Facts there is a global shortage of 4,300,000 doctors, nurses, midwives, and support workers This is Maya.... of the global population lacks 1/3 regular access to essential medicines Life Expectancy Range Japan Swaziland 83 years 40 years of non-communicable disease 80% deaths worldwide occur in low and middle-income countries people went 925,000,000 hungry in 2010 700,000,000 people will be obese by 2015 5,000,000+ people die prema- turely from tobacco use annually for every 1 child that dies in childbirth in Sweden, 1,000 die in Afghanistan Sources: Facing the Future, USAID, WHO, World Bank, World Hunger. 12 | handshake Help Maya take her first breath in this World Bank video about prenatal healthcare systems. IFC | 13 Money Talks PPP basics: Is your project affordable? By Lindsay Stowell & Matthias Loening PPPs in health are distinct from typical infra- Analysts must be able to identify how much structure projects for a few key reasons. Primar- the PPP project will cost and what the level of ily, private revenue contribution is usually low, government support will be. Analysts must also and as a result, these projects require a large ensure that the government is committed to and ongoing payment from the government. In making the project work given the financial addition, the ongoing expenses of operating a obligations required. Assessing the affordability hospital or other medical facility represent the of a project can be done using a high-level finan- vast majority of project costs, as opposed to a cial model that is tailored to health PPPs. There typical infrastructure project in which capital are three key drivers that will help determine if expenditures (capex) are the main cost element. the project is financially viable: Thus, there must be money available to fund the project post-construction. yy Estimated capital expenditures: number of beds, gross area per bed, construction Given that most projects face financial limita- and equipment costs. tions, assessing the government’s funding capacity and the resulting affordability level of a yy Revenue drivers: estimated demand, project early on is critical. This will allow for a public funding, copayments, and other timely commencement of discussions with the private revenue opportunities. government regarding financial viability, key priorities, and project scoping options. When yy Estimated operating expenses: salary projects are not sized and scoped according costs, maintenance costs, supplies and to affordability levels, the projects need to be utilities. downsized after construction has already begun. With a bit of research and analysis around these Worst-case scenario: construction is completed key assumptions, we can ultimately derive an but there is no funding to operate the hospital, expected annual PPP payment that can be com- resulting in the many “white-elephant” hospitals, pared to the current government budget available where beautiful new facilities sit and gather dust for the project. while waiting for equipment, medical personnel, and patients. 14 | handshake Once an availability payment is derived from the client. Will the client be able to bridge this gap? financial model, analysts can assess the potential If not, are donors or other sources of funding financing gap. The chart below displays the available, such as co-payment revenues or private expected annual availability payment required to patient revenues? Alternatively, can the project be paid by the government to the private opera- be scoped and sized to match the government’s affordability level? Options to consider include assessing the appropriateness of the standards for the hospital or phasing the project in terms of Conducting an early- size and/or services. stage financial analysis Conducting this early-stage financial analysis can also be useful in explaining the financial helps clients understand obligations and cost breakdown of the project the financial obligations to the client. The graphic on the next page, extracted from a hospital financial model, high- and cost breakdown. lights the key components of project cost over the life of the PPP. Used together, these tools for affordability analyses can ultimately lead to more successful project closings, fulfilling client tor during the life of the contract, along with the expectations and serving the health needs of current annual budget allocation available for the large numbers of people around the globe. project. The difference between the two is the financing gap that must be addressed with the Financing gap Annual PPP Payment $$$$$$$$$$$$$$$ MoH Current Budget $$$$$$$$ 15 years 42,000,000 USD In this example, the financing gap is $140.2 million over the life of the PPP, or $9.3 million per year on average 25,000,000 USD IFC | 15 Hospital ppps: key assumptions A long-term contract reduces Basic Assumptions: the annual PPP PPP Period (years) 15 payment. Capex Assumptions: Number of beds 90 Gross area per bed (m2) 170 Constructions costs/m2 $2,000 Construction/Equipment Cost Ratio 1.40 Ongoing Annual Capex: Building (as % of original cost) 2.5% Equipment (as % of original cost) 15.0% Operating Assumptions: Tax rate (%) 33.3% Operating cost/bed/year($) $140,000 Upfront capex subsidies reduce Financing Assumptions: the annual PPP Capex Subsidy $0 payment. Debt/Equity Ratio 70/30 Base Loan Interest Rate: 12% Loan to be repaid by year 12 12 Estimate Target Equity IRR 18% 18% to 20%. 16 | handshake Standards drive gross area per bed. Rule of thumb: Emerging Markets: 120m2 Western Europe: 170m2 U.S.: 360 m2 Construction costs vary by region. Estimate $2,000/m2 Operating expenses per bed figures vary depending on standards and salaries. Estimate between $120,000 to $160,000. Capex 10% Maintenance Eq uit 16 yR % et ur The debt service n component of a PPP payment can be reduced if an vice Operating expenses, S er not capital expend- upfront capex bt subsidy is provided De % itures, are typically the by the government. 17 Operating Expenses largest component of 57% a PPP project in health. Previous page: This graphic, from a hospital PPP financial model, displays in more detail some of the major assumptions, along with some notes regarding specific inputs. Note that for other subsectors of the health industry (such as diagnostic imaging, primary health centers, laboratories, and dialysis, among others), assumptions will vary. IFC | 17 8 18 | handshake KEY TRENDS in the evolution of healthcare PPPs Build and Beyond: The Revolution of Healthcare Public-Private Partnerships, a 2010 report from Pricewaterhouse Coopers, tracks the evolution of the PPP models and explores how the capital and operational structure provided by PPPs can be lev- eraged more broadly to address governmental de- mands for greater efficiency in health spending. compass 1 Government spending on healthcare is growing at a pace that is likely to be unsustainable unless new funding sources are found. In service delivery, PPP arrangements open broader conversations about 2 With the global recession, governments how to create and maintain locally- are increasingly looking to PPPs to based sustainable health systems. solve larger problems in care delivery Governments typically agree to build and wellness that are driving spending. in profit margins to induce private sec- 5 tor involvement. Competition and later The larger scope of PPPs means a reductions in government payments are much larger potential market for then used to generate long-term savings private organizations. Infrastructure and improve quality. represents only five percent of health spending. However, health spending PPPs are increasingly developed by beyond infrastructure—95 percent— local, rather than national govern- 6 will total more than $88.1 trillion. ments, that are closer to local health 3 This huge spend will become a target needs. However, national governments for government efficiency and create are important to setting a policy frame- a market for private investment and work that enables local regulations. management. Technology was often left out of PPP The measurements of success in PPPs infrastructure deals, but is central to 4 7 are evolving toward health outcomes the new generation of PPPs in which and performance. Healthcare infra- manufacturers are often risk partners structure PPPs are more focused on bet- themselves, as service delivery becomes ter procurement and value for money. more integral to PPPs. PPPs are challenging the notion that private healthcare is for the rich, and 8 public healthcare is for the poor. Rather than creating or exacerbating inequities in care, PPPs can equalize care across all populations. IFC | 19 contract mgmt Managing healthcare PPPs: Building public sector capacity By Rui Monteiro Developing public sector capacity for managing Three components of PPP healthcare public-private partnerships (PPPs) contracts is critical to the success of the initia- contract management tive. Both for infrastructure and for service As in any other PPP, the management of those contracts, the efficiency (and, in some cases, contracts by the procuring authority requires a even the effectiveness) of PPP procurement mix of: (a) enforcement, (b) cooperation, and relies on adequate contract management knowl- (c) prevention of potentially negative strategic edge and institutional development. Because moves. contract management is focused on healthcare performance, it allows contracting authorities to convert PPP challenges into opportunities for 1. Enforcement improving policymaking and healthcare delivery. Enforcement requires the monitoring of contrac- tually established performance indicators for the PPPs for the delivery of hospital infrastructure PPP project, and often for a larger set of hospi- and hospital services are long-term performance- tals (in order to build benchmarks for perfor- based contracts. Infrastructure contracts link mance evaluation), as well as the application of rewards to a set of key hospital performance penalties and fines. It requires a delicate combi- indicators; similarly, service contracts, such as nation of rigor (in measurement) and common those for radiotherapy or imaging, as well as sense (in disclosing information in order to all-inclusive hospital contracts that incorporate prevent problems or incentivize improvements, clinical services as well as infrastructure, are without being bureaucratic or punitive). based on a set of service performance indica- tors. Many of these indicators form the core of The long-term partnership, by necessity based healthcare public policy. These PPP contracts on an incomplete contract, requires a significant require that the procuring authorities carefully degree of cooperation between public and pri- manage the contractual relationship during the vate partners, primarily to solve issues that arise full length of the contract. in the relationships among the private partner 20 | handshake and public entities. For infrastructure PPPs, the adaptation but the public sector is not preparing critical area is the interface between the private for that, it is easy for a well-informed private provider and the public sector management and operator to create the conditions for forcing the staff of the hospital. For all-inclusive contracts, public partner to face some fait accompli and the critical areas are the interfaces with other then either pay a premium or face nasty distur- healthcare units (primary care, lower- and bances to healthcare delivery if the PPP hospital higher-level hospital, long-term care), and with is not providing a new needed service or tech- policymakers not used to having PPP hospitals nology. The contracting authority is therefore in the healthcare system. required to have a game-theory approach to con- For infrastructure PPPs, concerns tend to focus tract management, carefully assessing change and on day-to-day issues such as catering, cleaning evaluating all possible strategies by stakeholders, and laundry, while for all-inclusive contracts, in order to prevent or mitigate potentially public sector concerns focus on healthcare policy negative strategic moves by the private partner. The incompleteness of PPP contracts is unavoidable, because long-term contracts will necessarily face technological, demographic, managerial, and political changes. Contracting authorities must manage change in the way most compatible with healthcare policy. and health-system regulation. It is important to With hospital contracts, two main characteris- note that the former are typically management tics are noteworthy, as they influence the way issues, while the latter tend to be policy issues. procuring authorities should address contract The incompleteness of contracts is unavoidable, management: high political sensitivity, and fast because long-term contracts will necessarily face technological change. Both are present in PPP technological, demographic, managerial, and and non-PPP healthcare delivery. However, political changes. This creates opportunities under PPPs, the higher sensitivity and the higher for the private partner to manage change and fiscal risks linked to change may be (and should its consequences, pushing for additional busi- be) more than compensated for by better health- ness without facing competitive pressure. For care delivery and/or higher benefit/cost ratios. example, when change is calling for contract IFC | 21 2. Improving the institutional ingness to enforce rules and agreements, good personal relationships, and the ability to link framework and capacity with other public sector entities. The contract Institutional capacity. The ability of procuring manager need not be a trained hospital manager, authorities to manage the PPP contract and but does need to have a good basic understand- guarantee effective and efficient delivery of ing of hospital operation in order to usefully health services depends on having the required link with the private partner and with healthcare technical knowledge and personal abilities. It policymakers. The diversity of job requirements also requires an adequate institutional frame- and the complexity of the task suggest that it work. This includes not only dedicated teams, should be delivered by a team, and not by an but also empowerment and effective links with isolated contract manager. Scale economies other public sector stakeholders, allowing for invite cooperation among other healthcare good and timely decision making. PPP contract managers. 3. Auditing To allow contract managers to focus on their contract problem-solving and preventive tasks, it is enforcement important to support them with effective audits of PPP activities (and also of PPP contract management). Efficiency audits held by Courts of Auditors, as well as independent audits by strategic external experts, can relieve contract managers partnering of stress and allow legislators and citizens to analysis measure the quality and efficiency of health- care delivery. The coming era of contract management Hiring, training, and motivating staff. Hiring contract managers and their teams is challenging. As the PPP hospital experience is still scarce The task requires particular abilities: game- (especially for all-inclusive hospital PPPs), theory reasoning, a problem-solving approach, contract managers are in short supply all over the ability to negotiate mixed with strong will- the world. Training opportunities are rare, and procuring authorities tend to rely on learning 22 | handshake by doing, a costly and lengthy approach. Often, and new public sector institutions are being contract managers do not interact enough with developed. their peers in the same country and in other In the years ahead, analysts will also see the large countries, preventing them from learning from potential benefit to be extracted from healthcare other projects’ successes and failures. Motivation PPPs by linking contract management to health is typically not high enough to prevent frequent policy. The positive outcome from PPP focus turnover and retain the best people in the job. on performance includes creating benchmarks Additional challenges are created by real or and improving healthcare public policies and potential conflicts of interest in a context where their delivery. With some additional govern- both public and private partners are trying to ment efforts in improving contract management build capacity for dealing with PPPs, and com- institutions and teams, contract managers will be peting for the best people. allowed more time for their strategic tasks and Indeed, more—and more experienced—profes- will be able to interact more with policy advisers sionals will be required in the coming years. In and policymakers, returning quality and perfor- Asia, Europe, Africa, and Latin America, more mance to the core of healthcare public policy. countries (not only national governments, but also sub-national ones) are procuring healthcare PPP contracts and starting to engage in health- care PPP contract management activities. In this process, new PPP models are being tested WBI’s The World Bank Institute is focused on public sector capacity building through training, institutional development, and knowledge exchange. Its activities role include helping governments design institutions that improve contract manage- ment, training and advising contract managers, and linking them to their peers through regional and global networks, as well as through knowledge-interchange joint activities. wbi.worldbank.org/wbi/ IFC | 23 Lesotho Hospital PPP A model for integrated healthcare delivery In 2006, the government of Lesotho launched a project to dramatically improve the quality of its citizens’ healthcare. To maximize the use of limited healthcare resources and ensure long-term improvement in health- care facilities and services, the government implemented a landmark public- private partnership (PPP) to build a state-of-the-art 425-bed National Refer- ral Hospital to replace its dated main hospital. This pioneering PPP serves as a model for increased private sector participa- tion in Sub-Saharan Africa’s overburdened health sector. In addition to the hospital, the project included an adjacent gateway clinic, the renovation of three strategic filter clinics, and the private management of facilities, equip- ment, and delivery of all clinical care services for 18 years. It also includes a clinical training component to improve the availability of well-trained healthcare professionals. In this feature, Handshake examines the details of this innovative transaction from three perspectives. 24 | handshake feature: IHS IFC | 25 A pioneering healthcare transaction By Carla M.N. Faustino Coelho & Catherine O’Farrell 26 | handshake feature: IHS The Lesotho healthcare PPP is a first for Africa. In addition to the design, build, and full operation of the hospital and associated healthcare facilities, the private operator will deliver all clinical services, providing vastly improved, high-quality healthcare services at an affordable cost. PPPs in the health sector typically range from simple outsourcing of support services (such as catering or laundry) to the more complex design, build, and facilities management of hospitals. The Lesotho PPP structure is a first for Africa—and one of only a handful of similar projects worldwide. In addi- tion to the design, build, and full operation of the hospital and associated healthcare facilities, the private operator will deliver all clinical services, with the objective of providing vastly improved, high-quality healthcare services at an affordable cost. Here are some key differences from other infrastructure- focused hospital PPPs: Complete Healthcare Services Delivery The private operator is responsible for delivery of all clinical services, including recruitment of doctors, nurses, and other health professionals, and provision of all medical equipment and all pharmaceuticals necessary for clinical services delivery. In addition to the new facility, which will operate as the national referral hospital as well as the district hospital for the greater Maseru area, the private operator will be responsible for the refurbishment, re-equipping, and operation of three primary healthcare clinics at Qoaling, Mabote, and Likotsi in the greater Maseru area. The new structure will allow it to: a) manage a mini healthcare-network, and b) filter and treat less severe cases at the clinic level, freeing up as much hospital capacity as possible. Service Payment The private operator delivers budget certainty as well as patient-centered care. It assumes full patient risk from project inception and agrees to treat IFC | 27 all patients who present at the hospital and filter that is not remedied can result in termina- clinics, regardless of the type of condition—up tion of the agreement. to a maximum of 20,000 inpatients and 310,000 • The Lesotho project has an independent outpatients annually, with very few clinical monitor, a unique role specifically created exceptions. The government provides the private for this project and jointly appointed by operator with an annual fixed service payment the government and the private opera- for delivery of all services, escalated only by tor. This monitor performs a quarterly inflation annually. Private operators in similar audit of the private operator’s performance PPPs have historically opted for direct-cost- against the contractual performance indica- plus-margin payments until patient profiles and tors (clinical and nonclinical). Where disease patterns could be established, because performance has not been achieved, the they have been reluctant to commit to a fixed monitor determines the penalty deduction cost for clinical care. that applies. The independent monitor is a consortium of companies with specialized Performance Monitoring experience in PPPs, clinical services, hospi- tal operation and management, medical The Lesotho PPP agreement includes typical and nonmedical equipment, information performance monitoring, such as payment and management and technology, and soft and penalty mechanisms related to facilities manage- hard facilities management. ment, equipment, and other nonclinical service outcomes. This includes independent certifica- • The private operator is required to obtain tion of delivery of facilities and equipment. But and maintain accreditation from the Coun- it also requires additional monitoring. cil for Health Services Accreditation of Southern Africa, and failure to do so can • The Lesotho agreement includes a detailed result in termination of the agreement. list of clinical and non-clinical service indicators that the private operator must • The project provides for a Joint Services meet in order to receive full payment from Committee, established by the government the government. Failure to meet a perfor- and the private operator, to review perfor- mance indicator will result in a severe mance and discuss and develop mecha- penalty deduction (a percentage of the total nisms, procedures, or protocols to improve service payment). The relative importance the services at the hospital and filter clinics. of clinical versus facilities performance Given the long-term nature of the proj- indicators is reflected in the percentages ect, this committee provides a mechanism deducted. A ratchet mechanism for for altering the hospital’s services, by repeated service failure for the same agreement, to address new disease pat- problem increases the penalty deduction terns, new technologies, or new national for each repeated failure, and service failure priorities, thereby ensuring that the project remains relevant for the country. 28 | handshake A low-income country can embark on a very ambitious project that is affordable for the country and patients, is attractive to top-quality private investors, expands services to more people, and has the potential to deliver high- quality health services. The PPP agreement for this project was signed overcome. A key risk is the high probability that by the government and the private operator on the hospital will reach maximum capacity very October 27, 2008, and financial close occurred early in the project term, requiring the govern- in March 20, 2009. Construction began on ment to rapidly improve the service offering March 23, 2009. The filter clinics were opened at other hospitals to relieve the pressure on the in May 2010 and the new hospital is scheduled national referral hospital. to open in October 2011. To mitigate this risk, the government is working with the Millennium Challenge Corporation Outcomes to fund a program of refurbishment of over 150 health facilities in Lesotho, including 138 This PPP has demonstrated that it is possible for primary healthcare centers. The projects include a low-income country to embark on a very ambi- design, renovation, expansion, and construction tious project that is affordable for the country of health centers in Lesotho to an appropri- and patients, is attractive to top-quality private ate standard. These projects have all started investors, expands services to more people, and construction and are expected to be completed has the potential to deliver high-quality health in 2013. Once renovations are complete, the services that address Millenium Development government will assume responsibility for ongo- Goals and the critical shortage of health profes- ing facilities management at these health centers. sionals. These are all key constraints for many In order to ensure the long-term sustainability developing countries. of the refurbishment program, the government Although the project is still in its early stages is considering a new PPP for facilities manage- and the expectation of success is high, there ment, Information and Communication Tech- will certainly be challenges and obstacles for nologies and equipment maintenance. the private operator and the government to IFC | 29 Interview: IHS The private partner Helping Lesotho’s government care for its people Dr. Victor Litlhakanyane has been Chief Operating Officer of Primary Care Partnerships and Diagnostics of Netcare Limited since 2006. Prior to assuming an executive directorship position with Netcare, Dr. Litlhakanyane served as the Superintendent General of Department of Health of Free State province. He serves as a technical advisor to the World Health Organisation World Alliance for Patient Safety. 30 | handshake IFC | 31 Can you explain, in layman’s Simply because we saw it as an opportunity for terms, the mechanics of this PPP? us to permit the government to provide better care to the people of Lesotho. Yes, this PPP was actually very, very simple. Basically we entered into an agreement with the Is this a model that can be applied government of Lesotho for Netcare, as a private elsewhere? party, to build a new referral hospital to replace the Queen Elizabeth II, to rebuild and expand We believe this model can be implemented one clinic, renovate two others, and build a elsewhere on the continent, and in many parts gateway clinic next to the hospital. We will of the world. As it is applied here, a private party manage and operate the hospital for the next comes to assist the government to improve access 15 years. During this time, the government will to healthcare. It is very straightforward. pay us a fixed fee to cover original capital outlay and operational costs. To ensure that there will What are the critical success be value for money, they have appointed an independent monitor, insuring that the operator factors for healthcare PPPs? [Tsepong] achieves the required level of services and quality stipulated in the PPP agreement. If The critical success factor for health PPPs is we do not achieve those targets, we get penalized political will. There has to be the will from the with a deduction from our fee. And therefore highest level of government, from the president this will assure we will always comply with the and prime minister on down. The relevant requirements of the project. ministers have to come to the party and say, “We appreciate the support we get from the private sector. We have to work with the private sector.” The second thing is that governments have to have the right advice. IFC has played This project brought back a critical role in the project in Lesotho. dignity to the people. Some countries see healthcare PPPs as controversial. Is that changing? Why was Netcare attracted to Many countries believe that health is a public an unproven project like this? A good to be provided by government. But there is healthcare PPP of this scale had a slow realization that private business can play a role to provide access to healthcare, in the provi- never been attempted before. sion of capital and the expertise and resources. 32 | handshake There is a realization that private business can play a role to provide access to healthcare, in the provision of capital and the expertise and resources. So I’ve been to a number of countries on What impact did IFC’s involvement our subcontinent and I have seen a change have? in perspective. I foresee that in the future we will see similar projects coming through IFC used its knowledge and expertise from on the continent. projects all over the world to advise Lesotho. From the time they developed the concept to the Has this project unfolded the way time we got to negotiations, they were involved. you expected? Have there been They had a very tight plan, and managed to any surprises? meet tight time frames. This is the most efficient project with the shortest period of negotiations It has gone very, very well overall. There have that Netcare has ever embarked on. been things we had not planned for that turned out to be very good parts of the project. For How have the people of Lesotho example, we have managed to have a bigger benefitted from this project so far? impact on local economic development than we thought. The curtains and the bed screens at This project basically brought back dignity to the the clinics were sewn by local women in Lesotho. people of Lesotho. The story that illustrates this Local artifacts and photographs in the clinic best is from when we opened one of the clinics. were done by local Lesothos. That has been a One morning there was an old gentleman from very positive impact indeed. a local village who came to the clinic and at the The most difficult part has been access to health door, he asked if he should take off his shoes. professionals. Most of our doctors are foreign The reason was that the clinic was so clean he nationals. Lesotho has lost many of its doctors to thought his shoes would make the clinic dirty. South Africa and the rest of the world, so we are And we said to him that he can walk in with his hoping that this project will attract doctors back shoes on—that this clinic belongs to him. He to Lesotho. had tears in his eyes. IFC | 33 34 | handshake Photo © Victoria Adams-Kotsch Interview: IHS The government’s perspective Meeting demand with limited financial resources The Honorable Timothy Thahane is Lesotho’s Minister of Finance and Development Planning and a member of the nation’s Senate. He has served as Lesotho’s ambassador to the United States (1978-1980) and became Vice President and Secretary to the World Bank in 1980. During his 16 years at World Bank, he served on the Financial Policy; Managing; Reorganization Steering; Personnel and Administration; Policy and Research Committees as well as becoming a Member of the President’s Council. Following that, he was Deputy Governor of the South African Reserve Bank (1996-2001). IFC | 35 What was the motivation behind This PPP is a first for healthcare. this PPP project? Was it difficult to sell to the stakeholders? The motivation for the project lies in the need to address the health problems of Lesotho. The difficulty was whether or not you can get How do you deal in today’s world with the high the private sector participating in and financing social demand for medical services, alongside the a health project. It hadn’t been done. There is a constraint in terms of the financial resources in shortage of government and public funds, but the public sector? For a long time Lesotho faced we knew the private sector has the skills, the the problem of the Queen Elizabeth II Hospital, money, and the management. Ultimately, we had which is over 50 years old. One saw the high to convince the government, and we also had expenditures and operating costs, coupled with to convince the health professionals, who over a deteriorating infrastructure. This forced a lot of the years have looked at health as a government patients to be transferred to South Africa. At the responsibility with no role for the private sector. same time, the doctors and professionals found the surroundings of the hospital uninspiring. Do you think, in retrospect, this The challenge for me was to get a modern facility that will reduce the number of patients being was the right path ahead? referred to South Africa and that would also attract and motivate doctors and health Definitely. We were able in the final analysis professionals to work here in Lesotho. to bring in the private sector to put in its own money and put its money at risk. We convinced the government to put its money in as an How did you begin to tackle that upfront capital contribution, and define the challenge? costs they would contribute. Most important, the patients are not paying any more than they The first step for me was to understand what were paying before this launched. the disease profile in the country was. We had to understand how many people were suffering What aspects of the project have from what diseases and how far they came from and all that. Boston University had done some worked well? work earlier on that analysis, and we took that data. With that information we moved on to What has worked well is the political commit- the next question: What results are we getting ment of the government. The cabinet and myself for our money? We engaged IFC, they went to were committed to make this project work in the private sector, and the analysis began. order to supplement limited resources address- 36 | handshake We had to convince the government, and we also had to convince the health professionals, who over the years have looked at health as a government responsibility with no role for the private sector. ing public disease in the country. You need that What advice would you give to strong commitment and leadership. You also other governments contemplating need a technical advisor who understands public policy and private requirements and we were a healthcare PPP? able to work with IFC in that respect. We also succeeded in bringing together the doctors and Government and policymakers must be able nurses in the design of the facilities. They are to think very innovatively. We see PPPs being the ones who are going to use the facility; they applied in all sectors—why not health? That was have to say where the tap in the surgical theater our question. You must also educate the public should be, and dictate other important elements so they can come along and understand it’s not of the design from the start. business as usual. They can judge whether ser- vices are being delivered appropriately, correctly and cost-effectively. What was most difficult about the project? We did not have enough trained lawyers, and IFC had to supplement our legal expertise. We also did not have knowledge of the international market—there are investors all over—or how to tap in and test the market; we did not have that network. It needs to be put in place early. IFC | 37 feature: access Vouchers for safer pregnancy Output-based aid delivers results in Uganda By Calvin Armstrong & Wajiha Ahmed 38 | handshake Photo © GPOBA A voucher system for prenatal care in Uganda helps thousands of women give birth safely and more affordably According to a 2006 study, about 435 output-based aid (OBA) to extend access women die per 100,000 live births in to safe delivery services for poor mothers Uganda because of lack of access to through public-private partnerships (PPPs). health service facilities and professional Vouchers for maternal care link payment healthcare. The high cost of healthcare of public funding directly to the delivery of in Uganda, where most people live on less specific services, in this case a “safe delivery” than a dollar a day, remains a significant package of four prenatal visits, a delivery obstacle. The Global Partnership on Output- attended by a trained medical professional, Based Aid (GPOBA), a partnership program and one postnatal visit. administered by the World Bank, is using IFC | 39 A new approach to an million makes vouchers affordable for the poor old problem by paying the difference between actual cost of Hoima—a tranquil district located 203 kilo- services and the amount people are willing or meters from Kampala—is one of 20 districts able to pay. Grace and other mothers-to-be pay participating in a pilot project to help poor about $1.20, for a voucher. Services cost from communities gain access to reproductive health around $24 to around $78 for more complicated services via a voucher system. In Hoima, women cases. like Grace Nyakato, a 37-year-old mother of Leslie Villegas, GPOBA adviser for the project, three who is pregnant with her fourth child, emphasized that women became aware about the can buy the “safe delivery” voucher for about health vouchers through the project’s communi- $1.20. She uses the voucher to pay for services cations campaign. Campaign activities focused at local clinics. on the target beneficiaries, emphasized behavior GPOBA, working with Uganda’s Ministry of change messages, and promoted voucher value. Health, subcontracted Marie Stopes Interna- Communications efforts built on relations with tional (Uganda) (MSI) to implement the project. community groups. MSI accredits local clinics that offer services to patients in exchange for the pre-paid vouchers. Local service providers This arrangement was first tested in Uganda by Sister Kerezin, a midwife, runs Uganda’s non- KfW (Germany’s development agency), also a profit St. Jude Thaddeos clinic, one of the partner in the OBA plan. small, local service providers that have made the These OBA vouchers are achieving results, OBA partnership possible. The clinic serves an according to Peter Okwero, World Bank Task estimated 50,000 people, mostly refugees from Team Leader for the Reproductive Health the Congo and Sudan and internally displaced Vouchers in Western Uganda project. “By using people from Northern Uganda. The facility is the voucher scheme, women have been empow- a one block-long building housing offices, a ered to choose their preferred service providers; maternity ward, and a general ward where the providers have increased revenues, and they wall partitions are made of papyrus mats. have recorded major improvements in knowl- Sister Kerezin encourages expectant mothers edge and clinical practice as well as quality of to buy a voucher as soon as they know they are care,” he said. pregnant. She observes that the “safe delivery” Once approved services have been delivered, package has made it easier to “monitor a preg- clinics submit claims for payment to MSI. nancy from the beginning to the end,” helping Mobile phones can be used to manage the avoid preventable tragedies. claims process. A GPOBA grant of over $4 40 | handshake video: No woman, no cry | Trailer Activist Christy Turlington Burns shares the powerful stories of at-risk pregnant women in four parts of the world, including a remote Maasai tribe in Tanzania, a slum of Bangla- desh, a post-abortion care ward in Guatemala, and a prenatal clinic in the United States. Delivering results Justine Asaba, a 28-year-old mother of four, is I was referred to the clinic where I found other also a project beneficiary. Asaba dropped out of women who were using this service.” The OBA primary school after HIV/AIDS claimed both voucher was “sent from heaven” for her, she said. her parents, and she was forced to marry at an She made use of all of her prenatal appointments early age. She receives little financial support and gave birth to a healthy baby boy. from her husband and cannot afford private So far, over 34,000 babies have been safely healthcare. Asaba was able to obtain quality care delivered to mothers participating in the OBA for her last pregnancy through the OBA voucher voucher system. By the time the pilot ends in system. As she explained to GPOBA: “At first December 2011, 136,000 women will have I could not believe it when they told me about received a range of reproductive health services it [the voucher system]. So I went to the Local from maternal care to screening and treatment Council leaders to ask for more information and for sexually-transmitted diseases. IFC | 41 HealthStore Foundation’s micro-franchising model A turnkey management system for community health A short number of inexpensive generic drugs can effectively treat 70-90 percent of the children suffering and dying from infectious diseases in the developing world—but too often people do not have access to these drugs. The HealthStore Foundation seeks to improve access with a micro-franchise business model. With the CFW shops—storefront Franchisees operate small drug medical centers serving neglected shops or clinics strategically located communities—the HealthStore to improve access to essential medi- Foundation has combined establish- cations. These trained workers ed micro-enterprise principles with treat the diseases that cause 70–90 proven franchise business practices, percent of illness and death in their creating a model which has received communities. recognition from the Clinton Global CFW outlets are located at market Initiative. Building on its results, centers in agricultural areas of HealthStore aims to expand the approximately 5,000 people; cust- CFW network in Kenya to 200 outlets omers are primarily lower or middle- serving up to 1,500,000 patients and income women and children subsist- customers per year, and to expand ing on agriculture. the CFW brand of franchised health- care to more countries. 42 | handshake Photo © USArmyAfrica feature: access Why franchise? According to the HealthStore Foundation, the 20 poorest developing countries spend less than $33 per person each year on healthcare, compared to over $2,500 in the 20 most devel- oped countries and $7,000 in the U.S. Even a doubling of public health funding would fall short of meeting the need. While public funding will always be needed, at least part of the full solution to the distribution of medicines must incorporate a sustainable market-based model with effective incentives. The CFW model incorporates the key elements of successful franchising: uniform systems and training; careful selection of locations; and most importantly, strict controls on quality backed up by regular inspections. HealthStore also uses the combined buying power of the full network to obtain quality medicines at the lowest possible cost. The HealthStore Foundation is pursuing several key innovations to its CFW model, most notably the integration of a third-party pay- ment system to target current subsidies toward bottom-up and output-based reimbursement of care at the franchisee level, rather than top-down and input-based infusions of grants. video: Healthstore’s franchise network in Kenya www.pbs.org IFC | 43 Afghanistan’s health sector evolves Expanding access through PPPs By Tekabe Belay, Ghulam Dastagir Sayed & Mohammad Tawab Hashemi Against the backdrop of prolonged war and civil and the absence of explicitly articulated national strife, the Afghan health sector has made signifi- priorities all resulted in the limited availability cant progress toward achieving the Millennium and poor quality of services. Life expectancy was Development Goals. Since 2001, the number of only 45 years for women and 47 for men. Cover- functioning primary healthcare facilities has dou- age of services such as skilled birth attendance, bled, coverage of basic health services reached all antenatal care, and vaccination was very low, 34 provinces, the quality of services in publicly- with severe consequences for health outcomes. financed facilities improved, the infant mortality In 2001 the infant mortality rate (IMR) was rate fell 22 percent, and the under-five mortality estimated at 165 per 1,000 live births, and the rate fell 26 percent. Though significant chal- under-five mortality rate (U5MR) was estimat- lenges remain, strengthening the country’s Basic ed at 257 per 1,000 live births. The maternal Package of Health Services—in part through the mortality ratio was 1,600 per 100,000 live introduction of public-private partnerships— births (reaching as high as 6,500 in some has resulted in major health improvements. parts of the country). Afghanistan’s health system was in very poor In 2003, the Afghan Ministry of Public Health condition in late 2001, with few preventive (MOPH) launched, with donor assistance, a and curative health services. The prolonged far-ranging reform program to improve basic civil war, the shortage of staff in rural areas, healthcare services. The Ministry adopted the 44 | handshake feature: access Public-private partnerships have proven successful in implementing Afghanistan’s Basic Package of Health Services role of steward, rather than direct provider, of service delivery; established a Grant and Contract Management Unit to function as a purchasing unit; divided the provinces among donors for accountability; and defined a Basic Package of Health Services. Public-private partnerships Through public tenders, NGOs (Non-Govern- mental Organizations) were then contracted to provide basic health services throughout the country. The services were provided in three levels of care facilities: basic health centers, com- prehensive health centers, and district hospitals. The initial three-year contracts were lump-sum, with a performance bonus linked to specified performance targets. The contracts included baseline indicators and three-year targets for IFC | 45 Photo © isafmedia such health aspects as the number of functioning centers, and 51 percent to 100 percent for health centers, number of new outpatient visits, district hospitals. equipment functionality, availability of essential • An increase in the number of women deliv- drugs and family planning supplies, and medical ering with the assistance of a skilled birth staffing. Almost all NGOs contracted under the attendant from six percent to more than program received a performance bonus. 24 percent. The average cost of the basic health services • An increase in the number of pregnant rural provided by the NGOs under these PPP arrange- women receiving at least one antenatal care ments was $4-5 per capita, with an additional 10 consultation from less than 5 percent to 36 percent for monitoring and evaluation and 0.5 percent and an increase in deliveries in rural percent for the cost of establishing and operating areas with skilled birth attendance from six the Ministry’s purchasing unit. percent to 24 percent. • An increase in the percent of children Striking results receiving DTP3 immunization from 21 Because of the success of the initial contracting, percent to 43 percent. another round of contracting was implemented • An improvement in TB case detection rates. in 2009. Key achievements from 2002-2009, • A drop in infant mortality from 165 per as measured through independent assessments, 1,000 live births to 111, and the under-five include: mortality rate from 257 to 166. • A near-doubling of functioning health facilities from 934 (2002) to 1775 (2009). Public-private partnerships have been key to • An increase in the number of facilities implementing the Basic Package of Health with skilled female health workers from Services. Most health services in Afghanistan are 25 percent to 84 percent. being delivered by NGOs under contracts with • An increase in the number of facilities pro- the Ministry or through grants from a small viding delivery care from 41 percent to 80 number of donors. In three provinces near Kabul percent for basic health centers, 51 percent and parts of rural Kabul province, the Ministry to 95 percent for comprehensive health is contracting managers to help strengthen 46 | handshake service delivery using its own staff. This effort, known as the Strengthening Mechanism, involves the competitive recruitment of managers, the provision of a level of funding similar to that pro- vided to NGOs, and the use of the same monitoring and evaluation mechanisms. Both of these approaches have been considered successful based on facility assessments and administrative data. Government stewardship The Ministry’s stewardship role has been central to the success of the Basic Package of Health Services. Before its introduction, NGOs often focused on Photo © isafmedia a variety of priorities. Some emphasized infectious disease control, others repro- ductive health, and others non-com- municable disease control. The various NGOs also established different types of facilities and utilized different types of staff. The Basic Package has helped These efforts help to mobilize resources. External ensure that there is a standard national assistance to the sector in support of public-private set of priorities and a common overall partnerships grew from less than $100 million in 2003 approach, with a particular focus on to more than $277 million in 2008 and is increasingly key health interventions. “on budget.” Moreover, the proportion of external finance coming through Afghanistan’s government budget has increased dramatically. IFC | 47 Earthquake spurs primary healthcare revitalization in Pakistan By Naoko Ohno, Inaam ul Haq, Tayyeb Masud, & Kees Kostermans Pakistan’s 2005 earthquake, priority, especially because women and children were the heaviest users of the primary healthcare one of the most debilitat- services, representing 60-65 percent of the clients ing natural disasters in their before the earthquake and 70-75 percent of the reported deaths and injuries from the disaster. recent history, also dam- aged the country’s health International Assistance infrastructure. International assistance arrived within days of the earthquake. The World Bank, in col- On October 8, 2005, a magnitude 7.6 earth- laboration with other development partners, quake shook parts of Afghanistan, India, and undertook an Earthquake Damage and Needs Pakistan. Losses were most severe in Pakistan, Assessment and assisted Pakistan in mobilizing where over 73,000 people died and over 70,000 resources to finance the reconstruction and reha- were injured. The earthquake also damaged Paki- bilitation efforts. The World Bank also provided stan’s health infrastructure. Approximately 575 assistance through the Japan Social Development health facilities and management offices were Fund (JSDF) under the project “Revitalizing and partially or fully destroyed by the earthquake, Improving Primary Health Care in Battagram including 75 percent of first level care facilities District.” Battagram is an underdeveloped and all secondary care and smaller health units. district located in a mountainous setting with The earthquake also destroyed vehicles, drug- land area of 1,300 km2 and an estimated stores, cold rooms, health staff accommodations population of 361,000 (2004-05). and offices, medical equipment, and records. The JSDF project aimed to revitalize primary This disruption of health services left nearly four healthcare services in Battagram, strengthen million Pakistanis without access to primary and the capacity of district health management and secondary healthcare. Restoring this access was a 48 | handshake feature: access health workers, and contract NGOs to man- and stewardship/oversight, and the NGO being age primary care services. The project envis- responsible for management and implementation aged provision of an essential primary health of an agreed-upon package of primary care and service package with a focus on maternal/child community-based services. This was appropri- health including obstetrical and family plan- ate to the needs created by the post-earthquake ning services; diagnosis and treatment of major emergency, as well as to today’s needs in areas infectious diseases including tuberculosis; basic where militancy and conflict have disrupted the curative services; nutritional support including provision of public services. improving micronutrient deficiencies, therapeu- Certain characteristics of the contracting out tic feeding and breastfeeding promotion; and model were critical to its success: carrying out public health functions including disease surveillance and response to epidem- 1. The agreement between the Battagram ics. The services were expected to be provided District Government and the NGO through fixed facilities, mobile units, and gave flexibility to the NGO to manage community-based workers. and to innovate, including the flexibility to introduce performance-based incen- Photos courtesy of Dr. Amanullah Khan/Save the Children USA Key Features tives and hire staff at market rates. Specifically, full budgetary, human resource, Through a competitive public tender, the and administrative control of all district Department of Health contracted out manage- health services were transferred to the ment/delivery of primary healthcare services to NGO. The NGO was responsible for Save the Children USA with full administrative procurement of medicines, supplies and control of all health facilities and staff, and full equipment. The motivation of government financial powers. The contract specified the employees was addressed by the salary roles and responsibilities of both parties with supplement provided by the Performance the government’s role being that of financier Based Incentive scheme, which reduced IFC | 49 Photo courtesy of Dr. Amanullah Khan/Save the Children USA the differential in remunerations between were paid market salaries—roughly triple the government and NGO-recruited employ- government rate—and provided security, ees. This was one of the few contracting fully furnished accommodation, and arrangements where salaries of government transport. staff were paid through the NGO, which is 3. Effective coordination was maintained with likely to have contributed to good manage- the provincial and district governments as ment and enhanced managerial authority well as with community stakeholders. The within the NGO. transfer of execution responsibilities to the 2. The project ensured availability and pres- NGO allowed the government to focus on its ence of staff in the district, particularly leadership functions. The NGO gained the female health providers. With flexibility to cooperation of local officials by actively use resources across budget lines, the project involving them in project activities. The recruited additional staff (including a 53 project team also maintained close liaisons percent increase in the number of qualified with local leaders and influential community professionals) with a special focus on female members. health providers and strengthening commu- 4. Alliances within the local community were nity-based outreach to address gender con- key as the security situation in the province straints in a traditional society. Staff members deteriorated during the project period, and 50 | handshake international NGOs were especially targeted. The project successfully revitalized primary Close ties were established locally, and since healthcare service delivery in Battagram, with a many of the managers belonged to the com- substantial increase in utilization of preventive munity, project activities continued with and curative services. The project also helped minimal disruption. the provincial government explore options to 5. The project adopted a hub approach that improve the provision of primary care health ser- decentralized management to the Rural vices through better management of district-level Health Center level. The objective was for health systems—mainly by testing out innovative the Rural Center to function as a hub for methods through public-private partnerships. eight to ten Basic Health Units, to provide The results of the JSDF pilot were disseminated 24-hour emergency obstetric and neonatal through a workshop to a wider audience of care with a functional ambulance and resident political representatives and government officials male and female staff, and devolve financial at the provincial and district level. and administrative powers to a Rural Center These results have further strengthened own- manager. Most of the medical officers were ership and support within the government located at the Rural Centers, and each was administration and the provincial leadership to staffed with five medical officers, including replicate and scale up the initiative, particularly two female medical officers. in underserved districts. The World Bank has 6. The District Health Management Team received a request for the replication of the JSDF met regularly to review progress and pilot model in an additional five districts where resolve specific issues. District officials health services have been affected by the 2009 were trained in planning, budgeting, and militancy and 2010 flood crises. use of information. Performance-based incentives contributed to the use of data as a management tool. Delivering Results Available evidence suggests that the project objectives were met. The data point to sub- stantial improvement in utilization of services, and the findings of the facility survey indi- cate increased availability of medicines, staff, and equipment, and high levels of patient satisfaction. IFC | 51 feature: access Photo © Arne Hoel/World Bank Improving healthcare in Ghana National Health Insurance expands access to care By Nathaniel Otoo 52 | handshake In 2003, only 20 percent evolution of the NHIS of Ghanaians had access to 2003 the care they required. In -Act 650 passed response, Ghana established 2004 a National Health Insurance -Legislative instrument 1809 passed Scheme (NHIS) to protect the -First actuarial study population against the risk -First scheme established of catastrophic healthcare -Blanket accreditation granted expenditure. As a key social 2005 protection policy, the NHIS -Claims payment starts has come to represent an 2007 important plank in Ghana’s -First tariff review starts -National Information and medium-term poverty Communication Technology reduction strategy. It is key (ICT) project starts to achieving the country’s 2008 health goals. -Free maternal program starts -Diagnosis Related Groups Ghana’s National Health Insurance Scheme, cre- (DRGs) introduced ated to establish equitable and universal access to 2009 good quality healthcare, is a hybrid. The system -First actuarial review leverages the strengths of the private-for-profit, -Full scale accreditation starts private-not-for-profit, and public sectors for healthcare provision, using lessons learned from -Review of Act 650 starts pilot community health insurance schemes that 2010 operated before its establishment to shape its -Full scale clinical audits start successful design. -Claims processing center The NHIS has seen rapid growth, attributable to established its reliance on this mix of resources, and in the process it has significantly contributed to poverty 2011 reduction and achievement of national health -Preparation for capitation goals. pilot starts IFC | 53 The NHIS is regulated and supervised by As of June 2011, 145 District Schemes had been the National Health Insurance Authority (the set up. A further 10 satellite District Schemes Authority), an agency of the Ministry of Health. are expected to be set up by the end of 2011. In It has established three ways to provide financial 2008, the first private health insurance schemes access to healthcare for the population were licensed; since then, five more schemes have (see below). been added to further increase coverage. 1 District Mutual Health 2 Private Mutual Health 3 Private Commercial Insurance Schemes Insurance Schemes Health Insurance Schemes Public schemes promoted Promoted and set up by Promoted and set up by by and set up as companies private persons as companies private persons as limited (limited by guarantee) by limited by guarantee without liability companies with a district assemblies; the key a motive for profit. motive for profit. operational arms of Ghana’s decentralized governance system. 20,000,000 15,000,000 10,000,000 5,000,000 0 2005 2006 2007 2008 2009 2010 Cumulative membership* Utilization of outpatient services * This is the total number of members eligible for ID card issuance on a cumulative basis. There is a possibility of duplicates as some members re-register rather than renew after a long lapse in membership. Source: National Health Insurance Authority 54 | handshake Ghanaians who do not belong to the two types • Premiums paid by informal sector members. of private health insurance schemes can become • Consumption tax (2.5 percent). members of District Scheme, and there is no restriction on citizens belonging to one type • Social security contributions (transfer of of private health insurance scheme joining 2.5 percentage points). the other. • Returns on investment. The quick growth in membership of District • Sector budget support. Schemes over the years is attributable to several factors: Private health insurance schemes rely solely for their funding on premiums paid by their • Significant commitment by district assem- members. They are not entitled to subsidies blies to establish District Schemes as estab- from the National Health Insurance Fund. lishment of schemes was a key performance The benefit package offered by District Schemes indicator for district chief executives. is comprehensive, covering up to 95 percent of • Sense of community ownership of disease conditions in Ghana. Private health District Schemes. insurance schemes are free to determine their • Decoupling children from their parents benefit packages, but require the approval of for the purpose of membership in District the Authority to offer such packages to their Schemes. members. • Implementation of a maternal policy that Both District Schemes and Private Schemes provides immediate and free coverage for are free to select their healthcare service provid- pregnant women. ers from the public, private-not-for-profit and private-for-profit sectors. This approach proved • Extensive public education. pragmatic, considering Ghana’s healthcare • Bipartisan political support following the infrastructure, and it has also afforded schemes establishment of the NHIS. an opportunity to procure services in a way that engenders efficiency. Notwithstanding the proliferation of private health insurance schemes in the past few years, The accreditation of healthcare service provid- membership in District Schemes accounts for ers started in 2005 with the granting of blanket over 98 percent of the population with access accreditation to public, mission- and faith-based to one form or the other of health insurance. healthcare providers, as well as the grant of provisional accreditation to private healthcare providers based on a minimal documentation, as Mechanics a means to ensure a quick roll-out of the scheme. District Schemes are funded from the following As of December 2008, 1551 private and over sources: 3,000 public and mission providers had been accredited. IFC | 55 Government 1519 Private 1149 Quasi-Government 187 Mission 21 Total 2876 FACILITY BY OWNERSHIP Source: National Health Insurance Authority In 2009, the Authority developed a set of The provider payment system of choice for accreditation tools which formed the basis of District Schemes at the point of establishment a full-fledged accreditation system. The tools of the NHIS was fee-for-service. This payment are organized into 12 modules: system lent itself to easy use as most stakeholders were experiencing health insurance for the first 1. Range of services time. Over time, other more complex systems 2. Staffing of provider payment have been implemented 3. Environment and infrastructure or are being piloted. A Diagnosis Related Groups system was implemented in 2008 and 4. Basic equipment a capitation system is expected to be piloted 5. Organization and management in a selected region of the country in the third 6. Safety and quality quarter of 2011. 7. Outpatient services Challenges 8. Inpatient services Notwithstanding the NHIS’s successes since its 9. Maternity services inception, it faces significant challenges. NHIS project managers and staff have outlined prag- 10. Specialized services matic steps for addressing the issues that most 11. Diagnostic services threaten to derail the program. They include 12. Pharmaceutical services difficulties in identifying and covering some 56 | handshake categories of the poor and vulnerable; complex post accreditation monitoring, and strategic and unclear governance structures that some- health sector investments. times make regulation, supervision and imple- • Shorten claims processing and payment mentation difficult; inadequate capacity on key turnaround time. technical issues; challenges to sustainability of the scheme; increase in moral hazards; comput- • Strengthen audit and risk management erization of operations; and quality of care issues. systems as well as reward and sanctions regimes to reduce incidents of fraud The Authority is in the process of finalizing a and abuse. plan to directly address these challenges, and to evolve an agency that meets the original policy • Increase capacity in key technical areas. objectives. The plan aims to enhance the finan- cial sustainability through additional sources of funding, cost containment strategies, prudent fund management and a mix of payment Replicability mechanisms as well as: In Africa and other developing regions of the world where healthcare reforms have become top priority for governments, Ghana’s experi- • Increase membership by effectively identi- ences implementing a national health insurance fying and covering the poor and vulnerable scheme could hold valuable lessons. Not only and increasing enrollment within the has Ghana’s approach resulted in significant informal sector. improvements in access to healthcare, it has • Contribute to securing universal access to also helped strengthen quality assurance systems healthcare through implementation of a and a provided a space for the development mandatory basic health insurance scheme. of a fledgling private sector in the healthcare • Review the legal framework for the industry. implementation of the NHIS to ensure Ghana’s success is attributable to political improvement in governance and commitment, innovation, attention to local implementation. context, and experiential learning. The United • Improve computerization of operations Nations Development Program recognized through better specification, improved this in 2010 when it cited Ghana’s health project management, and effective Infor- insurance scheme as a model for south-south mation and Communication Technology cooperation, citing its attributes of being governance. demand-driven, country-owned, innovative, efficient, sustainable, scalable and for possessing • Improve quality of healthcare services in-country leadership. through an update of accreditation tools, IFC | 57 feature: access Protecting the uninsured How Mexico’s tripartite scheme ensures universal coverage for its citizens Mexico’s decade-old Seguro Popular finances healthcare through a broad package of care that extends coverage to citizens not eligible for social security By Claudia Macias 58 | handshake In 2003, Mexico was among the lowest spend- coverage. A benefit package includes the inter- ers on health (only 5.8 percent of GDP), and ventions and medicines associated with first out-of-pocket payments for health were high. and second level care at no cost to the patient. Mexican families already vulnerable to poverty were offered few options for healthcare, espe- cially those that covered catastrophic expenses. Enrollment and renewal That changed with the introduction of the Social rates Protection System in Health (SPSS) and its Enrollment began in 2002 in five pilot states and Seguro Popular (Popular Insurance), a policy was already in place in 24 states two years later. for financial and health protection for the unin- Since then, there has been a notable increase in sured. The goal is to extend healthcare coverage coverage. By the end of 2004, 5.3 million people to citizens not eligible for social security. were insured, and of that number, 94 percent Through SPSS, the Mexican government has belonged to the lowest two income deciles. By incrementally expanded coverage for the unin- mid-2005, all Mexican states had joined the sured. Seguro Popular now covers around 48.5 plan. By the end of 2009, more than 31 million million individuals, or almost 95 percent of citi- individuals were enrolled, and by the end of June zens without social security. The budget for SPSS 2011, this number reached 48.5 million. This has increased alongside recognition of its success: most recent figure represents 94.5 percent of the in 2004, it was approximately $385.6 million, federal target of universal health coverage. and in 2010 it reached almost $4,160.0 million, Extending coverage within indigenous com- according to the Results Report of the National munities has been a special priority for the Commission of Social Protection in Health government. As of the first half of 2011, 4.4 (June 2011). In the plan’s first decade, it has million people have enrolled from localities already reduced out-of-pocket and catastrophic with 40 percent or more speaking an indigenous health expenditures for the poorest segments of language. The states with the highest number the population, provided greater incentives for of insured in indigenous communities include the efficiency of the system, promoted a more Oaxaca, Chiapas, Veracruz, Puebla, Yucatán, and equitable allocation of the financial resources Guerrero. Of the total enrollment, 17.3 million in health, and offered a better quality of care. people live in rural areas (35.6 percent of the total) and 31.2 in urban areas (64.4 percent). Financing Ongoing challenges include ways to create The financial model of the SPSS is a tripartite the right balance of incentives, accountability, scheme with federal and state government and innovation at the level of the decentralized contributions as well as contributions by patients entities. However, universal health coverage is in accordance with their ability to pay. How- expected by the end of 2011, and reaching that ever, federal and state financing constitutes the milestone signifies real progress for citizens of principal source of resources to ensure equitable Mexico. IFC | 59 Interview: access Insuring Andhra Pradesh’s poor An Indian State Trust transforms access to care Mr. Srikant Nagulapalli is the CEO of the Aarogyasri Health Care Trust, the government body in charge of implementing the Rajiv Aarogyasri Health Insurance Scheme in the state of Andhra Pradesh (AP). He began his career with the government of AP and is now responsible for implementing this flagship health insurance scheme covering 20.4 million below poverty line (BPL) families across 23 districts of the state. The Aarogyasri Health Care Trust was founded in 2007 to address the issue of catastrophic health expenditure among the poor and uninsured families of AP. At the provider level, it gives the patient the choice of network facilities and service providers by empanelling both private and government facilities through rigorous infrastructure and services quality criteria and periodic renewal; at the level of administration and claims management, the scheme is built around a contracting arrangement with private insurance firms. These firms manage subscription/marketing, pre- authorizations, claims and fund disbursements, and absorb some of the underlying health insurance risks through a payment mechanism based on a capitated premium. Mr. Interview by Srikant Nagulapalli talked to Handshake about what makes Alison Buckholtz it successful. 60 | handshake Four years from inception, the located in Hyderabad or state headquarters [far Aarogyasri Trust manages the from the village]. So people were either suffering without treatment, or borrowing money from healthcare needs of over 80 the local moneylender and paying money to a million people in Andhra Pradesh private hospital at exorbitant rates. The scheme who are below the poverty line. helps finance their catastrophic healthcare costs, How did you publicize your which were ruining them financially. offerings? From the patient’s point of view, We reached out to patients, rather than waiting how does the process work? for patients to come to us. We held large-scale health camps [screenings] in every sub-district Let’s say a man has a heart condition. He would and at the village level. This resulted in a lot of consult his nearest public healthcare doctors, cases being detected that required tertiary care and if he is advised to take tertiary care, he procedures. All of these people were immediately would be referred to a network hospital empan- taken to a network hospital and operated on. eled with us. Our representative located in the Once they were operated on free of cost, imme- primary health center takes his details and he’s diately word spread around and gave publicity then escorted to the nearest hospital. Once he to the scheme. It’s all word of mouth. reaches the network hospital he is registered by We are bargaining with the network hospitals on behalf of the poor people, so instead of a patient buying the services individually, they now have bargaining power. one of our health facilitators at the reception How did they manage their center, who are available around the clock. We healthcare before they found out have a reception center at all of our 350 net- about your Trust? work hospitals. The patient is registered online, then examined by a specialist, who conducts Before this scheme, they never had any options the appropriate diagnostic tests. The results are for tertiary care. Most of these hospitals were uploaded online. Our doctors at the head office take a look at the documents and medical IFC | 61 records. If he is in need of a particular tertiary What has been the biggest impact care procedure, the approval is given within on the doctors at the network 12 hours of registration, the patient is oper- ated upon or the therapy given. The patient is hospitals? discharged and payment made to him to cover travel charges to go back to his home. Once he is We are bargaining with the network hospitals home, another of our health facilitators attached on behalf of the poor people. So instead of an to our primary health centers follows up the case individual poor patient buying the services at periodic intervals. individually, they have a bargaining power in the form of the Trust. This has caused doctors to change their mindset. How are the costs covered? Andhra Pradesh’s government provides budget- How do you communicate with ary support to the Aarogyasri Trust. The Trust the doctors at the network pays the premia on behalf of the beneficiaries hospitals? to an insurance company selected to administer the scheme in a group of districts. The insurance We have monthly meetings with doctors on company in turn reimburses the network service the kinds of standards that we enforce on hospitals for eligible procedures performed on various procedures, be it angioplasty or long the beneficiaries. The Trust also runs a self- bone fracture. All the protocols we enforce are administered scheme, under which the Trust a result of continuous brainstorming sessions. funds, built up through government grants, are We keep training these doctors and they give used to reimburse for procedures not covered us their inputs, based upon which we act under the Aarogyasri plan. Payments are made periodically. With doctors’ feedback, the scheme directly to the network hospital based on the can continually evolve and be responsive. We cost negotiated with them, keeping in view the see it as a way to continually strengthen these large-scale volumes needed. institutions. How are network hospitals certified? Commitment from the government has been quite We have statutory requirements for all the private medical hospitals to conform to certain phenomenal. That’s what minimum standards from an infrastructure, has made this a success. manpower, equipment, and service delivery point of view. We follow the statutory require- 62 | handshake ments of the government, plus certain additional Also, we don’t have a system of smartcards. We requirements that we enforce for the purpose of identify beneficiaries, based on their poverty this program. We have a very systematic empan- card status, whose data is available online. If they elment procedure where all applications are have that card, they are automatically eligible for made online. A team of doctors randomly visits the scheme, and they need not undergo another the hospital and inspects the premises, based on enrollment for this program. They can walk into the application submitted, and the standards any hospital and use the services. They don’t required for our purpose. Qualified hospitals need anything else. are automatically empanelled. Are other plans copying the Do you work with public hospitals successful elements of your as well? program? Can it be replicated? Yes. We do not differentiate between a private Other governments are interested in our scheme, hospital and a public hospital. We look at all of but each government has its own requirements, them on par. The public hospitals have a lot of so implementation depends on the policy the infrastructure, so they do qualify quite easily. government intends to pursue. Infrastructure, availability of doctors, everything varies from Has the scheme brought change state to state. Certainly other states and regions to public hospitals? can learn from our experience. Overall, the commitment of the AP government toward this It has provided the public hospitals with a lot scheme has been quite phenomenal in terms of of financial resources to upgrade their infra- the funding and administrative support. That’s structure, and this program has also provided an what has made this scheme a success. incentive for better services in public hospitals. How do you measure progress? What makes your program successful while others face It is a bit difficult to link up the scheme imme- diately with various health indicators, like life problems? expectancy, infant/maternal mortality rates, or a reduction in morbidity/mortality rates. On the It has to do with the way we identify beneficia- whole it’s about an increase in the productivity ries. With other public insurance schemes, there of the population. As long as the productivity of is no disease coverage prior to the insurance. We the population in terms of their working hours cover pre-insurance diseases also. increases, we feel that the scheme is a success. IFC | 63 feature: access Photo © Manu Dias/AGECOM Hospital do Subúrbio A project in pictures For more than a decade, the government of Bahia has been at the forefront of innovative approaches to healthcare. In the 1990s, the State of Bahia contracted with several not-for-profit companies to manage new hospitals built and equipped by the State, under contracts not exceeding five years. While this model delivered good results, the legal restrictions on longer-term contracting precluded any private sector investment for new public facilities or equipment. The establishment in 2004 of a PPP legal framework at the federal level (followed by the state level) allowed for longer-term PPP contracts. As a result, Bahia’s government launched Brazil’s first health PPP—the Hospital do Subúrbio. IFC advised the government on the transaction, in partnership with the Brazilian Development Bank (BNDES), and the Inter-American Development Bank. 64 | handshake 08/2009 Hospital do Subúrbio is located in a poor area of Salva- dor, the capital of Bahia State in northeast Brazil. Since 1988, the Brazilian constitution has guaranteed access to medical care for all citizens. To fulfill this mandate, the Government of Bahia engaged IFC to implement a pilot public-private partnership for the hospital, which is under construction. Under the PPP, the private operator will be responsible for equipping and manag- ing the 298-bed hospital, which also includes a surgi- Video: overview of the ppp project cal center, clinic, medical laboratories, physical therapy unit, and a pharmacy. 02/2010 For the first time in Brazil, a health PPP is bid on a stock exchange. The auction was held at Bovespa on February 26, 2010 at the Sao Paulo stock exchange, ensuring transparency. The Promedica & Dalkia con- sortium (Prodal), composed of a leading Brazilian healthcare company and a French firm specializing in facilities management and non-medical services, is Photos © Vaner Casaes, Alberto Coutinho, ElóiCorrêa / AGECOM declared the winner. Prodal is expected to invest $32 million in hospital equipment. Video: LeilÃo na bovespa 07/2010 Construction of the hospital is completed in July 2010 and the facilities are handed over to Prodal, the pri- vate partner, which takes responsibility for equipment and operations. This is the first hospital in Brazil to be equipped and managed through a PPP arrange- ment. The hospital represents the biggest investment in health in the country in 20 years and creates a new business model for providing high-quality healthcare Video: obra concluída services to Brazil’s poorest citizens. IFC | 65 Early 09/2010 The Development Agency of the State of Bahia and Prodal sign the financing contract for the purchase of equipment for Subúrbio Hospital. The value is esti- mated at R$31 million, comprising all equipment and furnishings required for the smooth operation of the hospital. Video: Assinatura de contrato Mid 09/2010 Subúrbio Hospital opens its doors to the public. Dur- ing the first month of operations, the hospital func- tions at a 50 percent capacity to ensure that all systems are working properly. In addition to traditional emer- gency care, the hospital provides specialized treatment for trauma, orthopedic emergencies, and other com- plex injuries. Video: Hospital abre as portas à população Photos © Roberto Viana/AGECOM, Luis Oliveira/ASCOM 03/2011 Six months after it opened its doors, Subúrbio Hospi- tal is working at full capacity and has provided medi- cal services to over 47,000 patients, including over 138,000 emergency room and outpatient visits—an average of three procedures per patient. audio: Hospital atende mais de 47 mil pessoas em seis meses 66 | handshake 09/2011 The hospital has now been in operation for over one year. Indicators from the first and second trimester demonstrate that the population has wide access to healthcare services, achieving the government’s goals for the period. The hospital has had 45,000 emer- gency visits, 90,000 outpatient consultations, and has conducted 115,000 therapeutic diagnostics; the occupancy rate is 95% with low rates of nosocomial infection. Photo © Luis Oliveira/ASCOM Four takeaways: The Subúrbio PPP By Dr. Jorge Solla, Health Secretary, State of Bahia 1. Select your consultants carefully. In this case, three factors were relevant: sector expertise, availability of the consultants to dedicate adequate time to the project, and their credibility in the market. 2. Select a cohesive technical team that is available, interested, and has balanced knowledge of the issues both from a technical and political perspective. 3. Have clearly defined policies and instruments for the project to be implemented. 4. Most important, provide adequate support for the team and involve the public representatives in areas such as finance, health, civil affairs, as well as and the top-level public representative, be it the mayor, governor or president. IFC | 67 Photo © Hoong Wei Long Singapore’s secret to healthcare Public-private collaboration for cost-efficient, high-quality healthcare By Meng-Kin Lim Singapore’s unique health financing system combines medical savings accounts, supplementary public catastrophic insurance, supplementary private insurance, government-funded subsidies for the majority who utilize public healthcare, and special grants for the poor and elderly. It includes a complementary health provider system, as well as periodic changes in incentives to encourage patients, providers, and insurers to adapt to changing needs. The results have been impressive, and although the approach is not easily replicable, aspects of it can pave the way for public-private collaboration in other countries. 68 | handshake Feature: Cost Is it possible for a nation to enjoy universal ing. At independence in 1965, half of national access to top-quality healthcare on a shoestring health expenditure was from government coffers; budget? Probably not, but Singapore comes now, it is less than one-third. Coverage then was close. Among developing as well as developed patchy; now, there is universal coverage. The economies, Singapore is gaining attention for a state guarantees “needed healthcare” to those healthcare system that costs so little, yet achieves unable to afford the co-payment levied on all, so much. regardless of income status. In 1960, there were This tiny island republic was once a British fewer than 50 doctors in the whole country with colonial outpost in the backwaters of Southeast any higher qualifications, and standards in the Asia, and has grown into a bustling city-state decrepit and poorly equipped government hos- with per capita GDP of $57,200 (PPP, 2010), pitals were low. Now, 800,000 foreign patients exceeding that of Britain, Japan, and Korea. In flock each year to this thriving medical hub to 2010, average life expectancy was 81.4 years, pay for world-class medical care. up from 62 years in 1957 (the earliest statistic Singapore’s approach to healthcare holds useful available) and infant mortality was 2.2 per 1,000 lessons for other countries struggling to balance live births, down from an appalling 82 per 1,000 the roles of the public and private sectors in live births in 1950. The World Health Statistics search of better performing healthcare systems. 2010 ranked Singapore second-lowest for infant Like other countries, Singapore faces the mul- mortality in the world and ninth-highest for life tiple challenges of a rapidly aging population, expectancy at birth. the escalating cost of increasingly sophisticated On the financial front, national health expendi- and high-tech medical treatment, and rising ture has remained between three to four percent consumer demand in the face of finite resources. of GDP in the past four decades, compared to However, there are reasons to believe that Sin- OECD’s average of nine percent of GDP in gapore is better situated than most to surmount 2009. The WHO 2000 report also gave Sin- these challenges. Among its advantages: a gov- gapore high marks, ranking it sixth best in the ernment willing to make hard-nosed decisions; a world for “overall efficiency.” And Singapore population conditioned to cost-sharing; and an holds the world record for the highest concentra- incentives regime that encourages demand-side tion of Joint Commission International (JCI) responsibility while discouraging supply-side accredited hospitals. waste. The relative ease with which health policies are introduced and implemented in Singapore (even Singapore’s “secret” when it comes to interventions aimed at lifestyle Singapore’s success in the healthcare sector is tied or behavior change as in the case of smoking, to an integrated system where the public and drug addiction and HIV/AIDS) is not easily private sectors play critical and intersecting roles replicable elsewhere. Singapore’s great advantage in healthcare financing and healthcare provision- is that its democratically elected government IFC | 69 has been in continuous power since 1959 and is sions, takes a significant load off the govern- thus able to pursue pragmatic policies with the ment’s back. longer term “good” in mind, while also garnering At the same time, private providers have to fend continuous public support. off competition from a stable of well-equipped In addition, because there has not been a tradi- and highly-regarded public sector hospitals and tion of state largesse in Singapore, the govern- national specialist medical centers for its own ment did not find it difficult to make the case share of the high-end, personalized, medical that free healthcare in the face of potentially services market. This competition forces both insatiable demand was illusory and potentially the public and private sectors to deliver more ruinous. Instead, it convincingly argued that efficient services. The government publishes whether the burden falls on taxes, Medisave, price and quality indicators of both public employer benefits, or insurance, it is ultimately and private hospitals on its website to facilitate Singaporeans themselves who must pay. Taxes informed patient choices. are paid by taxpayers, insurance premiums are ultimately paid by the people, and employee medical benefits form part of wage costs. In 3Ms: Medisave, Medishield, the end, overburdening the state or employers Medifund would affect the competitiveness of Singapore’s The foundation for Singapore’s health financing externally-oriented economy as well as individual system—Medisave, Medishield, and Medifund livelihoods. Citizens understand that, and act (“3M”)—was laid over two decades ago, with accordingly. the introduction of medical saving accounts in 1984. The underlying policy premise of health- Competition is care financing in Singapore is that healthcare (along with housing and education) should not encouraged be provided free of charge. Singapore’s unique Singapore’s economy thrives on global trade and cost-sharing and risk-spreading system of health- financial services; its formula for success includes care financing treats the majority of healthcare a strong commitment to open markets, minimal consumers as co-paying partners while making regulation, and rule of law. So it is not surpris- special provisions for the minority who cannot ing that Singapore’s healthcare sector is highly afford the co-payment. Such an approach avoids competitive. Singaporeans enjoy freedom of providing the rich with healthcare handouts, choice among providers, and the freedom to own as would be the case under a universal coverage shares of the private healthcare providers listed system that ignores income status. It also coun- on the Singapore Exchange. The private sector, ters the “moral hazard” generally associated with accounting for 80 percent of daily outpatient fee-for-service, third-party reimbursement. attendances and 20 percent of hospital admis- 70 | handshake The main elements of the 3M health financing system Medisave Medishield Medifund $ • Compulsory individual • Voluntary low-cost • State-funded, administra- medical savings account for insurance plan to protect tively decentralized, safety employees or self-employed households from large and net for the poor. citizens or permanent unexpected financial losses • Created in 1993 with residents; tax exempt and due to illness. an initial capital of $200 interest-yielding. • Coverage for catastrophic million; now stands at • Funded by employee illnesses for which Medis- $1.7 billion. payroll deductions from ave is unlikely to be • Interest is distributed to 6.5 to 9 percent (depend- adequate. both public and non-profit ing on age). • Singaporeans who want hospitals run by voluntary • Can be used for hospi- more benefits or ameni- welfare organizations, cov- talization, day surgery ties such as nicer hospital ering the costs of patients and certain outpatient rooms are free to purchase unable to pay their hospital expenses. enhanced “shield” plans bills. • Eight out of 10 Singapor- offered by private insurers. • In 2000, the ElderCare Fund eans admitted to hospi- • In 2002, Eldershield was was initiated for subsidizing tals pay their bills with set up to provide supple- voluntary care organizations Medisave. mentary, severe-disability that offer care to the • Combined Medisave insurance for long-term elderly. accounts of all Singapor- care. • In 2007, Medifund Silver eans amounted to S$42 • In 2008, 84 percent of was set up to provide even billion in 2008, six times Singaporeans were covered more targeted support for Singapore’s annual national under the Medishield and Singaporeans over 65 who healthcare expenditure. related shield plans. are unable to pay their bills in public sector hospitals. IFC | 71 Corporatization of Public and surgeons typically earn considerably more than their public sector counterparts. This Hospitals differential pay gradient has resulted in a steady Singapore’s patients are well-served by 29 hospi- flow of talent from the public sector, concern- tals and specialty centers. Seven public hospitals ing the government, which has moved to make and six national specialty centers account for 72 careers in the public sector more rewarding and percent of the beds, while 16 private hospitals satisfying. account for the rest. About 12 percent of daily outpatients are seen by traditional Chinese Government by Expertise practitioners in the private sector. Singapore’s proclivity to “government by Public-sector hospitals and specialist medical expertise” is relevant to any serious discussion institutions were restructured over a 15-year about the long-term success of its healthcare period, between 1985 and 2000, which resulted policies; it is an important reason why the in their gaining greater autonomy in operational country’s approach remains cohesive and and fiduciary matters. Government ownership consistent despite its ongoing evolution. was retained through a fully government-owned Often, the Ministry of Health forms committees holding company. Matters such as recruitment of experts to study policy issues, and takes these and remuneration of staff are decentralized, inputs seriously. Typically, these committees also while more sensitive issues such as increases in involve the participation of academics, com- ward charges require government approval. In munity groups, and the private sector. In recent 2000, the restructured institutions were reor- years, the process has become more consultative, ganized and consolidated into two “clusters” and feedback from the general public is also —Singapore Healthcare Services and National invited. Healthcare Group—each with its own tertiary hospital, supported by specialist medical cen- There is also an increasing realization of the ters and regional hospitals. Simultaneously, all need to buttress the policymaking process with government polyclinics providing outpatient a credible evidentiary base, resulting in increas- primary healthcare came under the management ing investments in policy analysis. Singapore’s of either of the two clusters. Thus, in one fell government understands it must play a lead role swoop, horizontal and vertical integration of in finding the solutions to the big problems of all the public sector healthcare providers the day, but that it cannot succeed alone—an was achieved. excellent milieu for strengthening collaboration between the public and private sectors. The private sector compares favorably to the public sector in quality of expertise and facilities, and is perceived to be better in terms of respon- siveness. Prices are not regulated, and in such a competitive environment, leading physicians 72 | handshake Challenges in health Usually more money spent means longer lives lived.... $1833 Lesotho – 48 years India – 65 years $875 Cuba – 78 years $495 Brazil – 73 years $122 $119 Singapore – 82 years Per capita expenditure (PPP int. $) ....but not always 100 10,000 80 8,000 60 6,000 40 78 82 81 79 $7164 4,000 $1833 $3851 20 $495 2,000 Life Per capita expectancy Cuba Singapore France United States expenditure (PPP int. $) IFC | 73 Subscribe: ifc.org/ppp Connect with us: facebook.com/ifcinfrastructure scribd.com/ifcppp handshake@ifc.org ifc.org/ppp October 2011