PRESENTATION: The potential for infrastructure PPPs to improve healthcare financing and delivery in Asia

PUBLIC PRIVATE PARTNERSHIPS

(PPP) FOR HEALTHCARE AN INTRODUCTION

Disclaimer: The views expressed in this paper/presentation are the views of the author and do

not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board

of Governors, or the governments they represent. ADB does not guarantee the accuracy of the

data included in this paper and accepts no responsibility for any consequence of their use.

Terminology used may not necessarily be consistent with ADB official terms.

THE THREE MESSAGES

PPP it can improve health outcomes.

Investing with your heart can still achieve returns.

Whilst more complex healthcare PPP is worth the resource investment.


PART ONE BRIEF HISTORY

PART TWO THE THREE Ps

PART THREE SOLUTION TO CANCER?


PART ONE BRIEF HISTORY

Before PPP

Swindon Hospital 2000

Birmingham Hospital 2000

Ward in 1920s

Before PPP

Tended to over run and be over budget.

Lack of access to capital so transformational change was difficult.

Teams inexperienced in delivering complex major health infrastructure.

Focused on short term delivery, rather than long term value.

All main risks borne by public sector.

Previous experience (1999 Government survey)

Construction projects where cost to public sector exceeds price agreed at contract 73%

Construction projects delivered late to public sector 70%

Before PPP - Solving the problems?

Early 1990s little public capital in NHS available circa USD 1.75 billion per annum (3% approx of revenue).

Large scale projects with a national budget extremely difficult.

Mid nineties USD 7.5 billion maintenance problem.

38% of linacs 10 years or older in 2002.

PFI (PPP) Initiative born early 90s.

After PPP

Swindon Hospital 2015

Birmingham Hospital 2015

After PPP

Tended to be delivered on time and to budget contract fixes costs at the outset, and financial penalties for late delivery.

Introduces significant private investment to achieve stepped transformational changes.

Public teams focus on what they are good at what the patient wants, private sector introduces innovation, and is responsible through the contract for managing the project implementation.

Focused on long term delivery and value, rather than short term and the cheapest.

All main risks borne by private sector.

After PPP

Over 165 major infrastructure projects 20 billion USD transformational change!

Over 60 projects over 100 million USD.

In cancer treatment increase from 433 to 690 linear accelerators by 2010 only 13% over 10 years old.

Previous experience (1999 Government survey)



PFI experience (2002 NAO census)



Issues still to resolve

Public Relations transparency.

Length of time of procurement bid costs.

Risk transfer.

Poor business case assessment.

Proposed resolutions

Publishing at every stage project information.

Limiting to 18 months from advert to award of preferred bidder regulated.

Risk transfer risk matrix to be published.

Transparency public sector to take minority equity stake (models already exist).

PPP VERSION 2!

PPP has spread

Programme to build 50,000 new beds in Turkey to be done.

Completing USD 1.75 billion Karolinska, Sweden.

McGill Hospital, Montreal USD 1.3 billion.

Etc etc.


PART TWO THE THREE Ps

What is a PPP in healthcare?

A partnership between the government and the private sector, where certain healthcare services are provided the private sector.

Services can be;

Design and construction of a health facility

Managing and operating clinical services (doctors and nurses etc.)

Managing and operating non-clinical services (cleaning, building maintenance etc.)

Equipment supply and on-going maintenance

Any or all of the above.

Primary aim to deliver improved health services.

P for Public Sector

To provide the regulatory and legal framework to allow for PPPs.

To ensure that regulatory framework is protected for the long-term.

To guarantee a level of security of revenue stream.

To act as a counter party to the agreement.

And maybe?

to provide clinical and or non clinical services within the privately built facility?

to provide the land or other assets?

P for Private Sector

To provide the solution.

To fund the complete project costs.

To take technical, operational and financial risk.

To act as a counter party to the agreement.

P for Partnership

Is normally for a long term, to reflect the life of the asset maybe as much as 30 years for a building or as long as debt terms can be agreed.

If it includes constructing a facility, the deal will contain long term building maintenance to incentivise quality and availability.

Will be geared around consistent performance and value over the long term.

If operational services provided, usually contains market testing

Types of Risk transferred

Financial

Currency and inflation risks priced in and fixed.

On-going maintenance costs fixed.

Variation procedures should services need changing pre agreed in contract.

Insurance.

Technical

Building fit for purpose

Building delivered on time

Coordination of all equipment.

Operational

Performance

Life-cycle.


PART THREE CANCER PPP

Health PPPs the differentiator

Purpose

Purpose of most sector PPPs

Primary End product road energy plant

Secondary Maintenance running.

Purpose of Healthcare PPPs

Primary Improve health of population

Secondary buildings/infrastructure.

Flexibility

Fast changing health care.

Complexity.

Case study: Turkey Profile

Bilkent Ankara.

1.25 million square metres 3800 Beds.

The project is the worlds largest single health campus constructed at once.

25 year concession.

Includes some clinical services.

Case Study: Turkey Structure

Case Study: Turkey Process

UK PPP Documentation adopted.

Dutch auction for builders.

Winning builder then appointed operators.

But operators not involved in first agreement = Significant delays.

Focus on the output rather than outcome.

Cancer context

Cancer Incidence Estimates 2008

Incidence per annum (millions) Deaths per annum (millions)

Developed countries 5.6 50% mortality (leading cause of death) 2.8

Developing countries 7.1 68% mortality (second leading cause of death) 4.8

TOTAL 12.7 TOTAL 7.6

Cancer context

Age Structure of the Population: from Pyramid to Mushroom

Men Women

Thousand People Thousand People

31 December 1910

1910 1910

Age

Thousand People Thousand People

2050 2050

Men Women

Age

31 December 2001 and December 2050

Cancer context

Case study: Vietnam Demographics

Population 91 million

Case study: Vietnam Need

112,000 new cancer cases a year 82,000 deaths (73%).

Against current Developed cancer rates 21,000 avoidable deaths per annum!

450 linear accelerators against current estimated 20.

Lack of experts to deliver solution.

Case study: Vietnam Objectives

To increase access and availability to state of the art cancer treatment in Vietnam.

To improve the capability of cancer treatment by radiotherapy in Vietnam.

To reduce the costs of cancer treatment.

To reduce the mortality rate from cancer.

Case study: Vietnam Solution

Train 128 nurses to become competent and qualified radiographers.

Train 64 physics graduates to become competent and qualified medical physicists.

Train 96 doctors to become competent and qualified radiation oncologists in new radiation therapy technology.

Equip learning centres for sustainable future.

Case study: Vietnam Solution

Equip 32 centres with 46 linear accelerators state of the art equipment.

Maintain the equipment and services at an agreed performance level for 12 years.

$116 million equipment over 5 years.

$5 million training over 5 years.

Case study: Vietnam Structure

Case study: Vietnam Profile

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2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

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Concession Period

COMPARISON OF CASH FLOW PPP OPTION vs STRAIGHT PROCUREMENT - REAL TERMS

Straight Procurement PPP Option

Case study: Vietnam Differences

Why does it make sense for the selection of a PPP model as a method of procurement?

Public funded are the skills there to manage the process?

Do you get the same level of innovation?

Solution tendered and fixed at outset.

Private funded skills assessed through procurement

Private operators can suggest innovation

Solution flexed through partnership process.

Lease focuses on delivery of buildings and equipment.

PPP focuses on delivery of services.

Case study: India Demographics

Population 1.25 billion

Case study: India - Challenges

Over 70% of health delivery from private sector

29 states - 676 districts

Complexity in strategic approach

Only 67 districts have cancer equipment

Initial discussions commencing at Govt level

Case study: India - Conclusion

A coordinated strategy would benefit

Private sector operators need to be involved

A consortium should put together a coordinated solution

Conclusion

PPP can be a model for transformational change in healthcare particularly in developing countries.

Healthcare is a complex PPP, the right people need to be brought together, to provide the right solution.

A healthcare PPP solution should focus on better health outcomes rather than assets that is how it provides a win-win solution for all parties.

Investing YOUR time in health PPP is rewarding and can change health delivery for generations.

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PRESENTATION: The potential for infrastructure PPPs to improve healthcare financing and delivery in Asia