1

minute Private/Public Partnerships: How to make them successful

Private/Public partnerships, also referred to as PPP, P3 or P3, are business ventures involving a contract between the public sector and

a private entity. As funding of public sector healthcare projects becomes more challenging, hospitals are looking at the private sector to help finance their investments. Using its recently launched panel of hospital CEOs in France, The MarkeTech Group (TMTG) held its first C-level webinar addressing the impact of PPP on hospitals’ purchasing strategies. “Will the influence of PPP continue to grow over the next decade?” is an important question that both hospitals and industry need to be able to answer to decide their future strategies. In this edition of the Minute, TMTG explores the impact of PPP and how hospital executives wish to leverage and benefit from PPP.

The origin of the "public-private partnership" concept is rooted in the late 70’s and early 80’s. The objective was to motivate economic activity. Several countries used PPP to finance the public sector infrastructure. The healthcare infrastructure is no exception and represents a significant amount of the projects initiated. Since the 2008 financial crisis, the rate of PPP projects has slowed down by as much as 40%; however, many projects are still ongoing.

Europe: $4 billion in hospital PPP deals in Europe were announced during the first

half of 2010, according to Infrastructure Journal. The biggest deal, €1.5 billion, 700-

bed Karolinska in Stockholm, Sweden, is estimated to be the largest hospital PPP in

the world. Another large project, New Hospital de Vigo, Galicia, Spain is a €375

million, 900-bed hospital.

North America: British Columbia, Ontario, and Quebec have completed $10 billion in

healthcare PPP projects in the last five years. In 2010, McGill University Hospital

project in Montreal reached financial close. At $1.3 billion, it will be North America’s

largest hospital PPP and is expected to open in 2014. In Mexico, 22 states now have

PPP regulations in place, and the remainders are in the process of approving their

own regulations.

ED

ITO

RIA

L

ISSUE 1 VOLUME 13 SUMMER 2014

MARKET OVERVIEW

The Rise and Decline of PPP

The MarkeTech Group

The Challenge: To better understand hospital executives’ needs and rationale for decision-making to optimize communication, positioning, messaging and, ultimately, to better engage and sell the company’s offering to top level management across multiple countries. Our Solution: In-depth one-on-one discussions with hospital senior executives in 11 countries across Europe, North America, Brazil and Australia to uncover the underlying reasons for choice and the relative influence of different stakeholders in the decision process for laboratory diagnostics equipment.. To identify the appropriate messaging, TMTG tested a selection of value statements and evaluated how these resonated with hospital executives. The Impact: TMTG identified the most relevant communication to direct to hospital senior management stakeholders.

CASE STUDY:

How to communicate with

hospital executives

2

Interviewer: Olivier Cotten, TMTG Partner Q: Before discussing further on how these PPPs affect purchasing and investment, I would like you to give us your own definition of a PPP.

ON THE HORIZON

What Hospitals need from Vendors

INTERVIEW OF THE SEMESTER

Hospital PPP from the inside Mr. Bernard Bensadoun (BB), Managing Director of Nantes Polyclinique

de l’Atlantique Mr. Yann Bubien (YB), Managing Director of Angers CHU

INT

ER

VIE

W

Mr. Michel Meignier (MM), Managing Director of Nantes Bretéché Clinic

Mr. Jean Michel Budet (JMB), Deputy Managing Director of Assistance Publique

Hopitaux de Marseilles (AP-HM)

BB: In the hospital world, PPP deals can be used either for hospital construction and renovation (e.g., expansion projects), or operational partnership (e.g., non-medical projects such as central heating, laundry and sterilization, etc.). Operational projects started when the Hospital, Patient, Health, Territory law (HPST law) was enacted to entice hospitals to improve their economic performance through infrastructure enhancement. YB: PPP can be defined as outsourcing of construction and management projects to a private for-profit player. . […] At the end of the day, this is a type of leasing arrangement over decades (10 to 40 years). This approach is attractive because it helps spread the cost of large investment over a long period of time. PPP also offer a leverage point to public hospitals that can take advantage of several private sector advantages: benefitting from more advantageous legal arrangements in market terms, less formal calls for tender, and more significant expertise, […] The rent approach is enticing, but recent PPP arrangements have often ended in failure or have been compared to financial “time bombs”, particularly for very large operations. JMB: PPPs effectively deal with cooperation, but some form of PPP practice already existed before the HPST law. For example, public service concessions can be considered PPPs. The 2004 law intended to formalize these partnerships to allow construction or logistics operations to be performed in the hospital market. The first PPP projects have evolved into different forms of partnerships in new areas such as novel real estate asset management and capital equipment purchases like imaging solutions. MM: In the past, some partnerships have been catastrophic. These failures can be explained by the lack of experience and perspective on these partnerships, and cultural differences. Long version of this interview: Hospital PPP from the Inside

At Stake! PPP allow hospitals to optimize costs by

pooling certain activities.

PPP enable public institutions to benefit

from the advantages of the private sector.

For example, reducing delays in the

procurement process or better access to

legal expertise.

The French HPST law HPST enables the

joint procurement between a public and

private entity of capital equipment (e.g.,

nuclear medicine PET) to improve the

delivery of care across the country.

So What?

PPP that are successful today typically involve small-scale projects not

related to the clinical activities. For example, one goal may be to share

some activities like heating or laundry service.

PPP represent a funding opportunity for the acquisition of new

equipment.

Following TMTG’s webinar on PPP, we asked a sample of French

Radiologists to tell us what impact they expect PPP to have on the

imaging offerings in their region:

o More than half of the respondents think that PPP have a positive

impact in geographic coverage of diagnostic offerings.

o PPP appear to be an attractive solution to providing greater

access for patients to state-of-the-art diagnostic imaging

technologies.

502 Mace Blvd., Suite 15 3, rue Emile Péhant Davis, CA 95618 44 000 Nantes - France PH: +1 530.792.8400 PH: +33 (0)2 72 01 00 83 FX: +1 530.792.8447 FX: +33 (0)2 40 48 29 40

MEASURING the VOICE-OF-CUSTOMER in HEALTHCARE

www.themarketechgroup.com

Facts The first PPP that involved large-

scale projects such as the

construction of a new hospital,

ended in failure.

One of the causes of these failures

was the difficulty in efficiently

operationalizing a clinical setting.

Public clinics and private practices

are difficult to standardize.

The new law HPST (Hospital,

Patient, Health, and Territory) now

facilitates the realization of smaller

PPPs.