A Model for Health of the Public-Private Partnership

January 2013

National Kidney and Transplant Institute

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.

NKTI Overview

Rationale for the Public-Private Partnership of the

Hemodialysis Center Project

Operational Concerns

Financial concerns

Dialysis Center financial performance

Effect on the overall financial performance of NKTI

Renewal of the project after 5 years

Tertiary medical specialty center for renal

diseases

Government owned and controlled corporation

Three-fold mission:

Service, Training and Research

1st Government Hospital to be ISO 9001:2000

certified

The lead government agency in renal care

NKTI HEMODIALYSIS SERVICES

NUMBER OF

HD

MACHINES

NUMBER OF DIALYSIS

SHIFTS PER DAY

(each machines is

used for 4 hours)

MODE OF

PROCUREMENT

1983 5 1 Negotiated

purchase

1998 16 2-3 Bid/purchase

2000 20 3 Bid/purchase

OPERATIONAL CONCERNS

Hemodialysis slots were immediately filled

1-2 patients per day were turned down for treatment

Emergency cases were not accommodated

immediately due to a lack of available HD machines

OPERATIONAL CONCERNS

Increasing patient’s dissatisfaction because they are displaced from their regular HD schedules by patients requiring emergency dialysis/treatment delay due to water treatment breakdown and morbidity due to water treatment contamination

Delayed technology upgrades on equipment

and services because of insufficient fund availability

OPERATIONAL CONCERNS Long machine down time due to

Frequency of repairs for old HD machines

HD machine replacements delayed due to either lack of funds for capital expenditures or lack of available spare parts

Bureaucracy in processing repair work

Frequent breakdown of an old water treatment facility

Occassional contamination of water treatment facility

Problems with storing a large (3-month) inventory of HD supplies: storage facility, ordering time and forecasting

Led To A Decline In Patient Services

FINANCIAL CONCERNS

Major concern: Rising cost of repairs and maintenance of HD equipments/water treatment facility

Frequency of downtime in machine operations including corresponding lost of revenue resulted in high cost of repairs

Reduced revenue: High repair costs and reduced number of HD sessions due to down time

FINANCIAL CONCERNS

Expected increase in capital expenditures

Limitations in funds to accommodate technology

upgrades

Insufficient storage space for old, poorly functional HD machines

Difficult disposal proceedings for junked machines

FINANCIAL CONCERNS

Inventory Management problems

1. Cost of money

2. Inventory losses

3. Poor inventory monitoring & control system

4. Insufficient storage area (3-month inventory)

OTHERS

Very poor customer satisfaction survey results

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What is the appropriate procurement

process that is affordable by a

government – controlled corporation

to upgrade the NKTI’s HD facilities into a

World-class HD Center

Text in

here

Public Private

Partnership

(PPP)

application to the

healthcare industry

SOLUTION:

Mandate: Secure permission from

Department of Health / Board of

Trustees

Legal: Seek the advice and clearance

from government corporate counsel

Request for assistance and

guidance of the BOT office of the

Dept of Trade & Industry

1

2

3

CONCEPT

A COOPERATIVE COLLABORATION

BETWEEN

a government-

owned

corporation

Private

corporation

AND

NKTI

Provide the space, staff

and utilities requirements

Maintain quality

performance in

accordance with

international standards

Ensure compliance with

government regulatory

policies

Prompt payment to

provider

PROVIDER

• Supply all HD equipment including state of the art water treatment and dialyzer reprocessing machines

• Provide maintenance / service technicians at all times

• Ensure availability of HD supplies at all times

• Provide regular training of staff

• Maintain and upgrade technology

CHALLENGE

Formulate TERMS OF REFERENCE (TOR)

to include all the excellent

features of HD machines

without excluding any of the major players

BIDDING INITIATED AND COMPLETED

1. Technical Working Group (TWG) was created with

members from NKTI, BOT Center, OGCC and a

representative from Commission on Audit was

invited to observe.

2. TWG formulated the TERMS OF REFERENCE that

included detailed features of the HD machines,

water treatment, dialyzers as well as other

furniture, fixtures needed to start the operations of

the HD center. Two separate HD Centers were

required for In-patient and Out-patient HD services.

3. Hospital Bids & Awards Committee conducted the

bidding with 3 Principal Bidders:

Fresenius Medical Care

B. Braun Phils

Gambro

4. TWG performed the post-bidding evaluation

5. Contract awarded to the bidder that submitted the

most responsive bid proposal: FRESENIUS

MEDICAL CARE

DIALYSIS UNIT DIRECTOR/

NEPHROLOGISTS/ DIETICIANS

ADMINISTRATIVE SERVICES

(ACCOUNTING, HR)

UTILITIES (WATER AND ELECTRICITY)

INTERIOR DESIGN, AIRCONDITIONING,

CABLE TV

NURSING SERVICES

BUILDING MAINTENACE / JANITORIAL /

SECURITY SERVICES

PATIENT MARKETING

CENTER INFRASTRUCTURE

DIALYSIS CHAIR AND CENTER FURNITURE

TECHNICAL SERVICES

DIALYZER, TUBINGS, FISTULA NEEDLES,

DRESSING KITS

REPROCESSING MACHINES AND

MAINTENACE

EDUCATIONAL UPDATES

WATER TREATMENT SYSTEM AND

INSTALLATION

EMERGENCY CART AND OTHERS

HEMODIALYSIS MACHINES AND

MAINTENACE

Conceptualization to Award of Contract

TOR

Preparation

4 months

Bidding

Activities

1 month

Post

Evaluation

1 month

Awarding of

Contract

1 month

Cooperation Period – 5 years

PROJECT TIMELINE

Diagram

IMPLEMENTATION

OF THE

HEMODIALYSIS

CENTER

PPP-PROJECT

✪

“THE FIRST IN HEALTH”

OUTCOME :

The NKTI offers a state of the art HD Center with the

highest standards at a reasonable cost

Patient satisfaction guaranteed

Continuous training of government personnel

Minimal funding released by NKTI

Competitive HD rates

1983 1998 2000 2003

# OF HD

MACHINES 5 16 20 40

# OF

DIALYSIS

SHIFTS PER

DAY *

1 2-3 3 4

MODE OF

PROCURE-

MENT

BID/

PURCHASE

BID/

PURCHASE

BID/

PURCHASE

BID / LEASE

FEE PER

TREATMENT

* EACH SHIFT LASTS 4 HOURS

First two ( 2 ) years

• High nurse turn over

• Training of personnel

to keep pace with the

demand

• Intensified nurses’ training

program

• Improved the rotation of

nursing staff

CHALLENGES STRATEGIES

IMPLEMENTED

First three ( 3 )

months

• Filling up the slots

• Maintained competitive HD

rates

• Liberalized the acceptance of

service (subsidized) patients

FINANCIAL IMPACT

OF THE

HEMODIALYSIS

CENTER

PPP-PROJECT

✪

Increased revenue contribution directly

from the operations of the HD Centers.

Increased revenue from the other

ancillary services units: laboratory,

radiology, nuclear medicine, physical

rehab, etc.

0

10000

20000

30000

40000

50000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

2005: Start of

4th shift

2007: Resistance

to the 4th shift 2010:

PCSO

issues

2003: Start of

partnership with

Fresenius

Hemodialysis Center:

Revenue against Lease Charges

0

20000

40000

60000

80000

100000

120000

140000

160000

2003 2004 2005 2006 2007 2008 2009 2010 2011

2010: New

contract,

lower rate

Lease fee/ treatment to Provider:

2003: $41

2010: $38

Hospital Rate/treatment:

2003: $58

2010: $63

CONTRIBUTION OF THE HD

CENTER REVENUE

TO THE OVER-ALL

FINANCIAL PERFORMANCE

OF NKTI

✪

0

500

1,000

1,500

2,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Revenue Subsidy QFS

2002 2009

NUMBER OF HD TREATMENTS

15,185 41,701

GROSS INCOME USD $ 997,202 USD $ 3,101,402

NET INCOME USD $ 293,738 USD $ 358,038

PHP 43: USD 1.00

22% increase in net income

2010 2011

GROSS INCOME USD $ 2.96 Million USD $ 3.34 Million

NET INCOME USD $ 374,976.00 USD $ 516,095.00

38% increase in net income

PHP 43: USD 1.00

DUE TO THE SUCCESS

OF THE 1ST PPP PROJECT,

AT THE END OF THE

CONTRACT

ANOTHER BIDDING WAS

UNDERTAKEN

FOR A 2ND CONTRACT

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TECHNICAL

ISSUES

Most advanced HD machine

Capable of HEMODIAFILTRATION

with on-line fluid substitution

• More advanced type of dialysis

• Uses BOTH convection and

diffusion to remove large

molecular weight poisons from

the blood

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TECHNICAL

ISSUES

Enhanced computerized database

system of HD treatments.

Provision of a single-needle HD

machine, and HD machine that does

continuous dialysis (24 hrs).

Portable water treatment (reverse

osmosis) machines to provide

additional HD treatments, anywhere in

the hospital, during calamities when

there are epidemics requiring

emergency HD.

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OPERATIONS

The lease-fee-per-treatment that is

the basis of payment to the winning

proponent, is ADJUSTABLE, in

case of fluctuations in the US dollar

to peso exchange rate, reflecting

an improved peso value.

Transfer of expenses related to

laundry and garbage disposal

(sharps, tubings, dialyzers) to the

winning proponent.

2003 2010

2003

CONTRACT

2010

CONTRACT

TOR

PREPARATION 4 months 2 months

BIDDING

ACTIVITIES 1 month 1 month

POST-

EVALUATION 1 month 1 month

AWARDING OF

CONTRACT 1 month 1 month

Cooperation Period – 5 years

• 3 proponents participated in the bidding

• 3 proponents participated in the bidding

The bid of Fresenius Medical Care emerged as

the most responsive bid

2nd contract became effective in March 2010

SUMMARY

• After 2.5 years of the 2nd

contract, the HD

Centers continue to increase its revenue

• The highest quality and most advanced typed

of HD therapy is provided for all Filipinos,

especially the underprivileged, at one third

the cost of delivery of the same treatment in

other hospitals

SUMMARY

• The success of the HD Project has

paved the way for PPP for another

NKTI project –

–Radiology-Oncology Center