presentation: the potential for infrastructure ppps to improve healthcare financing and delivery in...
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Presented by Nick Carter during the Joint SERD, PPP & Health Brownbag Seminar in ADB last 15 April 2015. - The potential for infrastructure PPPs to improve healthcare financing and delivery in AsiaTRANSCRIPT
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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.
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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.
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PUBLIC PRIVATE PARTNERSHIPS
PART ONE BRIEF HISTORY
PART TWO THE THREE Ps
PART THREE SOLUTION TO CANCER?
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PUBLIC PRIVATE PARTNERSHIPS
PART ONE BRIEF HISTORY
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Before PPP
Swindon Hospital 2000
Birmingham Hospital 2000
Ward in 1920s
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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%
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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.
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After PPP
Swindon Hospital 2015
Birmingham Hospital 2015
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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.
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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)
Construction projects where cost to public sector exceeds price agreed at contract 73%
Construction projects delivered late to public sector 70%
PFI experience (2002 NAO census)
Construction projects where cost to public sector exceeds price agreed at contract 22%
Construction projects delivered late to public sector 24%
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Issues still to resolve
Public Relations transparency.
Length of time of procurement bid costs.
Risk transfer.
Poor business case assessment.
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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!
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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.
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PUBLIC PRIVATE PARTNERSHIPS
PART TWO THE THREE Ps
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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.
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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?
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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.
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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
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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.
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PUBLIC PRIVATE PARTNERSHIPS
PART THREE CANCER PPP
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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.
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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.
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Case Study: Turkey Structure
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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.
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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
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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
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Cancer context
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Case study: Vietnam Demographics
Population 91 million
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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.
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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.
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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.
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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.
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Case study: Vietnam Structure
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Case study: Vietnam Profile
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10,000,000
20,000,000
30,000,000
40,000,000
50,000,000
60,000,000
70,000,000
80,000,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
A
n
n
u
a
l
C
o
s
t
$
Concession Period
COMPARISON OF CASH FLOW PPP OPTION vs STRAIGHT PROCUREMENT - REAL TERMS
Straight Procurement PPP Option
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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.
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Case study: India Demographics
Population 1.25 billion
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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
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Case study: India - Conclusion
A coordinated strategy would benefit
Private sector operators need to be involved
A consortium should put together a coordinated solution
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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.