Different strokes for different folks

Risks and Benefits in different hospital PPP models based upon

A Zebra or a Painted Horse

are Hospital PPPs infrastructure partnerships with stripes, or a separate species?

Dominic Montagu
Lead Health Systems Initiative, Global Health Group, UCSF

Asian Development Bank

May 16, 2012
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.

Private hospitals potential?

More capital
(which is often in very short supply)

Better maintenance of capital investments Better management

There is a strong relationship between management practices and outcomes

Source: LSE CEP and McKinsey cross country hospital study Further analytic detail can be found at http://cep.lse.ac.uk/_new/research/productivity/management.asp

There is a strong relationship between management practices and competition

Source: LSE CEP and McKinsey cross country hospital study Further analytic detail can be found at http://cep.lse.ac.uk/_new/research/productivity/management.asp

There is a strong relationship between management practices and size

Source: LSE CEP and McKinsey cross country hospital study Further analytic detail can be found at http://cep.lse.ac.uk/_new/research/productivity/management.asp

Management practices is correlated with managerial autonomy

Source: LSE CEP and McKinsey cross country hospital study Further analytic detail can be found at http://cep.lse.ac.uk/_new/research/productivity/management.asp

Autonomy is the most attractive incentive for managers

Source: LSE CEP and McKinsey cross country hospital study Further analytic detail can be found at http://cep.lse.ac.uk/_new/research/productivity/management.asp

Private hospitals have better management practices than public hospital

Source: LSE CEP and McKinsey cross country hospital study Further analytic detail can be found at http://cep.lse.ac.uk/_new/research/productivity/management.asp

Review
Private Ownership = Autonomy Productivity
Competition Size Better Outcomes

Does any of this benefit accrue to the government or health systems?

PUBLIC-PRIVATE PARTNERSHIP

A more or less permanent cooperation between public and private actors, through which the joint products or services are developed and in which the risks, costs and profits are shared.
Klijn, Edelenbos et al. 2007 cited in Tynkkynen and Lehto 2009

PPP PURCHASING CONTRACT

A more or less permanent cooperation between public and private actors, through which the joint products or services are developed and in which the risks, costs and profits are shared.
Klijn, Edelenbos et al. 2007 cited in Tynkkynen and Lehto 2009

PPP PURCHASING CONTRACT

A more or less permanent cooperation between public and private actors, through which the joint products or services are developed and in which the risks, costs and profits are shared.
Klijn, Edelenbos et al. 2007 cited in Tynkkynen and Lehto 2009

Health PPPs

vs.

Infrastructure PPPs

Health is special..
Infrastructure PPP Hospital PPP

Measurability of output Variability of outputs over time Variability of organizational configuration over time

Govt is primary purchaser

Principal risk is political

High ratio of investment capital to operating capital

definition
Options Contracting non-clinical support services Contracting clinical support services Contracting specific clinical services Buying hospital services common terms Outsourcing Contracting Private sector responsibility
Provides nonclinical services (cleaning, catering, laundry, security, building maintenance) and employs staff for these services. Provides clinical support services such as radiology or laboratory services.

Public sector responsibility

Provides all clinical services (and staff) and hospital management; manages contract and pays for support services Manages hospital and provides clinical services; manages contract and pays for services. Manages hospital and provides most clinical services; manages contract and pays for services. Contracts with private hospitals, monitors, pays for services. Contracts with private firm for provision of public hospital services, pays private operator for services provided, and monitors and regulates services and contract compliance.

Outsourcing; PPP Outsourcing; PPP

Contracting; Purchasing

Provides specific clinical services (such as lithotripsy; dialysis) or routine procedures (cataract removal).

Services

Operating contract

Facility / Finance

PFI

Contracted private hospitals provide services in accordance with contractual provisions Manages public hospital under contract with government or public insurance fund; provides clinical and nonclinical services. May employ all staff. May also be responsible for new capital investment, depending on terms of contract. Finances, constructs, and owns new public hospital and leases it back to government

Manages hospital and makes phased lease payments to private developer.

Combined

PPIP BOT BOOT

Co-location

Co-location Sale of public hospital for alternative use

Privatization

Reimburses operator for capital costs and recurrent costs for services provided. Finances, constructs, and operates new public hospital and provides nonclinical or Reimburses operator for capital and recurrent costs for services provided. clinical services, or both. Takes facility ownership at end. Manages public hospital for public Operates private wing or department (for patients and contracts with private wing private & public (?) patients); fulfills for sharing joint costs, staff, and payment and service access conditions equipment.; supervises fulfillment of agreed patient access and other conditions Purchases facility and converts it for Monitors conversion to ensure adherence alternative use depending on sales to contractual obligations. agreement

Options Contracting non-clinical support services Contracting clinical support services Contracting specific clinical services Buying hospital services

common terms Outsourcing Contracting

Contracting
Private sector responsibility
Provides nonclinical services (cleaning, catering, laundry, security, building maintenance) and employs staff for these services. Provides clinical support services such as radiology or laboratory services.

definition
Public sector responsibility
Provides all clinical services (and staff) and hospital management; manages contract and pays for support services Manages hospital and provides clinical services; manages contract and pays for services. Manages hospital and provides most clinical services; manages contract and pays for services. Contracts with private hospitals, monitors, pays for services. Contracts with private firm for provision of public hospital services, pays private operator for services provided, and monitors and regulates services and contract compliance.

Outsourcing; PPP Outsourcing; PPP

Contracting; Purchasing

Provides specific clinical services (such as lithotripsy; dialysis) or routine procedures (cataract removal).

Services

Operating contract

Facility / Finance

PFI

Contracted private hospitals provide services in accordance with contractual provisions Manages public hospital under contract with government or public insurance fund; provides clinical and nonclinical services. May employ all staff. May also be responsible for new capital investment, depending on terms of contract. Finances, constructs, and owns new public hospital and leases it back to government

Manages hospital and makes phased lease payments to private developer.

Combined

PPIP BOT BOOT

Co-location

Co-location Sale of public hospital for alternative use

Privatization

Reimburses operator for capital costs and recurrent costs for services provided. Finances, constructs, and operates new public hospital and provides nonclinical or Reimburses operator for capital and recurrent costs for services provided. clinical services, or both. Takes facility ownership at end. Manages public hospital for public Operates private wing or department (for patients and contracts with private wing private & public (?) patients); fulfills for sharing joint costs, staff, and payment and service access conditions equipment.; supervises fulfillment of agreed patient access and other conditions Purchases facility and converts it for Monitors conversion to ensure adherence alternative use depending on sales to contractual obligations. agreement

Options Contracting non-clinical support services Contracting clinical support services Contracting specific clinical services Buying hospital services

common terms Outsourcing Contracting

PPPs
Private sector responsibility
Provides nonclinical services (cleaning, catering, laundry, security, building maintenance) and employs staff for these services. Provides clinical support services such as radiology or laboratory services.

definition
Public sector responsibility
Provides all clinical services (and staff) and hospital management; manages contract and pays for support services Manages hospital and provides clinical services; manages contract and pays for services. Manages hospital and provides most clinical services; manages contract and pays for services. Contracts with private hospitals, monitors, pays for services. Contracts with private firm for provision of public hospital services, pays private operator for services provided, and monitors and regulates services and contract compliance.

Outsourcing; PPP Outsourcing; PPP

Contracting; Purchasing

Provides specific clinical services (such as lithotripsy; dialysis) or routine procedures (cataract removal).

Services

Operating contract

Facility / Finance

PFI

Contracted private hospitals provide services in accordance with contractual provisions Manages public hospital under contract with government or public insurance fund; provides clinical and nonclinical services. May employ all staff. May also be responsible for new capital investment, depending on terms of contract. Finances, constructs, and owns new public hospital and leases it back to government

Manages hospital and makes phased lease payments to private developer.

Combined

PPIP BOT BOOT

Co-location

Co-location Sale of public hospital for alternative use

Privatization

Reimburses operator for capital costs and recurrent costs for services provided. Finances, constructs, and operates new public hospital and provides nonclinical or Reimburses operator for capital and recurrent costs for services provided. clinical services, or both. Takes facility ownership at end. Manages public hospital for public Operates private wing or department (for patients and contracts with private wing private & public (?) patients); fulfills for sharing joint costs, staff, and payment and service access conditions equipment.; supervises fulfillment of agreed patient access and other conditions Purchases facility and converts it for Monitors conversion to ensure adherence alternative use depending on sales to contractual obligations. agreement

Options

common terms

PPPs
Description

definition

Services

Operating contract

A private organization is brought in to operate and deliver publicly-funded health services within a government facility A public agency contracts a private entity to finance, design, build and operate a hospital facility. Health services within the facility are provided by government. A private organization establishes capacity (through new construction or expansion of existing facility) to provide hospital services under sustained public or social insurance reimbursement A public agency allocates a portion of a public hospitals land and/or premises for sustained use by a private organization in exchange for payment and specified benefits to the public agency.

Facility / Finance

PFI

Combined

PPIP BOT BOOT

Co-location

Co-location

Services Public-Private Partnerships

Hospital Geral de Pedreira, Brazil

Sao Paolo State Government financed, built and equipped 16 new hospitals under traditional public works contracts State then contracted with not-for-profit hospital operators to manage the hospitals (including all clinical and non-clinical services) Operator obliged to treat all local residents Operator receives global fixed budget from State provided specified patient volume and quality parameters are achieved Operator receives capital expenditure reimbursement

Facility & Finance Public-Private Partnerships

Birmingham, UK

Private Finance Initiative (PFI) hospital contracts are awarded and managed by local Trusts. The contracts use private funding to build and maintain hospital buildings. The contractor often provides support services, typically including cleaning, catering and portering, often referred to as hotel services.
-The performance and management of hospital PFI contracts. British National Audit Office 2010
million
1,500 1,000 500 0 1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00e 2000/01p 2001/02p 2002/03p 2003/04p PFI

Source of Capital Investment in UK Hospitals

3,500 3,000

2,500

2,000

Net government

Asset sales

Combined Public-Private Partnerships

Alzira Model, Spain

1 University hospital (300 beds), 4 Integrated healthcare centers and 46 Public primary care health centers

Hospital de La Ribera

Built area: 41.000 m2 Number of beds: 300 Outpatient facilities: 65 Surgery rooms: 13 Emergency boxes: 22 ICU: 22 beds 22Pediatric emergency boxes: 7

1.850 workers
It offers public health service to 250.000 people, 6% of total region population.

Co-Location Public-Private Partnerships

Indonesia

Common for dialysis, sterilization, and other technical clinical or technical services.

The Hospital Act (2009) distinguished for-profit and NFP hospitals for the first time acknowledged the rights to tax incentives for the NFP hospitals

Austrian co-location sterilization joint venture: MPAV Vorarlberg GmbH

Ongoing challenge to develop regulations to give effect to this provision.

PPP hospitals potential?

More capital
(often in very short supply)

Better maintenance of capital investments Better management of services

Evidence for Improvement

Varies by type
Because the goals vary by type

Distribution
(equity)

Efficiency

Quality of Care

Conclusion
Hospital PPPs Infrastructure PPPs
Hospital PPPs Hospital Contracts Hospital PPPs exist in 4 types:
1. 2. 3. 4. Services Facility & Finance Combined Co-Location

Systems Perspective.
(technical and consumer responsiveness)

PPP Productivity
(allocative and technical)

Success for the PPP.

Quality

Responsiveness

Systems Perspective.
(to population health needs) (technical and consumer responsiveness)

PPP Productivity
(allocative and technical)

Quality

Health System
may not equal success for the health system

Equity