Post on 22-Feb-2016
description
PPP Problems & Pitfalls: How to
Avoid ThemApril Harding
Mazowiecke VoivodeshipJanuary 28 2010
Key points
2
PPP design to suit goals
PPP design to fit context
You will get things wrong (managing implementation is critical)
The “partnership” is critical
Outline
3
UK Case and Lessons
Spain Case and Lessons
Conclusions
UK starting point 1992: directly administered hospitals
4
UK national government directly administers hospitals
National Health Service (NHS) owns the hospitals, and funds their operation
Rigid public services rules undermines effective, responsive operation.
Low spending, run-down facilities
PPP infrastructure model gets adapted for hospitals
5
In infrastructure sectors (power, transport, water, rail)• tendered for finance, facility & services• large amounts of capital upfront; risks are
big, but there are many payers• efficiency gains captured in full range of
activities (facility design and operation)
When applied in health, one big change: services omitted.In health: another key difference, only one payer, the NHS….more risk, higher cost
Omitting services, limits efficiency gains
4%
2%
4%3%3%
5%
10%
15%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Average % of hospital operating budget by cost category
Dietary ITPharm-
acyFacilityMgt,Maint
Support
Services
MedicalTech
Diag&Lab
ClinicalCareDeliver
y
54%
Building Design & Constr.
Limited efficiency gains
DesignsBuilds
Non-clinical services
DesignsBuildsFinances
Non-clinical services, for 25-30 years
PUBLICLY-FINANCED ‘DESIGN & BUILD’
PRIVATELY-FINANCED ‘DESIGN, BUILD, FINANCE AND OPERATE’
What the private sector does....
PFI benefits
90% of all PFI projects delivered on-time
Within budget projects
Better maintenance
PFI costs
Transactions costs are higher for PFI than traditional procurement:
external advisers for all parties
longer duration of tendering and contract negotiation
Higher Cost of Capital
PUBLIC FINANCE•Government borrows•Government’s cost of capital paid•(Future taxpayers bear risks)
PRIVATE FINANCE•Borrow from banks, bond and equity markets• Higher cost of capital
PFI offers:•Slightly lower construction costs•Fewer construction time overruns•Little difference in support services•Better maintained hospitals•Higher transactions costs•Higher costs of borrowing
Privately Financed versus Well-Managed Publicly Financed
Result: in most cases, not value for money
12
PFI model used less often after budget reform compelling the costs to be properly accounted for (e.g. on capital account)
Main driver may have been getting around budget constraints on capital investment
Insight: PPP model didn’t fit the objectives of cost savings, and services improvement
Insight: Poor accounting misrepresented “value for money”
Valencia government applies a comprehensive PPP model
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Valencia starting point
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State (sub-national govt) directly administers services
Universal coverage; tax finance
Lacking facilities
Rigid public services rules undermines effective, responsive operation.
Alzira community needed a hospital
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Alzira community – 230,000 people
Nearest hospital: Valencia, > 30 miles
Political promise to build a new hospital
PPP for finance, facility & services
PUBLIC FINANCING
ALZIRAMODEL
PUBLICCONTROL PRIVATE
PROVIDER
PUBLICPROPERTY
CAPITATION PAYMENTPERIOD: 10/15 years
• Local Government Inspector
• Control• Inspection
• Builds new premises• Employ medical staff• Management “know how”• Free & public healthcare
services
Returns to the Local Government after 10 years
Innovative services purchasing: “money follows the patient”
CAPITATION PAYMENT
Yearly capitationpayment for each person
Annual review:• CPI or • % health budget
Hospital pays 100% of the cost of patients who go elsewhere
Hospital is paid an 80% of the cost of treatingpatients from other area
Alzira: phase 1
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Alzira Model I (Hospital Care): 1999/2003– Contract #1: lease of facility/ land– Contract #2: concession for 10 years, extendable
to 15 for the operation of hospital services for people in catchment area
– Capitation fee: $300 + CPI (1999)– Investment commitment ($95M) - build new
hospital
2002: Alzira model clearly not working
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Consortium can’t cover costs
Can’t constrain costs because PHC referrals are high, and they can’t influence them
Can’t deliver investment, and new facility
Renegotiation - PARTNERS
Alzira II: integrated with PHC to enable cost control
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Alzira Model II (Integrated Care): 2003/2018– Contract #1: lease of facility/ land– Contract #2: concession for 15 years, extendable
to 20– Covers management of primary and hospital care
in catchment area– Capitation fee: $570 + % yearly increase in the
health budget– Investment: $115 M during the 15-year period
Redesigned model achieves good results
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Increasing activity, services availability
Substantial increase in patient satisfaction
New facility offers sizable upgrade in capacity and quality
Ranked most years in top 20 general hospitals in Spain
More and more services and facilities provided with this PPP model
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Valencia Community: 25% of the population• Alzira (1999)• Torrevieja (2006)• Denia (2008)• Manises (2008)• Crevillente (2009)
Madrid Community• Valdemoro (2008)
• Portugal:• Braga ( 2006)
Insights: the services are critical
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Private sector (flexible) management and staffing enables:
• Incentivizing performance of staff• incentivizing team work and coordination• Incentivizing uptake of use of new
organizational models and technology supports
• widespread use of chronic disease management systems
Insight: monitoring and dealing with problems as partners is critical
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Extensive collaboration and cooperation was required to bring about the successful redesign
PPPs work when model fits goals and context
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Services taken over by private operator – allowed efficiency and quality gains
PHC added to enable cost containment
Capitation (money follows patients) worked within the Spanish health finance context to incentivize performance
PPPs can be fixed
26
Even with lots of effort…
• Everyone gets things wrong
• The “partnership” is critical