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.

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.

PUBLIC PRIVATE PARTNERSHIPS

PART ONE
PART TWO
PART THREE

BRIEF HISTORY
THE THREE Ps
SOLUTION TO CANCER?

PUBLIC PRIVATE PARTNERSHIPS

PART ONE

BRIEF HISTORY

Before PPP
Swindon
Hospital 2000

Birmingham
Hospital 2000

Ward in 1920s

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
Construction projects delivered late to public sector

73%
70%

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.

After PPP
Swindon
Hospital 2015

Birmingham
Hospital 2015

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.

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
Construction projects delivered late to public sector

73%
70%

PFI experience (2002 NAO census)

Construction projects where cost to public sector
exceeds price agreed at contract
Construction projects delivered late to public sector

22%
24%

Issues still to resolve

Public Relations transparency.

Length of time of procurement bid costs.
Risk transfer.
Poor business case assessment.

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!

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.

PUBLIC PRIVATE PARTNERSHIPS

PART TWO

THE THREE Ps

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.

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?

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.

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

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.

PUBLIC PRIVATE PARTNERSHIPS

PART THREE

CANCER PPP

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.

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.

Case Study: Turkey Structure

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.

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

7.6

TOTAL

12.7

Cancer context
Age Structure of the Population: from Pyramid to Mushroom
31 December 1910

31 December 2001 and December 2050

Age

Age

Men

Women

1910

Thousand People

Men

1910

Women

2050

Thousand People

Thousand People

2050

Thousand People

Cancer context

Case study: Vietnam Demographics

Population 91 million

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.

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.

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.

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.

Case study: Vietnam Structure

Case study: Vietnam Profile

COMPARISON OF CASH FLOW
PPP OPTION vs STRAIGHT PROCUREMENT - REAL TERMS
80,000,000
A
70,000,000
n
n
60,000,000
u
a 50,000,000
l
40,000,000
C
o 30,000,000
s
t 20,000,000
$

10,000,000
2014

2015

2016

2017

2018

2019

2020

2021

Concession Period
Straight Procurement

PPP Option

2022

2023

2024

2025

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.

Case study: India Demographics

Population 1.25 billion

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

Case study: India - Conclusion

A coordinated strategy would benefit

Private sector operators need to be involved
A consortium should put together a coordinated solution

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.