Public Private Partnership for replacing the national referral hospital

1. Dr Mphu K Ramatlapeng Minister of Health and Social Welfare Lesotho 3rd October 2007 Public Private Partnership for replacing the national referral hospital

2. Background • As part of the Health Sector Reforms, the referral system in the health sector needed to be greatly improved to meet the clinical needs of the country • The current national referral hospital QEIII could no longer fulfill this function satisfactorily because of its derelict infrastructure • In 2002 Boston University, as part of the reforms agenda, was tasked by the MOHSW to critically look at QEII Hospital and come up with recommendations as to the way forward • The Boston University report Economic Study of the Referral Health Services in Lesotho: The Future of QEII Hospital recommended the construction of a new hospital at a new site as the only option that would make economic sense. • The New Referral Hospital would provide a higher level of service and quality • The benefits of the hospital would be felt throughout the health sector due to in country high quality of specialist care thus reducing the referrals to neighboring South Africa, and training of health workers and • A Public Private Partnership was the preferred route to the provision of the new referral hospital

3. How did we get here? • Urgent need for replacement of existing hospital, Queen II Existing service unsatisfactory due to dilapidated building, over 50years old - Less expensive to replace than repair - Clinical service offered is of poor quality for an apex hospital • Public Private Partnership option taken by GOL in 2005 -The PPP partner will design, build, fully maintain and operate the new public hospital and 3 urban Filter Clinics for Government under an 18 year contract -The PPP allows Government to shift operating risks of the hospital project to the PPP Partner - PPP partner will bring operational experience in hospital management • IFC main advisor on this PPP

4. $ $ Hospital PPP PrivateOperator Ministry of Health PPP Agreement New Hospital • Detailed designs • Capital financing • Construction • Medical supplies & equipment • Clinical services • Maintenance • Non-clinical services • Staffing and Training • Sector Policies and Strategy • Service Package • Reimbursement for all clinical and non-clinical services • Performance monitoring • Joint Services Committee

5. Why the PPP Model for Lesotho? • Increased need for better services as expressed by both the public and government • Private Sector can deliver the results Government and the public are seeking • Government is increasingly focusing on accountability and results • Government intends the New Hospital PPP Project to provide - -Modern approaches to health management, clinical procedures, medical equipment -Training for the health sector -Predictable expenditure – to stay within Government’s Unitary Payment

6. Guiding Principles for the Project • The New Public Hospital serves two equally important functions: Training resource for health sector High quality services for all Basotho • Balance what is needed with what is affordable: Use current operating budget as a baseline • Maintenance of buildings and equipment Suitability, durability, ease of maintenance and minimum life-time cost for the building and equipment • Maximum value for money spent on this project

7. What is the Project? • Project Requirements: Higher volume of patients and meet GoL affordability • Site & Building: ~150,000 hectare site at a new site ; 29,000m2 building, designed for future expansion • Project Cost: M438m/$62.5m (M550m/$78.5m incl VAT) for design, construction & fully equipped for operation Description: GoL will contract through a competitive, transparent process with a PPP Partner for an 18 year contract of full Design-Build-Finance-Operate Capacity: 390 bed modern apex hospital for the country

8. What is included in the New Hospital PPP? Unitary Payment by GOL in exchange for the PPP Partner providing following – 1. Initial services - Design, construction and partial financing of the new hospital -Refurbishment and re-equipping of three filter clinics, initial staff training 2. Operational Services at the filter clinics and new hospital include: - Non-clinical services - Clinical Support Services - Clinical Services - Private Patients The Operator will integrate public and private clinical services (amenities being only difference) 3. Managing Referrals and adds-ons for full Oncology unit and other services - The PPP Partner will assist Government in managing the effectiveness and cost of referrals to South Africa especially oncology.

9. What is included in the New Hospital PPP? (cont)2.Operational Services at the filter clinics and new hospital include:-Non-clinical services- Clinical Support Services - Clinical Services- Private Patients The Operator will integrate public and private clinical services (amenities being only difference) 3. Managing Referrals and adds-ons for full Oncology unit and other services- The PPP Partner will assist Government in managing the effectiveness and cost of referrals to South Africa especially oncology.

10. Current Project Funding • Sources of Funds • Private sector (banks, investors, project company) • Providing 20% of capital costs • Multilateral • Global Partnership for Output-Based Aid (GPOBA) • Grant of M43.75m /$6.25m, payable over first five years of project, to augment the Unitary Payment. Administered by World Bank • Partial Risk Guarantee (PRG) has been requested from the World Bank by Government – this provides the operator with partial coverage (at their expense) should Government fail to make the unitary payment • Donors • IFC and Donor trust funds have supported technical consultants • Government • Providing 80% of capital costs, saving large debt service costs and significantly improving project risk profile

11. Current budget for QEII Hospital • The budget for QEII hospital in 2007/08 was137 million Maloti This included the Filter Clinics • This budget has been tripled over the past 3 years but with no commensurate increase of service levels. In fact services are decreasing • Government is spending as much to operate QEII today as it will spend for the new hospital which will have a higher level of service and quality

12. How to Avoid the Same Problems in a New Building? • Overcrowding with patients needing lower level care - Emphasize primary care and routine outpatient services at the filter clinics - Fully functioning filter clinics - Triage – patient management on entry at clinics and hospital • Strong referral policy • Equipment and Supplies • Servicing, supply and maintenance contracts • Human Resources / Staffing Staff complaints to be addressed include – lack of supplies, equipment, and training - low salaries - PPP Partner is contractually required to have full staffing - Partner prepared to provide better working conditions

13. How will the New Hospital Affect the Health Sector? • Higher level of medical services at New Hospital • Greater access to services – more patients can be seen • Better referral resource for district hospitals • New Hospital will serve as a training resource for the health sector • Fewer referrals expected to South Africa over time • Fits in Government’s affordability envelope

14. Other Concerns • Cost of public services will remain the same – cost to public patients does not increase • Government is not reducing the Ministry’s budget to pay for the new hospital • WB to provide support to Government to develop capacity for contract management • Other benefits to Basotho from the project include Local Economic Empowerment (LEE) • Recruitment should minimize disruption to staffing in the district hospitals and elsewhere • Existing staff at Queen II will be offered the choice of transferring to other Government facilities and transferring to the private operator

15. The National Scale-up Plan for ART services in Lesotho Thank you for your attention !