Building Public/Private Partnership for Health System Strengthening Hospital Contracting Professor EK Yeoh School of P

1. Building Public/Private Partnership for Health System Strengthening Hospital Contracting Professor EK Yeoh School of Public Health and Primary Care The Chinese University of Hong Kong Bali Hyatt Hotel, Sanur, Bali 21-25 June 2010

2. Objectives • Understanding the nature of hospital contracting and context under which hospital contracting may be considered; • Knowledge of different models and options of hospital contracting; • Understanding why and how hospital contracting works; and • Developing a framework for hospital contracting 2

3. Outline • Discussing nature and rationale of hospital contracting • Different models and options of hospital contracting from the experience of a number of countries • Discussing the issues, logistics and application of hospital contracting in different countries • Discussing the challenges and issues of hospital contracting and PPP programmes in the context of the health care system of Hong Kong • Discussing a framework for hospital contracting 3

4. What is Contracting? Contracting is a mechanism for a financing entity (such as a government ministry) to acquire a specified set of services, with specified objectives, of a defined quantity, quality, and equity, in a particular location, at an agreed-on price, for a specified period, from a particular nonstate provider (such as an NGO, private sector firm, or private practitioner). Source: Benjamin Loevinsohn, Performance-Based Contracting for Health Services in Developing Countries: A toolkit. World Bank, 2008 4

5. What is Performance-Based Contracting? A form of contracting that explicitly includes a clear definition of a series of objectives and indicators by which to measure contractor performance, collection of data on the performance indicators, and consequences for the contractor based on performance such as provision of rewards (such as performance bonuses or public recognition) or imposition of sanctions (such as termination of the contract or public criticism). Source: Benjamin Loevinsohn, Performance-Based Contracting for Health Services in Developing Countries: A toolkit. World Bank, 2008 5

6. “Loosely” defined Insufficient Weak Clearly defined Sufficient Strong Difference between Grant, Contracting and Performance-based Contracting Grant Contracting Performance-based Contracting Defining services Performance monitoring Sanction

7. Contracting for Health Service Delivery in Developing Countries “the impetus for all the contracting initiatives [studied] was the inadequate quality and coverage of government services, especially for poor people.” Benjamin Loevinsohn, April Harding. Buying results? Contracting for health service delivery in developing countries. Lancet 2005; 366: p. 680. 7

8. Nature of Hospital Contracting • Performance-based - clear objectives and indicators, - systematic data collection of the progress of the selected indicators - rewards or sanctions based on performance. • Services - primary healthcare; hospital surgeries; establishing a health insurance system; setting up and operating a voucher project; providing ancillary services such as equipment maintenance, cleaning, waste management, food preparation, and security, etc. • Typology - a management contract and a service delivery contract approaches - context and services specific • Pay-for-Performance - focus on important objectives and uses financial rewards to reinforce good performance. Specific explicit, measurable outcomes and allows for termination of the contract for nonperformance. 8

9. Typology of Service Delivery Arrangement Source: Benjamin Loevinsohn, Performance-Based Contracting for Health Services in Developing Countries: A toolkit. World Bank, 2008 9

10. Who receives What the funds can Who provides Relationship to Type of P4P the funds be used for the funds Contracting 1. Rewards for local Local Programs of local National Performance agreements governments governments governments government rarely true contracts 2. Rewards National Programs of national Development Not related to national governments governments partners governments 3. Payment per Individual Personal uses Government, May be easier to introduce service (fee for health workers individuals, or in the context of contracting service) NSPs with NSPs 4. Performance NSP Other programs or at Purchaser Sometimes used in health bonuses the discretion of the care contracting NSP 5. Performance- NSP At discretion of the Purchaser Can be incorporated fairly based payment NSP easily into contracts Source: Author. Note: DPT3 = third dose of diphtheria/pertussis/tetanus vaccine; GAVI Alliance = formerly the Global Alliance for Vaccines and Immunization; NGO = nongovernmental organization; NSP = nonstate provider. Types of Pay for Performance and Their Relationship to Contracting Source: Benjamin Loevinsohn, Performance-Based Contracting for Health Services in Developing Countries: A toolkit. World Bank, 2008 10

11. Models of Public–Private Partnership in Hospital Provision • Franchising Public authority contracts a private company to manage existing hospital • DBFO (design, build, finance, operate) : Private consortium designs facilities based on public authority’s specified requirements, builds the facility, finances the capital cost and operates their facilities • BOO (build, own, operate) Public authority purchases services for fixed period (say 30 years) after which ownership remains with private provider • BOOT (build, own, operate, transfer): Public authority purchases services for fixed period after which ownership reverts to public authority • BOLB (buy, own, lease back) Private contractor builds hospital; facility is leased back and managed by public authority • Alzira model Private contractor builds and operates hospital, with contract to provide care for a defined population Martin McKee, Nigel Edwards, & Rifat Atun, Public–private partnerships for hospitals. Bulletin of the World Health Organization, November 2006; 84 (11) 11

12. Private sector responsibility Other Private Participation in Hospitals 12

13. Other Private Participation in Hospitals 13

14. Critical Policy Issues Regarding Hospital Contracting • Universal access. To ensure that all public patients, particularly the poor and uninsured, have access to adequate hospital care, most contracts for private management of public hospitals require the provider to continue service to all public patients. • Funding. Governments generally fund public hospitals through budgetary payments or public health insurance programs, shifting the basis for payments from historical or input costs to the clinical mix of patients to be treated. • Consolidation. Many countries, particularly in Eastern Europe, have too many public hospitals and will need to downsize, consolidate, and close some facilities. Public-private partnerships can spur consolidation of services. • Competition. Competition between hospitals stimulates improvements in the quality and efficiency of service. • Regulation.Public-private partnerships may impose additional public policy obligations that require monitoring, sanctions for noncompliance, and dispute resolution procedures. 14

15. Cost:There are significant costs for the firms bidding for a public–private partnership and for the health-care provider. Quality:Trade off between cost, time and quality. Priority has been to meet the specifications agreed in the initial contract, with a reluctant acceptance that the project may go over time or budget. Flexibility:Public–private contracts are often specified in details with large penalties for introducing changes, leading to a lack of flexibility. Some hospitals has been out of date by the time they are opened in a changing environment. Complexity:Projects involve many different types of stakeholders, such as universities and research funders. The difficulties in reaching agreement with all of the stakeholders, combined with the high costs of the projects, may eventually lead to collapses in the project. Other Issues Relating to Hospital Contracting 15

16. Context Under which Hospital Contracting may be Considered 16

17. Examples for Hospital Contracting in low Income Countries • Contracting out dietary services (Bombay) • Contracts to hospital security and cleaning, and ambulance services (Port Moresby, Papa New Guinea) • Contract for major items, such as CT scanners (Bangkok) • Contract for rural district hospitals (Africa) • Contact with a mining companies for the use of their hospitals to provide hospital services in district (Zimbabwe). Source: Anne Mills To contract or not to contract? Issues for low and middle income countries. Health Policy and Planning; 1998; 13(1): 32-40. 17

18. Corresponding Reasons for Hospital Contracting in Low Income Countries • Reduction of the workload on management; expected to be cheaper; reduces wastage and pilferage; avoid service interruption (type: catering; place: Bombay) • Obtain cheaper; better quality service (type: cleaning; place: Bangkok) • Obtain latest equipment; avoid difficulty and delays in getting government approval and funds; overcoming difficulties of maintenance (type: medical equipment; place: Thailand) • Make use of private sector capital (type: building district hospital; place: South Africa) • Lack of government capacity (type: contract with private hospitals with spare capacity; place: Zimbabwe) 18

19. Objective Conditions for Hospital Contracting in Low Income Countries • Sufficient private sector capacity for efficiency gain • Government offers an attractive business market • Failure for the government to provide efficiently • Inflexible and inefficient public provision • Social, political and economic environment such as functioning legal, banking, and government procedure, resistant to corruption and patronage 19

20. Some Problematic Issues regarding Hospital Contracting • Unclear responsibilities for contract design and for monitoring contract performance. • Unclear specification of services to be contracted out • Unclear incentive schemes to motivate performance 20

21. Other Motivations for Contracting • Strengthening healthcare financing • Cost containment and efficiency gain • Improve healthcare quality (such as reduce waiting time) and patient safety • Development of regional medical hub 21

22. Steps to Contract Step 1: Conduct Dialogue with Stakeholders Step 2: Define the Services Step 3: Design the Monitoring and Evaluation Step 4: Decide how to select contractors and establish the price Step 5: Arrange for contract management and develop a contract plan Step 6: Draft the contract and bidding documents Step 7: Carry out the bidding Process and Manage the contract Source: Benjamin Loevinsohn, Performance-Based Contracting for Health Services in Developing Countries: A toolkit. World Bank, 2008 22

23. Complexity of Hospital Contracting Specify outputs Payment method Price/rate determined Delivery monitored Compliance Conflict resolution Incentives to induce participate Risk sharing arrangements Managing uncertainty Cost recovery and profit 23

24. Politics of Hospital Contracting a) the decision to contract; b) the process to contract; c) the relationship between government, public sector employees, non-government providers, and citizens 24

25. Why Contracting work? • Focus on Results. The very act of drafting a contract can help the purchaser define exactly what services are needed and help make objectives explicit. • Flexibility. NSPs have the important advantage of being less constrained by “red tape” (excessive regulation), bureaucratic inertia, and unhelpful political interference. In many circumstances, this is the largest advantage of NSPs over government delivery of the same services. • Reduction of Important Aspects of Corruption. Contracting appears to reduce some aspects of corruption that plague public health care systems, such as absenteeism, theft of drugs, selling of positions, leakage of funds on their way to peripheral health facilities, and informal payments to providers. • Constructive Competition. Contracting uses constructive competition to increase effectiveness and efficiency. Nonstate providers are impelled through competition to develop the most effective and efficient ways of delivering services, both during the bidding process and during implementation. 25

26. Why Contracting work? • Improved Absorptive Capacity. Nonstate providers are usually better at overcoming “absorptive capacity” constraints that often plague government health care systems and prevent them from effectively using the resources made available. • Better Distribution of Health Workers. As a result of greater flexibility and innovative approaches, NSPs can often improve the distribution of health workers and help ensure that skilled health workers are available and working in underserved areas. • Managerial Autonomy. Contracts, if drafted properly, provide managerial autonomy and decentralize decision making to managers closest to the ground. • Government Focus on Stewardship Role. Contracting provides a greater opportunity for government to focus on roles that it is uniquely placed to carry out, such as planning, evaluation, standard setting, financing, and regulation. 26

27. Asian PPP Experiences • Singapore – Exploring the role of PPP in healthcare delivery and financing • Malaysia – PPP in healthcare financing via private health insurance • Hong Kong – mainly for healthcare delivery 27

28. Case Study PPP in Hong Kong’s Healthcare System 28

29. Hong Kong’s Health Policy “no one should be denied adequate medical treatment through lack of means”

30. Hong Kong’s Healthcare System “Dual” health care system Public sector Private sector Food & Health Bureau Department of Health Hospital Authority • Execute health care policies & statutory functions • Statutory body responsible for management of public hospitals 30

31. Delivery of Services Primary care Health promotion & disease prevention services mostly provided by the public sector Primary care curative services Service provided by Out-Patient departments of HA hospitals (26%) Service provided by private Western medicine doctors (57%) Service provided by private Chinese medicine practitioners (13%) Secondary & tertiary services Public sector is the dominant provider (79%) Source: Thematic Household Survey 2008 31

32. Source: Hospital Authority Statistical Report 2007-08 32

33. Healthcare Expenditure Total health care expenditure (2005/06 figures) 5.1% of Gross Domestic Product (GDP) Public sector (52%) Private sector (48%) Source:Hong Kong’s Domestic Health Accounts, 1989/90-2005/06 33

34. Sources of Funding Tax-based Financing Sources: Hong Kong’s Domestic Health Accounts, 1989/90-2004/05 34

35. Healthcare Funding Public sector: heavily subsidized (2006/07 figures) Private sector: fee-for-service, free market 35

36. Hospitals in Hong Kong - Pre-Hospital Authority era - Establishment of Hospital Authority - Post-Hospital Authority era 36

37. Pre-Hospital Authority Era A mix of public hospital services provided by government departments and 15 Non-government Organisations on a subvented basis Overseen by the Medical and Health Department Lack of explicit services agreement and contracting Problems: over-centralization, lack of financial incentives, inflexibility, low staff moral, lack of courtesy to patients, long waiting time, over-crowding, poor coordination between government and subvented hospitals 37

38. Establishment of the Hospital Authority (HA) The HA was found in 1990. Establish governance and management systems across all constituent hospitals. Manage HK’s public healthcare services including hospitals, specialist out-patient clinics and general out-patient clinics 38

39. Post-Hospital Authority Era A single corporation that manages the public hospitals in HK Explicit services agreement 39

40. PPP: General Principles Public Private Partnerships (PPPs) are arrangements where the public and private sectors both bring their complementary skills to a project, with varying levels of involvement and responsibility, for the purpose of providing public services or projects. Source: Efficiency unit, HKSAR Government 40

41. Characteristics of PPP • Large scale expensive long-term projects usually involving the construction of a new facility designed to deliver particular services; • The Government defines the quality and quantity of services, and the timeframe in which they are to be delivered; • The private sector is responsible for delivering the defined service while the government is mainly involved in regulation and procurement; • A long term relationship is established, typically between 10 years and 30 years, depending on the nature of the facilities, assets or services to be delivered Source: Efficiency unit, HKSAR Government 41

42. Characteristics of PPP • Responsibilities and risks are allocated to the party best able to manage them; • The private sector and/or the Government finances the project (wholly or in part). The private sector and/or the Government would recoup its investment from charges on end-users or payments made by the Government during the life of the contract; • The private sector is encouraged to make use of its innovation and flexibility to deliver good quality, cost-effective services throughout the project lifecycle; and • The different functions of design, construction, operation and maintenance are integrated / use a whole-of-life approach. Source: Efficiency unit, HKSAR Government 42

43. Healthcare Financing Reform Proposals • Financial pressures on the government provision of public healthcare • Aging population • Medical technology • Social expectation • Continued reliance entirely on public supply and funding - sustainable? • Any alternatives: financing system; expanding the role of PPP, enhancing public-private interface 43

44. Examples of PPP in HK • Cataract Surgeries Programme • Haemodialysis Public Private Partnership Programme • General Outpatient Clinic Public Private Partnership Programme • Shared Care Programme • Development of private hospitals - North Lantau Hospital Phase 2 Public-Private Partnership Project  Hong Kong Hospital Authority: http://www3.ha.org.hk/ppp/pppprogrammes.aspx 44

45. Cataract Surgeries Programme (starting from February 2008) To shorten waiting time for cataract surgery in public hospitals 45

46. Cataract Surgeries Programme • Target Group Patients who have been on the HA routine cataract surgery waiting list as at 1 Feb 2008 • Financial incentives A One-off funding (HK$ 40million) by the Government for implementation– Providing subsidy to patients to receive cataract surgery in private sector • Fees and Charges • A maximum subsidy of HK$5,000 to patients for cataract surgery provided by private ophthalmologists. • Co-pay not more than HK$8,000 • Consists of 1 pre-op assessment, the intraocular lens in the surgery and 2 post-op checks 46

47. Cataract Surgeries Programme Outcome • Shorter waiting time: reduce from 35.5 months to 31 months (Dec 2009) • 91% of patients are satisfied with the Programme • 98% of patients say: - Easy to select a suitable ophthalmologist from the pool of participating private ophthalmologists, - The Programme has helped them to receive surgery earlier. • Smooth cooperation between the public and private sectors in arranging surgeries and providing follow up support service 47

48. Haemodialysis Public Private Partnership Programme (3-year pilot starting from March 2010) • To enhance HD service for ESRF patients • To enhance patients’ self care capacity and improve QoL • To enhance collaboration between HA & community medical organizations 48

49. HaemodialysisPublic Private Partnership Programme • Target Group Patients on haemodialysis (HD) in HA hospitals with stable conditions • Arrangement HA will collaborate with community medical organisations to provide options for patients to receive HD in the community • Nephrologists assess patients conditions and invite suitable patients • Patients complete and sign consent • Patients enroll in the “Public-Private Interface-Electronic Patient Record Sharing Pilot Project” • Patients receive HD in the community; HA will provide follow-up, medications and examinations. • Fees & Charges Patients pay the community HD centres the same fee as charged by HA • Outcome To be evaluated 49

50. General Outpatient Clinic (GOPC) Public-Private Partnership Programme • Tin Shui Wai Primary Care Partnership Project (a pilot starting from June 2008) To expand GOPC services in districts with increasing demand for GOPC services by piloting a PPP model for the delivery of primary care service and promote the family-doctor concept in the community 50