INVESTING IN PPPS FOR HEALTH
By: Deputy Executive Director Mia Mary G. Sebastian
The health and economic crisis brought by the covid-19 pandemic has thrust a renewed spotlight on the urgent need to invest in health care delivery. In the Philippines, the timely passage of the Universal Health Care Act in 2019 serves as the legislative and regulatory framework for much-needed reforms in the health care system. Responding to this significant development, the PPP Center has identified health as one of its priority sectors for PPP development and implementation. In March 2019, the PPP Center, in collaboration with the Asian Development Bank, organized a forum on “Fostering Universal Health Care through PPPs”. This event provided greater momentum as the PPP Center assisted various implementing agencies in the continued development and expansion of their health PPP project pipeline.
The World Health Organization defines “universal health care” (UHC) to mean “all people [having] access to the health services they need, when and where they need them, without financial hardship. It includes the full range of essential health services, from health promotion to prevention, treatment, rehabilitation, and palliative care.” As a component of UHC, the government needs to ensure resiliency in health care systems that can adapt to both standard scenarios (i.e. health care system requirements relative to population, demographics, and level of economic development) and emergency circumstances such as outbreaks and pandemics. To achieve this, the government has to formulate effective policy reforms and invest in health care facilities and services.
As investments in health care can entail significant costs to the public sector, PPP is one of the possible delivery mechanisms for the government to achieve UHC and ensure resilient health care systems. The public sector also stands to benefit from the efficiency gains, innovation, and expertise that the private sector can bring to health care systems.
In a PPP scheme, the government can tap the private sector’s financial, operational, and management efficiencies in delivering quality and cost-efficient health services. The PPP scheme is structured to ensure proper alignment of incentives and optimal risk sharing, with the private sector undertaking the construction, operations, and maintenance in a whole-of-life approach. Accountability is then set through performance-based contractual provisions. On the part of the government, strong governance structure, capacity building, and change management are essential given the shift in its role as over-all provider of health care facilities and services to supervision of the private sector’s tasks in a long-term PPP contractual arrangement.
PPP Project Structures
Health PPPs can be structured with general variations on the type of services included in the PPP arrangement, the scope of the tasks of the private sector partner (PSP), the roles retained by the government, and repayment mechanisms to the PSP.
Integrated health PPP or concession PPP. The PSP is tasked to design, build or renovate, finance, operate, and maintain either a new or an existing health care facility. The operations of both clinical and non-clinical services, including the provision of health care workers and the purchase of equipment, and the maintenance of the entire facility are transferred to the PSP.
Infrastructure PPP. The PSP is tasked to design, build or renovate, finance, and maintain either a new or an existing health care facility. In comparison with an integrated health PPP structure, the operations of the clinical services, including the provision of health care workers, remain with the government in an infrastructure PPP structure. The operations of the non-clinical services and the provision of medical equipment can be transferred to the PSP.
Services PPP. The operations and maintenance of clinical and/or non-clinical services can be transferred to the PSP in a services PPP structure. Clinical services pertain to medical, diagnostic (such as laboratory, imaging, and hemodialysis), therapeutic, and emergency services. Non-clinical services include information technology systems, admissions and billing, electronic patient records, and other ancillary services. The PSP can also be responsible for certain capital investment (such as construction, extension, or rehabilitation of facilities) and provision of equipment.
In these PPP structures, the possible repayment mechanism to the PSP includes availability payments from the government and/or revenues from the operations of the health care facility and services. The PSP can also earn from the operations of allowed commercial activities.
Implementing Agencies in Health PPPs
There are various government implementing agencies that can undertake health PPPs as a way to deliver quality and cost-efficient health care services.
Department of Health (DOH) is primarily responsible for the formulation, planning, implementation, and coordination of policies and programs in the field of health. While the Local Government Code provides for the devolution of basic services, including health, to local government units, DOH also operates or supervises certain retained hospitals (e.g. hospitals in Metro Manila that are maintained by DOH’s Personnel Administration Division, specialty hospitals in Metro Manila, and regional hospitals across the Philippines). DOH has already initiated the development of a pipeline of health PPP projects in several retained hospitals.
The PPP Center and DOH (central office and regional hospitals) jointly conducted business cases for the development, operations, and maintenance of hemodialysis centers, including the provision of equipment, via PPP mode in two DOH regional hospitals – the Cagayan Valley Medical Center and the Baguio General Hospital and Medical Center. Given this specialized health diagnostic service, the PPP Center and DOH consulted the National Kidney Transplant Institute on its lease arrangement for its hemodialysis services.
The PPP Center’s Project Development and Monitoring Facility (PDMF) also has an approved funding support for the project preparation and transaction advisory for the PPP projects of two DOH regional hospitals – the Mariveles Mental Wellness Center in Bataan and the Bicol Medical Center’s Medical Arts Building and Upgrading of Health Services.
State universities and colleges (SUCs), particularly those which have colleges of medicine and/or health care facilities, can also implement their health infrastructure and services via PPP. The University of the Philippines (UP) is leading the initiative with the development of two health PPP projects in its Diliman and Manila campuses. The UP Philippine General Hospital (PGH) Diliman Project, which is supported by the PPP Center’s PDMF, involves the development of a tertiary care hospital with outpatient services, medical research center, school of medicine, and other ancillary facilities. The UP PGH Manila Cancer Center Project aims to develop and establish the first comprehensive cancer center in the Philippines.
Local government units (LGUs), which are the frontliners in the delivery of health care services to their communities, can undertake PPPs to develop, rehabilitate, and improve the operations and maintenance of primary health care facilities and services (such as barangay and city health centers) and local secondary and tertiary hospitals. With the wide-ranging responsibility of LGUs over health services, they can also consider developing an integrated health care system via PPP with linkages between primary and specialized care.
The covid-19 pandemic illustrates the need for solidarity to ensure effective response against the resulting health and economic crisis. As the government continues to plan for the long-term and invest in sustainable and quality infrastructure, the private sector serves as a critical partner that can provide innovation, technology, and financing to critical health care facilities and services. Thus, engaging the private sector via health PPPs can support the efforts of the government to promote UHC, ensure sufficient investments in the health care system, and implement the path for economic recovery and resiliency. To support these goals, the PPP Center is committed to enhancing the enabling environment for health PPPs, including assisting the implementing agencies in the development and implementation of their priority health PPP projects.
