Conference “PPP in The Health Service” Czech Institute for EU Integration (CII)

1. Public-Private Partnerships in Healthcare: The Portuguese Approach to Health PPP’s Conference “PPP in The Health Service” Czech Institute for EU Integration (CII) 21th.April.2005 - Praha Jorge Abreu Simões President Partnerships.Health

2. Contents • Setting the Scene: Transformational Change in Public Healthcare .2001-2005 • Main Policy Initiatives • Healthcare PPP’s • PPP Projects Implementation: Up Date • The PPP Model for the Hospital Sector • Immediate Prospects for Health PPP’s

3. PPP’s in Portuguese Healthcare Setting the Scene: Transformational Change in Public Healthcare .2001-2005

4. Portugal. Country Profile • Country Data • Size: 92 142 Km2 • Population (2001): 10 358 million inhabitants • GDP (2001): 122 900,6 million Euro • GDP per capita (2001): 11 968 Euro • Healthcare Expenditure (% GDP) • 1997: 8,2% • 2001: 9.3% • Healthcare System based on the Public Healthcare (NHS) • Universal coverage and free access for all citizens • Financed by taxpayers, centrally direct and highly regulated • Most hospitals and primary care centres owned by public sector • Complemented by a liberal ambulatory medical system • Diagnosis: Health spending too high to be affordable (chronic deficits, questionable performance, persistent waiting lists) • World Health Report 2000. Health Systems: Improving Performance • Portuguese NHS ranked # 12 (among 191 countries) Porto Lisbon Faro

5. To a Pluralistic and Regulated System with the Participation of a Diversified Range of Providers From a Monolithic, Quasi-Monopolist and Bureaucratic System From a Administrative Management Model and Budgetary Hospital Finance System To a Corporate Management Model and a Hospital Finance System based on DRGs Structural Transformationof the Traditional Healthcare System

6. PPP’s Schemes • Proper Legal Framework • Partnerships. Health (PPP Task-Force) • PPP Programs with emphasis on hospital renewal and modernization 1 Competition & Sector Regulation Hospital Corporatization 2 3 • Increasing competition between providers • Increase patients’ free of choice • Creation of a Health Regulator • Transforming public hospitals into private/public owned corporations • Introducing a new hospital finance system based on DRGs • Improving efficiency and quality of hospital operations Reshaping the NHS into a Network -based Delivery System Managing Change

7. 90 Hospitals 90 Hospitals 90 Hospitals 31 Hospital Corporations (SA Model) 31 Hospital Corporations (SA Model) PAS Status (Administrative Institutes) 59 Administrative Hospitals 59 Administrative Hospitals PPP’s PPP’s 2001 2003 2005 Corporatization of Public HospitalsTransforming a Complex Organization System

8. PPP’s in Portuguese HealthcareBasic Concept and Principles • PPP schemes and contracts subject to eco-fin appraisal (Affordability and Value for Money) • Long term association with a private operator or a social entity within the context of the NHS Public-Private Partnerships • Competitive Procurement based on Standardize Documentation • Partnership duration related with assets life cycle (maximum duration 30 years) • Risk Transfer to Private Operator, accordingly to the party best able to manage them • Emphasis on Output Specification and Performance Levels

9. Focus Activities Payment Mechanisms • Hospitals • Primary Care Centres • Continuing Care Centres • Functional Hospitals Units • Diagnostic & Treatment Services • Design • Construction • Financing • Maintenance • Hard and Soft FM • Services Management • Clinical Services • Single Payment Mechanism • Service Availability • Per Capita Rates • DRG´s & Casemix • Global Package • Combined Payment Mechanism Scope • Single Projects • By Health Facility • By Area/Residential Population • “Clusters” • Vertical Integration • Horizontal Integration PPP Variable Geometry PPP´s in Portuguese HealthcareVariable Geometry Approach

10. PPP’s in Portuguese Healthcare PPP Projects Implementation: Up Date

11. 1st Wave (2001-2002) 2nd Wave (2002) New Hospitals Loures Sintra Évora Gaia Cascais VF Xira V. Conde Braga Replacement Hospitals Faro Guarda The PPP Hospital Program

12. Size (nº beds) • Loures Hospital 565 - 605 H3 H1 H5 H4 H2 H2 H3 H4 H5 H1 • Cascais Hospital 230 - 250 • Braga Hospital 600-650 • V. F. Xira Hospital 250- 300 • Sintra Hospital 180-200 PPP Hospital Location1st Wave

13. Size (nº beds) • Algarve Hospital 500-550 H3 H1 H5 H4 H2 H2 H3 H4 H5 H1 • Guarda Hospital 250-300 • Évora Hospital 380-420 • Gaia Hospital 550- 600 • P. Varzim Hospital 200- 230 PPP Hospital Location2nd Wave

14. Complexity Level University Hospital Pre-Graduation Courses General and Clinical Management of Existing Hospital General and Clinical Management of Existing Hospital Design, Build, Finance Operate and Clinical Management of New Hospital Design, Build, Finance Operate and Clinical Management of New Hospital Loures Hospital (Jan. 2004) Cascais Hospital (Sept.2004) Braga Hospital (Jan. 2005) Tender Packs 11 6 8 Nr. Bidders 4 4 PPP Hospital Projects TenderedPilot-Projects and Pathfinders Design, Build, Finance Operate and Clinical Management of New Hospital

15. PPP Projects Current Status Next Phases • New Loures Hospital • PSC: 800 Million euro (NPV. Jan 2004) • Tendered in Dec. 2003 • 4 Bidders • Presently in Bids Qualification & Evaluation Phase • Evaluation Committee Decision delayed and foreseen for May.2005 • Negotiation Phase with 2 Bidders • Followed by Negotiations with Preferred Bidder • Contract Award foreseen for 1st Quarter.2006 • Tendered in Sept. 2004 • 4 Bidders • Presently in Bids Qualification & Evaluation Phase • Negotiation Phase with 2 Bidders • Followed by Negotiations with Preferred Bidder • Contract Award foreseen for 2nd Quarter.2006 • New Cascais Hospital • PSC: 400 Million euro (NPV. Jan 2005) • Tendered in January . 2005 • Presently in Bids Preparation Phase • Deadline for Bidders: July.2005 • Bids Qualification & Evaluation Phase • Two Negotiation Phases with 2 and 1 Bidder • Contract Award foreseen for 3rd-4tht Quarter.2006 • New Braga Hospital • PSC. 1 186 Million euro (NPV. Jan 2006) PPP Hospital Projects TenderedUp Date

16. PPP Projects Current Status Next Phases • Tendered in January. 2005 • Presently, in Bids Preparation Phase • Deadline for Bidders .2005 • Bids Evaluation Phase • Followed by Negotiations with Preferred Bidder • Contract Award foreseen for 4th.Quarter.2005 • Rehabilitation Centre for Southern Regions • PSC: 40 Million euro (NPV) • Tendered in May. 2004 • 3 Bidders • Preferred Bidder announced in January.2005 • Negotiation Phase with Preferred Bidder • Contract Award foreseen for 2nd Quarter.2005 • NHS Contact Centre • PSC. 40 Million euro (NPV) Other PPP Schemes in ProcurementUp Date

17. PPP’s in Portuguese Healthcare The PPP Model for the Hospital Sector

18. Valência (Spain) • Integrated Delivery of Primary and Acute Hospital Care for a population area • Payment by a per capita fee • Victoria (Australia) • Hospital Management, Infrastructure and Clinical Services • Payment by Clinical Episodes (“Case Mix”) • United Kingdom • Basically, Infrastructure Services and Hard & Soft FM • Availably Payment • Portugal • Hospital Management, Infrastructure and Clinical Services • Availably Payment • Payment by Clinical Episodes (“Case Mix”) International PPP Models for Public Hospitals

19. SPCo Infrastructure SPCo Hospital Management New Hospital Management (Clinical Services) “Hard Facilities Management” & Fixed Equipment “Soft Facilities Management” & Moveable Equipment Design & Construction New Hospital Design Inputs 30 years 10 years PPP Model for New Hospitals Two Scopes/Two Payment Mechanisms Availability Payment Payment by Outputs (basedonClinical Activity Lines & DRG’s) Scope 1 Delivery of Clinical Services Trough the Existent and New Hospital Scope 2 Design, Build, Finance and Operate the New Hospital Infrastructure Existent Hospital Management (Clinical Services)

20. Soft FM Back to back Contracts CPA Scope I Clinco IT Systems Financial Syndicate Private Consortium Financial Agreement Facilities Utilisation Agreement Management Contract Maintenance Consortium Infraco Scope II Back to back Contracts Construction Consortium PPP Model for New HospitalsContractual Structure and Interface Agreement • Regulation of the interface relationships between thetwo SPCo’s by an utilisation agreement • Not foreseen any relevant financial flows between the two SPCo’s􀂃

21. Availability Payment Infraco • No Availability-No Payment • Annual Service Payment • Fixed Component: annual, not subject to revision • Variable Component: annual according to CPI • Performance Failures Deduction Inpatient Outpatient Payment Clinco • Payment by Clinical Activity Lines • Variable payment according to effective clinical production • Availability payment component related with special and specific clinical units • Pharmaceutical’s savings sharing • Performance Failures Deduction Two SPCo’s – Two Separated Payment Mechanisms

22. PPP’s in Portuguese Healthcare Immediate Prospects for Health PPP’s

23. Embryonic Developing Mature Clinical Services Model ? Infrastructure Services Model ? European Outlook

24. New Political Landscape and the Emergence of a New PPP Policy • General elections hold last 20th February • An “Absolute Victory” and “Absolute Majority” of Socialist Party (45.05%) • The three main left-wing parties count now for 58% of the votes against 36% of the combined votes of the ex-centre/right coalition • Government main strategic concept for public hospital management has changed • From a fully corporatized and “private” management approach maintaining public sector ownership (Hospital SA Model) to a semi- corporatization and less “private” approach (EPE Model) • EPE Model main features: corporate semi-equity and public management in conjunction with limited private management elements (more flexibility in public procurement, staff incentives and staff recruitment ) • EPE Model in articulation with management of primary care centres

25. Revision of PPP Legal Framework • Diversification of PPP’s Models • Downsize of PPP Hospital Programme • Most likely: 4-5 hospitals and a new implementation calendar • Maybe a new large hospital or Lisbon • Emergence of a new generation of PPP schemes (smaller scope and duration) • Existing Hospital Autonomous Functional Units • Medical Equipment and IT’s • Primary Care Centres (eventually a LIFT type approach) PPP’s Schemes 1 Competition & Sector Regulation Hospital Corporatization 2 3 • Enlargement of the role of the newly created Health Regulatory Agency • More competences regarding competition among providers • Appointment of the Regulator by the Parliament • Evaluation of the existing corporate hospitals • Possible passage of all “SA Model” hospitals” to “EPE Model” • Transformation of all administrative public hospitals into public corporations (EPE Model) New Agenda for ReformMain Structural Initiatives. Overview The New Agenda for Change

26. 90 Hospitals 90 Hospitals 90 Hospitals 31 Hospital Corporations (EPE Model) 31 Hospital Corporations (SA Model) 59 Administrative Hospitals 59 Hospital Corporations (EPE Model) PPP’s 2005 2006-2008 2005 New Hospital Corporatization PolicyFrom “SA” Hospitals to “EPE” Hospitals 2 1

27. A B Infrastructure Services Clinical Services Infrastructure Services Clinical Services Public Operator (PAS Hospital) Public Operator (Corporate Hospital) Clinco Clinco Infrastructure Services Infrastructure Services Clinical Services Clinical Services Private Operator Private Operator Infraco Public Operator Public Operator Infraco Infraco Clinco Private Operator Private Operator C D Infraco Clinco PPP Models for HospitalsThe Variable Geometry Approach

28. A Infrastructure Services Clinical Services Public Operator (EPE Hospital) Clinco Infrastructure Services Infrastructure Services Infrastructure Services Clinical Services Clinical Services Clinical Services Private Operator Infraco Public Operator Public Operator Public Operator Infraco Infraco Clinco Clinco Private Operator Private Operator Private Operator D D E Clinco PPP Models for HospitalsDiversification/Combination of Models

29. Contacts • Jorge Abreu SimõesAv. Álvares Cabral, 25 – 1º1250-015 Lisboatel: 21 388 04 89/fax:21 388 04 81 parcerias.saude@parcerias-saude.min-saude.pt jorge.simoes@parcerias-saude.min-saude.pt http://www.parcerias-saude.min-saude.pt