PPP and hi technologies in Healthcare

1. PPP and hi technologies in Healthcare Sofia Sheraton, 07 November 2007 Dr Stephen Vallely Northern Ireland Cancer Centre, Belfast

2. Model Franchising DBFO (Design, Build, Finance, Operate) BOO (Build, Own, Operate) BOOT (Build, Own, Operate, Transfer) BOLB (Build, Own, Lease Back) Alzira Model Description Public authority contracts private company to manage existing hospital Private consortium designs facility based on public authority’s specified requirements, builds the facility, finances the capital cost, and operates their facility eg PFI Public authority purchases services for fixed period (eg 30 years) after which ownership remains with private provider Public authority purchases services for fixed period after which ownership reverts to public authority Private contractor builds hospital; facility is leased back and managed by public authority Private contractor builds and operates hospital with contract to provide care for a defined population Models of Public-Private Partnership in Hospital Provision

3. Arguments for PPP By spreading payments over a period of time it allows more capital infrastructure projects to be funded, at least in the short term, than would otherwise be the case By transferring the risk of delays, cost overruns and performance shortfall to the contractor for an extended period it reduces costs for the public sector It provides incentive for delivery of project on time and on budget It encompasses a wider skill base from both the public and private sector The quality of the infrastructure must be maintained which encourages the private contractor to avoid cutting corners PFI transactions can be “off balance sheet” thereby removing the need to increase public borrowing to pay for capital investment Arguments against PPP More expensive than traditional public sector methods Public sector mat lack expertise for partnership with the private sector and vice versa It is not always possible to transfer life cycle costs to the contractor at a reasonable cost Loss of management control by the public sector The procurement process can be lengthy and costly The private sector has a higher cost of capital than the public sector Contracts can be too longterm and inflexible Public Private Partnership

4. Issues • How and why? - Public finance v PPP • What? - Equipment v Building + Equipment • Horizon scanning • Future proofing • Changing clinical profiles • External constraints • Multi- v single- vendor solution • Integration issues • Subjective personal preferences • Perceived loss of influence • Detailed negotiations • Guaranteed uptimes – generally 98% + • Guaranteed response times • Transfer of risk • Financial penalties

5. Process Construct business case OJEC advert Pre Qual (indicative tenders) Public / private comparator FITN Selection of preferred bidder Detailed negotiations Financial close Ongoing partnership / Refresh

6. Implementation: Cancer Centre The Northern Ireland Cancer Centre will become a centre of excellence for Cancer services and form the core of regional cancer services in Northern Ireland. Tender launched 1999 HTI Awarded Preferred Bidder status 03/01 GE Partnered with HTI • Therapy Equipment • 8 Varian Linear Accelerators • Diagnostic Equipment • 1 MR Scanner , 3 CT Scanners • 2 Nuclear Medicine Cameras • 1 Fluoro Room , 2 Rad Rooms • 1 Mobile X-Ray Unit • CR System , Dry Laser Imagers • RIS/Pacs System Financial Close 04/03 On-site work starts 03/04 Equipment handed over 11/05 Building handed over 01/06 Clinical Use Commencement Date 03/06 (Mantra: Up-front pain – long-term gain)

8. Advantages - Technical Future proofing equipment upgrades (hardware / software) High degree of integration Flexibility within overall financial envelope - Improved planning of service provision

9. Yellow indicates technology evolved at review

10. Advantages - Technical • Future proofing • equipment • upgrades (hardware / software) • High degree of integration • Flexibility within overall financial envelope - Improved planning of service provision

11. Advantages – H.R. • Removal of uncertainty over future service • Transfer of risk • Ultimately less labour intensive • Single v multiple business cases / tenders • Integrated staff training • Improved staff morale / retention • Higher level of commitment • Private partner • Manufacturer

12. Advantages - Financial • Smooth revenue stream v erratic capital stream • Added value v single purchases • Guaranteed funding over contract lifetime • Guaranteed (? lower) operating costs over contract lifetime

13. Scope project accurately (future proof) Clarity of vision of outputs more important to success than inputs Physical space as well as equipment Choose private partner wisely Common vision Mutual Goals Mutual Trust and Respect Ability to understand partners needs Flexibility Don’t try to cover every eventuality Aim for co-operation and flexibility rather than contractual rigidity Retain a sense of humour! Recommendations

14. Diagnostic CT / MRI Scenario

15. Recomendations • Scope project accurately (future proof) • Clarity of vision of outputs more important to success than inputs • Physical space as well as equipment • Choose private partner wisely • Common vision • Mutual Goals • Mutual Trust and Respect • Ability to understand partners needs • Flexibility • Don’t try to cover every eventuality • Aim for co-operation and flexibility rather than contractual rigidity • Retain a sense of humour!

16. The success of a PPP (MES) in Healthcare relies on the public and private partners sharing, and working co-operatively towards, a well-scoped, unambiguous endpoint which is seen to be mutually beneficial