Problems of PPP Implementation in Ukrainian Healthcare System

1. Problems of PPP ImplementationinUkrainian Healthcare System І. Akimova 10 October 2014

2. PPP and its Advantages Public-Private Partnership - Arrangements between the public and private sectors, where some services that fall under the responsibilities of the public sector are provided by the private sector (WB) Features of PPP: • Projects with medium to long-term period • The use of state budget to purchase ‘public sector’ services from private sector • Clear sharing of risks and objectives between public and private partners Advantages of PPP: • Renovation of facilities / supply of equipment without initial outlays of public funds • Increased access of population to modern medical treatment • Acquisition of private sector management skills into healthcare facilities • Higher quality standards + Improved cost-effectiveness • Viable instrument for testing the new models of healthcare financing and management • Systems of DRG-financing for hospitals, Capitation financing for PHC, Use of local clinical protocols

3. Obstacles to PPP in Healthcare • Low security of property rights for private partner • Long-term contracts between public and private partners are unavailable • No mechanism for state authorities to guarantee their contract financing obligations to private partner • Budgetary system does not give priority to PPP contracts financing • Outdated system of financing in HC • ‘Payment for beds instead of payment for services’ • Excessive state mandate for providing all HC services for free  Continued underfinancing of HC provider units • No operational and financial autonomy of healthcare institutions • HC institutions are over-regulated for the use of state funds (‘line-budgeting’), staffing, etc • Drawbacks of Law on PPP • Shifting risks to private partner • Insufficient protection of private partner from changes in tax/ customs, ecological active legislation • Lengthy and unfair mechanism of compensating private partner’s losses when PPP contract is terminated (e.g., termination of toll-road project took 8 years to make a court decision) • There is no guarantee of land-plot provision for PPP projects • Convenient organizational vehicles for PPP projects implementation are not allowed (e.g. provider units in form of JVs, which are convenient for operational and legal issues) • Present mechanism of public procurement is not conducive for development of PPP in healthcare • Negative experience • PPP project on dialysis in Cherkasy and Chernihiv oblasts failed because of the inability of local authorities to guarantee their contract/ funding obligations

4. Tasks to foster PPP in Healthcare • Ensure protection of property rights for private partner • Establish long-termPPP contracts between public and private partners & Define essential terms of such contracts. • Give priority of PPP contracts financing for budgetary system • Implement modern system of financing in HC • Establish the ‘Strategic purchaser’ function at oblast level, able to relocate funds between HC institutions • Based on payment methods: DRG for hospitals, Capitation and P4P for primary care • Establish the state-funded ‘benefits package’  to clearly define the area for PPP in healthcare service provision • Provide operational and financial autonomy to healthcare institutions • Establish financial and operational autonomy of PPP provider units • ‘global budget financing’, the use of bank accounts, staffing, salary regulation • Improve Law on PPP • Fair risk-sharingbetween public and private partnersin PPP projects • Provide protection from changes in legislation for PPP projects • Establish fair mechanism for compensating private partner’s losses when PPP contract is terminated • Public partner should guarantee land-plot provision for PPP projects • Allow for establishing of provider units in form of JVs for PPP projects implementation • Establish mechanism for mid-term public procurement contracts with PPP provider units

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