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CASE STUDY: PPP in Italian Health Sector Massimo Ricchi Presidency of the Council of Ministers Department for Economic Policy Coordination and Planning PPP Task Force, Italy . Geneva, 21-24 February 2012. The Task-Force – Organization.
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CASE STUDY: PPP in Italian Health Sector Massimo Ricchi Presidency of the Council of Ministers Department for Economic Policy Coordination and Planning PPP Task Force, Italy Geneva, 21-24 February 2012
The Task-Force – Organization UTFP activity “on the field” : institutional framework Inspired by the UK PFI Taskforce Established by law Previous consultation with the main parties involved Group of 11 professionals: Legal, financial, technical expertise selected from both private and public sector.
The Task-Force - Mission UTFP activity “on the field” : institutional framework (2) Educational Role • Promoting PPP techniques • Developing a PPP Methodology • Identifying workable PPP projects to be repeated • Database of successful PPP deals Assistance Role • Assistance to central, regional and local administrations • From the identification of suitable projects to the evaluation of offers • Multidisciplinary skills and expertise “Policy Making” Role • Improvement of legal framework • “Best practices” (standardisation of practices and contracts) Check PPP Contract for National Bureau of Statistic • Analysing risk distribution in the contract in order to put public investment on or off the public budget
Project Finance in the Health sector in Italy since 2004 Some figures: • ca. 5,15 billion euro total investment • ca. 17.300 beds • 240.000 – 300.000 € average cost of bed Initiatives: • 15 initiatives currently planned (0,8 billion €) • 53 concession awarded (3,7 billion €) • 15 initiatives at bidding stage (0,65 billion €) • 61 initiatives quitted (1.950 billion €) Public contribution in capital expenditure (grant amount): • Average grant amount: 55% of Capex Average procedure duration to conclusion: • Public initiative procedure: 13,4 months • Private initiative procedure: 36,8 months
Project Finance in the Health sector in Italy since 2004 (3) North 47 Centre 7 South 20 PPPs in the Italian Heath Sector 2004-2011 2 21 2 • >10 projects 9 1 5 4 3 • 5-10 projects 4 1 • 3-5 projects 1 2 5 • 1-2 projects 3 1 3 3 5
Project Finance in the Health sector: fundamental principle What the private sector can do: Providing non- medical services • Estate maintenance • Supply of energy and fluids (heat, air conditioning, water, medical fluids, etc.) • Medical equipment maintenance • Cleaning services of building and clinical equipment • Laundry • Waste disposal • Catering for patients and personnel • Security services • Housing services (Reception, booking, management of hotel facilities, etc.) • IT services • Commercial services (bar, newspaper, restaurant, shops, etc.) • Parking facilities • Laboratories and Radiodiagnostic service management (occasionally) What the private sector cannot do: Providing medical services • No nursing and clinical services delivery • No medical ruling of the hospital PPPs in the Italian Health Sector
Project Finance in the Health sector: strong contracting authority Lombardy's procurement approach • 6 hospitals in Lombardy • 4 hospitals in Calabria
Project Finance in the Health sector: catch the innovation The Innovative procurement approach • THE FOUR TUSCANY HOSPITALS • THE NEW MESTRE HOSPITAL • THE CANCER THERAPHY CENTER MESTRE
Project Characteristics The new Mestre Hospital The project concerns the construction of a new hospital to replace an inadequate existing hospital to consolidate and improve specialist hospital services (e.g. oncology, cardiology, eye-surgery). PROJECT DATA • Project Name: The new Mestre Hospital • Category: DBFO (Design Build Finance & Operate) • Awarding Authority: Unità Sanitaria Locale 12 Venice (NHS Local Authority) • Procedure: Concession under private initiative • Number of beds: 680 • Number of Op. Rooms: 16 • Number of Intensive Care Rooms : 24 • Parking Spaces : 1092 ( incl. 557 for visitors) • Total investment : € 245 million (VAT included) • Public contribution: € 105 million (45%) • Concession length: 29 years (incl. 4 years of construction)
Mestre Hospital: a case of success January 2008 Official Opening of the new Mestre Hospital
What to improve • No specific risk assessment or risk analysis realized in the early stage of the project through a matrix of risks • Case studies prepared by the promoter • Difficulties in comparing proposal in the different stage of the procurement process • Need to revise some financial aspects of the concession
THE CANCER THERAPY CENTER:Project Characteristics The Cancer therapy Center The project concerns the construction of a Cancer therapy center. The new center will be part of an existing hospital to consolidate and improve specialist hospital services. The project was awarded and the contract signed. PROJECT DATA • Project Name: Cancer therapy centre • Category: DBFO (Design Build Finance & Operate) • Awarding Authority: (NHS Local Authority) • Procedure: Concession under private initiative • Bidders: 3 • Project awarded: choice of the private partners • Total investment : € 168 million (VAT included) • Public contribution: No public contribution ex ante
Concession Notice: UTFP regulatory advices Risk assessment procedure: the new approach in the concession notice A greater attention to risk assessment procedures through specific additional requirements apart from those provided by law. In particular, the promoters taking part in the bidding process had to: 1) Provide information on risks • Present a matrix of risks; • Specify who is taking each risk; • Specify in which contract clause the risk is managed and how; • Specify the mitigation instruments provided. The risk matrix prepared by the promoter and agreed on by the administration presents the following structures: • Design of the project (6 risks) • Constructions (30 risks) • Management phase (12 risks) • Costs of management phase (6 risks) • Revenues (8 risks) • Resolution of the contract (6 risks) • Technology (2 risks) • Return of the infrastructure (1 risk) • Other risks (12 risks)
Concession Notice: UTFP regulatory advices (2) Other tips by UTFP for better valuation of the bids in concession notice 2) Present a Financial plan making a distinction between the costs of services + VAT and the charge required for the coverage of construction costs. 3) Present the electronic version of the Financial Plan. 4) Present a validation of the project’s input from the certifying bank
CONTACTS UNITA’ TECNICA FINANZA di PROGETTO Presidency of the CouncilofMinisters Head Office - Via della Mercede, 9 – 00187 Rome, Italy Tel. +39 06 6779 6512 – Fax. +39 06 6779 6573 – www.utfp.it Massimo Ricchi–Lawyer and memberof UTFP Tel. +39 06 6779 6520 Mob. +39 347 225 3268 E-mail: m.ricchi@governo.it