Doctors waiting for partners. PPP in public health service


In many countries structures created on the base of Public Private Partnership in the sphere of Public Health work rather successfully. In Russia there are practically no such projects. The reason for that is imperfection of our legislation.
For healthy cooperation

Schemes of PPP are the most widespread in the countries with a high level of Public Health Care: Germany, Switzerland, Great Britain and Australia. Implementation of partnership projects in public health care in these countries showed the especial efficiency of two models of cooperation (note that there are about 10 efficient models in other spheres).

 The first — under the conventional name BOLB (stands for Buy, Own, Lease back) — includes constructing of a facility by a private partner and sailing it to a state body on condition of  subsequent transferring it to the same private partner.

 The second — called Alzira (named after a hospital in Spain, where this scheme was used for the first time) — includes retaining investor’s right of property for the hospital built at his expenses. But on the condition: the hospital must conclude an agreement with state agency of health care, according to which it is obliged to provide health care services to people for fixed payments from the government.

In different countries different forms of partnership prevail. For example, in Germany healthcare facilities can be sold to private investors for low prices, and in return the investors must make investments and fulfill state order. In Switzerland the private sector was admitted to the system of Health Care in 1991: private persons were allowed to lease hospitals, ambulance services, laboratories. As the first step to introduction of PPP to the system of Health Care the Government of Australia has chosen the single private operator for planning, constructing and managing new hospitals. The operator works with investors, with 15 year’s contracts under the obligation not to restrict the availability of medical help. In Great Britain since 1993 private persons engaged in designing, constructing and sometimes operating of new healthcare facilities. Mostly contracts with private investors are concluded for 30 years, during this time a state partner provides to his private partner the rights of possession and operation, and makes payments for availability of medical help.
After introduction of public private partnership the quality of medical services becomes higher, and prices decrease. For instance, in Switzerland leasing out of Stockholm hospital Sent Gregory  decreased costs by 30% and serve additionally 100 000 patients a year, price for X-ray services decreased by 50%, time of waiting  for diagnosis and treatment  increased by 30%, cost of ambulance services increased by 10%, cost of  laboratorial services increased  by 40%. In Australia thanks to the reform state expenses on constructing of healthcare declined by 20%, the number of patients grew by 30%.
A good example is the project, which was started this summer in England. Kristy state cancer centre in Manchestersigned an agreement with HCA International, which invested £14 mln. into a new project. In December a new building of Kristy Clinic will be opened and modern facilities for chemotherapy and radiotherapy will be there. In 2013 a new private hospital building will be opened. Kristy Clinic will become one of the leaders of HCA cancer chain.  ‘In result of this cooperation Kristy will increase its profits by more than 14% compared with that in 2005. Today tendency is growing of demand for private medical services in oncology. Private investors see the potential for healthcare’, Karina Solloway says, who is the head of department of relations between the RF and HCA International.

Russian partner

According to the legal company Tenzor Consulting Group, in Russian system of healthcare only 18% of services are accounted for private capital. For comparison: in transport sphere this index is 65%, in housing communal services is 55%, in power engineering is 35%. “Such numbers tell that using PPP in healthcare service is underestimated, and the legislative base is insufficient as well”, Roman Dzhaparidze, the head lawyer of Tenzor Consulting Group, points out.
Development of PPP in Russia is regulated by the federal law of the RF On concessional agreements (No115 from July 15, 2005). According to this document, concessional legislation is applicable to health care facilities. In standard agreement, described in the law, one party (concessioner) is obliged to build or to make reconstruction of a certain facility owned by the other party (grantor), to operate the facility, and the grantor is obliged to provide to the concessioner possession and usage of the facility for particular activity for the term stipulated by the agreement.
Today in Russia the mechanism of PPP is applied for creating new health facilities and reconstruction of the old ones. “In Russia various forms of PPP can be applied, including those that do not involve transfer of ownership to private partner”, says Natalya Reznichenko, professor of St.Petersburg University Graduate School of Management.
Business is reluctant to invest into health care projects. “There are some one time projects, which are more likely to be created by local authorities”, points out Sergey Anufriev, founder and director of St. Petersburg health care forum. One of the first governmental bodies in PPP were the government of St. Petersburg and St. Petersburg health care committee, which faced lack of financing in health care industry and began to look for additional sources of means. First attempts of developing a new mechanism were made in 2004. Reconstruction of buildings of City hospital No14 and City geriatric centre became the pilot project. These works were carried out by Sogas insurance company. In exchange, city transferred building of the former city hospital No 5 into company’s ownership. “Of cause, we can’t positively call it a project realized on the base of PPP. However, this is our first step in development of PPP in Health Care Service. We hope to attract private investors more actively”, Farit Kadirov, the head of St. Petersburg committee on health care, told to BG.
Now one more project with using of PPP is being prepared. Alexander Golishev, who has been Chief medical officer of city children’s hospital No 5 for more than 10 years, is going to renovate and to upgrade the hospital. “We are planning to open a modern perinatal and rehabilitation centre. According to the project, we are planning to renovate existing buildings, to buy equipment, to set more beds”, says Mr. Golishev. But it’s difficult to say when these plans will be realized.   Farit Kadirov   assures, that he knows about Golishev’s initiative and wants hospital No 5 to submit him the detailed plan of the project.
During a long period of time City children’s hospital No 5 has been trying to enter into a partnership with a private organization, and the main supporter of this idea is the chief medical officer of the hospital, Alexander Golishev.
While in St. Petersburg they are just going to create perinatal center using private investments, in Kazan a modern perinatal center (the floor space is 8 thousand square meters) is being built using money of private company, AVA-Peter. For this the building of former city hospital is being reconstructed (before reconstruction its floor space was 3.3 thousand square meters). In the centre there will be a policlinic, a maternity hospital with prenatal and postnatal wards, a clinic of reproductive medicine, a high-technology diagnostic centre and a pharmacy. According to the investor, about $20 million were invested into the project.
“We want this centre to provide modern services in the system of compulsory health insurance, compete for state order and render commercial services. Centre will be able to provide services to more than 50 000 ambulatory patients.  Delivery department is for a thousand labors per year, reproductology clinic is for 2.5 thousand IVF circles”, says Gleb Mikhaylic, the chief executive of  AVA-Peter. According to him, the project will pay off in 10 years.
 Since 2008 a new PPP project has been being realized in Kazan as well. It’s Kazan educational centre of high medical technologies. The project was started in September, 2007. It was initiated by Ministry of Public Health and Social Development and supported by OOO Johnson & Johnson in the frames of Zdorovye national project. The main function of the centre is personnel training for high technology medical services — endoscopic surgery, cardiac surgery, traumatology, neurosurgery, reproductive technologies and so on. Project’s objective is to create new standards of personnel training in medicine.
As the company told to BG, Ministry of Public Health recommended to realize the project in Tatarstan, as it is “one of the most progressive regions in the field of public health”. At that time region’s authorities were searching for innovative projects in the sphere of public health, moreover they had ready infrastructural decisions. No amendments were made by the subject to the legislation. “Investments of Johnson and Johnson into the project are $15 mln during 5 years. The company transferred to the partnership computer stimulators; the company pays for trainings, transport expenses, accommodation of trainees and trainers, honorariums for trainers”, informs Arman Voskerchan, the chief executive of OOO Johnson & Johnson Russia and CIS. Republic Tatarstan, in its turn, gave to the partnership a building (its space floor is 3000 square meters).
According to Airat Farrakhov, minister of public health care in Tatarstan, the executive board’s chairman of High Medical Technologies Educational Centre in Kazan,  this project is realized in the form of  non-commercial partnership, it’s absolutely limpid, it’s within frames of current legislation. “For a long time we have been focused on cooperation with private business, and this project is one of many. For the last three years we have been systematically modernizing the system of Public Health. Optimizations of approaches and clear strategy enable us to use resources more effectively. In Russia 80% of all kinds of high technology medical services rendered in Russia”, said the minister.

 PPP and law
The system of public health care existing in Russia imposes certain restrictions on usage of PPP in medicine. The difficulty lies in the fact that the government must guarantee to a private investor reimbursement of invested means, and this connected with high risks; investments into this sphere can’t pay off quickly. Moreover, common ownership and common usage of assets are not regulated by the law. “Considering that population ageing and a large number of chronic diseases are the current worldwide tendencies, 10-20 years later there will be no such a country in the world which is able to maintain national health care system at governmental expenses. It’s clear that if we participate in PPP, we need guarantees for a long period of time. We do not just supply equipment, most often we realize the whole project; this means diagnostic laboratories, technical infrastructure, business process, administrative system, highly professional personnel. In the frames of current Russian legislation it’s hard to implement PPP projects. We face a lot of difficulties. The main difficulty is the fact that governmental financing and governmental guaranties in the RF subjects and municipalities can be only within a period of a year. While the most successful PPP projects in Public Health Care have guaranties for 5-6 years. As a result, such a partnership is a more complicated mechanism, than, for example, purchase of equipment for cash”, asserts Ruslan Nozdryakov, corporate communications director of Philips.         
Another thing in the legislation, which worries investors today, is multichannel financing of municipal medicine institutions. Now compulsory health insurance includes wages of medical personnel, bonuses, expenses for inventory, medicines, food. “The last three points are to do with in-patient clinic. In out-patient clinics these points are not covered by insurance. If we are talking about ambulatory treatment, it’s only wages and bonuses. Of cause, investors are not interested in getting only such a reimbursement; the most significant costs are not covered: utilities, telephone, trainings, computer support, and labor protection”, reasons Gleb Mikhailik.
“This system demands payments from various sources, and it is difficult to organize and to control it”, Natalia Reznichenko has the same opinion.
Svetlana Malyavina, the spokesperson of the Ministry of Health Care and Social Development reminds that the system of compulsory medical insurance (OMS) will change in 2011. “We are passing to the full-tariff system. If a private clinic would like to work in the OMS system, it will be able to do this (e.g. any person with OMS-policy will be able to turn to this clinic and get service). We are not going to transfer governmental facilities into private management. We consider PPP in Health Care only in one way: a private organization provides a high quality service to a person, and the government pays for it through OMS.    

29 October 2010