THE EASTERN CAPE DOH/NETCARE PPP PARTNERSHIP

DDG FOR HEALTH, ECDOHDR NANDI DILIZA

Overview

o Introductiono Traditional Procurement vs PPP’so Reasons for PPP’s in generalo Reasons for Health Specific PPP’so Benefits for Public Health from PPP’so Challenges for Health PPP’so The ECDOH/Netcare PPP o Lessons learnto Conclusion

Introduction

• A PPP is defined in South African law as:o A contract between a government institution and

private party, where:– the private party performs an institutional function

and/or uses state property in terms of output specifications

– substantial project risk (financial, technical, operational) is transferred to the private party

o The private party benefits through: o unitary payments from government budgets and/or

user fees.

Benefits of PPP procurement

o Leveraging of private sectoro Capital o Skills

o Transfer of;o Financial risk to the private sectoro Specialist skills to the public sector

o Public sectoro Pays only once the goods or service have been deliveredo Focuses on outputs and benefits from the start of the

project

Challenges i.r.o. PPP procurement

•• Slow Turn Around TimesSlow Turn Around Times

•• Political will and general Buy Political will and general Buy ––In In

•• Dwindling Competition due to size of marketDwindling Competition due to size of market

•• Risk Averse Private sectorRisk Averse Private sector

Challenges i.r.o. PPP procurement

•• Pooling of Funds from different programmes for Pooling of Funds from different programmes for PPPsPPPs

•• Very Litigious EnvironmentVery Litigious Environment•• Limited Pool of experience both in public & private Limited Pool of experience both in public & private

sectorsector•• Innovation and thinking outside the boxInnovation and thinking outside the box•• Understanding basic principles of Understanding basic principles of PPPsPPPs, win, win--win win

situationsituation•• Contract ManagementContract Management

Reasons for PPP’s in Public Health

oo Discrepancy in the standard and quality of Discrepancy in the standard and quality of healthcarehealthcare

oo Access to health careAccess to health care

oo The exodus or dearth of skillsThe exodus or dearth of skills

oo Degraded and dilapidated public facilitiesDegraded and dilapidated public facilities

oo Equity and transformationEquity and transformation

Public Health Sector Benefits

o Providing scope for medical professionals to grow their private practices

o Improving hospital management through skills transfer and

o Access to quality healthcare for communities served by the PPP hospital

Key success factors for PPP’s

oo Legal certainty and enforcement of rulesLegal certainty and enforcement of rules

oo Political will and commitmentPolitical will and commitment

oo Transparent, fair, open and competitive Transparent, fair, open and competitive processprocess

oo Competent consultancy marketCompetent consultancy market

oo Dedicated state resources and internal skillsDedicated state resources and internal skills

Key success factors for PPP’s

oo Private sector interest and capacityPrivate sector interest and capacity

oo Balance between profit and commitment to Balance between profit and commitment to improved service deliveryimproved service delivery

oo Availability of funds to honor commitmentAvailability of funds to honor commitment

oo Common vision and purposeCommon vision and purpose

THE ECDOH PPP

THE CASE STUDY

Background

• The Department determined the need to upgrade the hospital facilities in the Cacadu Region, namely;

• Port Alfred and Settlers District Hospitals • Also recognized the need to maintain the

improved facilities at a high level and • To provide associated non-core support

services to an acceptable standard.

Planning Phase

Purpose of TA• The Transaction Advisors assistet the

Department with Feasibility Study that would • Determine whether the proposed PPP was in

the best interest of the Department and that • The PPP met the need to offer strategic and

operational benefits to the Department wrtgovernment strategic objectives and policy

Concession Agreement

• The concession agreement was signed on the 7th of May 2007, in terms of which

• The Private Party upgraded and refurbished the two Hospitals

• The financing, design, upgrade and refurbishment of the facilities and provision of operational and associated services including hard and soft facilities management

Concession Agreement

• Terms of the agreement –– To build property, plant and acquire equipment – Life-cycle maintenance, replacement and

refreshment of selected equipment, including medical equipment, IT and furniture

– Together with the co-located private beds to be operated by the Private Party

Concession Agreement

• Private beds• Private pharmacy • Private administration• Two private consulting rooms• Public beds• Public outpatients facility• Public pharmacy • Public administration • Shared facilities of Labour ward, Maternity ward, Casualty,

Theatres, CSSD, Kitchen, mortuary, stores, linen areas and plant and workshop areas

Contract Management

• Critical success factor for a PPP• Project Officer is the Contract Manager• Leading a team of various experts:

– Finance– Legal– Clinical HR– Facilities management

Contract Management

• Quarterly meetings held• Looks at strategic matters• Direct access to the accounting officer• Private sector has own team• Meets with departmental Contract

management team quarterly

Contract Management

• Operational Team below Contract Management Team

• CEO of each hospital together with his/her management team

• Meet monthly to consider operational matters and take decisions

• Makes inputs to the Contract Management team

Contract Management

• Day to day management overseen by local managers – CMOs, Nursing Managers, Nursing Unit managers, Admin Mangers from both sides

• Regular and frequent interactions key• Problems WILL arise but MUST be addressed

on site, elevated if necessary• Stick to the terms of the contract

Contract Management

• This PPP has taken off well• Good bed occupancy rate on both sides• Shared resources ensure Economies of Scale• Doctors share after hour calls• Private sector better able to attract doctors

due to flexibility in remuneration models• OSD for doctors will also assist in attracting

doctors to the Public sector

Exit Plan

• The Private Party shall upon expiry or early termination of this Agreement, handover the facilities (including the Private Facilities) to the institution free of any Encumbrance or any liabilities or debt, and

• In good order as at commencement of PPP• No payment of any amounts by the state

PPP Benefits

• The benefit of the project is the extent of investment involved, the socio-economic benefits and spin-offs, the BEE participation requirements and the contributions to health service delivery

Lessons Learnt

o Full and detailed understanding of all facets of project essential

o A clear affordability statement up front with appropriate funding and payment mechanisms

o Product design MUST provide value-for-money and the sources of “drivers” of such value must be exposed & understood

Lessons Learnt

o A formal cooperative procurement plan

o A carefully appointed project team = LEADERSHIP!!

o ++ POLITICAL & MANAGEMENT BUY-IN

o Well-defined output specifications

o Transparent risk transfer

Conclusion

• True PPP’s bring value-for-money healthcare within reach of public patients provided there is clear understanding between parties involved, and a commitment to meeting critical success criteria:o Accessibilityo Affordabilityo Transfer of appropriate technical, operational and

financial risk between the sectorso Profit is an essential component in providing

sustainable, quality healthcare delivery

Conclusion (cont.)

True PPP’s also contribute substantially to the evolution of

BBBEE in the healthcare sector – a CRITICAL aspect of healthcare

transformation

THE END

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