/~As J/&L - v .

Doct.ment of

The World Bank

FOR OFFICIAL USE ONLY

MICROFICHE COPYReport No. 9816-POL

Report No. 9816-POL Type: (SAR YOUNG, MAR/ X32466 / H-8021/ EMl

STAFF APPRAISAL REPORT

POLAND

HEALTH SERVICES DEVELOPMENT PROJECT

MARCH 27, 1992

Human Resources Sector Operations DivisionCentral and Southern Europe DepartmentsEurope and Central Asia Region

This document has a restricted distibution and may be used by recipients only in the performance oftheir oMcrat duties. Its contents may not otherwise be disclosed without World Bank authorzation.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCX EOUIYALENTS(March 1992)

Currency Unit - Zloty (ZL)US$1.00 - ZL13,360

WEIGHTS AND MEASURES

Metric System

FISCAL YEAR

January 1 - December 31

ABBREVIATIONS AND ACRONYMS

ACT - Anatomic Chemical Therapeutic SystemA/D - Admission/DischargeCCO - Consortia Coordination OfficeCY - Calendar YearDDD - Daily Drug DosageEC - Comission of the European CommunitiesECU - European Currency UnitFY - Fiscal YearGDP - Gross Domestic ProductICB - International Competitive BiddingIDA - International Development AssociationILO - International Labor OrganizationlcM - Institute of Occupational MedicineLCB - Local Competitive BiddingMOF - Ministry of FinanceMOB - Ministry of Health and Social WelfareMOHPD - MOH Pharmaceuticals DepartmentNBHP - National Board for Health PromotionNBPC - National Board for Primary CareNCDG - National Consortia Development GroupNCHSM - National Center for Health System ManagementNDI - National Drug InstituteNPIU - National Project Implementation UnitOECD - Organization for Economic Cooperation and DevelopmentPCP - Primary Care PhysicianPOM - Project Operations ManualRTU - Regional Training UnitSANEPID - Sanitation Epidemic Prevention SystemSCBP - Steering Comittee for Budget PlanningSCIS - Steering Committee for Information SystemsSCPC - Steering Committee for Primary CareSOE - Statement of ExpenditureTA - Technical AssistanceWHO - World Health OrganizationZL - ZlotyZOZs - Zespol Opieki Zdrowotnej or Integrated Health and Social Services

DEFINITION

Poland is divided into 49 administrative areas called "voivodships".

FOR OMCIAL USE ONLYPOtAND

ijiLTH SERVICES DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

Table of ContentsPage No.

HEALTH AND POPULATION DATA SHEET . . . .

Loan and Project Summary . . . . . . . . . . . . . . . . . . . . . . . . iv

I. THE HEALTH SECIOR IN POA[D . . . . . . . . . . . . . . . . . . . . 1

A. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 1B. Sector Background . . . . . . . . . . . . . . . . . . . . . . . 2C. Sector Issues . . . . . . . . . . . . . . . . . . . . . . . . . 6D. Government Program .... . . . . . . . . . . . . . . . . . . 11E. Rationale for Bank Involvement . . . . . . . . . . . . . . . . 12F. Role of Other Donors . . . . . . . . . . . . . . . . . . . . . 13

II. THE PROJECT ............. ..... .... .... . . 14

A. Health Promotion . . . . . . . . . . . . . . . . . . . . . . . 15B. Primary Health Care . . . . . . . . . . . . . . . . . . . . . . 16C. Health Management ....... .. .. .. .. .. .. .. . . 18D. Regional Health Services (Consortia) . . . . . . . . . . . . . 21E. Environmental Considerations ..... . . . . . . . . . . . . 24

III. PROJECT COSTS. FINANCING. MANAGEMENT AND IMPLEMENTATION . . . . . . 25

A. Project Costs ......... ... .. ... ... ... . . 25B. Project Financing . . . . . . . . . . . . . . . . . . . . . . . 28C. Project Management and Implementation . . . . . . . . . . . . . 29D. Project Procurement Arrangements . . . . . . . . . . . . . . . 33E. Status of Preparation . . . . . . . . . . . . . . . . . . . . . 36F. Project Reporting, Evaluation and Supervision . . . . . . . . . 37

This report is based on the findings of an appraisal mission that visitedPoland in October, 1991. Mission members were Mary E-Ming Young (PublicHealth Specialist, Mission Leader), Terrice Bassler (Operations Officer,EC1/2HR), Leonardo Concepcion (Sr. Implementation Specialist, EMTPH),Alexander S. Preker (Health Economist, EC1/2HR), Carl Whitehouse (PrimaryCare/Medical Education specialist, Consultant), Jan Blanpain (Health ServicesSpecialist, Consultant), and Kurt Moses (Information Systems Specialist,Consultant). Lia Achsien (EC1/2HR) was responsible for text processing. TaskManager: Mary E-Ming Young (EMTPH); Division Chief: Ralph W. Harbison(ECl/2HR); Director: Kemal Dervis (EC2DR); Peer Reviewers: Anthony Measham(PHRHN); Salim Habayeb (SA2PH); Bernard Liese (HSDDR); Eugene Boostrom(AFTPN).

This document has a restricted distribution and may be used by recipients only in the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Table of Contents (cont'd)

IV. BENEFITS MD RISKS ....................... . 39

Benefits .39Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

' V. AGREEMENTS REACHED ANP RECO(ENlDATION . . . . . . . . . . . . . . . 40

Agreements Reached . . . . . . . . . . . . . . . . . . . . . . . . 40Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Text Tables

Table 3.1: Project Cost Summary by Project Component . . . . . . . . . . 25Table 3.2: Project Cost Summary by Category of Expenditure ... . . . . . 26Table 3.3: Financing Plan by Disbursement Category . . . . . . . . . . . 28Table 3.4: Procurement Arrangements .34

An_nexes

Annex 1 : Development of Regional Health Services (CONSORTIA) . . . 42Org. Chart : Structure of the Consortium Management . . . . . . . . . . 45Attachment A: Guidelines for Regional Strategic Plans . . . . . . . . . 46Annex 2 : Detailed Project Cost Estimates . . . . . . . . . . . . . 49Annex 3 : Project Implementation Arrangements . . . . . . . . . . . 57Annex 4 : Technical Assistance Summary by Project Component . . . . 59Annex 5 : Project Implementation Schedule and Monitoring Indicators 65Annex 6 : Schedule of Disbursement . . . . . . . . . . . . . . . . . 73Annex 7 : Documents Available on Project File . . . . . . . . . . . 74Annex 8 : Supervision Plan . . . . . . . . . ' . . . . . . . . . . . 76

ME&: IBRD No. 232282R

HEALTH SERVICES DEVELOPMENT PROJECT

HEALTH AND POPULATION DATA SHEET 1/

A. General Country DatA

Year

1. Population (millions) 38.2 19902. Area (km2 in thousands) 312.7 19903. Population Density (per kW2) 122.0 19904. GNP Per Capita (US$) 1,790.0 19895. Gross Hard Currency Debt (in billions of dollars) 46.6 1990

B. PoDulation and Health

1. Annual Rate Of Population Growth (X) 0.4 19892. Urban Population (X of total) 61.0 19893. Population Age Structure

0-14 Years (X) 25.1 198915-64 Years (t) 65.1 198965(+) Years (X) 9.8 1989

4. Crude Birth Rate (per 1,000 population) 15.0 19895. Crude Death Rate (per 1,000 population) 10.0 19896. Life Expectancy At Birth:2/

- Female 76.0 1989- Male 67.0 1989

Life Expectancy At Age 30:2.1- Female 47.0 1989- Male 39.0 1989

7. Infant Mortality Rate Per 1,000 Live Births- National Average 16.1 1989

8. Risk of Dying By Age 5 (per 1,000 population)2./- Female 17.0 1989- Male 22.0 1989

9. Total Fertility Rate 2.2 198910. Women of Childbearing Age (as a percentage of

total female population) 48.0 198911. Maternal Mortality Rate Per 100,000 Live Births 12.0 198912. Babies Born With Low Birth Weight (S) 8.0 198813. Daily Calorie Supply Per Capita 3,451.0 1988

/ Unless otherwise indicated, figures are World Bank estimates.

/ Annual Health Statistics Report, MOH, Poland, 1990.

- ii -

C. Health Sector Resources and Expenditures

Year

1. MOH Health Expenditures as X of 3tate Budget 10.5 1991Public Expenditures on Health as X of GDP 4.5 1991Total Expenditures on Health per Capita (US$) 97.0 1991

2. Physicians per 10,000 Populatior. / 21.4 19903. Hospital Beds per 10,000 Population 2 56.1 1990

2 Annual Health Statistic Report, MOH, Poland, 1990.

- iii

DEFINITIONS OF POPULATION. HEALTH AND NUTRITION TERMS

Average Occupancy Rate - Number of hospital days/(number of beds x 365).

Average Length of Stay - Number of Hbspital days/number of admissions.

Crude Birth Rate - Number of live births per year per 1,000 people.

Crude Death Rate - Number of deaths per year per 1,000 people..

Infant Mortality Rate * Annual deaths of infants younger than 1 year oldper 1,000 live births during the same year.

Life Expectancy at Birth - The number of years a newborn child would liveif subject to the age-specific mortality ratesprevailing at time of birth.

Low Birth Weight (LBW) - Infants whose weight at birth is less than 2,500grams.

Maternal Mortality Rate - Number of maternal deaths per 100,000 livebirths in a given year attributable topregnancy, childbirth, or post-partum.

Rate of Natural Increase - The rate at which a population is increasing (ordecreasing) in a given year due to surplus (ordeficit) of births over deaths expressed as apercentage of the base population.

Rate of Population Growth - The rate at which a population is increasing (ordecreasing) in a given year due to naturalincrease and net migration, expressed as apercentage of the base population.

Total Fertility Rate - The average number of children a woman will haveif she experiences a given set of age specificfertility rates throughout her lifetime. Servesas an estimate of the number of children perfamily.

- iv -

PgOLAND

HEALTH SERVICES DEVELOPMENT PROJECT

STAFF APPRAISAL REPORT

Loan and Proiect SuMmary

BORROWER: Republic of Poland.

BENEFICIARIES: Min stry of Health and three project regions.

LO~13ANmO : US$130.0 million equivalent.

TERMS: Seventeen years, including a four year grace period, at theIBRD standard variable interest rate.

PROJECT The project would support the Government's economicOBJECTIVE: reform program by improving health, strengthening the health

sector's contribution to the social safety net, and con:ainingupward pressure from the health sector on the state budget.To achieve these goals, the project would: (a) improve healthstatus by strengthening health promotion and preventionprograms; (b) support the first steps in restructuring thehealth sector by shifting the focus from institutional care toeffective primary care through better trained primary caredoctors and nurses; (c) strengthen institutional capacity inpolicy making, planning, management and evaluation byproviding managers access to improved information systems andmanagement education; and (d) ensure sustainability ofservices and control costs in the health sector in the medium-term by improving effectiveness, efficiency and quality ofservice delivery in three project regions.

PROJECT The project would comprise four components: (a) HealthDESCRIPTION: Promotion; (b) Primary Health Care; (c) Health Management; and

(d) Regional Health Services. For each, it would provide fortechnical assistance, training, equipment and civil works(US$182.6 million equivalent base cost; and US$227.0 milliontotal cost including contingencies). The project would beirplemented over a period of seven years and completed byDecember 31, 1998. A special feature of the project design isthe targeting of components (a), (b) and (c) in three projectregions under component (d) to maximize impact. Healthservices in the three regions would be reorganized as "healthconsortia" of participating voivodships. Concurrently, theproject would also contribute to progressive strengthening ofthe entire health sector through aspects of components (a),(b), and (c) that would be implemented in a phased manner atthe national level.

BENEFITS: Major benefits include increased orientation toward preventionof health problems, more accessible and effectiva primarycare, more efficient and professionally managed healthservices, reduced reliance on the state budget for health carefinancing, and experience in decentralization of healthservices. Improved targeting of poor and vulnerablepopulations would be achieved through better equipped and morehighly trained family doctors. This would also addressfragmentation of primary care and reduce reliance onenterprise-based setvices, thereby facilitating labormobility. A reduction in avoidable infant deaths could beexpect .t. Improved accounting methods, monitoring of drugprescriptions and sales, and professional hospital managementwould all lead to efficiency gains and contribute to costcontainment. Regional restructuring of health services isexpected to permit greater involvement of the private sectorin hospital support services such as laundry, catering andmaintenance. Development of training for primary carephysicians and nurses is also expected to foster high qualityprivate practices. The three project regions would contributeto sustainability of the project through cost containment andimproved efficiency by establishing shared services intechnology and materials management, planning and evaluation.Once materials management is operating, up to 10% savings onoperating budgets could be achieved, and up to 5% savings arepossible on both investment and operating budgets withefficient equipment management. The combined total savingsfrom measures that address pharmaceutical consumption andefficiency in hospitals could be as high as ZL3 trillion or 8percent of the total health care budget. These internalsavings could be redirected toward priorities such as healthpromotion, prevention and primary care.

, RISKS: There are two main risks. The first is continuation of weakproject implementation capacity in the Ministry of Health andSocial Welfare (MOH). Project implementation presents anadministrative challenge unprecedented in MOH, and the numberof qualified staff responsible for implementation needs to beincreased. This risk is compounded by the difficulty inattracting and maintaining staff with the present publicsector salaries. Management capacity at the regional level isalso a concern. To reduce this risk, technical assistance inproject management would be provided during project start-upand implementation. The second risk is that continueduncontrolled rise in health expenditure and further economicdifficulty could compromise financing and sustainability ofhealth services. Project design has been tightly focused onessential investments to rationalize health expenditures andminimize incremental recurrent costs. Management improvementsand cost recovery to be implemented under the project wouldyield substantial efficiency gains.

- vi -

Estimated Proiect Costs: i}

Local Foreign Total-(US$ million) ----

Health PromotionHealth Promotion Programs 0.5 1.5 2.0Training of Health Educators 1.5 3.7 5.2Occupational Health 0.1 Q. Q_a

Sub-Thtal 2.1 5.4 7.5

Primary Health CarePrimary Care Practices 15.3 14.3 29.6In-Service Training 2.3, 6.4 _.7

Sub-Total 17.6 20.7 38.3

Health ManagementHospital A/D Information & Accounting (national) 2.3 11.5 13.8Pharmaceutical Monitoring (national) 4.5 20.6 25.1Budgeting 0.1 0.4 0.5Management Development 1.1 4.2 5.3Health Financing O.5 .1 .6

Sub-Total 8.5 37.8 46.3

Regional Health ServicesRegional Management 2.5 4.4 6.9Infrastructure Consolidation 31.9 34.6 66.5Hospital A/D Information & Accounting (regional) 2.5 7.9 10.4Pharmaceutical Monitoring (regional) 0.7 2.6 3.3Materials and Technology Management 0.4 , 3.0 3.A

Sub-Total 38.0 52.5 90.5

Total Base Cost 66.2 116.4 182.6

Physical Contingencies 5.4 10.3 15.7Price Contingencies 11.2 17.5 28.7

TOTAL PROJECT COSTS 82.8 144.2 227.0

I/ Project costs include an estimated 10 percent, or US$6.1 millionequivalent, for indirect taxes on locally procured services and civilworks. Numbers may not total exactly due to rounding.

-vii-

Local Foreign Total---- (US$ million)-------

Financing PlAn:GovernmentNational Government 45.9 A/ 0.0 45.9Regional Consortia (voivodships) 26.1 0.0 26.1

IBRD 0.0 130.0 130.0European Community .8 14.2 25.0

Total 82.8 144.2 227.0

j/ Includes US$6.1 million in taxes and duties.

Estimated Disbursements:

Fiscal Year1992 1993 1994 1995 1996 1997 1998 1999-------------------- (US$ million) ------------------

Annual 0.5 9.0 27.6 30.3 24.9 17.0 11.8 8.9Cumulative 0.5 9.5 37.1 67.4 92.3 109.3 121.1 130.0

Rate of Return: Not applicable

MEP: IBRD 23228R

I. THE HEALTH SECTOR IN POLAND

A. Introducelon

1.1 The Government of Poland is committed to major reform andrestructuring of the health sector to improve the bleak social conditions leftby decades of poor standards of living, disregard for the environment,unhealthy lifestyles and misdirected priorities in provision of healthservices. 5ince the mid-1970s, health status in Poland has deterioratedsignificantly while it improved in most western countries. Currently, lifeexpectancy is low and mortality high compared with western Europe. A programof extensive but poorly targeted investments during the early 1970s led to abuild-up of acute care hospitals and training of medical specialists. Littleattention was given to the construction of adequate rehabilitation servicesand long-term care facilities. Training of general practitioners, nurses andother health care personnel was neglected, leading to serious imbalances inthe type and number of health care workers and their geographic distribution.The recurrent budget required to operate the resulting massive National HealthService qutckly outstripped the country's financial resources. In recentyears, underfinancing and neglect have left health services badly in need ofmaintenance, repair and replacement. Hospitals and ambulatory clinics oftenlack even basic diagnostic and therapeutic equipment. Chronic shortages inmany critical drugs and supplies lead to ineffective and low quality care.Finally, there are virtually no incentives to motivate patients to maintaingood health and to use scarce resources judiciously, or to encourage healthcare workers to provide effective, efficient, and high qw-ilty care.

1.2 The health sector confronts these problems during a period ofeconomic crisis. Following a period of hyperinflation, the Governmentlaunched reforms to introduce a market economy in January 1990. Although theeconomy is beginning to stabilize, the annual rate of inflation during thelatter part of 1991 was still about 40 percent and cutput h.;- declined sharplyfor two consecutive years. This has resulted in a seriou .a.iiscal deficit,which could potentially worsen in 1992. Measures taken to confront thepresent fiscal crisis are likely to include real expenditure cuts. Thesereductions could have an important bearing on the health sector, which reliesalmost exclusively on state budget transfers for its financing. It isbecoming increasingly clear that success of the Government's economic reformprogram depends to a large extent on measures taken to balance the budget andreduce the social cost of adjustment. Increasing public expenditure on healthservices and deteriorating standards of care could compromise the reformprogram.

1.3 The Government's fiscal situation is simultaneously a primedeterminant of the fate of the health system and a consequence of it. Healthexpenditure is a significant component of public expenditure which must becontained to trigger a successful economic recovery. Continued inflation andincreased demand for health services drive up health expenditure; pooreconomic growth and public sector budget constraints reduce the healthsector's financial resources. The Government is therefore introducingmeasures to enhance cost-containment, to increase cost recovery and to achievegreater targeting of services. With the collapse of the previous economic

-2-

order, the health sector can no longer depend upon the foundation on which it

was built--public ownership of facilities, public management of services, and

financing through the state budget. In the medium-term, Poland is in critical

need of a radical restructuring of its health sector through the introductionof a new and more appropriate balance in the public/private mix in ownership,

management and financing.

B. Sector Background

Hgalth Status

1.4 From 1947 to 1964, health status in Poland improved significantly.As in other parts of Europe, mortality declined, and degenerative and chronic

non-communicable diseases replaced infectious diseases as leading causes of

death. These trends have continued in Western Europe since the mid-1960's.

Since then, however, mortality in Poland and other Eastern European countries

has risen and life expectancy has decreased. This trend has been especially

pronounced for middle-aged men and women. By 1989, life expectancy at birth

in Foland was 67 years for men and 76 years for women, compared with the OECD

range of 70 to 76 years for men and 76 to 81 years for women. During the same

period, there has been a steady decrease ifi life expectancy for adult males.Between 1970 and 1985 life expectancy for men at age 30 decreased by 1.5

years. The age-standardized death rate from cardiovascular disease increased

by 72 percent for men between 1970 and 1985, whereas there was a reduction of

about 30 percent in most Western European countries. By 1989, male life

expectancy at age 30 was 39 years, and female life expectancy was 47 years.

In contrast to what is observed in other developed and developing countries,urban adults have a lower life expectancy in Poland than rural adults, despite

a higher crude mortality rate and higher infant mortality rate in rural areas.In Poland, urban areas appear to be associated with higher health related risk

factors than rural areas (environmental hazards, stressful work, substandard

housing and unhealthy lifestyle). A similar observation was made in many

western countries during the early period of the industrial revolution. With

increased development, these trends reversed themselves in most western

countries.

1.5 Between 1950 and 1990, infant mortality in Poland declined from 111.2

deaths per 1,000 live births to 16.1, but the rate of decline has slowed in

recent years. The infant mortality rate in Poland is lower than the average

for Eastern European countries (18.5 per 1,000 in 1986), but higher than for

Western European countries (5.0 to 14.2 per 1,000). Half of infant deaths

occur in the population group falling below the lower third'of householdincome distribution. There are significant differences between regions and

socioeconomic groups. About two-thirds of infant deaths are related to

premature births and perinatal problems; both are indicators of access to

health services and quality of basic care. Post-neonatal mortality,accounting for the remaining third of all infant deaths, is higher in Poland

than in most Western European countries. It is used as an indicator of poorenvironmental hygiene, malnutrition, and lack of basic medical care.

-3-

Health Services

1.6 Structure and Organization. Health services provided by the Ministryof Health and Social Welfare (MOH) and voivodships offer a highly structurednetwork of health care institutions to 90 percent of the population in Poland.Additional parallel health services are provided by other Ministries,l/public enterprises, medical cooperatives and a small private sector.Ownership of health care facilities, provision of health services andfinancing is limited almost exclusively to the public sector. The MOH isresponsible for formulating health policies, planning the health care budget,monitoring and providing a limited range of highly specialized tertiary care.The 49 voivodships and 400 ZOZ (Zespol Opieki Zdrowotnej - integrated healthand social service units) are responsible for providing the bulk of primary,secondary and basic tertiary care for the general population. The number ofZOZs in a single voivodship ranges from 3 to 33. The population covered by asingle ZOZ is uneven, ranging from 30,000 to 150,000 people, with an averageof one ZOZ per 100,000 population.

1.7 Public health and disease prevention activities are carried out atboth national and voivodship levels by the Sanitation and Epidemic PreventionSystem (SANEPID). SANEPID stations are responsible for disease surveillanceand reporting, control of communicable diseases, monitoring of environmentalhealth,/ food hygiene, health education and preventive medicine. One of themost tangible achievements of the SANEPID stations has been their contributionto the programs for supplying vaccines to pediatricians and conducting surveysand follow-up action for the control of communicable diseases. They are alsoresponsible for determining the safety of workplaces, measuring levels ofrisk, enforcing orders to change specific occupational practices, andundertaking clinical work on occupational diseases with individual workers.Many of the SANEPID stations have microbiological and immunologicallaboratories which provide clinical testing for local hospitals. In contrast,most public health services found in western countries do not provide clinicallaboratory services for hospitals.

1.8 Health Care Personnel. Since the 1970s, the total number of doctors,nurses, dentists, and pharmacists per capita has increased significantly toreach a doctor/population ratio that is within the mid-range for the OECD, andsimilar to that found in many other eastern European counties. By 1990, therewere 21.4 doctors, 4.8 dentists, 54.4 nurses and 6.3 midwives per 10,000

1/ Ministries that provide parallel health services include the Ministry ofTransport (railways), Ministry of Industries (mines, occupational health),Ministry of Interior (police), Ministry of Defense (armed forces),Ministry of Justice (prisons) and Ministry of Foreign Affairs (embassies).The parallel health services provide health care for the remaining10 percent of the population, while occupational health services providedby enterprises and the private sector overlap with those of the MOH.

/ The Ministries of Environmental Protection and Natural Resources,Agriculture, Forestry and Food Economy share responsibility with the MOH'sSANEPID system for monitoring environmental health.

-4

inhabitants in Poland. Distribution of medical personnel is uneven, however,ranging from 41.8 doctors per 10,000 people in Warsaw to 9.9 in the Siedlcevoivodship. The mix of medical personnel is characterized by a predominanceof specialists, even at the primary care level, where internists,gynecologists, pediatricians and dentists provide the first point of contactto the health system. More than 72 percent of the physicians are specialists,and 50 percent of these have a subspecialty. There are no formal trainingprograms for preparing doctors for general practice or family medicine. Thenurse/doctor ratio and nurse/bed ratio is low by western standards.

1.9 Physical Resources. Eguipment. SunDlies and Medical Drugs. Theexpansion that took place in Poland's health care resources over the past 20years led to a marked increase in hospitals, out-patient clinics and medicalcenters. By 1990, there were 56 beds per 10,000 population in Poland, whichis in the mid-range of values observed in the OECD. This bed/capita ratiodoes not include additional beds found in the parallel health servicesprovided by other Ministries. There are also 8.9 beds per 10,000 populationin psychiatric hospitals, 1.5 in tuberculosis sanatoriums and 1.6 in othersanatoriums. Although these additional beds were designed and intended foracute care, many are used for long-term chronic care due to a shortage ofchronic care beds and related support services elsewhere in the system. Sinceacute care beds that are occupied by chronic care patients are not availablefor active care, the actual number of active acute care beds in Poland is lessthan what is observed in many western countries despite the high number oftotal beds. Furthermore, the distribution of hospital beds is uneven, rangingfrom 79.6 per 10,000 in Wroclaw to 35.4 in Konin. Construction of hospitalsand clinics has decreased significantly in recent years due to a markedreduction in the investment budget of the health sector. Medical drugs,syringes, gloves, needles, small instruments and electronic equipment (much ofwhich is imported or depends on imported inputs), are in chronic short supply.Although Poland has a large pharmaceutical industry and capacity to produceabout 80 percent of the drugs it needs, many of the raw materials and semi-finished products required for production must be imported. At present,domestic industry is meeting about 60 percent of the country's requirements.

1.10 Utilization of Services. In 1988, the number of hospital bed daysper capita was 1.3 in Poland, compared with a range of 0.7 to 4.9 in OECDcountries. At 12.6 days, the average length of hospital stay is in the mid-range of patterns in Western Europe. In OECD countries, the range of theadmission rates was from 5.5 percent to 22.6 percent, and the length of staywas 6.1 to 34.8 days in 1988, excluding Japan. On average, a person in Polandvisits a physician 7.7 times per year (including dentists), compared with arange of 2.0 to 12.8 physician visits per person reported in the OECD. Localaveiages range from 11.4 in Lodz to 4.5 in Siedlce. Unreported visits tohealth care facilities, including those in the parallel health services andprivate sector, distort what appears to be a low use of health care resourcescompared with the range of norms observed in the OECD. Only 62 percent ofpatients' contacts were provided by primary health care physicians. Queues,waiting lists, low-quality services, and supply shortages create a barrier toaccess that prevents utilization rates being a good indicator of demand.

-5-

Health Financing

1.11 Overall ExRenditures. The estimated total health care expenditure inPoland for 1991 is Zloty (ZL) 48.8 trillion (US$4.23 billion) or 5.4 percentof Gross Domestic Product (GDP). The health sector's claim on GDP in Polandis similar to estimates of health care expenditure for other Central andEastern European countries and for developing countries with similar nationalincomes, but in the low range of expenditure reported by the OECD, excludingTurkey (5.3 to 11.2 percent of GDP). In 1991, the recurrent and capitalexpenditure budget for health services provided by MOH accounted for 80percent of total health care expenditure. MOH's share excludes expenditure onhealth services provided by enterprises, parallel health services provided byother Ministries, and out-of-pocket expenditure by households. During thelate 1970s to mid-1980s, total expenditure on health services provided by theMOH increased both in nominal and constant values. It also increased relativeto GDP and to general government expenditure. This growth slowed dramaticallyin 1989, and both capital and current expenditure on health care decreasedmarkedly in real terms in 1990 and 1991.

1.12 Recurrent and Capital Expenditure. Throughout the 1980s, the mostsignificant rQcurrent expenditure categories in the health sector were wagesat about 30 percent and drugs at about 15 percent. Other categories undermaterial expenses such as food, energy, services and maintenance, made up amuch smaller proportion of recurrent expenditures. The low relative wagestructure for health care workers and high expenditure on drugs and importedmedical equipment distort relative expenditure on these categories in Polandcompared with western countries where salaries comprise more than 60 percentof recurrent expenditure. Construction costs comprise 60-70 percent of totalcapital expenditure and 80 percent of accumulated assets. Capital expenditurehas decreased relative to GDP and in constant values during the late 1980s.In 1991, the ratio of capital expenditure to total expenditure in the healthsector dropped to 8.2 percent.

1.13 Budget Process. The MOH and other ministries that operate parallelhealth services each prepare their own independent budget. MOH has a centralbudget for institutions under its direct responsibility, while institutions atthe regional and ZOZ levels are financed through the central government'sbudgetary transfers to voivodships. The central government budget providesfinancing for the general administration of MOH, specialized nationalinstitutions, university-affiliated hospitals and special national programs.The voivodship budget provides financing for regional, district and communityand associated institutions at the community level. In principle, voivodshipbudgets are to be determined by catchment area population, the number of beds,and the number of medical personnel. In practice, the budget is determined byhistorical allocations adjusted for deficits, inflation, and the individualnegotiating power of directors, local authorities, and other interest groups.

1.14 Source of Financing. Health services provided by MOH, the parallelservices provided by other Ministries, and occupational health servicesprovided by public enterprises are all financed through the state budget(90 percent of total sources of financing). With the exception of nominal co-payments for some drugs and gratuities, there is no direct individual

- 6 -

responsibility for financing health care such as user charges or insurancecontributions, Out-of-pocket household expenditure is estimated at 10 percentof total sources of financir.g. Private health insurance does not exist. Bycontrast, in most OECD countries, public financing (general revenues, socialinsurance and statutory health insurance) accounted for 41-97 percent of totalhealth care expenditure in 1987.

C. Sector Issues

1.15 Many problems plague the Polish health sector. Those described inthe following sections were identified by a joint World Bank/Government TaskForce during 1990 and 1991 as issues that need to be addressed most urgentlyduring Poland's economic stabilization and transition to a market economy.They include: (a) poor health; (b) ineffective specialization;(c) inefficient bureaucracy; and (d) distorted priorities.

Poor Health

1.16 Health Status. Declining health status, rising mortality rates andlow life expectancy compared with western countries are the most seriouschallenges that face the health sector in Poland. Experience from western anddeveloping countries suggests that life expectancy increases with development,irrespective of specific health sector interventions. The most importantdeterminants of good health are level of income, standards of living, goodhousing, adequate diet, healthy lifestyle and safe workplaces--not healthservices. Poverty, substandard housing, poor diets, smoking, alcoholconsumption, stressful work, accidents and environmental hazards allcontribute to poor health and ultimately to mortality. With the exception ofhealth promotion and public health programs, traditional health services donot address most of these problems. For life expectancy to fall in Poland,some form of reverse development has taken place under which health-relatedliving conditions deteriorated to such an extent that mortality rates rose.The core of this bleak situation lies mainly in rising mortality fromcardiovascular diseases, stroke and cancers, which has exceeded gains fromcontinuing decreases in infant mortality. A major health sector priority mustbe to address effectively this deterioration in health status, whilepreserving achievements in communicable diseases control, and maternal andchild health.

1.17 Public Health Institutions. The SANEPID stations have beenineffective in controlling environmental pollution and reducing lifestyle riskfactors. The total number of epidemiologists per capita may be higher inPoland than in other European countries, but their work is mainly descriptive.Lack of adequate data processing has no doubt contributed to this weaknessalong with the uncompetitive and sheltered intellectual environment of thepast. The activities of SANEPID stations led to few positive outcomes, partlyas a result of an inability to influence legislation, policy or publicattitudes, and partly because of the prevailing attitude that 'to measure theproblem is to solve the problem'. Tests to measure pollution continue to beconducted without introducing effective policies or programs to deal with the

- 7 -

measured phenomena. Volumes of other data are painstakingly andsystematically collected without effective interventions. Although theGovernment recognizes that health promotion and prevention are the means toreduce morbidity and mortality, clear action and Implementation in this areahave been difficult (e.g., the proposed Smoking Control Bill has not yet beenpassed by Parliament).

1.18 Health Promotion Proframs. Preventive services are especiallyvulnerable during the present economic crisis because they are likely to havetheir budgets cut to a proportionally greater extent than curative services.Such cuts could undermine the continuation of essential and effective servicesfor women and children (e.g., immunization, prenatal care), and could delay orprevent the launching of new initiatives in such areas as family planning.Legal abortion is used extensively to limit fertility. Lack of informationand access to alternative and affordable methods of birth control contributeto this trend. This is both medically inappropriate and economicallyinefficient. In the past, prevention was excluded from the scope of healthcare in Poland. During the 1970s, the deteriorating health status of thepopulation was known by the Government but was not revealed for politicalreasons. A National Health Strategy was approved by the Economic Commissionin June 1990, but the MOH has been unable to mobilize the financial resourcesand institutional capacity to develop and implement proposed programs such asschool health education, anti-smoking measures and workplace safety. Despiteobvious financial constraints, occupational health services continue tomisdirect their scarce financial resources toward curative services forprivileged groups rather than toward protection of workers. Similarly, theSANEPID stations continue to conduct microbiological and immunological testsfor acute care hospitals instead of devoting scarce resources to combattingthe leading threats to public health.

Ineffective Specialization

1.19 Services. Despite the highly structured character of Polish healthservices, functional distinctions between primary, secondary and tertiarylevels of care are often unclear. Lack of basic equipment, supplies, drugs,social services and home care in the primary care setting, and the narrowrange of clinical skills of non-hospital based doctors, make it impossible forservices to function properly at the primary care level. The use of medicalspecialists rather than general practitioners as the first point of patientcontact with the health care system amplifies this problem. Compulsorycatchment areas and the role of primary care doctors as gatekeepers areunpopular with patients who rightfully feel they are wasting time in queuesonly to be told that services they need are not available at that level ofcare. Not surprisingly, patients are willing to pay substantial gratuities tobe referred quickly to higher levels of care. This leads to inappropriatereferrals to more specialized levels of care for problems that could have beentreated adequately at the community and district levels, if equipment andproperly trained staff were available. More specialized, expensive and oftendistant regional and national institutions end up providing first line carenot only to their immediate catchment populations but also to patients fromvastly different parts of the country. Simply designating some centers forhighly specialized care and others for primary care has not solved this

problem. Combined with a chronic shortage of nurses, auxiliary and primaryhealth care workers, the result is ineffective fragmentation of primary careand poor targeting of vulnerable populations.

1.20 Training. The orientation of Polish health services towardssuper-specialization has much to do with unbalanced postgraduate medicaleducation and the power base that specialists enjoy within the medicalestablishment. Postgraduate medical schools in Poland have not kept up withtrends in many western and developing countries of restructuring part of theirmedical education towards training primary care doctors and allied health careworkers, and introducing financial incentives that make community-basedservices attractive to both patients and health care workers. Instead, thenear public sector monopoly and low quality of most ambulatory clinics createstrong negative incentives for doctors who might otherwise be attracted bygeneral practice. A continued increase in the total number of specialists percapita, without a balance in the number of general practitioners, communitynurses and other auxiliary health care workers, will have serious consequencesfor the Polish health care system in the future in terms of quality of care,targeting of vulnerable populations and health care expenditure. A majorhealth sector priority must therefore be to address this problem by providingbetter training and improved conditions of service for primary care doctorsand allied health care workers.

Inefficient Bureaucracy

1.21 Management. Health services in Poland are poorly managed. Rigidbureaucracy, with strict adherence to arbitrary norms, deprive directors andhealth personnel of the flexibility to determine local priorities and toallocate resources according to specific needs. The lack of management-basedinformation systems (data on health outcomes, performance of health servicesand expenditure trends) prevents policy makers, managers and other health careprofessionals from maximizing effectiveness and efficiency in provision ofservices. Instead, administrators implement central dictates with littlescope for individual decision-making. Most hospital directors are doctorswith no training in health care management or access to basic management toolssuch as information systems to assist in record keeping (admission/dischargedata), accounting, personnel management, materials management, equipmentmanagement and tracking utilization patterns (drug monitoring). Highlyspecialized health care workers waste time performing administrative dutiesrather than the medical care for which they were trained, and there are nouniversity programs for training health care managers. As the health sectorcontinues to experience strong inflationary pressures with respect to theprices of pharmaceuticals, imported medical technology, and the relative wageof health workers, and as financial resources from the state budget decreasein real terms, it becomes increasingly critical to achieve marginal gainsthrough more effective use of scarce resources and efficient management.

1.22 Incentives. There are no incentives in the Polish health care systemto stimulate effective and efficient work habits among managers and healthcare providers; there are no deterrents, other than queues and poor qualityservices, to prevent patients from using services needlessly. Rules onnon-fungibility among budget categories prevent directors of institutions from

- 9 -

adjusting their operations to specific contexts; rules requiring the return ofbudget surpluses and the cancelling of deficits at the end of the yearencourage a mentality of deficit financing and remove all incentive to balancethe budget. Doctors working on salaries have few incentives to deal withcomplex problems themselves, but are easily tempted to minimize their workload by referring patients to higher levels of care. Likewise, directors ofhospitals have a strong incentive to refer difficult cases to higher levels ofcare--the less work, the less strain on their global budgets. Salaries ofmost health care workers are at the bottom of the list for the public sector.As a result of such perverse incentives, there are often queues and waitinglists even though visits and beds per capita are high compared with westernstandards. Improvements in management techniques are unlikely to besuccessful unless underpinned by more positive incentive structures.

1.23 Budgeting. Budget allocation in the health sector is historical andresource-driven, with political factors playing a large part. Institutionsthat have more beds receive larger budgets, irrespective of how well thesebeds are used. This is one of the reasons Poland has such a highbed/population ratio compared with western countries. Directors have beenquick to learn that putting 6-8 beds in a room built for 4 beds significantlyincreases their budget. Not surprisingly, the correlation between recurrentor capital expenditure and populations is weak; the.correlation betweencapital expenditure and accumulated assets is equally weak. Such manipulationof the budget rules reinforces existing geographic disparities. Since mid-1989, inflation has made the budget process extremely difficult for localadministrators. At the regional level, many western countries are movingtowards using demographic, morbidity and socio-economic factors in preparingregional budgets and planning the geographic distribution of health careresources. Poland is looking to introduce a similar system in the future, butlacks knowledge and experience in this area.

1.24 Cost and Financing. Currently, Polish firms faced with increasedcompetition and the possibility of bankruptcy are forced to cut costs notdirectly related to production. This includes expenditure on enterprise-basedhealth services. Heavy reliance on the state budget as the principal sourceof financing makes the health sector in Poland extremely vulnerable torestrictive fiscal policies and high inflation. At the same time as financialresources are decreasing, expenditure on health care is rapidly increasing.Since 1989, there has been an explosion in the cost of pharmaceuticals due toa rapid removal of subsidies, quick deregulation and privatization (importers,manufacturers, wholesalers and retailers), and liberalization of priceswithout effective counter measures to contain utilization. This resulted in adisproportionate increase in expenditure on pharmaceuticals compared with therest of the health sector (20 percent of the total health care budget in 1991and nearly 50 percent of the MOH budget). Imported medical equipment hasfollowed the same trend. Faced with budgetary cuts and increasing expenditureand demand, the MOH has found it necessary to suspend all but the most urgent

- 10 -

capital investment projects../ A growing part of the health care recurrentbudget is now being spent on the repair of outmoded and inefficientfacilities, with future investment needs increasing over time. Faced withthese problems, the MOH is looking to health insurance as a source of healthcare financing, but has yet to examine the feasibility and draft a concreteproposal for this alternative to financing through the state budget.

Distorted Priorities

1.25 Ineffectiye Planing. Under the previous system, the health sectorrelied on policies that were drawn up at the supra-ministerial level in theform of 5-year national plans. When the last 5-year plan expired, the healthsector was left without direction for the future and without experienced staffto assume this role. Many of the potential advantages of national policymaking were lost in the process. There was little sharing of services at thevoivodship level, and no joint management of materials or equipment. A beliefin economies of scale led to the construction of massive multi-pavilionhospitals and large polyclinics. Most of the advantages of size are lostthrough poor communication between pavilions, poor integration among differentlevels of care and the additional cost to pay for the utilities of thesecomplexes. Large 1,200- to 1,600-bed hospitals make visiting by both familiesand doctors difficult. There are also significant overlaps in some servicesprovided by the MOH, other Ministries and occupational health services whilethere are shortages of other services. These duplications are wasteful andbecoming increasingly difficult to justify in the face of limited financialresources. Enterprises are already looking at how to decrease theirresponsibility for occupational health services which add to their operatingcosts without providing any apparent benefit in terms of production orprevention of occupational related illness. Many spas and sanitoria provideluxury rather than standard rehabilitation. Ambulances are often used forcases that are not emergencies but in which the patients have no other meansof transportation. The resulting health service is costly, and often providesineffective, inefficient and low quality care.

1.26 Integration of Services. Instead of providing comprehensive andintegrated services with continuity of care, the highly structured NationalHealth Service in Poland creates many direct barriers to access. Lack offunctional links between ambulatory and institutional care, and between healthand social services make integrated services and continuity in care anillusion. Lack of same-day surgery, pre-admission testing and post-dischargehome care result in excessive and inappropriate reliance on institutionalcare. Health systems in many Western European countries are striving for moreintegrated ambulatory, hospital, emergency care and laboratory services to adefined catchment population. Poland already nominally has the appearance ofsuch integrated services in the form of its voivodships and ZOZ healthservices, but these structures function poorly and provide little continuityof care. The voivodships often have populations that are too small to support

i/ In 1990, MOH resources fell significantly short of requirements forcompleting investments in planned hospital beds, chronic care facilities,nursery places, outpatient departments and rural health centers.

advanced higher level care. The ZOZ catchment areas are too small for anefficient utilization of resources, and management is ineffective due to thehighly centralized, top-down structure of the system.

D. Government Program

1.27 In 1990, with input from a Joint Government/World Bank Task Force onHealth System Reform, the Polish Government formulated the strategic frameworkfor a fundamental systemic reform in the health sector._/ The Governmentplaces a high priority on improving health as a vital strategy in reversingthe bleak social conditions left by decades of poor standards of living,disregard for the environment, unhealthy lifestyles and misdirected prioritiesin provision of health services. Furthermore, an improved health care systemis critical to strengthening the safety net to protect poor and vulnerablepopulation groups both during and after the transition. The Governmentrecognizes that major restructuring of the health care system will requiretime and cannot take place through simple remedial measures to addressisolated problems. Upgrading health services to western standards is farbeyond the financial resources that will be available to the health sector inthe near future. The Government does not intend now to address all the issuesin the health sector. Instead, it will address only those priorities thatwould have the greatest impact on improving health, increasing effectivenessand efficiency in the provision of health care and transferring some of theresponsibility for financing health care from the state budget to contributorysocial insurance.

1.28 To provide an appropriate legal framework for implementing thesestrategies in the health sector, the Government has introduced a number ofimportant policies since 1990, submitted legislation to Parliament, and is inthe process of passing critical regulations: (a) a National Health PromotionStrategy was formulated in 1990 to develop health promotion programs thatwould address key preventable threats to health; (b) a Health CareInstitutions Act was passed in 1991 that will allow establishment of privatepractice and a greater role of the private sector in the provision of healthservices; (c) a Pharmaceutical Act was passed in 1991 that will increase costrecovery, redefine entitlement, and introduce criteria for a limited drugformulary; and (d) the Health Care Provisions under the Local Government Act,which was passed by Parliament two years ago, would support efforts todecentralize the health care system by significantly increasing theresponsibility of local government for the financing and provision of healthcare. Additional regulations are being prepared in the area of minimum healthdata set, accounting and pharmaceutical monitoring.

i/ The Bank's analytical contribution to the Task Force is documented in aWorld Bank report entitled Poland Health System Reform: Meeting theChallenge, (Gray Cover), Report No. 9182-POL, January 1992.

- 12 -

1.29 In a clear departure from past centralized state control, theGovernment's strategy for reform in the health sector is to address many ofthe issues that were discussed above by reorganizing the provision of healthservices in regions of more appropriate population size, integrating thevarious tiers and providers of health services within a given region, anddecentralizing their management. Within each region, the Government wouldsupport specific programs to strengthen public health and prevention, primaryhealth care, and health care management and would reorganize the structure andfunction of health services. In designing its health reform strategy andprograms, the Government has determined that it is necessary to launch well-integrated national initiatives on a broad front. Given limited fiscalresources for the initial capital investment required, the Government willneed to proceed selectively with regional restructuring of health services.In view of these factors, the Government has identified a first group ofregions where health services will be restructured and where national programscan be introduced and refined, prior to nationwide implementation. Thisapproach, which is necessarily complex and phased in its development, is thebasis for the design of the proposed project.

E. Rationale for Bank Involvement

1.30 As the second year of Poland's Economic Transformation Program drawsto a close, it is becoming increasingly clear that success will depend to agreat extent on measures to reduce the social cost of the transformation to amarket economy. Measures to alleviate the initial wave of unemployment andpoverty have stood up well, but continued restructuring of the economy, inparticular of public enterprises, could lead to additional unemployment in theimmediate future. Although these factors are fostering doubts in Poland aboutthe soundness of the economic reform program, a return to low growth andcontinued hyperinflation would waste important gains made so far and lead tofurther economic hardship in the near future. The alternative to a reversalin the country's economic strategy is to alleviate some of the associatedsocial burdens by radical reform in some of the vulnerable programs that arepart of the safety net. Unless quickly addressed, critical issues relating topublic expenditure on health care and deteriorating standards of care nowthreaten to jeopardize this strategy.

1.31 The Bank's sector dialogue and involvement in project preparationhave already assisted the Government to develop new strategies, policies andprograms to restructure the health sector in support of a new and moreappropriate balance in the public/private mix. The proposed Health ServicesDevelopment Project would provide more effective targeting of poor andvulnerable populations; increase the effectiveness, efficiency and quality ofcare; and improve institutional capacity in policy making, planning andevaluation of the MOH and related institutions. Many components of theproject have foreign currency requirements and need for foreign technicalassistance that are far beyond the capacity of local financial resour^os orthose that can be mobilized through the international donor communit,. TheGovernment is therefore seeking a World Bank loan to launch its health sectorreform. The proposed loan and project are envisaged as a first phase in asustained program of World Bank support for the health sector in Poland.

- 13 -

F. Role of Other Donors

1.32 The Commission of the European Communities (EC) has been closelyinvolved in project development. EC-sponsored health specialists participatedin the July 1991 preappraisal and October 1991 appraisal. The EC has approvedEuropean Currency Units (ECU) 20.0 million (about US$25.0 million) in grantfund cofinancing. MOH is being supported in its project preparation effortswith technical assistance mobilized by the Bank and funded by the Governmentsof Denmark, Japan, Sweden and the United States, and by direct technicalassistance from Project Hope. The Government is also receiving support in the

health sector from the United Nations Fund for Population Activities, UNFPA(population policy and analysis); United Nations Development Program, UNDP(short-term advisory services); World Health Organization, WHO (technicalassistance in policy evaluation and AIDS control); Austria (fellowships formedical students); Italy (equipment for a hospital in Zamosc); the Netherlands(fellowships and hospital quality improvement); Switzerland (technicalassistance and medical equipment); the United Kingdom (technical assistance);and the U.S. (emergency medicines, hospital development and technical supportto the MOH through Project Hope).

- 14 -

II. THE PROJECT

2.1 The project would support the Government's economic reform program by

improving health, strengthening the health sector's contribution to the social

safety net, and containing upward pressure from the health sector on the state

budget. The project would have four specific objectives:

(a) to improve health status by strengthening health promotionand prevention programs;

(b) to support the first steps in restructuring the health sector by

shifting the focus from institutional care to effective primary care

through better trained primary care doctors and nurses;

(c) to strengthen institutional capacity in policy making, planning,management and evaluation by providing policymakers and managersaccess to improved information systems and management development;and

(d) to ensure sustainability of services and control costs in the healthsector in the medium-term by improving effectiveness, efficiency andquality of service delivery in three project regions.

2.2 The project would provide technical assistance, training, equipment

and civil works (US$182.6 million equivalent base cost; and US$227.0 million

total cost including contingencies). It would comprise the following four

components and would be implemented over a period of seven years:

(a) Health Promotion(i) Health Promotion Programs(ii) Training of Health Educators(iii) Occupational Health

(b) Primary Health Care(i) Primary Care Practices(ii) In-Service Training

(c) Health Management(i) Hospital Admission/Discharge Information and Accounting

(national)(ii) Pharmaceutical Monitoring (national)(iii) Budgeting(iv) Management Development(v) Health Financing

(d) Regional Health Services(i) Regional Management(ii) Infrastructure Consolidation(iii) Admission Discharge (A/D) Information and Accounting (regional)(iv) Pharmaceutical Monitoring (regional)(v) Materials and Technology Management

- 15 -

2.3 A special feature of the project design is the initial targetedapplication of components (a), (b) and (c) in three project regions undercomponent (d) to maximize impact. Health services within the three regionswould be reorganized as "health consortia" of participating voivodships.Concurrently, the project would also contribute to progressive strengtheningof the entire health sector through specific aspects of components (a), (b),and (c) that would be implemented in a phased manner at the national level.

A. Health Promotion(estimated base cost US$7.5 million)

2.4 The Health Promotion component would help: (a) consolidate nationalefforts to support selected health promotion activities focused on criticaland preventable risk factors (tobacco and alcohol consumption, and unhealthydiets); (b) strengthen capacity in health education (public awarenesscampaigns, schools and family planning). The project would also (c) supportstudies, policy development, and planning of programs to address occupationalhealth and safety issues.

2.5 Health Promotion Programs. This subcomponent would support policiesto improve health status by strengthening health promotion and preventionprograms. Improving health of the population should be the most importantpriority of the new health care system in Poland. The project would increasethe institutional capacity of the National Board for Health Promotion (NBHP),established by the MOH in the Institute of Hygiene, to design and coordinatethe implementation of such programs at national and regional levels.j/ NBHPwould implement the National Health Promotion Strategy drafted and approved bythe MOH in 1990. A first priority for the NBHP would be preparation ofeducation and counseling programs to address critical and preventable healthrisks stemming from tobacco and alcohol consumption, unhealthy diets andoccupational hazards. It would also develop programs in family planning, andmaternal and child health. During the first phase of the project, the NBHPwould develop a capacity to assist the three project regional health promotionunits in designing and implementing health promotion programs. Duringsubsequent phases of the project, the NBHP would assist other regions inPoland to introduce similar programs. The NBHP would also develop a capacityto monitor and evaluate health promotion programs implemented in the threeproject regions and other parts of Poland. This would include support forcommunity outreach programs.

2.6 The project would strengthen the NBHP through: (a) fellowships anddegree programs in public health, health education, mass marketing andcommunications; (b) technical assistance to design health promotionstrategies, monitoring and evaluation; and (c) provision of equipment andtechnical assistance to design, produce and disseminate health promotion and

1/ The NBHP comprises a full-time director, who has already been appointed,and assistant directors for programs, research, resources and publicrelations, who will be developed and trained under the project.

- 16 -

health education materials. The project would provide a total of 72 staffmonths of technical assistance, 12 staff months of fellowships, officeequipment, audio-visual equipment, teaching aids, and computer hardware andsoftware.

2.7 Training of Health Educators. This subcomponent would support designof health education curricula and training of health educators, other healthprofessionals, and non-health professionals (such as journalists and primaryschool teachers) in the School of Public Health at the University oE Krakow,National Institute of Hygiene, Institute of Occupational Medicine at Lodz, andInstitute of Cardiology. The project would provide fellowships and degreeprograms for faculty development. The facilities and equipment of the schoolwould be upgraded to support the new program. Capability in design andediting of health education materials would be developed through technicalassistance, training, equipment and other materials. The project wouldprovide a total of 7 staff months of technical assistance, 626 staff months offellowships, and in-service training of about 800 local staff.

2.8 Occupational Health. This subcomponent would strengthen theinstitutional capacity of the Institute of Occupational Medicine (IOM) in Lodzto design and implement occupational health policies. It would assist the MOHto adopt the International Labor Organization (ILO) Convention 161, whichpr,vides for protection of employees against health hazards at the workplace.The project would provide study tours and in-country technical assistance tothe IOM in developing occupational health standards, workplace inspectionguidelines and policies to enforce surveillance of workplace safety standards.Assistance would be provided for the IOM to organize a team of nationalexperts in occupational medicine. Thiis team would participate in study toursabroad to increase their understanding of design and implementation ofoccupational safety programs and th-ereafter develop standards in occupationalhealth and safety to protect workers from occupational diseases and injuries.The project would provide a total of 36 staff months of technical assistanceand 5 staff months of fellowships.

B. Primary.,.ealth Care(estimated base cost US$38.3 million)

2.9 The Primary Health Care component would initiate a fundamentalrestructuring of the health sector by strengthening community-based primarycare teams which would include family doctors, community nurses and alliedprimary health care workers. Family doctors would be trained to providecomprehensive first line care, including family planning, to the generalpopulation, to ensure continuity in care by specialists, and to coordinate theresources needed to provide adequate long-term chronic care in the community.Academic training units would be established at existing academicinstitutions, while in-service training would be established in community-based teaching practices. Nurses and other allied primary health care workerswould also be trained. As an incentive for general practitioners to undergoretraining, the Government would introduce licensing requirements andcontinued accreditation of family doctors. Licensing of doctors in private

- 17 -

practice would samilarly be contingent upon adequate training andcertification. The project would provide local training of 500 primary caredoctors, and upgrading of the physical facilities and equipment of 500 primarycare practices (200 supported by the Bank and 300 by the EC).§/ The EC wouldalso provide additional training facilities in academic institutions outsidethe three project regions.

2.10 Primarv Care Practices. This subcomponent would support developmentof primary care training units associated with existing medical academicinstitutions in the three project regions. Following faculty development andcurriculum design in 1992-93, the three regional training units (RTUs) wouldprovide an intensive course in the techniques of teaching family medicine to200 doctors. These doctors would subsequently become the clinical teachersfor the future cadre of family practitioners in the three project regions.The project would support upgrading of the clinical facilities, equipment,teaching materials and library materials used in family medicine teachingpractices in the community and hospitals. The project would subsequentlysupport a three-year certification program in family medicine for aspiringdoctors. Each RTU would provide a formal three-year postgraduate program infamily medicine. These programs would include clinical training at designatedhospitals, supervised in-service training in approved primary care teachingpractices and in disciplines necessary to operate a family practiceeffectively and efficiently (practice management skills, budgeting, resourceallocation, monitoring and evaluation). The initial teaching practices wouldaccommodate up to 200 students per year in the three-year program. A SteeringCommittee for Primary Care, appointed by the MOH during project preparation,has already initiated start-up activities. The project would providetechnical assistance to allow the Steering Committee to evolve into a NationalBoard for Primary Care, which would be responsible for overseeing curriculumdevelopment for family medicine, research and information-sharing. Theproject would provide a total of 91 staff months of technical assistance, 495staff months of fellowships, in-service training of local staff, medicalequipment and refurbishment of 500 PCPs, office equipment, audio-visualequipment, materials, and computer hardware and software.

2.11 In-Service Traininj. This subcomponent would strengthen the primarycare team by upgrading in-service training in selected teaching hospitals,community clinics and training practices of teachers of family medicine. Itwould provide technical assistance in short-term manpower planning, upgradingof training facilities and development of programs needed to strengthen in-service training of doctors, nurses and allied primary health care workers(community nurses, midwives, rehabilitation workers and social workers). Itis expected that the activities initiated under this component would attractadditional investments from other external donors. The project would provide

i/ The Commission of the European Communities (EC) has approved a grant(ECU 20 million) to train 300 of the 500 primary care doctors and toupgrade the facilities and equipment of 300 of the 500 practices to bedeveloped under the project. Upgrading costs of the 200 PCPs supported bythe Bank are included under the Infrastructure Consolidation subcomponentof Part D - Regional Health Services (para 2.25).

- 18 -

a total of 82 staff months of technical assistance, 614 staff months offellowships, 800 staff months of in-service training of local staff, computerhardware and software and training materials.

C. Health Management(estimated base cost US$46.3 million)

2.12 The Health Management component would strengthen institutionalcapacity in health care management by providing managers with the tools andknowledge to operate their institutions more effectively and efficiently. Itwould support strengthening of institutional capacity in budgeting and thefirst steps in restructuring health care financing away from nearly exclusivereliance on the state budget. The component comprises six inter-linkedsubcomponents: (a) hospital admission/discharge information systems;(b) accounting information systems; (c) budgeting; (d) pharmaceuticalregistration and monitoring; (e) management education; and (f) healthfinancing. Activities are focused on improving decision-making through basicinformation systems and developing professional health services management inPoland through education and training.

2.13 Hospital Admission/Discharge (A/D) Information (national). Datacollection on patient admission and discharge would be standardized forhospitals nationwide. Training would be provided in data coding, transferfrom paper to electronic form, aggregation of data from local to nationallevels, and analysis and interpretation of data. Local managers would betrained to use the data for decision-making. Automation of the system wouldbe undertaken initially in the three project regions and later throughout thecountry to provide by project completion a comprehensive nationwide data base.A disease monitoring system, using population-based techniques, would bedeveloped and implemented later during the project to permit routinemonitoring of hospital utilization patterns and eventually of the costs ofhospital services provided to defined populations. A Steering Committee forInformation Systems (SCIS) has been appointed by MOH, with representativesfrom the three project regions, to coordinate the automation of the A/Dinformation, accounting, and drug monitoring systems. Minor renovation wouldbe provided for selected admission/discharge offices to accommodate their newactivities. The system would have the capacity to be expanded, as skillsdevelop and resources become available, to include outpatient services,personnel management, materials management, technology management and otherservices such as laboratory services and radiology centers. The project wouldprovide technical assistance to develop and implement the system, in-servicetraining of staff and the needed software, hardware and materials.Computerization of the A/D information would be closely coordinated with theaccounting and pharmaceutical subcomponents and similarly phased incountrywide. As a condition of loan effectiveness, the MOH would issue aregulation on the recommended minimum data set of patient information.

- 19 -

2.14 Accounting (national). This subcomponent would introduce nationalstandards for accounting practices (new charts of accounts and double entryledger systems) throughout the health sector. The system would be introducedin three phases: (a) during the first phase, selected health careinstitutions in the three project regions would serve as development sites todesign and fine-tune the system; (b) during the second phase, the system wouldbe introduced in most health care institutions in the three project regions(small institutions of less than 200 beds would be provided with only minimalcomputer equipment) and the accounting offices in the voivodships; and (c) inthe third phase the system would be introduced countrywide. Local managers ofhealth services would be trained to use the system to track expenditures,identify ways to contain costs and operate their services effectively andefficiently. Clinicians would be trained to identify cost effective treatmentby combining financial data with information from the admission/dischargeinformation system. The project would also develop the capacity to aggregatefinancial data in a meaningful way at the local, regional and national levels,to use these data to analyze costs and expenditure trends, and provide adynamic and continuous feedback to policymakers, managers and health careproviders. The project would provide the software, hardware, officeequipment, training and needed renovation to computerize the accountingsystems in the health sector..Z/ The project would provide a total of 187staff months of technical assistance, 11 staff months of fellowships, in-service training of local staff, equipment, materials, computer hardware andsoftware, and reference materials for the hospital A/D information(para. 2.13) and accounting subcomponents of the project. As a condition ofloan effectiveness, the KOH would lssue a regulation on accounting practicesin health care institutions.

2.15 Pharmaceutical Monitoring and Ouality Control (national). Thissubcomponent would address the recent escalation in public expenditure ondrugs and the resulting budget crisis in the health sector. The project wouldsupport development of policies, institutions and technical capacity toexamine drugs, assess their cost-effectiveness and monitor their utilization.The project would support computerization of the pharmacy outlets (forexample, in public hospitals and clinics) that remain public after extensiveprivatization of pharmacy retailers. The new computer system would enablecomprehensive reporting of utilization patterns and prescription practices.Private pharmacies would be required to comply with similar reporting bysubmitting billing in electronic form. The subcomponent would first beintroduced in the three project regions and subsequently countrywide, parallelto development of the A/D information and accounting systems. The projectwould also provide technical assistance to begin upgrading existing drugregulations to European standards. The project would support restructuringand strengthening of the National Drug Institute (NDI) and Department ofPharmacy in the MOH. A National Pharmaceutical Monitoring Center established

]/ Computer hardware purchased for the Hospital Admission/DischargeInformation system would be used also for the Accounting system. The twoactivitiez are therefore combined as a single subcomponent in projectcosting.

- 20 -

in NDI would be strengthened. Activities would include: (a) creation of anationwide standard data set for reporting the utilization of prescription andnon-prescription drugs financed by the Government's drug program;(b) identification of doctors, pharmacies and patients through the use ofstandard identification numbers; and (c) development of a capacity toaggregate data at regional and national levels, analyze the information at thenational level, and provide a dynamic and continuous feedback to policymakers,managers and health care providers. Local managers and clinicians would betrained to use the system to control needless expenditure on drugs. Theproject would provide a total of 116 staff months of technical assistance, 11staff months of fellowships, 294 staff months of in-service training of localstaff, equipment, materials, and computer hardware and software. As acondition of loan effectiveness, the MOH would issue a regulation requiringregistration of drugs and a standard format for drug prescriptions (reportingin Daily Drug Dosage [DDDsI and use of an Anatomic Chemical Therapeutic [ACT)coding system or similar international standards).

2.16 Budzetine. This subcomponent would develop a more efficient andequitable basis for preparing the yearly recurrent health budget for thevoivodships and setting priorities for capital investments. New objectivecriteria would be introduced in the later years of the project by the MOH andMOF during preparation of the annual voivodship budgets. These criteria wouldbe based on demography, morbidity, socio-economic factors, existing healthcare resources, cross-boundary flows and market forces. Data generatedthrough the admission/discharge and accounting information systems wouldcontribute to the new budget process. The project would provide a total of 26staff months of technical assistance, 8 staff months of fellowships, in-service training of local staff, equipment, materials, computer hardware andsoftware, and reference materials.

2.17 Management Development. This subcomponent would strengtheninstitutions, programs and information resources needed to train health caremanagers. Centers for undergraduate and graduate education in health servicesmanagement would be established in relevant departments of universities(Warsaw, Wroclaw, Krakow and Lodz). Once established, these centers woulddevelop degree and continuing education programs in health services managementduring the project. Faculty development would be supported throughpostgraduate degree fellowships abroad in health economics, health servicesmanagement, human resources management (personnel), business administration,medical sociology, information science, and technology assessment. Existingfaculties would be provided support for short-term study abroad andparticipation in professional conferences. The project would provide 317staff months of specialist services to develop curricula for degree programsand continuing education. The project would also provide 531 staff months offellowships abroad for these programs and 63 staff months of in-servicetraining of local staff. Each of the centers would be equipped with computerhardware and software, library resources, and other materials.

- 21 -

2.18 Health Financing. This subcomponent would assist Poland to assesspotential sources of health care financing other than the state budget. Theproject would support feasibility scudies on: (a) the introduction ofcontributory health insurance; (b) cost recovery; (c) private sector healthservices; and (d) preparation of draft legislation on health financing. Theproject would provide 12 staff months of fellowships, technical assistance,equipment, and materials.

D. Regional Health Services (Consortia)(estimated base cost US$90.5 million)

2.19 The Regional Health Services component would initiate adecentralization of the Polish health care delivery system in voivodshipsbelonging to three project regions known as Ciechanow, Pomerania, andWielkopolski (see Map). These regions comprise 10 of Poland's 49 voivodshipsand account for 16 percent of total population. One hundred twenty five ofPoland's 750 health care institutions are located in these three projectregions. Ciechanow region consists of two voivodships in central Poland(Ciechanow and Ostroleka) and has a population of 0.48 million. Pomeraniaincludes three voivodships in north western Poland (Koszalin, Szczecin, andGorzow) and is inhabited by 2 million people. Wielkopolski consists of fivevoivodships in midwest Poland (Kalisz, Konin, Leszno, Pila, and Poznan) andhas a total population of 3.4 million people.

2.20 The three project regions were selected in April 1991 through anationwide competitive process organized by MOH. In consultation with theBank, the MOH developed a request for preposals on the regionalization ofhealth services and evaluation criteria that were provided to all voivodshiphealth authorities (see Annex 1). The competition provided impetus forvoivodships to collaborate on health reform initiatives. Approximately 20

proposals were received by the MOH. Technical assistance was provided duringproject preparation to assist the three selected regions to develop theirproposals for a regional management structure. A National ConsortiaDevelopment Group (NCDG), comprising experts from the MOH, National Center forHealth System Management and Polish universities, facilitated projectpreparation in the regions and coordinated joint technical assistanceactivities.

2.21 The new regional organizational structures are called "healthconsortia". Relying heavily on local application of capacities and programsdeveloped in the preceding three components, the project would support in eachof the project region3: (a) strengthening of policy making, planning;management and evaluation capacity through design of priority health programs(health promotion, primary care, strategic master plans for health carefacilities, management information systems and human resources development)that would be implemented later during the project; (b) beginning of arestructuring of health services to provide more effective care through aselective upgrading of the infrastructure and equipment of primary care andinstitutional care facilities, and establishment of a new balance betweenacute and chronic care; (c) strengthening of the management capacity of localinstitutions to provide efficient services through the introduction ofmanagement information systems (A/D information, accounting and monitoring ofdrug utilization described in the previous sections); and (iv) improvement in

- 22 -

the management of expensive and scarce resources through joint materials and

technology management. The regional health promotion and primary careprograms of the project are costed under the national components. Experience

gained in the initial three project regions would be evaluated and used inplanning for establishment of similar health regions in other parts of Poland.

The Government of Switzerland is already preparing an investment ofSF10 million (US$13.8 million equivalent) in Silesia region based on theregional health services concept.

2.22 Regional Management. This subcomponent would strengthen the policymaking, planning, and evaluation capacity of regional health services. In a

clear departure from the previous centralized control over the operationalaspects of service delivery, the Government has decided to decentralizeresponsibility and accountability for management of health care services in

Poland.ff/ This requires that senior management in three project regions

quickly develop a capacity to formulate regional policies to support acoordinated decentralization of the health care system, design programs toimplement these policies and evaluate their effectiveness. Preparation of the

project has already successfully initiated the process of policy making andplanning by providing an incentive for several voivodships to regroupthemselves into three project regions.

2.23 Each region has already prepared statutes based on agreements reached

among participating voivodships. The statutes define: (a) consortiummembership; (b) content of membership agreements; and (c) main statutorymechanisms. The mechanisms are the: (i) Supervisory Board assisted byadvisory committees; and (ii) Board of Directors assisted by managementoffices. These statutes delineate the powers and responsibilities of the newregional management. The Supervisory Board comprises leaders of theparticipating voivodships, local parliamentarians, and representatives ofvarious community interests to help guide and provide broad endorsement for

the regional effort. The key element is the Board of Directors with itsmanagement offices. Eventually, this board with an executive director will be

assisted by consortium wide management offices for planning and evaluation,accounting and budgeting, human resources development, health promotion,primary health care, materials management, technology management, and

pharmaceutical monitoring. The required upgrading of existing managementstaff, the clustering of management offices and the phasing in which they are

implemented will differ for each region, depending on the size of theconsortium, degree of shared services envisioned, and the availability of

potential management staff in the participating voivodships. To expedite thestart of the management offices, each region has established a Consortium

Coordination Office (CCO), consisting of a core group of four managers to

address the urgent planning and coordination issues arising from thiscomponent and from the development within the region of other components(hospital A/D, accounting, drug monitoring, etc.). It is envisaged that these

managers will become the core of the cluster of management offices(see Organization Chart in Annex 1).

L/ See Government of Poland, Health Care Institutions Act, 1991. All healthcare units in the three regions, including units under MOH as well asthose operated by other ministries and enterprises, would be incorporated

into the new regional management structure.

23 -

2.24 The project would provide the technical assistance, training, andequipment necessary to allow local policy makers and managers to furtherdevelop the regional management structure over the next seven years. Theproject would support ongoing development of regional health policies,regional implementation of programs in priority areas (public health, primarycare, strategic plans for health care facilities, management informationsystems and human resources development), and design of ongoing evaluation.The project would provide a total of 292 staff months of technical assistanceto support project management and preparation of strategic plans andoperational proposals for consortia development. The project would alsoprovide 12 staff months of fellowships, 200 staff months of in-servicetraining of local staff, equipment and materials, and vehicles to the threeCCOs to facilitate project supervision.

2.25 Infrastructure Consolidation. This subcomponent would support theinitial upgrading of the infrastructure and equipment of primary care andinstitutional care facilities, and establishment of a new balance betweenacute and chronic care. The project would provide civil works and equipmentbased on a survey of physical resources within the three project regions(completed in May 1991) and regional strategic plans for consolidating andupgrading existing health facilities and medical equipment (to be completedduring the first year of the project). The consolidation of health facilitiesunder the project would rehabilitate about 50 percent of the acute careinfrastructure in the Wielskopolski and Pomerania consortia, and all of theacute care facili