THE EASTERN CAPE DOH/NETCARE PPP PARTNERSHIP - DDG FOR HEALTH, ECDOH DR NANDI DILIZA

THE EASTERN CAPE DOH/NETCARE
       PPP PARTNERSHIP

    DDG FOR HEALTH, ECDOH
        DR NANDI DILIZA

Overview
o   Introduction
o   Traditional Procurement vs PPP’s
o   Reasons for PPP’s in general
o   Reasons for Health Specific PPP’s
o   Benefits for Public Health from PPP’s
o   Challenges for Health PPP’s
o   The ECDOH/Netcare PPP
o   Lessons learnt
o   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 sector
   o Capital
   o Skills
o Transfer of;
   o Financial risk to the private sector
   o Specialist skills to the public sector
o Public sector
   o Pays only once the goods or service have been delivered
   o Focuses on outputs and benefits from the start of the
     project

Challenges i.r.o. PPP procurement
• Slow Turn Around Times

• Political will and general Buy –In

• Dwindling Competition due to size of market

• Risk Averse Private sector

Challenges i.r.o. PPP procurement
• Pooling of Funds from different programmes for
  PPPs
• Very Litigious Environment
• Limited Pool of experience both in public & private
  sector
• Innovation and thinking outside the box
• Understanding basic principles of PPPs, win-win
  situation
• Contract Management

Reasons for PPP’s in Public Health

o Discrepancy in the standard and quality of
  healthcare
o Access to health care
o The exodus or dearth of skills
o Degraded and dilapidated public facilities
o Equity 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

o Legal certainty and enforcement of rules
o Political will and commitment
o Transparent, fair, open and competitive
  process
o Competent consultancy market
o Dedicated state resources and internal skills

Key success factors for PPP’s

o Private sector interest and capacity
o Balance between profit and commitment to
  improved service delivery
o Availability of funds to honor commitment
o Common 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 wrt
  government 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 Accessibility
   o Affordability
   o Transfer of appropriate technical, operational and
     financial risk between the sectors
   o 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

THANK YOU