Transcript EHPN WORKSHOPJUNE 2005 OULU

EuHPN
WORKSHOPJUNE 2005
OULU
AUSTRALIAN EXPERIENCES IN PPP AND
PFI
ANNETTE SCHMIEDE
World Bank Study




World Bank commissioned study of hospital conversions
in late 2003.Focus was on lessons learned for
developing countries.
Germany, Sweden and Australia.
Experience of hospital conversions “conversion of public
hospitals to privately owned and operated hospitals that
provide services back to the government, under contract,
for public patients.’
Today will look at the Australian experience of PFI.
WB Terms of Reference




It is unlikely that we will see this form of contract in Australia
again.
Governments now turning slowly to the more traditional form of
PFI. Build and operate, no clinical services.
World Bank wanted a case study approach examining the
political economy of reform; the tender process;goverance
arrangements;allocative and technical efficiency;implementation;
success and factors militating against success;community
involvement and reaction;lessons learned dfor developing
countries.
Study relied on available official reports, usually govt audits,
original research and personal experience. Budget was limited.
Australia’s Health System


Australia’s health system including hospitals
is a mix of public and private.
Under Australia’s national health insurance
system all residents have access to hospital
services through public hospitals. These
public hospitals provide the bulk of services
and undertake teaching and research.
Australia’s Health System



Private hospitals are an essential component
of the health system. They do almost half of
all surgical episodes, the fee for service
reimbursement system for doctors and
medical services is partly driving this.
Private hospitals owned by charitable groups
(mainly religious) and investor companies.
Total health expenditure $60bill 9% gdp.
National govt funds services, state govts
provide and regulate.
History




In the 90’s Australia adopted entrepreneurial
strategies to stimulate improvement in public
services and infrastructure.
These began in the UK with Thatcher
The creation of market pressures,
contestability and innovation.
Purchaser provider splits
History


The Australian PFI experience began in early
1990’s. It was a radical policy move as the
contract included both the provision to build
own and operate all services including clinical
services. Contract for 20 years, called
BOOT’s, build own operate and transfer.
There have been seven of these projects
across four Australian states, the last one
opened in 2000 in Queensland.
Economic Drivers




The driver of much of this reform in Australia was
the poor economic situation of many state govts.
Early nineties Australia like much of the rest of the
world was emerging from a severe recession.
State revenues were static, govt. debt was high and
demand for services was growing.
State govts. were restricted in being able to raise
loan funds. Off balance sheet transactions involving
the private sector were seen as a way around these
constraints.
Economic Policy


A main driver of health system reform of
which the hospital conversions were part,
came out of macroeconomic policy reform
NOT health policy reform.
Treasury was setting health policy not Health
Ministries.
PFI Objectives
Stated objectives were;
1.
Accelerate the upgrade of health services infrastructure by
gaining access to private funds
2.
Optimise efficiency and effectiveness of services delivery
through introducing a measure of competition between service
operators and enabling greater flexibility in operational
management
3.
Improve accountability for the delivery of health services by
separating the role of service operator from those of purchaser
and regulator, specifying the nature and quantity of services
and the criteria for assessment of quality and introducing
guarantees of access and sanctions for non performance.
PFI PROJECTS
Capital Beds
value
$40mil 160
Locat’n New or
replace
country replace.
$47mil
127
Joond’l 1996
up
$70mil
335
Latrobe
$56mil
$37mil
$20mil
$48mil
257
130
100
192
outer
met.
outer
met.
country
country
regional
regional
Project Year
Port
1992
Macq
Hawkes 1994
1997
Mildura 1998
Noosa 1998
Robina 1998
replace
new
replace
replace
new
new
Results

Australian experience includes successes as well as failures.
Three out of the 7 projects have reverted to govt ownership well
before the end of the contracts, which were usually 20 years.

No systematic evaluation of each project against stated
objectives and actual outcomes.

No evaluation to determine if they are delivering quality services
at a comparable or lower cost than the govt.sector. Contracts
required services to be discounted to govt. benchmarks.

The rest of the presentation will look at some of the findings of
the study that may be of interest to EuHPN.
Contract issues



These have included ideological opposition to
the projects following changes in state
governments.
Failure to negotiate acceptable annual
operating budgets.
Disputes over the methodology for covering
price increases, CPI versus real cost
increases.
Findings





Risk exposure for operators around open ended
demand, particularly with A&E services.
Some projects have subsidised A&E services by up
to $1mill per annum.
Growth assumptions in tender documents not
reflected in annual operating budgets.
Bureaucratic opposition, proposals mainly came
from asset management and capital works
branches. Service and policy areas were often
opposed. Once facilities completed responsibility
passed to these areas.
Relationships often adversarial.
Benefits




The major demonstrated benefit has consistently
been health facilities delivered at a reduced initial
capital cost over what govt’s could deliver.
Shorter delivery time frames mainly due to the
streamlining of the planning, design and building
process.
Space used more efficiently by private operators.
Lifecycle maintenance built into the pricing, allowing
generous maintenance and replacement over the
contract period, usually 20 years.
Process Issues



All of the conversion projects were initiated
by conservative governments. Supportive of
economic rationalism, small government and
private sector investment.
First project unleashed significant opposition
in political and health policy circles.
To overcome some of this opposition some
projects were only open to charitable private
health operators.
Process Issues



Competition was fierce in finance and legal
circles to advise govt and operators and earn
the lucrative fees.
Financing and ownership structures were
complex.
No standardised approach across the country
each state and almost each project differed in
approach contract fundamentals and project
structure.
Process Issues



Public servants lacked experience and
knowledge. The private operators were
building skill and expertise.
Methodologies used by government to set
ongoing prices has not always been
transparent consistent or logical.
Pricing methodologies were complex and not
easily benchmarked to govt. services.
Process Issues


Probity requirements were onerous and did
not always lead to sensible processes.
Naïve view that the private sector had the
skills and experience to deliver projects. One
failure due to the inexperience of the
operator.
Lessons









Policy intent should be overt, not policy change by stealth.
The community must be supportive.
Process must be understood and driven by health not treasury.
Health policy implications need to be clearly understood.
Clarity about the role of the private sector in the overall health
system.
Understand the real costs of providing govt services, capital and
operating.
Accurate awareness of the capacity of the private sector to
participate.
Risk allocation must be equitable.
Goodwill and commonsense.
Where to from here





Most states moving cautiously.
Largest project just announced in Victoria. Major
hospital project.
One other acute hospital project completed in
Victoria.
Some non acute facility partnerships completed,
community health, aged care in NSW.
No proposals for public clinical services to be
contracted.