Sunday, March 27, 2011

PPP in healthcare - what can make it tick?

I got the opportunity to chair two sessions recently in a CII
healthcare PPP conference at Ahmedabad. I was surprised with the large
delegate turn out. Delegates from across the country had come to
attend. The good quality profile of delegates was another surprising
factor. This indicated rising interest among stakeholders in public
private partnership in healthcare.

The 'take home' points were:

1. PPP has been better successful where government has been a 'PAYOR'
where it pays for the services rendered by the private partner.
Chiranjivi program in Gujrat is a good example where the obstetrician
is paid Rs 800 for conducting one normal delivery. The government pays
the clinicians 15000 Rs in advance to boost compliance and reduce
payment delays. This has reduced maternal mortality by half there.
Other successful projects are seen in the PPP or outsourcing of
diagnostic and imaging centres which also works on a 'pay' per case
And when the private partner is expected to give things beyond
service, the ppp tends to fail. The instances of seven hills hospital
in mumbai where BMC wants the private partner to pay for consumables
and medicines is putting the PPP project in doldrums.
So the 'take home' is to realistically prioritize PPP initiatives
based on a payor model (to begin with) to make it successful.
Government should understand that the private partner (unless it is a
spiritual or religious donor funded entity) is there to earn and ROI
in healthcare are very thin to expect unreasonable deliverables from
2. There should be a 'solid' legal contract and not just an MOU. It
should be ensured that the agreed terms are honoured by both partners
and should be shielded from possible interference by a civic body or
state administrations and change in regimes later. One should realize
that the financial projections for private partner will be based on
agreed upon assumptions and terms at the time of signing the contract,
and any change later can make the project unviable. In all failing
PPPs the interference has always been from the public partner to
change the terms of the contract, usually when the governing
administration changed and finds some contract terms objectionable.
This has resulted in majority of private entities shying away from PPP
3. Even though it is expected that PPP contract terms eventually will
become better and both parties will be congenial to each other, the
projects will not take off well till the issue of Human resources and
skill sets which are deficient in huge numbers is addressed. There is
a severe dirth of doctors, nurses, front office personnel, radiology
technicians and more. A large human resource base should be set in on
priority basis to make these skill sets available as the healthcare
expansion in any form-PPP or otherwise would not takeoff if there are
no human resources available. PPP initiatives should be initiated or
intensified in healthcare education also on a priority basis.
Education loans on low interests and other incentives could be
provided to make healthcare education affordable. All this will help
creating a larger base of healthcare skill sets.
Telemedicine should be seriously looked into to mitigate the human
resource constraints where the skilled doctors from remote urban setup
can interact with patients in rural setups where these medical skill
sets are deficient.
4.Banks are unwilling to fund PPPs due the prevailing 'state of
confusion' and lack of confidence in sustenance of such projects. A
clear legal contract, setting of regulation mechanism, etc will make
prospects better for banks to look at financing such projects.
5.Private players are willing to even service rural areas and harsh
terrains - contradictory to the myth that the private players are only
urban centric. However the interest would be motivated more by
availability of clear legally binding contract terms, and under a
'payor' mechanism.
6. A national PPP policy framework should be created on immediate
basis. Though it seems that work on the same is going on, a result on
ground and adoption by all states should be visible. A standardised
contract terms keeping in mind certain popular PPP scenarios should be
looked into, to address atleast a large proportion of PPP projects in
the pipeline. All guidelines should be made to make a 'win win'

My notes:

Public and private partners need to go 'beyond' contracts and should
'work towards' making the 'marriage' successful. As the PPP phenomenon
is relatively new and has yet to gain maturity, both parties should
make an attempt to reasonably 'bend down' to accept each others
limitations and practicalities and ensure that the PPP results into a
'successful role model' for others to replicate.

Newer avenues for PPP in healthcare should be looked at. Government
should also look beyond usual health PPPs and consider partnering with
private players to improve quality (NABH accreditations/ISO) of their
existing public health setups (some work on this avenue has already
started but will need more momentum), avail from private partner -
professional administrative insights by way of managed administration
of PHCs/district hospitals, etc, and most importantly, opening up
attractive avenues in health education for the private partner for
creating the much needed skill sets to sustain the progress in
healthcare delivery.

A 'let's sign contract and will see later' attitude needs to be shed.

Everyone should keep in mind that the private party will always look
at earning and sustaining any business. It will be unreasonable to
expect the private player to 'pay out of pocket' and there fore a
'payor' model where public partner will pay the private partner for
services rendered will be a reasonable model and will work better.

Public partner should also realize that the underprivileged citizens
for whom this PPP is typically created for, would be unwilling to pay
out of pocket even for consumables. It will also be unreasonable to
expect that the private party will pay for expense on patients and
expect them to earn too. So ultimately the only party left to pay is
the public entity. A volume based highly low cost rates could be
negotiated with the private party for a 'win win' partnership. Such
volume based low cost payments have worked previously and there is no
reason why it should not work again. A effective monitoring and
regulatory mechanism though should be in place for every PPP to ensure
timely and due payments to private partner and also to ensure that the
private party delivers the right quality of service as agreed upon.

Better incentives as provided in other industries (like 150% tax
deduction in pharma research, unconditional subsidies, zero duties
etc) will be other great attractors.

There is no doubt that the healthcare needs of a nation cannot be
mitigated without PPP, and all stakeholders therefore should strive
for a successful, meaningful and reasonable sustainable partnership.

Dr Akash S Rajpal

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Dr Akash Rajpal

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