By LENESA LEAOOA Ministry of Health LESOTHO REFERRAL HOSPITAL PPP PROJECT - INFRASTRUCTURE

2 Outline Background Replacement of the QE II Project overview infrastructure design PPP structure Performance monitoring Successes Challenges

3 Background Lesotho is a mountainous country of 11,720 square miles (30,335 sq km) entirely surrounded by South Africa The population is estimated to be 2 million people The Lesotho government is custodian of the health services in the country. It is in partnership with Christians Health Association of Lesotho (CHAL), where by the government owns 51% and CHAL 49% of the Health Facilities Beside CHAL there is also Lesotho Red Cross society which runs only Health centres The Lesotho health system is predominately publicly funded (61% of the health expenditure and the health spending represents the 11.1% of the GDP.

4 Background cont…. Government of Lesotho is the main funder of the Lesotho Health system. It provides an annual line budget for government of Lesotho health facilities and subvention for CHAL and LRCS facilities though a MOU. Development partners support different programmes of the Ministry of Health inline with the national policy guideline and strategic plan of the Ministry.

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6 Replacement of Queen Elizabeth II Hospital In 2000 the Lesotho MOH undertook a compressive strategic assessment of the only tertiary hospital in the country QE II. The assessment identified that QE II hospital is over 100 years old and needed either replacement or extensive refurbishment. It was also identified that: The infrastructure was too old and Dilapidated Inadequate human resources for Health Poor management of services Old and outdated equipment Poor maintenance systems All of which contributed to decline in quality health services provision

7 Replacement of Queen Elizabeth II Hospital cont.. In 2001 The MOH through Lesotho Boston Health Alliance commissioned a feasibility study to review the status of the QEII The study confirmed the old infrastructure status and recommended the need for replacement of QEII Against this background, a decision was taken for establishment of PPP project by the Prime Minister and cabinet International Financing Corporation (IFC) Engaged as transaction advisor for the PPP project

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9 PPP Project Overview The proposed PPP project was assigned with the responsibility to Design, build, finance, fully maintain and operate the Hospital and its 3 filter clinics in Maseru for a period of 18 years. 2.5 years for construction and 15.5 years for operating the facilities The PPP project has a mix of public/private financing with Government of Lesotho contributing 37.7% and the Private sector contributing 62.3% The tendering bid was won by Private Operator Tsepong (Pty) Ltd which is the private operator

10 PPP Project Overview (Cont) Infrastructure Design & Construction: The facility is a: – 425 beds Hospital with 390 public beds and 35 private beds and a gateway clinic. – Equipping and commissioning of the hospital – Refurbishment and re-equipping of three filter clinics (Mabote, Qoaling, Likotsi). Infrastructure/Project Capital Costs (design, construction, equipment): M 1,2bn (±US$120m). Funding: Government Capital Contribution (37.7%); Private Finance (62.3%). Annual Unitary Payment is fixed in PPP Agreement and is escalated by annual inflation index. Patients’ user fees remain unchanged and are guided by Government policy.

11 PPP Project Overview (Cont) Infrastructure design for Clinical Services include: – Casualty – Tertiary Hospital specialties – Outpatient (general and specialist services), – Inpatient services : General and specialist surgeries, neonatal ICU, ICU, etc. – And a gateway clinic

12 PPP Project Overview (cont) Infrastructure for Clinical Support Services e.g. biomedical engineering, laboratory, pharmacy, etc Infrastructure for Non-clinical services: e.g. administration, facilities management, maintenance and repair, etc. Exclusions: Clinical Services or ProceduresExclusions TransplantsAll transplants are excluded except corneal transplants Major OrthopaedicJoint replacements are excluded except hip replacements DialysisChronic (end stage) renal disease is excluded CardiacAll elective cardiac and great vessels surgery is excluded, except compelling emergency procedures Oncology services such as Chemotherapy and Radiotherapy All chemotherapy and Radiotherapy is excluded, except for data capturing Obstetrics and GynaecologyInVitro Fertilisation (IVF) and advanced fertility treatments are excluded Plastic SurgeryPlastic surgery other than basic, essential reconstructive and with medical need, is excluded DentistryCosmetic dentistry excluded

13 PPP Project Overview (cont) Infrastructure for Private Patients There are 35-bed private ward. Revenue shared with Government. Managing Referrals to South Africa Tsepong (Pty) Ltd together with Government will be responsible for monitoring the cost of referrals to SA; If the data shows sufficient patients’ need for specific additional services, they can be added at a later stage as a project variation. Patient Volumes: Unitary Payment guarantees service for 20,000 inpatients and 310,000 outpatients p.a.

14 Infrastructural design The hospital was strategically located to allow easy access Road network was developed before the commencement of construction to connect the hospital with the three filter clinics Hi-tech Telecommunication infrastructure was also developed to enhance easy communication with other Health facilities within the country There is adequate provision of packing space for patients, visitor and taxi rank for easy of transportation

10% 20% 40% 20% 15 PPP Structure 10% PPP Agreement Financing Agreements Subcontractor Agreements Lenders Direct Agreement Construction Contract Clinical, Soft FM & Equipment Contract Hard FM Contract annual

16 Performance Monitoring Service Payments Penalty Deductions from Service Payments

17 WHY THE PARTNERSHIP WAS A SUCCESS Setting affordable limits for the Government to ensure that the outcome of the bid would not be way beyond what the government could accommodate in its budget allocations. Contribution of the Government to the capital cost, which has resulted in the unitary payment and which will be a long-term recurrent cost, was made to be affordable. The design of the PPP model gives a comprehensive solution – Infrastructure and services. The Local economic empowerment which is a mandatory requirement from the operator did build local private sector capacity.

18 WHY THE PARTNERSHIP WAS A SUCCESS: CONT…. The monitoring regime engaged an Independent Monitor for independent audit of services provided by Tsepong (Pty) Ltd, to ensure that they meet the set quality standards. This is commonly done for infrastructure work only with an Independent Engineer/Certifier. Payment mechanism is output based, where by there will be penalties tied to failure to meet construction/service standards. Access to the Global Partnership on Output-Based Grant (GPOBA) from the World Bank has resulted in reduced financial burden on the Government during the first two years of the operations of the project. This financed service provision at the 3 filter clinics until the hospital opened, therefore, disbursement of the unitary payment from the Government commenced upon completion and take off of the hospital.

19 WHY THE PARTNERSHIP WAS A SUCCESS: CONT…. The project is not fully financed by the User fees, which ensures continued access to health care services to all the inhabitants of the country. Tsepong (Pty) Ltd has been requested to utilize the country’s National Drug supply System for procurement of its own drugs. This has strengthen our supply chain management capacity of the country. An MOU has been signed between Tsepong (Pty) Ltd and the National Health Training College (NHTC) for collaboration in upgrading capacities of health workers, exchange of Tutors and use of Hospital infrastructure.

20 Challenges No Legal and Regulatory framework to guide the way forward for all other PPP projects. However the New Referral Hospital succeeded without it. PPP Policy has developed though SADC support and ready for approval. Internal capacity – The MOF and MODP are at the inception phase of setting up a PPP Unit, which will need to be capacitated to enable it guide all sectors in PPP projects. SADC is supporting the process The New referral Hospital was the first big PPP for Lesotho and there is a need to learn from it before moving to many other PPPs. The Ministry has to ensure that the contract management system is fully functional, as this is core to the continued success of the project.

21 Thank You

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