Problems of PPP Implementation in Ukrainian Healthcare System І. Akimova 10 October 2014

PPP and its Advantages Public-Private Partnership - Arrangements between the public and private sectors, where some services that fall under the responsibilities of the public sector are provided by the private sector (WB) Features of PPP:  Projects with medium to long-term period  The use of state budget to purchase ‘public sector’ services from private sector  Clear sharing of risks and objectives between public and private partners Advantages of PPP:  Renovation of facilities / supply of equipment without initial outlays of public funds  Increased access of population to modern medical treatment  Acquisition of private sector management skills into healthcare facilities –Higher quality standards + Improved cost-effectiveness  Viable instrument for testing the new models of healthcare financing and management –Systems of DRG-financing for hospitals, Capitation financing for PHC, Use of local clinical protocols 2

Obstacles to PPP in Healthcare 1.Low security of property rights for private partner  Long-term contracts between public and private partners are unavailable –No mechanism for state authorities to guarantee their contract financing obligations to private partner  Budgetary system does not give priority to PPP contracts financing 2.Outdated system of financing in HC  ‘Payment for beds instead of payment for services’  Excessive state mandate for providing all HC services for free  Continued underfinancing of HC provider units 3.No operational and financial autonomy of healthcare institutions  HC institutions are over-regulated for the use of state funds (‘line-budgeting’), staffing, etc 4.Drawbacks of Law on PPP  Shifting risks to private partner –Insufficient protection of private partner from changes in tax/ customs, ecological active legislation –Lengthy and unfair mechanism of compensating private partner’s losses when PPP contract is terminated (e.g., termination of toll-road project took 8 years to make a court decision) –There is no guarantee of land-plot provision for PPP projects  Convenient organizational vehicles for PPP projects implementation are not allowed (e.g. provider units in form of JVs, which are convenient for operational and legal issues)  Present mechanism of public procurement is not conducive for development of PPP in healthcare 5.Negative experience  PPP project on dialysis in Cherkasy and Chernihiv oblasts failed because of the inability of local authorities to guarantee their contract/ funding obligations 3

Tasks to foster PPP in Healthcare 1.Ensure protection of property rights for private partner  Establish long-term PPP contracts between public and private partners & Define essential terms of such contracts.  Give priority of PPP contracts financing for budgetary system 2.Implement modern system of financing in HC  Establish the ‘Strategic purchaser’ function at oblast level, able to relocate funds between HC institutions –Based on payment methods: DRG for hospitals, Capitation and P4P for primary care  Establish the state-funded ‘benefits package’  to clearly define the area for PPP in healthcare service provision 3.Provide operational and financial autonomy to healthcare institutions  Establish financial and operational autonomy of PPP provider units –‘global budget financing’, the use of bank accounts, staffing, salary regulation 4.Improve Law on PPP  Fair risk-sharing between public and private partners in PPP projects –Provide protection from changes in legislation for PPP projects –Establish fair mechanism for compensating private partner’s losses when PPP contract is terminated –Public partner should guarantee land-plot provision for PPP projects  Allow for establishing of provider units in form of JVs for PPP projects implementation  Establish mechanism for mid-term public procurement contracts with PPP provider units 4

Thank you for attention! AC «New Social and Economic Policy» Kyiv, str. Irynynska, 5/24 Tel