Public Private Partnerships in the service of the nation Any nation that can lay claim to a strong healthcare sector is a nation that has found its power!
The health of the people is really the foundation upon which all their happiness and all their power as a state depend. Benjamin Disraeli - June 1877 Healthcare is one of the foundations upon which the democracy of South Africa was founded. Yet, it is often said that we have made light of its importance in the lives of our people. Undeniably any nation that enjoys health is a nation that has found its power. When negotiating the constitution for the new democratic South Africa s leaders agreed that health would be included as a basic human right. In so doing it has been enshrined in the Bill of Rights of South Africa s Constitution. Background Private Public Partnerships: While they may not hold all the solutions they do have some sound benefits In South Africa, the government is hard at work to transform the healthcare sector into one that delivers access to quality healthcare for all citizens, irrespective of their ability to pay for it. Significant challenges nevertheless impede increased access to quality healthcare. Among the most critical are skills and funding shortages. Ensuring that all citizens have access to affordable, quality healthcare is a momentous challenge facing the healthcare sector. It requires commitment, dedication and clear leadership. But, critical to achieving this goal is collective action, with participation and hard work required from all stakeholders. As funding is such a major impediment to improved public sector delivery increased public expenditure is seen as fundamental to addressing the yawning divide in levels of access to healthcare in South Africa. To provide a new national funding mechanism to broaden access to quality healthcare, government is exploring the introduction of National Health Insurance (NHI). The private sector has a pivotal role to play in helping to attain and maintain high standards of healthcare across the entire national healthcare system. Netcare strongly believes that Public Private Partnerships (PPPs), involving the provision of clinical services rather than just the traditional build-operate-and-transfer model, are a sustainable way to bolster and support government healthcare infrastructure and delivery.
Track record Our considerable PPP experience in the United Kingdom, working with the NHS, stands Netcare South Africa in good stead in this regard. Our active involvement in the largest healthcare PPP in Africa, which is at present being implemented in Lesotho, is furthermore providing invaluable, additional experience. The Lesotho project clearly demonstrates what can be achieved through such a model. These are experiences that can be drawn upon closer to home, as there is much we can achieve through PPPs in South Africa. The Public Private Partnerships (PPPs) entered into by Netcare consortiums follow many years of active pursuit of PPP opportunities in South Africa. Netcare has made measurable progress in the PPP arena. Some examples of projects Netcare has been involved in include: PPP agreement between the Free State Department of Health (FSDH) and CHM/Netcare in the Bloemfontein Universitas and Pelonomi Hospitals; PPP agreement between Nalithemba Hospitals/Netcare and Eastern Cape Department of Health (ECDOH) for the refurbishing, equipping and maintenance of Settlers (Grahamstown) and Port Alfred Hospitals; PPP agreement between Tsepong/Netcare for a new referral hospital in Maseru, Lesotho; PPP agreement between University of Cape Town Academic and Community Hospital Group, (GHG)/Netcare; The leasing of beds by the Gauteng Department of Health for acute public sector patients at Netcare s Bronkhorstspruit Hospital since 1999; Netcare National Emergency Department. Netcare has also fulfilled several public private partnerships on behalf of the United Kingdom s National Health Service (UK NHS) Overseas Clinical Teams (OCT) initiative since October 2002. In 2006 Netcare acquired a 50.1% ownership in GHG. Before After
Challenges facing the healthcare sector in South Africa The delivery of healthcare in South Africa is steeped in historic inequality, with significantly higher levels of healthcare resources found in the private than the public sector relative to the population served by each sector. The current HIV/AIDS epidemic is exacerbating the situation, with an estimated 50% of patients admitted to public sector hospitals requiring treatment for the opportunistic ailments characteristic of the disease. Indicative of the massive health inequalities that continue to pervade the South African health system, the infant mortality rate among black South Africans remains high. At the same time, rapid escalation in medical schemes expenditure, and hence in member contributions, continues to widen the financial resource gap between the public and private healthcare sectors. In view of the above, there is considerable scope to use total health system resources (both public and private sector) to better meet the needs of all South Africans, effectively harnessing maximum value for all concerned. Mutual commitment to transformation Motivated by the conviction that the pooling of expertise and resources between the public and private sectors has the potential to make quality medical care available to everyone, Netcare actively pursues Public Private Interaction (PPI) opportunities, both in South Africa and abroad. Specific emphasis is placed on entering into PPP arrangements, whereby Netcare PPP Division assumes responsibility for a government health department function or uses state healthcare facilities to help strengthen the overall health system for the benefit of all South Africans. Public Private Partnerships A PPP is a commercial transaction between a public institution and a private party, where the private party either performs the function or acquires the use of state property for a defined period, with the aim of achieving an overall improvement in the services delivered. Inherently beneficial to both parties, a PPP involves substantial risk transfer to the private sector while the public sector retains a significant role. The Netcare group s efforts are aligned with and support government s determination to transform the existing health system to improve the country s overall health status while redressing existing health inequalities. Reflected in an ever-increasing number of PPIs in the health sector, the South African government has adopted the new internationally accepted approach to service delivery whereby the state retains responsibility for ensuring the delivery of healthcare without necessarily delivering the requisite healthcare services. Of the diverse mechanisms for the public and private sectors to engage with each other, PPPs repeatedly emerge as meaningful platforms for overcoming serious service delivery and infrastructure backlogs around the world. Acknowledging the potential of the PPP concept in general, the government is serious about making PPPs work in South Africa. The rehabilitation of state-owned hospitals is just one area in which the government intends to harness the resources, capacity, technology and knowledge that resides in the private sector. In all instances, the approach will be a non-negotiable shared undertaking between government and the private sector to secure South Africa s well-being and to meet the socio-economic needs of all South Africans, in particular to alleviate poverty.
Hospitals in the hot seat As is the case in most countries, hospitals in South Africa are the largest, most visible and most costly operational unit of a country s health system. Not only do they account for a large portion of the health sector s financial and capital resources (an estimated 75% of the government s health budget), but they also employ the majority of the country s trained health personnel. Clearly, the potential for PPPs to enhance the management and operation of hospitals, to the benefit of all South Africans, is substantial. With this in mind, Netcare PPP Division strives to leverage the group s resources, knowledge and expertise so as to enable the sustained delivery of cost-effective, quality medical care for patients in the public sector. Emphasis is placed on working together in the hospital environment, with opportunities in other components of the healthcare delivery value chain such as emergency medical services and specialist medical units - being explored wherever possible. Tackling the challenges Aiming to address the challenges that face the South African health system as a whole, Netcare s PPP Division endeavours to fulfil the following objectives in all current and future PPP ventures: To share resources between the public and private sectors (where such resources include people, skills, equipment, facilities, spare capacity); To avoid duplication in service provision; To obtain better value for money (embracing the provision of healthcare cover at lower cost and improving overall health status with the available resources); To redress the large disparities in health services and health status, and thereby promote equity; To improve the retention of skilled health professionals in the country; To promote revenue generation within the public sector and thereby reduce the heavy reliance on tax funding for these health services; and To create a win-win solution with significant and tangible benefits for both the public and private sectors. Cognisance is also given to the critical success factors for any PPP, as endorsed by the PPP Unit of the National Treasury (whose approval is required for the final terms of a PPP contract and the PPP management plan). As the private sector partner, Netcare brings the group s expertise, capital and business management skills to assist the public sector in the delivery of equitable healthcare by achieving a balance between: Affordability; Value for money (including measurable cost savings); and Appropriate risk transfer (transferral to the private sector of those risks that it is better able to manage than the public sector, including operational, financial and technical risks). As such PPPs allow the public sector to concentrate on its core responsibilities in terms of healthcare delivery. Good outcomes Operating efficiencies in Netcare hospitals are such that more patients are treated every year, yet require shorter periods of hospitalisation.
SOUTH AFRICA: African countries: PPP-Regulations specific to a country.( Similar Principles)
Widening access The net result of pooling the expertise and resources in the public and private healthcare sectors is to make quality medical care available to all people resident in Southern Africa, i.e. both accessible and affordable. Indeed, many patients who would normally attend public facilities, but who have been compelled to use private institutions at great cost, will be able them to return to these public healthcare facilities and be assured of quality health care.
Healthcare Partnerships at work The Bloemfontein PPP South Africa s first true PPP within the healthcare sector made its début in October 2003 when a consortium comprising blackempowerment company Community Hospital Management (CHM) and Netcare Limited began utilising spare capacity in hospitals owned by the Free State Department of Health (FSDH). Governed by an agreement signed in November 2002 and commissioned in January 2003, the PPP entails the co-location of public and private healthcare facilities at Pelonomi and Universitas Hospitals in Bloemfontein, effectively bringing quality, affordable healthcare to residents in the region. Universitas Hospital is equipped to offer an extended range of specialist services. These services include cardiac surgery, cardiology, general surgery, orthopaedics, neurosurgery, gynaecology, internal medicine, neurology, urology and othorhinolaryngoly (ear nose and throat surgery). The CHM/Netcare consortium s Universitas and Pelonomi Private Hospitals will occupy dedicated wings of both hospitals, comprising 270 beds, for a period of 21 years. As part of the PPP agreement, the CHM/Netcare consortium will invest a significant sum in upgrading and maintaining certain facilities at Pelonomi Hospital, namely: Block A (offices and consulting rooms); Block D (wards); Block E (ICU and theatres) for FSDH use; and Block I (wards) for FSDH use. The value added to the FSDH through the co-location of public and private facilities is substantial, with benefits including: Opportunities to generate additional revenue; Improving hospital management through skills transfer; Enhancing the service offering to the communities served; A vastly improved and well maintained facility; and The ability to attract and retain high quality medical specialists and staff. The Eastern Cape PPP The Eastern Cape Department of Health signed a landmark Public Private Partnership agreement with Netcare and Nalithemba Hospitals (Pty) Ltd that set in motion the facelift of Settlers Hospital in Grahamstown. This included its refurbishment, upgrading and the addition of medical equipment. The re-building of Port Alfred Hospital was also undertaken as part of the agreement. The consortium in this PPP is composed of 50% Netcare equity with the other 50% held by Pro Health, Vestline and Qapela women s group.
Settlers Hospital The refurbishment and upgrading of Settlers Hospital was the first phase of what is known as the Eastern Cape Department of Health Public Private Partnership for Port Alfred and Settlers Hospitals. Through a tender process the Eastern Cape Department of Health partnered with a consortium consisting of Nalithemba Hospitals (Pty) Ltd, which comprises local investors, Vestline, ProHealth and Qapela Women s Group, and Netcare Limited, South Africa s foremost private hospital group. This Consortium forms the private partner and the Eastern Cape Department of Health the public partner in this PPP. Settlers Hospital was extensively refurbished while the facilities and equipment was upgraded. All current facilities were retained but newly refurbished. Upgrades included a new theatre complex, complete with a third theatre and a recovery area, and an improved emergency department. Old, out-of-date medical equipment was replaced with new, state-of-the-art equipment. The additions to the existing hospital building are a private wing, public outpatient, ARV and pharmacy divisions. This facility was newly built at the hospital and features 32 private beds, a new theatre complex, emergency department, radiology, a private maternity ward, specialised neo-natal intensive care and a six-bed ICU/High Care units. The new private facility became fully operational in August 2009. The hospital provides a full range of hospital services to private patients who, until now, had to travel to either East London or Port Elizabeth to get access to private healthcare services. Where it is deemed necessary specialist services are also offered to all patients, ensuring that they do not have to be transferred to other hospitals. Specialist services offered at the hospital by fulltime - and visiting specialists include the following: Anaesthesiology Audiology Othorhinolaryngoly (ear nose and throat surgery) General surgery Gastroenterology Netcare Settlers Hospital Pharmacy and dispensary caters for all dispensing requirements. The in-house dispensary is contracted into most medical aids and also offers monthly chronic medication. The Consortium will be responsible for managing both the private facilities and hospital facilities for 15 years, following the construction activities. Facilities Management include the provision of all soft services such as catering, cleaning, linen and laundry, pest control, gardening and estate maintenance, security, maintenance and replacement of facilities and equipment.
Port Alfred Hospital The second phase of this PPP is the rebuilding of Port Alfred Hospital. Because the old Port Alfred Hospital was situated in a lowlying area it frequently experienced flooding and had continual damping problems. There was a concern that this could result in structural damage. It therefore seemed wise to move the entire building to higher ground. The Consortium built a completely new Port Alfred Hospital that has both public and private facilities. This new facility includes a new theatre complex with an additional theatre, an extended radiology facility, emergency department, public outpatient facilities, improved access to the hospital as well as new reception and waiting areas. State-of-the-art medical equipment were also installed at the hospital. The private facility features 31 beds, including a four-bed maternity unit with a specialised neo-natal intensive care unit and a two-bed high care unit. The new Port Alfred Hospital opened its doors in March 2009. The hospital provides a full range of hospital services to private patients who previously had to travel to either East London or Port Elizabeth if they wanted to access private healthcare services. Specialist services are also offered to public patients. Specialist services offered at the hospital by fulltime and visiting specialists include the following: Anaesthesiology Otorhinolaryngology (ear nose and throat surgery) Gynaecology and obstetrics General surgery Maxilla-facial surgery Plastic and reconstructive surgery Specialised orthopaedic surgery (hip and knee replacements etc) Netcare Port Alfred Hospital Pharmacy and dispensary are able to meet all dispensing requirements. The in-house dispensary is contracted into most medical aids and also offers monthly chronic medication. Specialised facilities The Consortium is also responsible for managing all of the soft services at the hospital for 15 years. Value-added services to both hospitals include wellness and ARV clinics, a joint care unit for victims of violence and the transfer of skills and skills development.
What does this mean for local communities? Besides being able to access enhanced medical treatment in their immediate area rather than having to travel for specialist care to one of the larger city centres, patients within the locality of these two hospitals now have the option of choosing private healthcare. This option was not available in these areas previously. There are a number of other positives for the communities surrounding Port Alfred, Grahamstown and the greater Eastern Cape. PPPs aim to improve government s health delivery beyond the bare minimum while leveraging the empowerment opportunities arising from the expenditure. Through this PPP empowerment in the Eastern Cape Province will be boosted substantially. As much as 40% of the construction and 50% of the ongoing operational expenditure is going to black people and/or enterprises. Local and black people hold a minimum of 50% of the shareholding in the Consortium for the duration of the project. Black women comprise a percentage of the management of both the private party and their key subcontractors. In PPPs such as these, great emphasis is placed on skills transfer and embedding management and clinical policies that ensure the upkeep of the quality of care delivered in a sustainable way. Lesotho PPP The Lesotho PPP involves the construction of a new 425-bed referral hospital (390 bed public, 35 private), Gateway Clinic and Likotsi Clinic as well as the refurbishment of Mabote and Qoaling Clinics. Medicross was subcontracted by Netcare Hospitals to manage the primary care service that commenced operations in May 2010. The new National Referral Hospital will replace the Queen Elizabeth II Hospital. It is anticipated that the new facility will dramatically improve the quality of healthcare in the Mountain Kingdom. The new hospital and the three existing, semi-urban filter clinics Mabote, Qoaling and Likotsi will form an integral part of the project as they, together with the main hospital will operate as a much needed healthcare network for the district. The Likotsi, Qoaling and Mabote Filter Clinics all commenced operations in May 2010. This was just over eighteen months after the signing of a PPP agreement between the Government of Lesotho and Tsepong, a regional PPP consortium led by healthcare services group Netcare. Tsepong, supported by JSE-listed private healthcare services provider Netcare, has designed and is building and partially financing the new facility. It will also fully operate Lesotho s new hospital, which includes the provision of clinical services for up to 18 years with a consortium of Lesotho doctors, service providers and investors. Through this Public Private Finance initiative the Lesotho government is partnering with the Development Bank of South Africa, the International Finance Corporation and the World Bank. The financial risk for these institutions is mitigated by Netcare s involvement and is ring-fenced to the project.
The Hospital site was handed over to the Design and Construction subcontractor, RPP Lesotho on 3 March 2009. RPP Lesotho appointed Grinaker LTA as their Construction subcontractor. The expected completion date for the Hospital is March 2011. Shareholding Netcare SA Healthcare Group 40% Excel Health Lesotho based doctors 20% Afri nnai Bloemfontein based doctors 20% Women Investment company Basotho women group 10% D10 Investments Lesotho Chamber of Commerce investment arm 10% Clinical services Primary Health Care Nurse led primary care services at filter clinics Gateway clinic at hospital entrance for un-referred patients 24 hour midwife-led Maternity & Obstetrics Unit (MOU) Medical Officer supported Transport to hospital Referral protocols Accreditation with COHSASA Hospital Outpatient departments Inpatient departments Labour ward 10 ICU beds 4 Neonatal and paediatric ICU 8 Theatres 1 Gastroenterology Unit 4 Delivery rooms X-ray department Emergency Department Support services Hospital laboratory Dialysis unit
The 32 bed private facility will offer the same services as public section and will also offer, hip replacements, cosmetic surgery, chemotherapy and chronic renal dialysis Advantages of PPPs for the Public Sector Upgraded facilities, which are also well maintained for the duration of the PPP contract until being returned to the provincial healthcare authority; Opportunities to generate additional revenue; Attracting and retaining high quality medical specialists and staff; Providing scope for medical professionals to grow their private practices while retaining their skills on site; Improving hospital management through skills transfer; and Enhancing the service offering to the communities served by the hospitals by sharing the improved facilities (such as the trauma unit) and expertise. Advantages of PPPs for the Private sector Access to existing brick and mortar structures in the public domain; The licence to operate privately within the government sphere, including sharing certain existing facilities at reasonable cost; Attracting and retaining new doctors and emerging market patients to the private healthcare sector; Building relationships with the public sector, based on trust and mutual goodwill; and Delivery quality healthcare to historically disadvantaged South Africans.
About Netcare Netcare Limited, an investment holding company listed since 1996 on the JSE Limited, SA, through its subsidiaries operates the largest private hospital network in SA and the UK. Among its many comprehensive healthcare services, Netcare owns and operates: 54 private hospitals, comprising 8 843 registered beds in SA; 58 acute care private hospitals, comprising 2 891 beds, through GHG in the UK; 96 medical centres, providing primary healthcare through Medicross Family Medical and Dental Centres and Prime Cure Medicentres, with a compliant network of 559 healthcare practitioners; Netcare 911, the largest private emergency service with 7.9 million managed lives; Pharmacy services, rendered at 88 retail pharmacies throughout SA; Netcare entered the UK market in 2001 to provide specialised healthcare services on contract to the NHS. In May 2006 the company acquired a controlling 50.1% interest in GHG, which owns BMI Healthcare, the largest private acute care hospital provider in the UK. The other equity partners in GHG are Apax Partners Worldwide LLP (31.7%), London and Regional Properties Limited (7.4%), Brockton Capital LLP (3.0%) and GHG local management (7.8%). Through Netcare UK, GHG is also an established independent service provider to the NHS, under Independent Sector Treatment Centre (ISTC) contracts such as the Greater Manchester Surgical Centre and the Commuter Walk-in Centre in Leeds. Netcare (JSE code: NTC) has a market capitalisation of R19 billion as at 31 March 2010. The company is included in the JSE s mid cap and Socially Responsible Investment (SRI) indices.
Primary Healthcare expertise The Primary Care Division operates medical and dental provider services and a managed care organisation that focuses on the low-income market, thus extending healthcare to previously uninsured lives. Medicross and Prime Care Medicentres, as the largest national network of private primary care clinics, deliver high volume quality primary healthcare in urban and peri-urban settings. A countrywide group of 677 independent doctors and dentists provide comprehensive primary health services to about 3,5 million patients funded through private medical aid insurance, managed care capitation premiums or self pay arrangements. Prime Cure has extensive experience in both clinical risk management and primary care service delivery. This positions the organisation well as a strong partner in primary healthcare delivery as envisioned in the government s programme of action for health reform. The Prime Cure managed care organisation manages a large number of capitated lives across most major medical scheme options ranging from primary to full risk options. The managed care business manages a designated provider network of more than 5 099 doctors, dentists and optometrists, 1 266 pharmacists, 24 Prime Cure clinics, various provincial hospital, and 270 private hospitals. Committed to making healthcare more accessible Netcare s core value is care. We care about the dignity of our patients and all members of the Netcare family. We care about the participation of our people and our partners in everything we do. We care about truth in all our actions. We are passionate about quality care and professional service. Netcare remains committed to making healthcare more accessible, affordable and sustainable for more people. In doing so it has committed itself to partnering with the SA Department of Health, the National Health Service in the UK and other stakeholders.
Public Private Partnerships in the service of the nation Enquiries to: Mari Bruwer Managing Director Public Private Partnerships Tel: +27 (0) 11 301 0209 Fax: +27 (0) 11 217 9838 Cell: +27 (0) 82 520 6120 E-mail: mari.bruwer@netcare.co.za www.netcare.co.za Netcare VCD 3681 9.2010