Australia s s Experience with Health PPP s

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Australia

’

_’

s Experience

_{s Experience}

with Health PPP

’

_’

s

_s

Annette Schmiede Annette Schmiede

Adj. Assoc Professor Adj. Assoc Professor

Menzies Centre for Health Policy

Sydney University

Berlin 2009

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Federal and State Governments

Pop 23 mill high growth, highly urbanisedPop 23 mill high growth, highly urbanised

Federal Government with six states and Federal Government with six states and

territories. territories.

Federal govt raises taxes States provide Federal govt raises taxes States provide

services services

States operate and fund the public States operate and fund the public

hospital system and community health hospital system and community health

Federal govt funds primary care, GPFederal govt funds primary care, GP’’s and s and

specialists. specialists.

Complex system, poor accountability, Complex system, poor accountability,

major reform imminent major reform imminent

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Mixed Private and Public System

70% funded by govt, 19% funded through 70% funded by govt, 19% funded through

“

“out of pocket”out of pocket” 70% provided by private 70% provided by private providers

providers

Tax funded national health insurance Tax funded national health insurance

system, all residents have access to system, all residents have access to

hospital services through public hospitals hospital services through public hospitals

free of charge. free of charge.

Private health insurance available to cover Private health insurance available to cover

private hospital stay. private hospital stay.

Private health insurance subsidized by the Private health insurance subsidized by the

Government. Government.

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Role of Private Hospitals

Private hospitals are an essential Private hospitals are an essential

component of the health system component of the health system

Account for 30% of all hospital beds but Account for 30% of all hospital beds but

do almost half of all surgical episodes, do almost half of all surgical episodes,

mainly elective mainly elective

Do not provide trauma services or Do not provide trauma services or

teaching teaching

Private hospitals owned by charitable Private hospitals owned by charitable

groups (mainly religious) and investor groups (mainly religious) and investor

companies. companies.

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First Generation PPP’s

First health PPP’s introduced in the

early 90’s by conservative State

governments

Began as an early adoption of

ideology of liberalising public

infrastructure, roots in Thatcherism

Not driven out of health policy

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First Generation PPP

’

s

1990

-

2000

Full service contracts Full service contracts

All services bundled All services bundled

including clinical services,

community health and

emergency

20 year plus contracts20 year plus contracts

Service prices to be Service prices to be

discounted

Demand risk shifted to Demand risk shifted to

operator

Mainly replacement of Mainly replacement of

existing hospital some new

greenfields

First project caused First project caused major public outcry

major public outcry

Second project limited Second project limited to not for profit

to not for profit

operators

7 projects across 7 projects across country

country

3 projects reverted to 3 projects reverted to public ownership in

public ownership in

early years of contract

Ideological opposition Ideological opposition from bureaucracy and

from bureaucracy and

State Labor

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Project

Project YearYear CapitalCapital value

value

Beds

Beds LocationLocation _{New or}_{New or}

replace

Port Macq

Port Macq 19921992 $40mil$40mil 160160 countrycountry NSW

NSW

replace.

Hawkes

Hawkes 19941994 $47mil$47mil 127127 outer outer met. met. NSW NSW replace replace Joond

Joond’’luplup 19961996 $70mil$70mil 335335 outerouter met. met. WA WA new new Latrobe

Latrobe 19971997 $56mil$56mil 257257 countrycountry Vic

Vic

replace

Mildura

Mildura 19981998 $37mil$37mil 130130 countrycountry Vic

Vic

replace

Noosa

Noosa 19981998 $20mil$20mil 100100 RegionalRegional Qld

Qld

new

Robina

Robina 19981998 $48mil$48mil 192192 RegionalRegional Qld

Qld

new

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SERVICE CATEGORIES

SERVICE CATEGORIES ACUTE INPTS SUB-ACUTE INPTS A&E COMMUNITY HEALTH OUTPTS MENTAL HEALTH ACUTE MENTAL HEALTH SUBACUTE HAWKESBURY _√√√√ _X _√√√√ _√√√√ _X _X _X LATROBE _√√√√ _√√√√ _√√√√ _X _√√√√ _√√√√ _√√√√ ROBINA _√√√√ _√√√√ _X _X _√√√√ _√√√√ _√√√√

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SERVICE CATEGORIES

SERVICE

CATEGORIES ACUTE INPTS

SUB-ACUTE INPTS A&E COMMUNITY HEALTH OUTPTS MENTAL HEALTH ACUTE MENTAL HEALTH SUBACUTE HAWKESBURY Fee for Service Direct

Billing Direct Billing

LATROBE

Case

Payment Per Diem

Annual Budget

Annual

Budget Per Diem Per Diem

ROBINA

Case

Payment Per Diem

Fee for

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FUNDING MODEL

COMPONENTS

OPERATING

CASE PAYMENTCASE PAYMENT

FEE FOR SERVICEFEE FOR SERVICE

DIRECT BILLING OR DIRECT BILLING OR LUMP SUM

LUMP SUM

PER DIEMPER DIEM

PRIVATE PATIENT PRIVATE PATIENT REVENUE REVENUE INFRASTRUCTURE OR INFRASTRUCTURE OR TEACHING AND TEACHING AND RESEARCH GRANT. RESEARCH GRANT.

CAPITAL

RECOVERY

COSTS OF FUNDING COSTS OF FUNDING THE DEVELOPMENT, THE DEVELOPMENT, PRINCIPAL & PRINCIPAL & INTEREST. INTEREST. MAINTENANCEMAINTENANCE CAPITAL CAPITAL EXPENDITURE EXPENDITURE INSURANCEINSURANCE

EQUITY RETURN (NOT EQUITY RETURN (NOT ALWAYS)

ALWAYS)

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Implementation Issues

Risk exposure for operators around open Risk exposure for operators around open

ended demand, particularly with A&E ended demand, particularly with A&E

services. services.

Some projects significantly cross Some projects significantly cross

subsidised

subsidised services from services from ““privateprivate”” patients.patients.

Growth assumptions in tender documents Growth assumptions in tender documents

not reflected in annual operating budgets. not reflected in annual operating budgets.

Bureaucratic opposition, proposals mainly Bureaucratic opposition, proposals mainly

came from asset management and capital came from asset management and capital

works branches. Service and policy areas works branches. Service and policy areas

were often opposed. Once facilities were often opposed. Once facilities

completed responsibility passed to these completed responsibility passed to these

areas. areas.

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Implementation Issues

Policy did not have bi partisan

support at a State political level.

Significant ideological opposition

against many of the projects when

governments changed.

Failure to negotiate acceptable

annual operating budgets.

Disputes over the methodology for

covering price increases, CPI versus

real cost increases.

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Process Issues

Financing and ownership structures

were complex.

No

standardised

approach across the

projects each state and almost each

project differed in approach contract

fundamentals and project structure.

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Process Issues

Methodologies used by State

governments to set ongoing prices

has not always been transparent,

consistent or logical.

Pricing methodologies were complex

and not easily benchmarked to govt.

services.

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Lessons

Policy intent should be clear.Policy intent should be clear.

The community must be supportive.The community must be supportive.

Process must be understood and driven by health Process must be understood and driven by health not treasury.

not treasury.

Health policy implications need to be clearly Health policy implications need to be clearly understood.

understood.

Need for clarity about the role of the private Need for clarity about the role of the private sector in the overall health system.

sector in the overall health system.

Need to understand the real costs of providing Need to understand the real costs of providing govt services, capital and operating.

govt services, capital and operating.

Accurate awareness of the capacity of the private Accurate awareness of the capacity of the private sector to participate.

sector to participate.

Risk allocation must be equitable. Risk allocation must be equitable.

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Lack of clear expectations of the desired Lack of clear expectations of the desired

outcomes of projects outcomes of projects

Shortage of experience and skills transfer.Shortage of experience and skills transfer.

Unbalanced risk transfer.Unbalanced risk transfer.

Lack of flexibility in implementation Lack of flexibility in implementation

process. process.

Inadequate commitment to averting and Inadequate commitment to averting and

resolving disputes. resolving disputes.

Uneven capability within the public and Uneven capability within the public and

private sectors. private sectors.

No bipartisan political support.No bipartisan political support.

Factors influencing outcomes.

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Project Updates

Joondalup longest operating, 14 yrs, to

have significant investment by

government, $ 230mill, and operator, $90 mill. 530 beds.

Emergency Dept busiest in Perth 63,000.

Runs more efficiently than public sector

Hawkesbury, flexibility allows quick

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New Wave PPP

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s

No clinical services

Berwick Community Hospital, Victoria Berwick Community Hospital, Victoria

Royal WomenRoyal Women’’s Hospital, Victoria s Hospital, Victoria

Royal ChildrenRoyal Children’’s Hospital, Victoria s Hospital, Victoria

Orange Base Hospital, New South Wales Orange Base Hospital, New South Wales

Royal North Shore Hospital, New South Wales Royal North Shore Hospital, New South Wales

Long Bay Prison Forensic Hospital, New South Long Bay Prison Forensic Hospital, New South Wales

Wales

Newcastle Mater Hospital, New South Wales Newcastle Mater Hospital, New South Wales

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Future Need

Australia needs substantial capital

investment driven by past

underinvestment, population growth

and ageing

Federal govt set up Hospital Fund as

part of GFC response investing $5

-

-10bill plus state investment. Most

10bill plus state investment. Most

projects now over $1bill will still

need private strategy

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New Projects

Sunshine Coast University Hospital QldSunshine Coast University Hospital Qld

.

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Noosa Hospital

Mildura Base Hospital

Joondalup Health Campus

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Port Macquarie Base Hospital

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