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8/6/2019 8foster Anastasi Presentation
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PPP in Australia: Hospital Sector
Case Study
Richard Foster
Executive Manager, Partnerships Victoria
Kylee Anastasi
Consultant, World Bank Institute
Knowledge Sharing on Infrastructure -
Public Private Partnerships in AsiaSeoul, May 19-21, 2009
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Agenda
Healthcare in Australia
History of PPP in the State of Victoria
Lessons learned from early PPP hospitalprojects in Victoria
Applying the lessons learned - The RoyalWomen’s Hospital
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Healthcare in Australia
Public hospitals – Directly funded by government
– Provide most acute care, emergency outpatient services and morecomplex types of hospital care
– Long waiting times for elective surgery
Private hospitals – For-profit or not-for-profit organisations
Large corporate operators, religious operators, private health
insurance funds – Shorter waiting times, but costly
May be covered by private health insurance
– Traditionally provided less complex non-emergency care, such as
simple elective surgery – Increasingly providing complex, high technology services.
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Agenda
Healthcare in Australia
History of PPP in the State of Victoria
Lessons learned from early PPP hospitalprojects in Victoria
Applying the lessons learned - The RoyalWomen’s Hospital
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History of PPP in Victoria
1980s: – Focus on achieving off balance sheet financing
1990s:
– Belief that increased private sector involvement in infrastructureservices could drive growth and efficiency Economic and financial outcomes were largely positive Desire for maximum risk transfer and private sector efficiencies led
to some projects being unsustainable
2000: – Partnerships Victoria Policy is launched
Framework for integrating private investment in public infrastructure Value for money in the public interest Optimal risk allocation Whole of life approach to costs No presumption of private sector efficiencies
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Agenda
Healthcare in Australia
History of PPP in the State of Victoria
Lessons learned from early PPP hospitalprojects in Victoria
Applying the lessons learned - The RoyalWomen’s Hospital
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Early PPP Hospital Projects
Two hospital projects with similar characteristics: – Regional hospital projects, multiple service locations
– Capital cost below $60m
– Outdated facilities resulting in inefficient service delivery
– Build, Own, Operate contracts
– Demand, supply and price risk transferred to the private
company – Winning contractor accepted all risks transferred
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Early PPP Hospital Projects
Latrobe Regional Hospital Opened 1998 Operator Issues
– Limited experience in public
service delivery – Staff levels and cost – Service level and efficiency
targets – Tax implications
Operator and Ownerseparate entities under thecontract structure
Reverted to public
management
Mildura Base Hospital Opened 2000 Experienced operator
appointed Operator has modest risk
appetite A financially robust contract
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Key Lessons Learned
Separation of owner and operator creates difficulties – Government should have a single point of contact
Contract must be sustainable – Thorough Due Diligence is required
Pick your partner carefully
Private sector experience does not necessarily implyexpertise in delivering public services
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Agenda
Healthcare in Australia
History of PPP in the State of Victoria
Lessons learned from early PPP hospitalprojects in Victoria
Applying the lessons learned - The RoyalWomen’s Hospital
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The Royal Women’s Hospital
Delivered under the Partnerships Victoria Policy Design, Build, Finance, Maintain contract Capital cost $235m, 3 year limit on construction Total NPV of PPP Contract $360m 25 year operating period
– Facility maintenance, cleaning, pest control, security,grounds, car park, help desk
– State provides clinical medical services State funding for additional works Tender commenced November 2003
Financial Close June 2005 Hospital opened June 2008
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The Royal Women’s Hospital
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The Royal Women’s Hospital
Relocation of two hospitals – Royal Women’s Hospital: Major public hospital for women
and newborn babies
– Frances Perry House: A 60 bed co-located private hospital Specialist hospital with consulting, teaching and
research facilities
Relocated next to a large public hospital – Integrated operations e.g. linen, meals
– Within a major medical precinct
Enabling works at new site to facilitate relocation
Sale of old site with proceeds contributed to theproject cost
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The Royal Women’s Hospital
New Hospital Site Plan
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Applying the Lessons Learned
Qualitative and quantitative assessment – Due diligence required by both parties
– Scope for innovation in delivery
– Opportunity for commercial opportunities e.g. retail, car park Interactive tender process
– Knowing the bidders
– Understanding of government requirements
– Initiated the partnering relationship
Optimal risk allocation – State retained risk of enabling works as it could best
manage these risks – Consideration of brownfield risks reflected in the PPP
contract
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Successful Outcomes
Qualitative Value for Money – Innovative design
Accommodates future operational changes
Increased perimeter light Ecologically sustainable development
Improved ventilation
– Asset Utilization
Approximately 30% more Gross Floor Area
Quantitative Value for Money – Bid $2.5m or 0.67% lower than PSC
– Delivered on time, on budget
Project considered a successful PPP
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Summary
PPP model for healthcare has developedover time
Key changes in approach: – Drivers for private sector participation
– Risk allocation
– Efficiency expectations of the private sector
– Experience required to deliver public services
Change supported by policy
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Thank you