Lesotho hospital PPIP under fire

Our post “Ailing public hospitals in PNG: a radical remedy from Africa?” on the Devpolicy Blog last year summarized available information of a public private integrated partnership (PPIP) in Lesotho as a possible model to consider in the reconstruction and operation of dilapidated hospitals in PNG. We posed the question: “If PNG wishes to reconstruct its major hospitals and improve the quality of their services, is the Lesotho PPIP model an option to be considered?”

Since then, two reports have become available on the Lesotho PPIP. These are the 133 page final report of the Endline study for Queen Mamohato Hospital Public Private Partnership (PPP) conducted by the Centre for Global Health and Development at Boston University, published on 20 September, 2013; and an Oxfam Briefing Note of 7 April, 2014, entitled, A dangerous diversion: will the IFC’s flagship health PPP bankrupt Lesotho’s Ministry of Health? Both make interesting reading and highlight lessons from the Lesotho model, identifying ways in which the model could be improved and what further evaluation is needed. Beyond that, the reports are quite divergent in their purpose and conclusions.

The Boston University report was commissioned by the IFC and conducted by the Lesotho Boston Health Alliance (LeBoHA). LeBoHA researchers collected detailed baseline and endline indicators on the situation at Queen Mamohato Hospital (QEII) and the filter clinics, including indicators of access to services, utilization, clinical quality of care, referrals, patient satisfaction, staffing and health outcomes. The data show substantial improvements in clinical quality, access and patient satisfaction compared to baseline. The report rejects criticisms including that “quality of care, patient experience, and outcomes … are not much different from baseline and yet the GoL is paying a great deal more”.

The report acknowledges that the PPIP hospital costs more than the old QEII for a variety of reasons, including the addition of new services (such as a 10 bed intensive care unit and an eight bed neonatal intensive care unit, along with additional labor rooms, operating theatres, and accident and emergency), as well as significant increases in volume. The former QEII expenditures were calculated as 38.5% of the Ministry of Health (MOH) budget at baseline. The report estimates that at the originally contracted service level, which was 25% more for hospital services and 87% more for outpatient visits, the PPP hospital would have consumed 37.2% of the MOH budget. But improved access has made the utilization levels much higher than anticipated and, when this excess volume is considered, the costs of the PPIP have risen to 41.2% of the MOH budget.

The report recommends the need for improved monitoring and oversight of the partnership, a process for reviewing Independent Monitor reports to assure accuracy of data and the need to examine the full cost of services more closely.

In contrast, the Oxfam report comes out strongly on the attack against the Lesotho PPIP, the IFC, World Bank, Netcare (the hospital operator) and private sector solutions in general. It is highly critical of the quality of the advice given to Lesotho in the lead up to the PPIP decision, and the quality of support provided subsequently. It incorrectly states that the replacement of the referral hospital was not part of a broader health sector investment plan. It also raises the need for resources for primary and secondary care in rural areas, which were part of the original health sector plan, but were unfortunately never implemented.

While the Oxfam report recognizes that services have improved under the PPIP, it calls for another independent, system-wide evaluation of clinical performance and impact. It also claims that the new hospital cost at least three times what the old public hospital would have cost today, at more than half (51 %) of the total government health budget, significantly higher than the LeBoHA and MOH calculations .

Some of the Oxfam criticisms of the project include:

  • Unfavourable terms in the PPIP contract and inflexibility have left the government exposed to escalating costs in the future.
  • There is a lack of transparency associated with the contract terms because of commercial confidentiality.
  • Referrals to South Africa have increased, despite the rationale for the health PPIP being to reduce the need for these referrals.
  • There has been poor management and oversight of the PPIP by the Government of Lesotho, and insufficient IFC support to the government on PPIP capacity-building of the project.
  • Rapidly escalating costs have meant that the the MOH is struggling to pay the monthly fees and penalty charges are being incurred for every late payment,

Both Lesotho’s MOH and Netcare have disputed the Oxfam report in the media. MOH operations adviser for health planning and statistics, Majoel Makhake, has defended the project as a good one and the health outcomes as very impressive. She has countered that Oxfam did not undertake a lot of research to come to the conclusions they made. She stated that the percentage of the health budget going to the PPIP was closer to 30%. In the same press report, Netcare CEO Richard Friedland disputed Oxfam’s claim that Netcare would get a 25% return on its investment as “grossly inaccurate”.

There is not a great deal that the reports agree upon. They were written for different purposes with different methodologies. They do agree that the PPIP hospital has delivered far better services than its dilapidated predecessor, but that financial sustainability is a key challenge that needs to be addressed.

Tertiary hospitals are part of every country’s health care system. They are complex, expensive and difficult to manage and maintain the quality of. One of the most important lessons to be learned from the Lesotho and other PPIP projects is that enhanced access to high quality health services will lead to an increased use of these services by the people. Making choices to balance the iron triangle of cost, quality and access are issues that governments at all income levels must confront.

Beyond that, the recent reports certainly show that there are further lessons to be learned and questions that remain to be answered from the Lesotho experience, which we will continue to follow with interest.

Neelam Sekhri Feachem is the CEO of The Healthcare Redesign Group Inc. Jane Thomason is the CEO of Abt JTA

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Neelam Sekhri Feachem

Neelam Sekhri Feachem is the CEO of The Healthcare Redesign Group Inc.

Jane Thomason

Jane Thomason is the CEO of Abt JTA.

6 Comments

  • Allow me to leave a few comments from Oxfam:

    The figures in our report are based on up-to-date figures provided by Lesotho’s Ministry of Health during extensive research in February 2014 in partnership with the Consumers Protection Association of Lesotho. Oxfam conducted interviews with key stakeholders in Lesotho including representatives from the Government, Netcare, Tsepong Ltd, health worker associations, civil society organizations, as well as district level and other health practitioners. The figures we provide are more recent than those used in the Boston study. The new private hospital complex cost the country $67 million in 2013/14, accounting for 51% of its $133 million health budget.

    Oxfam also stands by its figures on the 25 per cent return on investment. The financial model for the Lesotho PPP issued in March 2009 confirms that the contract was projected to generate a 25.2 per cent rate of return on equity for Netcare and the broader Tsepong shareholders.

    Contrary to what is said in the article, the Lesotho Ministry of Health has not defended the project as a success. The Minister of Health Dr Pinkie Manamolela has raised a number of concerns about the project since our report was published. A recent article in one of Lesotho’s Public Eye newspaper on April, 11, 2014 reported, “The minister held the view that by establishing Tšepong, the government had not been well advised “because now we are even experiencing more congestion and high costs with the new hospital.” In another interview with Public Eye on May 2, 2014, the Minister questioned the advice given by the IFC on this project and is very clear on the fact that the costs of the project have escalated, contrary to what was promised: “as negotiations got under way, around 2007, the costs as agreed between the parties were already at anything up to 10 times the running costs of maintaining the QE-II. And with the contract now in place the costs have only been escalating.” As she also says in this interview, she opposed the project from the beginning: “We all saw it coming as Basotho practitioners, at least those of us who were in the private sector, and we opposed it all the way but were ignored and even snubbed.”

    And she is not alone: her colleague from South Africa, Minister of Health Dr Motsoaledi said “When the minister of health in Lesotho came to invite me for (the launch of the project), I told her it’s not going to work”. In an interview to the BBC on April 11, 2014, the Prime Minister of Lesotho himself said they were considering reopening the old hospital to correct the big mistake made in this project

    Oxfam stands by its figures and its recommendation that the World Bank leadership should take action to remedy the grave consequences of the PPP in Lesotho.

  • The The Queen ‘Mamohato Memorial Hospital in Lesotho built under a PPP, which is the first of its kind in a low-income country and has been described as opening a new era for private sector involvement in healthcare in developing countries. There have been a number of reports and discussions regarding this project from its inception to today and more will be completed before the end of the 18 year project period.

    The project is indeed being watched with much interest by a variety of interested parties and its success or otherwise will impact the future of healthcare in many countries. It is therefore critical that the project be fully and openly examined, including the roles of all parties and the any resulting reports be analysed as for any country contemplating such an investment must fully understand all issues including costs over time.
    The Feachem/Thompson article rightly states that the Boston University report and the Oxfam study are quite divergent in their purpose and conclusions and there is not much they agree on. They do agree that the PPIP hospital has delivered far better services than its dilapidated predecessor, but that financial sustainability is a key challenge that needs to be addressed.

    A critical issue to be contemplated is what happens at the end of the 18 year project period? What options does the Government truly have and at what cost?

  • To clarify, both the reports on which Oxfam based its numbers, as well as the report by Boston University were commissioned by the World Bank.

    I can not comment on the data, analyses or methodology of the report done by the academics to whom David Yates refers, because they have not made this information available for public review.

    The full Boston University Report containing their analyses is available here.

  • …and surely we (and the World Bank) should be highly allergic to an approach which sucks money away from rural and primary services in order to meet the tertiary care needs of the urban elite.

  • You are absolutely right that these two reports come to very different conclusions concerning the cost-effectiveness of this PPIP in Lesotho and its broader impact on the efficiency and equity of the overall health system. However your inference that one report is well-researched and impartial whilst the other is a hatchet job, is completely wide of the mark. I know for a fact that the Oxfam report was extremely well researched by university academics and unlike the LeBoHA report it was not funded by one of the major partners in the project.

    Anyway putting aside issues of impartiality for the time being and agreeing that services at the new hospital are better than the old QEII hospital, the big issue is whether there has been a significant cost-escalation with these new arrangements. The LeBoHA report acknowledges that, contrary to the original promise that the project would be cost-neutral, costs have risen and that the PPIP is now consuming 41.2% of the MoH budget. The Oxfam report though argues that costs have risen much more rapidly to the extent that they are now an unsustainable 51% of the budget and that this is distorting health expenditure away from district-level PHC services.

    Without access to the actual figures it is difficult for external observers to assess which figures are closest to the truth. However in saying this some of the quotes in the Oxfam report are very telling. In particular this one on page 6:

    The PPP is ‘eating more than half of the health budget. It is hitting the government hard’.
    Minister, Government of Lesotho

    and on page 11:

    ‘The PPP hospital has had a bad impact on how we’ve allocated resources over the last two years. There are less and less resources for primary health care and district services.’
    Senior official from the Lesotho Ministry of Health

    Also readers may wish to refer to this article on the Lesotho PPIP by a journalist from the Guardian Newspaper and also watch the embedded video which contains interviews with stakeholders in Lesotho.

    As you point out, given these discrepancies, there are clearly major questions to be answered about this project – particularly in terms of whether it has represented good value for money for the limited government health budget.

    Therefore, as a top priority an extensive, independent evaluation should be conducted of this project, looking at efficiency and equity issues which should include an assessment of the impact on the health system as a whole.

    Only then will countries like PNG be able to assess whether initiatives like this represent a good investment for the health of their people and their economic development.

    Rob Yates: http://www.twitter.com/yates_rob

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