May 2009

1. Supporting the Development of Public Private Partnerships in HealthIFC Advisory Services Department May 2009

2. Enterprise Assistance Public-Private Partnerships Environment & Social Sustainability Business Environment Access to Finance Advisory Services and Financing IFC’s Role IFC also provides advice to governments and businesses World’s largest multilateral provider of financing for private enterprises Advisory services to governments and businesses $30+ billion in outstanding investment commitments

3. IFC’s Strategy in Healthcare Health is One of IFC’s Strategic Priorities • Supporting the private sector in healthcare is a strategic priority of IFC • IFC supports private healthcare companies and healthcare PPPs through: • Financial support to private organizations, through long-term debt, equity, and structured finance products • 76 private healthcare projects in 26 countries, US $840m of IFC direct investment, for projects valuing in total US $2.5bn • These have included investments in hospitals and clinics, diagnostic imaging and dialysis centers, and labs • A significant and quickly growing business in transaction advice to governments in developing and implementing PPPs • 14 completed transactions and a strong pipeline

4. IFC’s Infrastructure Advisory Services • Lead advisor, mostly to governments • Strategy definition for private sector participation / PPPs • Coordination with World Bank and other multilaterals on sector policy, institutional reforms and needed resources • Transaction due diligence: legal, technical, other • Preparation of tender documentation • Marketing of business opportunities to selected investors • Transparent international competitive bidding • Post-transaction assistance, as needed • Fee based services • Modest retainer paid by Clients (according to milestones) • Largest portion of remuneration to be paid as success fee at closing of transactions (by winning bidder)

5. IFC’s Infrastructure Advisory Services • At the forefront of advisory services in • Physical Infrastructure: roads and transport, water and sanitation, power and telecommunications sectors • Social Infrastructure: health (hospitals, clinics, specialised clinical services) and education (universities and schools) sectors • Our staff are transaction specialists • Experienced in the key elements of PPPs and privatization transactions • Emphasis on the private provision of public services – increasing the access to and quality of public services • We undertake pioneering transactions • First, difficult, political, reform-based, innovative • Since 1986, over 165 advisory assignments in more than 60 countries

6. IFC’s Infrastructure Advisory Services • Objectivity and transparency • Independent advice, no links to potential investors • Separation between advisors and investors within IFC (“Chinese Wall”) • Precise procedure and rules, based on best practices and experience • Orientation towards development and results • Importance attached to social and developmental objectives of client country • Transactions structured to be sustainable and bankable for all parties • Staying the course with our clients • Knowledge of investors’ market • Broad expertise covering private sector transactions • Regular contacts with leading companies • Essential marketing role on behalf of our clients, lends confidence to investors • Integrated approach and synergies within the World Bank Group • Access to experts; coordination of institutional reforms and resources • Search for public financing and guarantees, when needed

7. Telecom Kenya Mauritania Uganda Brazil Egypt Gabon Morocco Philippines Romania Saudi Arabia Ports & airports Water & irrigation Brazil Jordan Madagascar Saudi Arabia Albania Bangladesh Brazil Cameroon Gabon Liberia Panama Peru Philippines Trinidad & Tobago Vietnam Brazil Cameroon Kenya Nigeria Samoa Serbia Tanzania Tonga Uganda Air, roads & rail Botswana Lesotho Romania Mexico Egypt Power Health & education IFC’s Infrastructure Advisory Services

8. Possible Solution to Challenges in Finance and Delivery of Public Health Public Private Partnerships in Health • Health care spending is the biggest component of GDP globally – 9% and rising • Governments are facing increasing demand for health care services, but also rising costs (medical technology, changing disease patterns) • Governments are looking for new models to respond to these challenges PPPs can mobilize private finance, increase access, introduce efficiences in the delivery of public health services, and improve health outcomes

9. Providing Public Healthcare through Private Delivery Public Private Partnerships in Health • PPPs do not require an introduction of user fees, or an increase of existing user fees • The services delivered by the private sector under a PPP are still public services: patients face the same charges as they would without a PPP • All patients receive equal treatment (no two-tiered service) • Service quality is well-regulated to ensure patient care/safety and contract compliance • Payment to operator is tied to performance

10. Contribution to the Millennium Development Goals Public Private Partnerships in Health • PPPs can contribute to achieving the three health MDGs of child mortality, maternal health, and disease reduction • Directly through supporting the expansion and improvement of maternal and child health services (e.g. proposed India maternity hospital wing project and Brazil Bahia children’s hospital) • Indirectly through improved health services / performance

11. Different solutions for different needs IFC’s Infrastructure Advisory in Health Non-clinical Services Clinical Services Design/Build/Manage Contracting out works and services such as IT equipment and service, cleaning, catering, maintenance, etc. Country examples: global Management of entire hospitals or networks of hospitals and/or clinics Country examples: Brazil Contracting a private provider to design, biuld and manage facilities Country examples: UK, Spain, Italy, Mexico, South Africa, France, Australia Design/Build/Manage/Deliver Clinical Services Contracting out services such as dialysis, radiotherapy, day surgery etc. Country examples: Romania, Peru, UK Contracting a private provider to design, build, and manage facilities as well as deliver clinical services Country examples: Portugal, Lesotho, Spain

12. $ $ Roles of the Private Provider and the Public SectorTypical PPP Transaction PrivateConsortium Ministry of Health orNational Health Insurer • Legal permits and authorization • Reimbursement for clinical and non-clinical services • Performance monitoring • Medical licensing & certification • Detailed designs • Capital financing • Construction • Medical supplies & equipment • Maintenance • Non-clinical services • Staffing • Clinical services

13. Health PFI Contract Structure Public Entity Direct Agreement (?) Project/Concession Agreement PPP Project Company Holding Company Share Capital/Sub Debt Loan Agreement Lender Construction Subcontract Services Subcontract Services(FM) Contractor ConstructionContractor

14. Health PPP Contract Structure Public Entity Direct Agreement (?) Project/Concession Agreement PPP Project Company Holding Company Share Capital/Sub Debt Loan Agreement Lender Construction Subcontract Services Subcontract Mgmt/Services Subcontract Healthcare Provider Services(FM) Contractor ConstructionContractor

15. Lesotho Hospital IFC Transaction Example: Hospital PPP Project • A PPP for constructing, equipping, financing, and managing (all clinical and non-clinical services) of a new 390 bed hospital and 3 referral clinics Structure • One of only a few hospital PPPs in the world where the operator is responsible for all services • Under the performance-based contract, the Operator receives an annual global budget and must treat all patients Results • The Government signed an agreement in October 2008, with Netcare, a large South African healthcare services group “Thanks to the innovative PPP structure, operating costs for the new hospital are roughly equivalent to those at the existing facility. Patients will have access to greatly improved medical services and care, but pay the same minimal charge they currently do at any other public hospital in Lesotho.”Honourable Timothy T. Thahane, Minister of Finance

16. Romania Dialysis Centers IFC Transaction Example: Dialysis Center PPP Project • PPPs for 8 dialysis centers covering 25% of the country’s dialysis patients, to address unmet demand, aging facilities, shortage of trained staff, and lack of national standards Structure • Operators receive per treatment payments, with full responsibility over facilities, staff and treatment • New best-practice national standards developed and implemented Results Confirmed through an Independent Evaluation • Improved service quality and facilities • Private operators invested US $40m to upgrade facilities • Nearly US $4.5m in savings created for the National Health program •  % of clinics complying with national standards for running diagnostic blood tests rose from 50–63% to 100%

17. IFC Transaction Example: Hospital PPP Alexandria Hospitals (Egypt): ongoing Project • PPPs under preparation for Alexandria University for a new maternity hospital, blood bank and teaching hospital with centers of excellence for neurosurgery and nephrology/urology Structure • Long-term PPP contracts for the design, financing, construction and equipping, and facility management of the new hospitals • The public sector will retain responsibility for the clinical services and hospital management Timeline • Demand assessment, sizing of the hospitals, estimation of capital and operating costs completed • 8 major consortia have prequalified and the tender is expected in the first half of 2009

18. IFC Transaction Example: Hospital PPP Mexico State Hospitals: ongoing Project • Client is the state health insurer (ISSEMyM) of State of Mexico • PPPs for two new secondary level hospitals (120 beds each) • IFC has completed demand assessment, site selection, hospital sizing, financial and Value for Money analyses • Projects currently at the State Legislature for approval Structure • Operator will be responsible for constructing, financing, equipping, facility management, and clinical support services (radiology, labs, dialysis) • The public sector will be responsible for most clinical services Timeline • Tender is expected end 2009

19. Phase 1: Analysis Phase 2: Implementation • Legal/Inst. framework • Payment mechanism • Risk allocation • Investment program • Info memo • Road show • Pre-qualification • Data room • Service standards • Performance targets • Payment procedures • Penalties • Monitoring • Technical evaluation • Financial evaluation • Winner selection • Contract effectiveness & assumption of service obligations IFC’s Role as Transaction Advisor Typical transaction advice activities and timing

20. Responding to a Growing Pipeline Strong and Growing Global Pipeline Uzbekistan diagnostic/ ambulatory centers Moldova health PPPs Mexico hospitals Egypt (Alexandria) hospitals Yemen hospital Mexico oncology and dialysis India (Delhi) hospitals and maternity wings India (Gujarat) medical college and teaching hospital Brazil (Bahia) secondary and childrens’ hospitals

21. Thank you Robert Taylor Health Sector Manager Infrastructure Advisory Department IFC Tel: +1 202 437-1974 Email: rtaylor@ifc.org Laurence Carter Director Infrastructure Advisory Department IFC Tel: +1 202 437-8628 Email: lcarter@ifc.org