Monish Patolawala joined GE Healthcare as chief financial officer in May 2015. He is responsible for driving the financial strategy and operational performance of GE Healthcare’s US$18 billion business unit of General Electric, a business that provides medical technologies to the global healthcare industry.
What advantages are there for using a public-private partnership (PPP) and managed equipment service (MES) versus straight investment by governments?
PPP and MES projects usually require a team of private companies who agree to supply outcome-based solutions to the implementing agency. This takes the burden off the government to monitor/measure how the service is being provided, and pays only if the service meets certain criteria (such as guaranteed performance of the medical technologies). The risks are thereby transferred to the private sector throughout the life cycle of the project and will positively contribute to the overall value of the investment. It also enables access to newer technology innovations.
Who are your customers? Which people need to align and agree on PPPs for them to be implemented?
Depending on our role, we may serve as a subcontractor to a construction company and/or maintenance company. In some instances, we may contract directly with the hospital (private or public) or directly with the Ministry of Health (MoH). The Concession Agreement between the public and private parties sets out the roles and responsibilities of each party respectively. On the private side, those responsibilities will be reflected and aligned back to back in the subcontracts with each private party as well as the Funding Agreement with the banks. On the public side, alignment in terms of policies and guarantees needs to be devolved from parliament, Ministry of Finance (MoF), PPP Knowledge Center and then to MoH and ultimately the implementing agency.
How many PPPs has GE been involved with and what has been achieved to date?
Over the last 15 years, GE Healthcare has been involved in over 100 PPP/MES projects and approximately 50 operational projects across the globe. We work on small to large-scale projects to support better access to healthcare with improved efficiency.
In Turkey, GE Healthcare, GAMA Holding A.Ş. and Türkerler İnşaat A.Ş., are partnering for the development of two strategic MoH PPPs; the İzmir & Kocaeli Integrated Healthcare Campus Projects. This deal is part of a US$10 billion plan from the Turkish Ministry of Health to deliver 29 PPP’s and 41,000 new hospital beds. GE will provide a multi-vendor and maintenance contract. GE is also a minority shareholder.
As part of the government’s patient- focused ‘Smart Hospitals’ initiative aimed at introducing well designed modern facilities to improve the quality of healthcare in the region, both health campuses will offer a general hospital, oncology hospital, women’s and children’s hospital, cardiovascular diseases center and rehabilitation units.
In Kenya, the seven-year MES between GEHC and the MoH is part of an overall US$450 million healthcare transformation programme launched by the Kenyan MoH. This is the largest public sector structured financing programme of its kind in Africa. The objective is to provide Kenyans with access to improved medical services, tele-radiology infrastructure and skills development across 98 Ministry of Health hospitals in Kenya’s 47 counties. This supports Kenya’s vision for Universal Health Coverage.
What are the typical options a ministry of health has to obtain finance and how do PPP and MES differ from traditional finance?
The amount a MoH has to spend on healthcare depends on its budget for the year, which is determined by the MoF and aligns with the overall annual government budget. Any long-term commitments by the MoH would need approval by the MoF, especially for PPP and MES contracts where the tenure ranges from 7 to 20 years.
With traditional finance methods, the MoH would take out a loan from a bank or issue a bond so those long-term commitments would appear on the government’s balance sheet. The difference between a PPP and MES model is the possibility to fund through project finance, in which case the financing will not appear on the government books.
Are there any downsides to this type of finance? Is it much more expensive than a government using its balance sheet to finance equipment?
Complex PPP/MES projects can require significant preparation time and requires assembling the right combination of expertise. Some may consider longer lead times and higher upfront costs like feasibility studies and/or hiring external advisors as a downside to this type of finance.
However, for many governments borrowing, it is likely to be less expensive than a private consortium providing the funding either on their books or through project financing. Total project life costs savings and transfer of risks is likely to provide better value for money to the government.
Why is additional financing needed by healthcare systems? What is the scale of the need?
A healthy population is required develop any given economy hence financing for health systems is critical. Furthermore, a study of 13 OECD countries over a period spanning two centuries found a fundamental, long-term statistical correlation—between life expectancy and both total GDP and GDP per capita in all 13 counties. An increase of 1 percent in life expectancy resulted in an average 5 percent increase in GDP per capita in the long run, and an average 6 percent increase in total GDP.
As many countries continue on the road to universal health coverage, WHO Member States in 2005 committed to developing their healthcare systems so that more people can have access to healthcare. Although progress has been made, there’s still work to be done.
High quality services require significant investment. The benefits of such large-scale investment of this caliber can bring improved economical and clinical outcomes across a country. For example, by creating in-country access to services, patients are more likely to seek care in their own communities rather than traveling abroad for treatment.
At GE, we work with our partners to structure healthcare delivery models to increase access and maximize efficiency. In Kenya, for example, supporting the Ministry of Health’s Managed Equipment Services program (a form of Public Private Partnership (PPP), GE Healthcare has so far achieved more than 50 percent increase in patient throughput and more than 30 percent reduction in the cost of scans. This has enabled increased access to healthcare and diagnosis of diseases.
How long does a typical PPP take to arrange and what advice/ tips would you give an MoH considering this approach?
A well-executed PPP project that isn’t too complex can be finalised relatively quickly, in about six to 12 months. More complex projects can take up to two years. We recommend hiring advisors to help structure the deal and guide governments through the procurement process. This critical step builds confidence with private companies and investors.About this Content