Author: Dr. Rahul S Reddy Kadarpeta, National Coordinator, Health Systems Transformation Platform Modern medicine has strengthened its hold as the preferred choice…
Authors: Rich Feely, Boston University School of Public Health
Timothy Thahane, Former Minister of Finance, Kingdom of Lesotho
The article by Scott et al in this issue appears to provide the penultimate chapter in the history of a ground breaking Public Private Partnership (PPP) for health; the construction and operation of Queen ‘Mamohato Hospital in Maseru, the capital of Lesotho. The denouement of this story, with the recent announcement that the Government of Lesotho cancelled the partnership and is taking control of the hospital, may be seen by some as proof that a PPP of this kind cannot work. Our experience over the twenty-year development and operation of this apex hospital in a resource-constrained African nation suggests that no such lesson should be drawn from the Lesotho experience.
In 2001-2002, one of the authors (FF) was part of a team that studied the existing apex hospital in Lesotho, Queen Elizabeth II (QEII). Our study was conducted before antiretrovirals were available in Lesotho, and we found that AIDS and its complications were the leading cause of non-maternity admissions. We also found that the majority of QEII patients came from Maseru and its environs. The building was worn out and poorly maintained, the Accident and Emergency service overcrowded, used by many Basotho as a source of primary care. Staffing was inadequate for the current patient mix, there was no ICU, and the quality of care seemed to have deteriorated. Essential diagnostic and surgical equipment was often not operational.
It came as no surprise to the Government that we recommended the replacement of QEII, and the need to strengthen primary care facilities in Maseru so that a new hospital would not be immediately overcrowded. As we reviewed the staffing and facility deficiencies at QEII, it became apparent that it is very difficult for the Lesotho Government to manage a complex tertiary hospital. Government-wide financial control and personnel systems (Civil Service) work better for teachers and policemen than for a high tech facility employing a variety of clinical specialists and support personnel. In the conclusion of our report, we recommended that the Government consider for the new hospital an outside management contract, or a parastatal organization, like the Trust Hospitals in the British National Health Service.
In the years following our report, the suggestion for a new form of management morphed into the PPP concept. With the support of the International Finance Corporation, Lesotho developed tender documents to have the facility built and operated by a public private partnership. In 2011, the new Queen Mamohato Hospital opened and replaced QEII. The new facility included an ICU, and the PPP built or refurbished four “filter” clinics to provide primary care and routine maternity services.
While the hospital was being built, studies quantifying a variety of quality of care indicators at QEII were undertaken by Boston University. These provided the baseline for subsequent evaluations of the new facility.
The first evaluation (Vian et al) was conducted in 2012, using the first full year of operating data from Queen ‘Mamohato. The hospital was busy and almost all indicators showed improvement. Perhaps most significant, qualitative interviews with hospital staff—-many of whom had worked at QE II—- were very positive about the new hospital. Training and supportive supervision were better, while the supply of drugs and disposables was much more reliable.
At the heart of the PPP arrangement was a contract that paid a fixed annual sum to the Consortium for all care up to a maximum number of inpatient stays and outpatient visits. Above this level, the Consortium would receive additional payments for additional care. Very quickly, the demand on Queen Mamohato and the filter clinics pushed patient volumes above the basic contract level, and supplementary payments became the focus of disputes between the Consortium and the Government.
The PPP had always been controversial within Lesotho, with some political factions strongly opposed. Internationally, there was also strong opposition from organizations, such as Oxfam UK, which traditionally oppose private sector health care and concerned about the cost of the PPP arrangement. The PPP contract cost more than the budget for QEII; there is no question about that. However, some of the operational costs would have been incurred regardless of ownership. The 2002 analysis suggested a new hospital would need substantially more personnel to provide adequate care, particularly since it would contain an ICU. New diagnostic equipment would cost more to operate, while funds would be needed to assure reliable stocks of drugs and medical supplies. The VAT charged on the Tsepong payments also is not really a “cost” of the PPP arrangement, since this money is returned to the Government’s coffers.
The contractual payments were also intended to reimburse the PPP, over the lifetime of the contract, for the capital costs of the project. This increased the contract amount above what would have been paid solely for annual operating expenses (personnel and supplies) by any operator. Ministry of Health budgets include only personnel and supplies. There is no allowance for depreciation of buildings and capital equipment. Interest paid on any funds borrowed by the Government for a new hospital would not be shown in the Ministry budget, nor would the cost of Civil Service retirement benefits for hospital staff. So any direct comparison of Ministry “costs” and PPP contractual payments is misleading.
Payment for the increase in volume over the contract “ceiling” was particularly contentious. This growth is not surprising. Like all capital cities in Africa, Maseru is growing faster than the country as a whole, so a greater proportion of national health care inevitably shifts to the public provider of primary, secondary and tertiary care in the city—Queen ‘Mamohato and its filter clinics. The perception of improved quality probably led to more “self-referrals” to facilities in the city. It is also quite possible that Basotho who sought care in South Africa now elect to use the facilities in Maseru.
One other explanation for the increase in volume is the improved survival of the HIV-infected population. In 2002, we projected that AIDS mortality would substantially reduce the population surviving into middle age and requiring care for chronic conditions like cancer and heart disease. With ARVs now generally available and HIV-positive patients surviving much longer, the need for chronic disease care is growing beyond the projections made when AIDS mortality was at a peak.
When the Government refused to make payments to the Consortium for the additional volume of care provided, the financial condition of the hospital became more difficult, likely explaining the decline in some quality indicators (crash cart supplies, A&E triage time) between evaluations one (2014) and two (2021). Increasing patient demand, for the reasons outlined above, likely explains the hospital crowding reported by Scott et al, and a resulting decrease in the quality of care.
Changes in the Government of Lesotho exacerbated the contractual disputes with the Consortium, as those who had opposed the PPP came to power. When the Government granted a major salary increase to Civil Servants, including health care personnel, the PPP had to compete in a radically changed labor market and pay higher wages to attract staff. But the contract had no provision to adjust payments for this major market shift. Financial pressures on the Consortium increased along with acrimony between the contractual parties. Now the Government has terminated the PPP and will attempt to run Queen ‘Mamohato.
What can we conclude from the experience of this PPP? Clearly, the projections of future patient demand were inadequate. Future PPPs should have some provision for re-negotiation when demand exceeds contractual expectations. A fundamental shift in the cost of labor (or supplies) beyond the control of the PPP contractor should be a cause for re-negotiation as well.
Secondly, it is important for all parties to understand what is included in the costs covered by a PPP relationship, and to understand how these costs compare to the costs shown in Government budgets for public providers.
Finally, a sustainable PPP needs the support of key political actors, including those who are out of power when the contract is written, but may be in Government when the PPP is in operation. This may be the most difficult pre-condition to meet, as there will always be parties who oppose private health care, or feel that they have been “cut out” of the PPP process.
Yet PPPs are not doomed to fail. There is no comprehensive comparison of the PPP contract payments with the true cost of running a similar hospital under Government ownership. We really don’t know if it was more expensive than a Government-run operation of similar size and quality. The two evaluations show that a PPP can increase the quality of health care in a difficult environment. What happens now, with the Government running the hospital as it did QEII, will prove instructive. We hope that a new evaluation will be commissioned after one or two years of Government operation. Alas, we predict the results will not be encouraging.