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Unhealthy Profits: PFI in the NHS – Its real costs

The announcement by British Chancellor Philip Hammond last November, in the costly aftermath of the collapse of major contractor Carillion,  that the Conservative government would be signing off no more projects funded through the Private Finance Initiative (PFI) (better known around the world as Public Private Partnerships, or P3s) might seem to be the end of an era.

It came after firm statements from the current leadership of the Labour Party that it had not only abandoned the party’s previous support for PFI, but was determined to bring hundreds of projects funded through PFI back “in-house.”

In other words, both of the major parties that had most avidly embraced PFI in Britain, where it began, appear now to have now learned the hard way that the policy did not deliver its promised benefits, but carried expensive consequences.

Yet the grim legacy of PFI contracts signed in the past and still operational lives on, not least in the health service in Britain, where 125 projects valued at £12.4 billion were signed between 1997 and 2017, but are set to cost almost £81 billion in “unitary charge” payments running into the late 2040s.

Hospital financial deficits, problems with the inflated cost, and restricted size, design, quality and safety of buildings constructed by PFI consortia all continue as daily problems in Britain.

The same is true in many other countries around the world which unwisely followed the model of PFI and used private capital to construct hospitals, to be paid for on complex, index-linked contracts covering maintenance and support services lasting for periods up to 40 years.

How to limit the financial cost and the impact on health services of these ill-conceived projects, and their aftermath, is a live issue which will be with us for a generation to come.

That’s why I would argue my new book on PFI and PPPs, Unhealthy Profits, is still very relevant now even though the heyday of PFI deals being signed off wholesale by Tony Blair’s government from 1997-2010 is now over.

The book, which was commissioned and published by a local branch of the health union UNISON where they have been fighting PFI and its consequences for over 25 years, is in three sections: the theory of PFI (how it was supposed to work); the experience in practice (focused on a case study of the UNISON branch and the issues it faced in Mid Yorkshire); and what to do about it.

An extended Postscript examines the global spread of PFI and shows the extent to which the same flawed model has generated similar problems in very different health care systems around the world, not least the disastrous hospital project in Lesotho driven by the World Bank.

Yet even now a new ‘Global Health Group’ at the University of California San Francisco featuring former World Bank executive Richard Feachem is working with management consultants PWC in an effort to whitewash over some of its flaws and promote the P3 model.

From its inception in Britain in 1992 PFI was a device to open up public sector budgets to create profitable opportunities for construction companies, service providers, banks and finance houses (as well as lawyers, accountants and management consultants like PWC).

The theory – since largely abandoned – was that because the borrowing was done by private consortia, and the buildings were effectively leased until the contractual payments were complete, this would not impact on levels of public sector borrowing.

However, like any hire purchase agreement it meant the public sector bodies would wind up paying much higher interest, and having to finance the new projects from limited revenue budgets. Contracts were tightly written to ensure PFI payments were a first charge on revenue, regardless of the consequences. In some hospitals this meant whole floors built but left unused to avoid staffing costs.

The book reviews academic literature and other studies to show that all of the arguments justifying the higher cost of PFI compared with conventional government borrowing – promises of “innovations”, “efficiencies” and that risk would be transferred to private consortia, have proved illusory.  Expected tax revenues from consortia evaporated as profitable PFI contracts were sold on to firms in off-shore tax havens.

So what is to be done about PFI/PPPs? Unhealthy Profits takes a critical look at and dismisses various ideas, from buy-outs, defaults on payments and a windfall tax on excess profits, but concludes that the plan developed by Labour Party advisors to nationalise the small companies (Special Purpose Vehicles or SPVs) at the centre of PFI contracts offers the best hope of bringing the projects into public ownership and control.

The book, normally £7.50, is available to download from Amazon. A 288-page paperback version will be available online soon.

 

 

 

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Critical issues in the prevention and control of non communicable diseases

There is now worldwide recognition of the global health and economic impact of non- communicable diseases (NCDs). The health goal of the Sustainable Development Goals (SDGs) has a specific target to “reduce by one third the level of premature mortality from NCDs”. However, progress towards achieving the target has been poor.

The WHO set up a special Commission to make actionable recommendations for governments to act on in order to respond to the crisis of NCDs. The commission outlined six recommendations, including the critical importance of strong political will to ensure that NCDs prevention and treatment are top national and international priorities.

These recommendations will contribute to the third UN High Level Meeting on NCDs to be held in September. If NCDs are to be prevented and controlled, governments and international institutions need to address the following issues to curb the resulting health and economic impact:

  1. Women

Women bear the brunt of chronic diseases as the most likely unpaid carers of sick family members. Women’s unpaid health care work has been valued at 3.09% of the global gross domestic product – a hidden subsidy to countries’ health budgets. Lack of access to treatment for any member of the family adds to women’s unpaid care work. Moreover, some of the NCDs carry stigma for women. For example, a young women may never get married if it is known that she is diabetic, and the cost of treatment is a factor in her rejection. The costs of treating cancer and the stigma attached to the disease, especially breast cancer, may lead to women being rejected by husbands without financial or other support.

Just two weeks ago, the WHO called for the elimination of cervical cancer given that vaccination and screening programmes are feasible. It is critical that governments expand awareness and delivery programs for early detection, diagnosis and treatment of breast and cervical cancer, as well as other NCDs. These programmes are critical not only for health but also for removing stigma against affected women.

  1. Access to medicines

High prices are a major barrier for patients’ use of medicines that save lives, significantly improve the quality of life and decrease suffering. Globally there is stark inequality in access to medicines for NCDs, which is reflected in the higher morbidity and mortality rates in poorer populations and poorer countries.

Cancer is the second cause of mortality worldwide. Early detection of cancer without affordable treatment could feel as a death sentence for patients. Anecdotal data shows the serious impact of high prices of medicines on patients’ lives.

The UN and its member states must find sustainable solutions to the crisis in medicines if they are to tackle NCDs in a meaningful way. Prevention alone is not the answer for the millions who already suffer NCDs, nor for their families who suffer the economic and emotional impact of ill health and of lack of treatment. The UN High-Level Panel on Access to Medicines proposed actionable recommendations for governments and relevant international agencies that pave the way to improving access to medicines and innovation. These must be urgently implemented. By doing so, governments would adopt strategies that make medicines affordable to payers.

It is also time that the WHO lead in developing an R&D convention that ‘de-links’ financing R&D from the price of medicines so that research is driven by public health needs, not financial incentives, and thus produce medicines at low prices.

  1. Health in trade

Free Trade Agreements (FTAs) usually include conditions that have negative implications on the health of the population in the signatory countries, especially in relation to NCDs. Firstly, FTAs usually include further protection of intellectual property rules beyond the TRIPS[1] agreement, and therefore increase the potential of high prices for new medicines.

Secondly, Investor-state dispute settlement clauses (ISDS) prevent governments from implementing policies that aim to protect public health. There are recent examples of this impact in the case of a Lily pharmaceutical company using ISDS to stop the Canadian government from adopting policies to cut the price of a medicine for treating Attention Deficit Hyperactivity Disorder. Another example is Philip Morris tobacco company taking legal action against the governments of Uruguay and Australia for including warnings against smoking on cigarette packets. In three cases the companies used ISDS clauses in an FTAs that considered governments’ actions not as protection of population’s health, but as cutting companies’ profit. Although the companies lost their cases, threat of arbitration can be a deterrent to developing countries preventing the adoption of policies to respond to NCDs.

Therefore, before signing an FTA, governments must conduct impact assessments of the potential impact of the agreement on health policies and access to medicines with meaningful engagement of civil society, parliament and media. WTO needs to monitor and condemn pressure from countries and companies on those governments who intend to use the flexibilities enshrined in the TRIPS agreement to decrease the price of medicines.

  1. Universal Health Coverage

Sustainable investment in healthcare is critical to creating resilient public health systems that can prevent and treat NCDs.  Strategies that tier services according to ability to pay, result in increased societal inequality and ill health in addition to being inefficient. No country has achieved or made progress towards achieving UHC without the majority of financing coming from the public purse. Lack of government spending and delivery of health care results in more unpaid caring work for women and high impoverishing out of pocket spending. Most countries face a health work force crisis, which requires long term investment in training and remunerating workers.

Governments need to increase investment in public healthcare systems in order to reach a minimum of 15% of public expenditure or 5% of GDP. Public investment has to prioritise financing of healthcare through progressive taxation, and avoid regressive and unaffordable insurance schemes, which tend to exclude the poorest and most vulnerable people at scale in countries with large informal sectors. Health services should be free at the point of use to ensure equity of access to healthcare. Public investment in comprehensive primary health care should be prioritised including the training and remuneration of Community Health Workers, especially women workers to enhance reaching women in rural and remote areas.

Donor countries must support developing countries to invest in building resilient public healthcare systems; including training and remuneration of health workers, through aid.

  1. Private sector’s engagement

Clearly the private sector has a role to play in responding to NCDs. However, commercial determinants of health present huge risks given that profit motives of tobacco, processed food and beverage companies, are directly at odds with public health goals. It is highly unlikely that “voluntary” actions by companies would result in cutting the negative impact of those products, given that cuts in sales act directly against companies’ commercial interest.

State-led initiatives and strong regulation are critical to tackling the NCDs crisis. “Sin taxes” on sugar products, tobacco and alcohol have been heavily opposed by those industries, despite the clear evidence of the positive impact of tax on lowering consumption of those harmful products and generating revenue for public spending on health.

Yet governments’ engagement with the private sector has been heavily promoted without emphasis on these crucial safeguards. Engagement with commercial actors should be driven by public health concerns not by economic interest.

  1. Promoting mental health

According to WHO, depression is a leading cause of disability in the world. Yet there is a lack of political support for the promotion of mental health and for investing in the diagnosis and treatment of mental health problems. Governments need to invest in evidence based training, to develop appropriate and adequate services for those suffering from mental health problems. Furthermore, integration of mental health awareness, diagnosis and treatment is needed in primary health care. National awareness campaigns in collaboration with civil society and the media are also critical to remove stigma associated with mental health, especially for adolescents who usually suffer in silence.

Conclusion

The forthcoming UN HLM on NCDs is an opportunity for world leaders to commit to protecting their citizens, by turning rhetoric into reality through serious political will and adequate financial commitments. Actions at national and international levels are necessary and feasible to prevent and control the pandemic of NCDs.

[1]Trade Related Aspects on Intellectual Property Rights, which countries automatically sign when they join the WTO

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Unhealthy partnerships: Karnataka Public Private Partnership, India By Dr. Sylvia Karpagam

The Rajiv Gandhi super-speciality hospital, in Raichur, Karnataka, has been celebrated as an example of a successful public-private partnership (PPP). The Planning Commission of India described it as a ‘possible model for replication and up-scaling’, while the National Institute for Transforming India (NITI) Aayog has been active in promoting PPPs across the health sector in India, with the World Bank as the technical partner. The Confederation of Indian Industries (CII), which has submitted a report to the NITI Aayog on options for PPP for select Non Communicable Diseases, hails this as a successful model. The fact that this PPP has been a complete failure and has led to the termination of the contract as early as 2012, figures nowhere in any of these discussions. This calls into question the agenda behind the promotion of hospital PPP models.

The Rajiv Gandhi Super-speciality hospital was set up in 1997 to provide tertiary care with Rs 600 million (US$150,000) in financial aid from the Organisation of Petroleum Exporting Companies as a one-time grant and as a PPP between the state government and Apollo Hospitals Enterprise Limited . The government was to pay a monthly Rs. 10 million on top of providing the 73 acre campus land, hospital building, staff quarters, roads, power, water and infrastructure. A one-off government grant covered building and civil works, medical equipments, furniture and fitting, non medical equipment, computers and software, vehicles, pre-operative expenses and working capital. Moreover the government agreed to pay Rs. 95 million for re-equipping the hospital and Rs. 101 million for administrative expenditure.

One of the key objectives of establishing this PPP was to provide quality healthcare to patients below the poverty line (BPL) in the districts of the Gulbarga division where the BPL population has been identified to constitute the majority (67%) of the population. However, data on the utilisation of the hospital services reveals that of the 340 hospital beds, only 154 were operational, of which only 40 (25.9% of operational beds and 11.4% of total beds), were available to BPL patients.

Figure 1 and 2 of the utilization of In-patient and Out-patients services show failure to achieve the hospital’s primary objective of providing services to BPL patients.

Figure 1: Rajiv Gandhi Super-speciality hospital: Utilization of In-patient services by BPL and Above Poverty Line (APL) 2002–2003 to 2010–2011 (Feb 2011)

 

India PPP- Apollo Hospital-Fig1

(Source: Government of Karnataka, 2011)

 Figure 2: Rajiv Gandhi Super-speciality hospital: Utilization of Out-patient services by BPL and APL 2002-2003 to 2010 -2011 (Feb 2011)

India PPP- Apollo Hospital-Fig1

(Source: Government of Karnataka, 2011)

The evaluation report of the government of Karnataka states that “this sub-optimal capacity utilisation has seriously affected the sustainability of the hospital, thereby leading to serious question on the commitment towards the PPP model of functioning”. The report has also found this model to have poor governance and accountability, with poor maintenance of records and failure to deliver on many fronts.

On May 31, 2012, the state government terminated the contract with Apollo and the hospital went into a ‘coma’. In August 2016, hospital equipment was seized by the Principal District and Sessions court for defaulting on payments. According to S.K. Purohit, the lawyer for the company that supplied laboratory items to the hospital “The material seized is nothing as compared to the outstanding. This is just a warning to the hospital authorities. We will hand over the seized material to Court which will auction them. If the Hospital does not pay the remaining amount, the court may again order for further action for recovering the remaining dues. ”

The government has handed the hospital from the Ministry of Health to the Ministry of Higher Education to set it up as a teaching hospital. This was widely protested for fear of adversely affecting poor communities and employees.

It is unacceptable that a failed hospital is being promoted as a successful example of a PPP. Why is this model being called successful in spite of no documented evidence of the success? As Dr. Sujatha Rao, Former Union Secretary, Ministry of health says ‘The NITI Aayog has an obligation and a duty to consult, listen, collect evidence, analyse, understand and reflect, not prescribe based on the advice of the World Bank and a few interested corporate houses.’

The writer is a public health doctor and researcher who has studied the PPP models in Karnataka and works with urban marginalised communities.

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It failed in the UK so why export it?

In the town of Huddersfield in northern England, the local hospital’s Accident and Emergency Department is set to be closed. 130,000 local people have signed petitions against the closure, fearing the impact on their community.

The local health service around Huddersfield is under increasing financial pressure, and one of the reasons is the Public-Private Partnership (PPP) deal in neighbouring Calderdale Royal Hospital. The hospital was built between 1998 and 2001. Its planned initial cost of £34 million has increased three folds to £ 103 million by the time it was finished.

Under the terms of the PPP deal, the local health service is expected to pay $966 million over 30 years in order to be able to use the hospital. The Local MP Jason McCartney from the governing Conservative party has called this situation “scandalous”. These huge costs have contributed to the local health service seeking to close the Accident and Emergency Department at Huddersfield Royal Infirmary.

The UK’s PPPs Disaster

The high costs of PPPs are being felt across public service sectors throughout the UK. PPPs (or the ‘Private Finance Initiative’ as they are known in the UK) began in the early 1990s, but new schemes were at their peak from 1998 to 2007. They consist of a contract between a public body and a private company, where the latter builds and operates a public infrastructure, and the public body guarantees to pay to use it through a long-term contract, usually around 30 years.

Such PPPs have been far more expensive than the alternative of the government borrowing to build the infrastructure itself. An inquiry by the UK parliament’s Treasury Select Committee found that PPPs have “The effect of increasing the cost … to the government”. A review by the National Audit Office, the independent body responsible for investigating government accounts, found that the interest rates ultimately paid by the government through PPPs are double those paid by the government when it borrows directly. Moreover, PPPs further increase the cost to the public sector, including through the payment of high profits and inflated running costs to the private companies, as well as the financial cost of expensive lawyers and consultancy companies hired to work on the complex contracts behind PPP schemes.

Since they started in the early 1990s a capital investment of $71 billion in the UK has been through PPPs, but the government will pay more than five times that amount under the terms of the PPP contracts it has signed up to.

Despite their high cost, one of the reasons PPPs were pursued is that they keep debts hidden, off the government’s accounts. Although the actual payments made by governments for PPPs are higher than if the government had borrowed directly, these payments don’t go on the government’s books in the same way as direct government borrowing. Therefore, PPPs are an expensive way to bypass transparency and accountability and to hide public debt. Even the IMF criticise PPPs impact on debt. The IMF’s Fiscal Affairs Department state that in many countries, investment projects have been procured as PPPs not for efficiency reasons, but to circumvent budget constraints and postpone recording the fiscal costs of providing infrastructure services.

The promotion of PPPs around the world

The disaster of PPPs in the UK has been criticised by politicians from all parties. In 2015, the UK’s Health Minister, Jeremy Hunt, from the Conservative Party said: “One of my biggest concerns is that many of the hospitals now facing huge deficits are seeing their situation made infinitely worse by PFI debt.” The Mayor of London, Sadiq Khan, from the Labour party described the PPP deals as “a millstone round the necks” of London hospitals.

Professor Jean Shaoul from Manchester Business School concludes that PPPs in the UK have been “an enormous financial disaster in terms of cost” adding: “Frankly, it’s very corrupt… no rational government, looking at the interests of the citizenry as a whole, would do this.”

Yet despite the evidence from the UK and from other countries  PPPs have been heavily promoted around the world by institutions such as the World Bank. Shockingly, in an evaluation in 2014, the World Bank’s own Independent Evaluation Group found that of 442 PPPs supported by the World Bank across numerous sectors, assessments of their impact on poverty were conducted for just nine of them (2%), and of their fiscal impact for just 12 (3%).

In the UK PPPs constitute an inefficient use of public money to provide health service. Governments elsewhere should adopt evidence-based policies to finance and run health services. International institutions, such as the World Bank, should refrain from pushing countries to adopt ideology-based policies such as PPPs. Instead, countries should be helped to adopt strategies that ensure that health services are accessible to all those who need it without breaking the budget of the household or the country.

This blog is based on ‘The UK’s PPPs disaster: Lessons on private finance for the rest of the world’ by Jubilee Debt Campaign http://jubileedebt.org.uk/reports-briefings/briefing/uks-ppps-disaster-lessons-private-finance-rest-world

Tim Jones, Policy Officer, Jubilee Debt Campaign

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Why Brazil should not take a U-turn on its health system, by Pallavi Gupta, Health Programme Coordinator, Oxfam India

Brazil has been the envy of the world in terms of its successes in reducing health inequality. Yet recent developments threaten its health achievements. This blog looks at the potential impact of recently announced policies on the public health system in Brazil by exploring how similar policies have played out in the Indian health system.

Brazil: success and threats

In response to its commitment to the 1978 Alma-Ata declaration of “health for all”, the constitution of Brazil enshrined health as a right of all citizens in 1988, thereby mandating the state to provide universal and equal access to health services to its population [1]. A long political struggle and the Brazilian Health Reform Movement led to the establishment of the Unified Health System (SUS) [2]. The SUS decentralized and universalised access to health care, with municipalities providing comprehensive and free health care, financed by the states and federal government [1]. Primary health care (PHC) has been key to Brazil’s health reform strategy. PHC integrates medical care with health promotion and public health actions. Family health-care teams, comprising one doctor, one nurse, one auxiliary nurse, and four to six community health workers are assigned per 600–1000 families [2]. Despite opposition from the private health sector as well as underfunding, the SUS has managed to vastly improve access to primary and emergency care, reach universal coverage of vaccination and prenatal care, and invest in the expansion of human resources and technology, including the production of essential medicines [2]. Since 2000, the government has been investing 3 to 4 % of GDP in health [3]. Consequently, fertility rates in Brazil decreased from 5·8 per woman in 1970 to 1·9 in 2008, and infant mortality reduced from 114 per 1000 live births in 1970 to 19·3 per 1000 live births in 2007 [2].

Furthermore, in response to protests by Brazilians demanding better access to physicians, Brazil sourced doctors from the country and from Cuba as part of its “More Physicians” (Mais Médicos) programme introduced in 2013 by Dilma Rousseff’s government. This additional workforce benefited 63 million Brazilians living in remote and vulnerable areas, which previously had shortages of health professionals [4]. Today, 70 to 80% of the country’s more than 190 million people rely on SUS for their healthcare needs [2[4].

However, the austerity measures proposed by the new government after the impeachment on August 31st 2016 and approved by the senate in December 2016 include the control of public spending for 20 years, which will have an impact on public education and public health services. Another measure that has been controversial since the interim government (from May to August 2016) is the creation of a plan to encourage people to seek healthcare from private providers instead of the country’s public health system, while the government is ending the monitoring of the private health-care sector. There are also attempts to diminish the role of public health care as evident by the staff cuts in the National Unified Health System. There is also a possibility of reduction in the number of foreign professionals in the country’s “More Physicians” programme [4].

Learning from India

Will looking at the fate of people in India make the new President and Minister of Health of Brazil think again about their plan? What the Brazilian government is planning to dismantle is exactly what civil society organisations and health rights groups have been calling to be established in India for decades. 70% of the out-patient care in India is sought from the private sector and nearly 60% of healthcare expenditure in the country is paid out-of-pocket by people at time of use [5]. One of the reasons for this is the abysmal state of the public health system in the country which has forever been underfunded, at a meagre 1.28% of GDP5. Shortages of health staff is a huge challenge that India faces, especially in the rural and tribal areas. The private healthcare industry, that has been growing by leaps and bounds, is largely unregulated and enjoys tax sops in more ways than one [5]. The central government passed the Clinical Establishment (Registration and Regulation) Act 2010 to regulate private medical services across the country, so that the patients can get good quality services with some control over their cost [6]. However, the whole private health care industry, including the Indian Medical Association (a private voluntary association of doctors) has been protesting the implementation of the Act and the sector continues to operate more or less on its own terms, leaving patients at their mercy.

Oxfam India supported the collection of testimonies of 78 rationally practicing doctors who shared the inside stories of how private healthcare operates in an “industry mode” and how patients are frequently fleeced of their money and right to care [7]. For example, a pathologist in a leading Indian city hospital gave a fake report declaring a patient diabetic (when his blood sugar was normal) on the suggestion of the doctor who had referred the patient. By doing so, the doctor ensured having a long term patient under his care who would be a continuous source of income. And this is not a one-off case.

The results of the proposed measures in the Brazilian public health system can be seen in Indian healthcare.

As the saying goes, “to make, it takes one lifetime, and to break, it takes one day”. India’s one life time for progressive changes is still to come but Brazil’s “one day to break” is right here. Given the impact that we witness everyday of a weak health system on people, we can only hope that the Brazilian public health system does not take a U-turn and tread the India Path.

References

[1] Flawed but fair: Brazil’s health system reaches out to the poor, Bulletin of the World Health Organization, Volume 86, Number 4, April 2008, 241-320. http://www.who.int/bulletin/volumes/86/4/08-030408/en/ (accessed 7 December 2016)

[2] Jairnilson Paim, Claudia Travassos, Celia Almeida, Ligia Bahia, James Macinko. The Brazilian health system: history, advances, and challenges. Lancet 2011; 377: 1778–97

[3] http://apps.who.int/nha/database/ViewData/Indicators/en (accessed 30 November 2016)

[4] Katarzyna Doniec, Rafael Dall’Alba, Lawrence King. Austerity threatens universal health coverage in Brazil. Lancet 2016; 388:687

[5] Vikram Patel, Rachana Parikh, Sunil Nandraj, et al. Assuring health coverage for all in India. Lancet 2015; 386: 2422–35. http://www.thelancet.com/pdfs/journals/lancet/PIIS0140-6736(15)00955-1.pdf (accessed 30 November 2016)

[6] The Clinical Establishments (Registration and Regulation) Act, 2010, Ministry of Health and Family Welfare, Government of India. http://clinicalestablishments.nic.in/cms/Home.aspx (accessed 30 November 2016)

[7] Voices of Conscience from the Medical Profession. Support for Advocacy and Training to Health Initiatives, Oxfam India 2015.

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Global Health Check was created by Anna Marriott and is currently edited by Mohga Kamal-Yanni