1 CASE STUDY: PPP in Italian Health Sector Massimo Ricchi Presidency of the Council of Ministers Department for Economic Policy Coordination and Planning.

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CASE STUDY: PPP in Italian Health Sector

Massimo RicchiPresidency of the Council of Ministers Department for Economic Policy Coordination and PlanningPPP Task Force, Italy

Geneva, 21-24 February 2012

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UTFP activity UTFP activity ““on the fieldon the field”” : institutional framework : institutional framework

The Task-Force – OrganizationThe Task-Force – Organization

Inspired by the UK PFI Taskforce

Established by law

Previous consultation with the main parties involved

Group of 11 professionals:

Legal, financial, technical expertise selected from both private and public sector.

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UTFP activity UTFP activity ““on the fieldon the field”” : institutional framework (2) : institutional framework (2)

The Task-Force - MissionThe Task-Force - MissionEducational Role Promoting PPP techniques Developing a PPP Methodology Identifying workable PPP projects to be repeated Database of successful PPP deals

Assistance Role Assistance to central, regional and local administrations From the identification of suitable projects to the evaluation of offers Multidisciplinary skills and expertise

“Policy Making” Role Improvement of legal framework “Best practices” (standardisation of practices and contracts)

Check PPP Contract for National Bureau of Statistic Analysing risk distribution in the contract in order to put public investment on or off the public budget

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Project Finance in the Health sector in Italy since 2004Project Finance in the Health sector in Italy since 2004

Initiatives: 15 initiatives currently planned (0,8 billion €) 53 concession awarded (3,7 billion €) 15 initiatives at bidding stage (0,65 billion €)

61 initiatives quitted (1.950 billion €)

Public contribution in capital expenditure (grant amount):

Average grant amount: 55% of Capex

Average procedure duration to conclusion: Public initiative procedure: 13,4 months Private initiative procedure: 36,8 months

Source: Finlombarda 2011

Some figures: ca. 5,15 billion euro total investment ca. 17.300 beds 240.000 – 300.000 € average cost of bed

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2006 2007 2008 2009 2010

Conventional Proc. 232 292 239 511 141

PPP Proc. 346 590 287 187 260

Capex Healt Sector 578 882 526 698 401

Source: Finlombarda 2011

Project Finance in the Health sector in Italy since 2004Project Finance in the Health sector in Italy since 2004(2)(2)

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PPPs in the Italian Heath Sector 2004-2011

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>10 projects

5-10 projects3-5 projects1-2 projects

9955 44

33

33

22

11

11

1122

55

33

55

22

Source: Finlombarda 2011

North 47

Centre 7

South 20

Project Finance in the Health sector in Italy since 2004 (3)Project Finance in the Health sector in Italy since 2004 (3)

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PPPs in the Italian Health Sector

What the private sector can docan do: Providing non- medical services        Estate maintenance Supply of energy and fluids (heat, air conditioning, water, medical fluids, etc.)   Medical equipment maintenance   Cleaning services of building and clinical equipment Laundry Waste disposal Catering for patients and personnel Security services Housing services (Reception, booking, management of hotel facilities, etc.) IT services Commercial services (bar, newspaper, restaurant, shops, etc.) Parking facilities Laboratories and Radiodiagnostic service management (occasionally)

  What the private sector cannot docannot do: Providing medical services    No nursing and clinical services delivery No medical ruling of the hospital

Project Finance in the Health sector: fundamental principleProject Finance in the Health sector: fundamental principle

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Lombardy's procurement approachLombardy's procurement approach

6 hospitals in Lombardy

4 hospitals in Calabria

Intervento Valore complessivo

dell'intervento(IVA inclusa)

Importo Contributo Pubblico

(IVA inclusa)%

Regione CALABRIA 406.978€ Ospedale della Sibaritide 133.396€ 92.185€ 69,1%Ospedale di Vibo Valentia 132.418€ 88.453€ 66,8%Ospedale della Piana di Gioia Tauro 141.164€ 91.983€ 65,2%Regione LOMBARDIA 1.075.912€ Ospedale Niguarda Ca' Granda 287.796€ 175.263€ 60,9%Complesso Ospedaliero di Vimercate 166.768€ 105.896€ 63,5%Ospedale Sant'Anna di Como 169.580€ 138.942€ 81,9%Ospedale di Legnano 133.476€ 83.500€ 62,6%Ospedale di Garbagnate Milanese 126.806€ 79.841€ 63,0%Presidio Ospedaliero "San Gerardo" di Monza 191.487€ 121.218€ 63,3%

TOTALE 1.482.891€ 977.282€ 65,9%

Project Finance in the Health sector: strong contracting authority Project Finance in the Health sector: strong contracting authority

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The Innovative procurement approachThe Innovative procurement approach

THE FOUR TUSCANY HOSPITALS

THE NEW MESTRE HOSPITAL

THE CANCER THERAPHY CENTER MESTRE

Project Finance in the Health sector: catch the innovation Project Finance in the Health sector: catch the innovation

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The new Mestre HospitalThe new Mestre Hospital

PROJECT DATAPROJECT DATA

• Project Name: The new Mestre Hospital

• Category: DBFO (Design Build Finance & Operate)

•Awarding Authority: Unità Sanitaria Locale 12 Venice (NHS Local Authority)

• Procedure: Concession under private initiative

• Number of beds: 680

• Number of Op. Rooms: 16

• Number of Intensive Care Rooms : 24

• Parking Spaces : 1092 ( incl. 557 for visitors)

• Total investment : € 245 million (VAT included)

• Public contribution: € 105 million (45%)

• Concession length: 29 years (incl. 4 years of construction)

Project CharacteristicsProject Characteristics

The project concerns the construction of a new hospital to replace an inadequate existing hospital to consolidate and improve specialist hospital services (e.g. oncology, cardiology, eye-surgery).

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Mestre Hospital: a case of successMestre Hospital: a case of success

January 2008

Official Opening of the new Mestre Hospital

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What to improve What to improve

No specific risk assessment or risk analysis realized in the early stage of the project through a matrix of risks

Case studies prepared by the promoter

Difficulties in comparing proposal in the different stage of the procurement process

Need to revise some financial aspects of the concession

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The Cancer therapy CenterThe Cancer therapy Center

PROJECT DATAPROJECT DATA

• Project Name: Cancer therapy centre

• Category: DBFO (Design Build Finance & Operate)

• Awarding Authority: (NHS Local Authority)

• Procedure: Concession under private initiative

• Bidders: 3

• Project awarded: choice of the private partners

• Total investment : € 168 million (VAT included)

• Public contribution: No public contribution ex ante

THE CANCER THERAPY CENTERTHE CANCER THERAPY CENTER:: Project CharacteristicsProject Characteristics

The project concerns the construction of a Cancer therapy center. The new center will be part of an existing hospital to consolidate and improve specialist hospital services.The project was awarded and the contract signed.

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Risk assessment procedure: the new approach in the concession noticeRisk assessment procedure: the new approach in the concession notice

A greater attention to risk assessment procedures through specific additional requirements apart from those provided by law. In particular, the promoters taking part in the bidding process had to:

1) Provide information on risks

•Present a matrix of risks;

•Specify who is taking each risk;

•Specify in which contract clause the risk is managed and how;

•Specify the mitigation instruments provided.

Concession Notice: UTFP regulatory advicesConcession Notice: UTFP regulatory advices

The risk matrix prepared by the promoter and agreed on by the administration presents the following structures:

1. Design of the project (6 risks)2. Constructions (30 risks)3. Management phase (12 risks)4. Costs of management phase (6 risks)5. Revenues (8 risks)6. Resolution of the contract (6 risks)7. Technology (2 risks)8. Return of the infrastructure (1 risk)9. Other risks (12 risks)

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2) Present a Financial plan making a distinction between the costs of services + VAT and the charge required for the coverage of construction costs.

3) Present the electronic version of the Financial Plan.

4) Present a validation of the project’s input from the certifying bank

Other tips by UTFP for better valuation of the bids in concession noticeOther tips by UTFP for better valuation of the bids in concession notice

Concession Notice: UTFP regulatory advices (2)Concession Notice: UTFP regulatory advices (2)

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CONTACTSCONTACTS

UNITAUNITA’’ TECNICA FINANZA di PROGETTO TECNICA FINANZA di PROGETTO

Presidency of the Council of MinistersPresidency of the Council of Ministers

Head Office - Via della Mercede, 9 Head Office - Via della Mercede, 9 –– 00187 Rome, Italy 00187 Rome, Italy

Tel. +39 06 6779 6512 Tel. +39 06 6779 6512 –– Fax. +39 06 6779 6573 Fax. +39 06 6779 6573 –– www.utfp.it www.utfp.it

Massimo RicchiMassimo Ricchi –– Lawyer and member of UTFP Lawyer and member of UTFPTel. +39 06 6779 6520Tel. +39 06 6779 6520Mob. +39 347 225 3268Mob. +39 347 225 3268E-mail: [email protected]: [email protected]