Pilot PPP projects in healthcare in Kazakhstan · Pilot PPP projects in healthcare in Kazakhstan. ... Organisational and legal structure ... •Laundry services

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Pilot PPP projects in healthcare in Kazakhstan

Construction and operationof general hospital with capacity of 300 beds

at “Kazakh National Medical University after S. D. Asfendiyarov” in Almaty

Project Team

PPP AC

MH&SD RK

KPMG AJZ Engineering

Mandated as a legal entity for advisory support of

national and regional concession projects by the

decree of the Government of the Republic of

Kazakhstan on 30 April 2014 №248.

The mission

to support the development of infrastructure in the

Republic of Kazakhstan by providing advisory

services on preparation and implementation of

infrastructure projects including PPP projects.

PPP Advisory Center

Concept of the project

Name of the concession

project

Construction and operation of a multi-disciplinary hospital at Kazakh National Medical

University named after SD Asfendiyarov RSE in Almaty

Project Grantor Ministry of Healthcare and Social Development of the Republic of Kazakhstan

Concession Type Design – Finance – Build– Maintenance – Operate (DFBMO)

Срок концессии 20 years

CAPEX in constant

prices (est.)

USD 100,7 mln. (30 882,8 bln. tenge in prices of 1 кв .2015 г.)

Objectives of the

project

• Applying new technologies to improve quality of medical services to the population

of the Republic of Kazakhstan

• Providing base for clinical training of students and retraining of doctors of KazNMU

involving on the latest achievements of medical science

• Creating a base for scientific and clinical research in cooperation with foreign

scientific communities

Uralsk

Atyrau

Aktobinsk

Kostanay

Pavlodar

Karaganda

Aktau

Astana

Almaty

Ust-Kamenogorsk

Semipalatinsk

TarazKyzylorda

Shymkent

Taldykorgan

• The object is to be located in the Nauryzbayskiy district of Almaty

• The object consists of a 300-bed hospital and clinics that can handle 300 visits per day

Concession object

N

S

Almaty

Distance from city

centre: 12 km

Location of object of concession

Strengths of the project

• The project is in line with the Strategic Plan of development of healthcare ofKazakhstan up to 2020 and Perspective plan of the network of health careorganizations of Almaty city for 2015-2025.

Strategic importance for Government

• In 2010 - 2014, the population of the city increased by 16.19%, while the realincome of the population grew by 26%*

Economic advantages of Almaty

• Kazakh National Medical University benefits from 1454 lecturers, including4 academicians, 172 doctors of science, 475 candidates of science.

• More than 1,600 medical professionals are graduated from KazNMU annually

• Ministry envisages high level of medical equipment of the university hospital

Strong resource base

Trends in the development of Almaty

• The role of the private health sector is increasing inAlmaty

In 2009 to 2013 number of private outpatientorganizations and doctors' offices in Almaty almostdoubled from 168 to 293.

• competition among private and public organizationsis expected to increase due to introduction of theinsurance system

This demonstrates the need for quality services and theconfidence of patients in the planned hospital.

ACCORDING TO THE MARKETING STUDY OF

MEDICAL SERVICES IN ALMATY OPTIMAL

CAPACITY OF THE UNIVERSITY HOSPITAL IS

300 BEDS

1 413,501 449,80 1 475,40

1 507,50

1 642,30

2010 2011 2012 2013 2014

Population, thous. people

10,009,70

10,80 11,10

11,70

2010 2011 2012 2013 2014

Rate of natural increase,%

71,0071,70

72,8073,70

74,10

2010 2011 2012 2013 2014

Life expectancy at birth, years

Structure of profiles and beds

Profile Quantity

Therapeutic 40

Cardiological 30

Neurologic 30

Endocrinological 30

Rheumatological 25

Ophthalmological 20

Traumatologic 30

Surgery 30

Interventional cardiology 15

Gynaecological 20

Rehabilitation of adults 30

TOTAL 300

Out-Patient Daily Department’s Services

Ophthalmologic Treatment

Otolaryngological Treatment

Proctologic Treatment

Gynecological Treatment

Therapy

Surgery

Consultations of doctors - 300 visits per day

Therapist

Gasteroenterolog

Pulmonologist

Nephrologist

Rheumatologist

Ophthalmologist

Otolaryngologist

Traumatologist

Surgeon

Cardiologist

Neurologist

Endocrinologis

t

Gynecologist

Urologist

Proctologist

Types of Support Services

Types of Support Services

Operating rooms, beds in intensive carebeds, in the recovery room

Diagnostics Center

• Functional diagnostics and ultrasound: EKG, EEG, Doppler blood vessels

• Radiological diagnosis: CT, MRI, X-ray diagnostics, mammography

• Endoscopy

Center for Laboratory Medicine

The spectrum of research:

1. Immunological

2. Biochemical

3. Hemostasis

4. Hematology

5. Cytological

6. General hospital

7. Immunology

8. PCR analysis

9. Immunoassay

Schedule of pre-investment stage

Development of the concession proposal

Development of tender documentation and draft concession agreement

Competition for the selection of the concessionaire

2015 2016

Kickoff Commercial

close

Announcement of

Tender

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb

Pre-qualification

BAFO*

* BAFO – Best and Final Offer

Due Diligence

2017

Financial Studies

Technical Studies

Marketing Studies

Legal Studies

Social Studies

Risks Studies

KPMG

10

Schedule of pre-investment stage

Pre-qualification

Initial discussion

Receipt of applications

to confirm compliance

with the qualification

requirements

Participants who have

passed the qualification

are invited to

competition

Submission of

applicationsAnnouncement of BAFO

2 months 2,5 months3 week 6 months 2 months

Estimation of conformity

of criteria

Competitive dialogue

The development of

competitive application,

including a feasibility

study

Choosing of BAFO

Negotiations with the

participant whose bid as

the best

Announcement of the

winner and the signing

of the contract

Preliminary project concept

Construction of flagship hospital and clinics on a

concession basis

• An investor is invited to build the object, supply

equipment, and provide technical maintenance

• The preliminary contract duration is 20 years

• Medical services in the hospital are to be provided by a

state operator (on basis of KazNMU)

Legal aspects

• The project is carried out in accordance with the

Kazakhstan Law “On Concessions”

• The concessionaire is to design, build and operate a 300-

bed hospital and clinics with a capacity for 300 visits per

day (concession object)

• The Kazakhstan Ministry of Health and Social

Development (MHSD) acts as a grantor

• 2-stage tender procedure: prequalification and bidding

process

• Upon the start of operation the object is transferred to the

state. The concessionaire obtains rights of use and

ownership until the end of concession period

• At the end of concession period the concessionaire shall

return the object to the grantor in an appropriate condition

• The grantor shall provide a land plot for construction and

shall pay an availability payment

Typical pack of other project agreements

• Financing agreement with shareholders

• Agreement with shareholders for the provision

of subordinated debt

• Senior loan agreement

• Direct agreement

• EPC-contract

• Operation services contract

Organisational and legal structure

Concessionaire

Kazakhstan Ministry of Health

and Social Development

(grantor)

Insurance companies

Department of the committee

for the payment of medical

services

Medical operator

transfer to operational

control

Partner university clinics

Patients

Rights of use and

ownership

Hospital and clinics

(concession object)

Interaction

agreement №1

Concession

agreement

Interaction

agreement №2

The hospital is transferred to operational control

Medical services

agreement

Voluntary health

insurance agreement

GVFMS*

Agreement

Notes: * GVFMS – Guaranteed Volume of Free Medical Services

Payment mechanism (1/2)

Compensation for investment costs Concession management fee

Compensation for senior debt service costs

• Repayment of the principal

• Interest payments during construction

• Bank fees during construction

• Security bonds bank guarantees

Compensation of concession object management costs to

shareholders

• Repayment of the subordinated debt principal

• Interest payments on subordinated debt

• Shareholder’s return on investment in the form of dividends

• Interest payments during operation

• Bank fees during during operation stage

Availability payment

• Supply and maintenance of medical equipment:

• The maintenance of medical equipment (till the 1st

upgrade)

• Utility services:

• The maintenance of electricity, water, heat, lighting, air

conditioning, IT systems

• General cleaning services, sanitation

• The cleaning of nearby areas

• Waste disposal, medical waste disposal

Compensation of operational costs

• Maintenance services:

• Maintenance of the building, technical equipment, elevators

• Maintenance of the medical gas supply system

• Other services:

• Communication services (including the internet)

• Security services

• Disinfection

• Catering services for patients

• Laundry services

• Free car parking

Payment mechanism (2/2)

Revenue from additional services

• Additional paid catering services

• Pharmacy sales

• Waste disposal services for other clinics

(B- and C-class waste)

Additional revenue of the concessionaire (not covered by the availability payment)

Preliminary cash flows. Construction stage

Concessionaire

General contractorKazakhstan state

budget

Payment for

construction

works

Taxes

Taxes

Insurance companies

Insurance costs

Financing

institution (Bank 1)

Senior long-term debtShareholders

(Sponsors)

Shareholder’s capital

Subordinated debt

Financing institution

(Bank 2)

Security bond fees

Interest payments / fees

under senior long-term debt

Subordinated lender

Preliminary cash flows. Operational stage

Patients

Department of the

committee for the

payment of medical

services

Payment of GVFMS* tariff

Payments from Voluntary

Medical Insurance

Revenue from paid medical services

Taxes

Access fees

Shareholders

(Sponsors)

Subordinated lender

Financing institution

(Bank 1)Principal and interest

repayments on

subordinated debt

Dividends, repayment of share capital

Fees, principal and interest repayments on

senior long term debt

Taxes

Financing institution

(Bank 2)

Security bond fees

Insurance

costs

GrantorKazakhstan

state budget

Insurance companies

Medical operator

Concessionaire

Partner university

clinics Payment under partner

agreement

Notes: * GVFMS – Guaranteed

Volume of Free Medical Services

General PPP project structure. Key project agreements

Private

partnerLenders

Shareholders

Construction

contractorOperation contractor

Public

partner

Loan

agreement

Direct

agreement

Concession

agreement

Agreement with

shareholders

Service

contract

EPC-

contract

Loan agreement

• The main document between the lenders and the private

partner contains the project funding terms: the list and

terms of all loan facilities under the project, requirements

for drawdown and repayment, security, debt covenants, and

early repayment terms, including early termination of the

concession agreement

Direct agreement

• Three-way agreement between the public partner, private

partner and the lenders under which the public partner

agrees to give the lenders a period of advance notice of the

impending termination of the project arrangement

• This agreement also gives the lenders the opportunity to

step in, either directly or through a nominee or

representative, to remedy the termination event or to

find another party who will be acceptable from the point

of view of taking over the rights and obligations of the

private partner under the concession agreement

Construction and operation of outpatient hospital for 500 visits per shift in Kyzylorda city

Moscow, November 3rd, 2015

ATTRACTIVENESS OF THE PROJECT

Stable partner from government side represented by Akimat of Kyzylorda region

Reimbursement of investment expenses

Management fee

Stable demand for medical services in the new, developing residential area

RESULT OF THE PROJECT

Outpatient hospital for 500 visits per shift in “beyond the line parT” of the city Kyzylorda,

residential area “Al-Farabi”.

Access to medical services of primary medical care for the population of “beyond the line part”

of the city.

PROJECT OBJECTIVE

Providing quality and available medical services of primary medical care of the population

Kyzylorda and Kyzylorda region.

Construction and operation of outpatient hospital

for 500 visits per shift in Kyzylorda city

2

Grantor Akimat of Kyzylorda region

Operating statements 500 visits per shift, 2 shifts per day

Location Kyzylorda city, residential area Al-Phatabi, Alshynbayeva-Ashirbayeva str.

Concession period Up to 18 years

Investment volume (estimate) ~3 billion tenge (10,8 mln.USD)

Sources of reimbursement expenses and

income provision of the concessionaire

Reimbursement of investment expenses of the concessionaire

Management fee

Income from medical and non-medical services

Type of concession BTO («Design - Finance - Build - Transfer - Operate»)

Estimated type of Tender Tender at the selection of the concessionaire without using the two-stage procedures

Tender announcement July, 2016

Construction of object will be carried out according to design estimate documentation of outpatient hospital for

500 visits per shift in Kyzylorda city, developed by the order of Akimat of Kyzylorda region

Construction and operation of outpatient hospital for 500

visits per shift in Kyzylorda city

3

Selected land parcel for construction

City outpatient hospital

№5 - 32 813 people

attached

City outpatient hospital

№2 - 35 134 people

attached

COH - City outpatient hospital

Concession object location

Residential are Al-Pharabi

(population 6 865 people)

“beyond the line part” of the

city часть города (population

31 853 people)

The private sector dominates.

4

Concession object

COH №5COH №2

Public outpatient organizations in the city

6 outpatient hospitals, with two of them (outpatient hospitals №2 and №5) located in “beyond the railway part” of the city

8 medical ambulances, 9 medical centers, 1 rural health post

Diagnostic center of Kyzylorda region

Public hospital organizations, rendering similar ambulance services

State hospital, children hospital, branch outpatient hospital «Railway hospital of medicine of accidents» JSC, Kyzylorda railway

hospital, Regional medical center

Private organizations

18 private medical organizations:

‐ ambulance services (physiotherapeutic procedures, treatment sessions on east and Chinese medicine and etc.), consulting services,

laboratory services

‐ some of them have stationary beds, a day patient facilities

‐ none of those located in the region of planned outpatient hospital

Overview of medical organizations

in Kyzylorda city

5

6

The new outpatient hospital is planned as replacement of the existing city outpatient hospital №2

Planned number of attached people - 35 000 people

Creation of the new state medical organizations in "beyond the railway part " of the city is not expected in the next 10 years

The forecast number of the attached population:

1st year: 35 000 people, 2nd year: 35 700 people, 3rd year: 36 414 people, 4th year: 37 142 people, 5th year: 37 885 people

The predicted growth rate of the attached population to outpatient hospital is 2%*

Estimation based on Healthcare department’s data taking into account growth rate of the population "beyond the railway" part of the city and dynamics of number of the

attached population of the operating outpatient hospitals.

Demand factors for medical services in “beyond the railway part” of the city

CONCLUSION

THE DEMAND ON NEW OUTPATIENT HOSPITAL FOR 500 VISITS PER SHIFT IN NORTH-WEST SIDE OF THE CITY

Public outpatient hospital №5 and public outpatient hospital №2 are located in “beyond the railway” part of the city.

City outpatient hospital №2,

500 visits per shift35 134 people are attached

Located in the building, which is not standard and

run-down (made from clay-straw material in 1957)

City outpatient hospital №5,

650 visits per shift32 813 people are attached Served population who are not living in the majority in " beyond the line part " of the city

Institutional scheme

The scheme of interaction of the parties during the post-investment period

INCOME OF THE CONCESSIONAIRE

financing and creating the object of concession

rendering medical services and non- medical services

maintenance of concession object, including routine

maintenance and overhaul repairs of concession object

ensuring security and safety of concession object, observance

of standards of fire safety, management of medical waste and

chemical means (including utilization)

FUNCTIONS OF THE CONCESSIONAIRE

reimbursement of investment expenses of the

concessionaire

Management fee

Income from medical and non-medical services

FUNCTIONS OF THE GRANTOR

post-investment period

transfer rights to possess and use concession object for

the term of concession to the concessionaire

payments of reimbursement of investment expenses and

management fee

project monitoring and control the quality of services

provided under the concession agreement.

Вuild – Тransfer - Operate

RIE – Reimbursement of investment expenses

GVFMC – volume of medical care, guaranteed to citizens of Kazakhstan by State.

GRANTOR (AKIMAT)

Concession agreement

Founder Creditor

Patients

Committee of

medical services

payment

Insurance

companies

Paym

ent fo

r

GV

FM

C

Paid

serv

ices

Concessionaire

Insura

nce

paym

ents

RIE,

Management fee

Financing

7

Primary health care services

Therapist, pediatrician, general practitioner, obstetrician-gynaecologist, psychologist, case worker, midwife

Consulting at specialist doctors

surgeon, ENT specialist, cardologist, rheumatologist, neuropathologist, infection disease doctor, endocrinologist,

ophthalmologist, traumatologist, otolaryngologist, traumatologist-orthopedist

Laboratory diagnosis

‐ All-clinical trials;

‐ Hematologic researches;

‐ Biochemical researches;

‐ Immunological researches;

‐ Serological researches;

‐ Histopathology and cytology

Instrumental diagnosis

‐ Functional diagnostics: Electrocardiography (electrocardiogram), Elektroentsephalografphy (EEG), Ultrasonic

diagnostics (ultrasonography);

‐ Radio diagnosis: X-ray diagnostics, mammography

Procedures and manipulations

Physioprocedures

Day patient facility (10 beds)

Outpatient hospital services

8

Development of Concession proposal

Development of Tender documentation and draft of Concession agreement

Tender procedures

2015 2016

Kick off

Commercial Close

Tender

announcement

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar

Introduction of

CO

DBAFO

Due diligence and

coordination

2017

Financial studies

Technical studies

Marketing studies

Legal studies

Social studies

Risks studies

Selection of

the private partnerNegotiations

Project planning timeline

9

Clarification of Tender

conditions

Introduction of Tender

offers

Potential concessionaires

receive the admission to

participation in Tender

Announcement of the

winner and signing the

contract

2 month2 month10 days

Estimation of pre-

qualification

requirements

Negotiations with

participants , whose

offer defined the Best

Beginning of

construction

Choosing Best Concession Offer

2 month

Announcement of the

best Concession offer

As part of the tender documentation participants will be given a concession proposal and design and

estimate documentation.

The Potential concessionaires can also participate in competition with their own land plot.

Financing close and

organizational works

of concessionaires

6 month

Tender procedures timeline

10

Construction and operationof general hospital with capacity of 300 beds

at Karaganda State Medical University in Karaganda city

Object locationKaraganda city, Republic of

Kazakhstan

Concession schemeBuild -Operate – Transfer (BOT) or

Build -Transfer – Operate (BTO)

Estimated activities of the

Concessionaire within the concession

project

financing,

construction and equipment,

medical activities,

renovation of the equipment

Multidisciplinary Hospital with 300 beds at Karaganda State Medical

University in Karaganda city

Ministry of

healthcare and

social

development

of RK

(Grantor)

Committee of

the state

property and

privatization of

RK

(Committee)

Concessionaire

Financing

institution

(Bank)

Shareholders

(Sponsors)

Concession agreement

Repayment of a

body and percent

on the senior debt

Reimbursement of own

capital

Transfer of rights of

possession and use of

Concession object KarSMU

Cooperation agreement

Students

Teaching staff

GVFMS Private VMI

Reimbursement of investment expenses

Payment for medical services

Payment for clinical site

Road-map of PPP in healthcare in Republic of Kazakhstan

Program of development of PPP in RK for 2011-2015 provides for creation of social infrastructure by PPP. In sectoral

strategic documents, such as Healthcare development program in RK for 2016-2020, Strategic plan of MHSD RK for

2015-2018.

Standard of a state policy on PPP in healthcare of the United Nations Economic Commission for Europe (UNECE)

recommends development and adoption of the detailed program document - the Road map on introduction of PPP in

health care (PPP Delivery Plan).

Detailed and realistic plan of action and pool of selected projects at the national level can become a major factor of

attraction of private and domestic investments into healthcare.

Formation of an effective Road map includes a number of extensive analytical works which are at the moment not

carried out and aren't begun.

The action plan of public-private partnership in healthcare in the Republic of Kazakhstan

Road map of PPP in healthcare in the Republic of Kazakhstan will be developed

Basic templates in part to monitoring of concession projects, the interface of the agreement between the concessionaire and medical operator, systems of penalties and deduction within contracts PPP, systems of indicators to which there have to correspond services of the concessionaire

Base template of service contracts and contracts of transfer to trust management, providing conditions under which efficiency for the state party is reached

Pool of bankable projects

On all chosen projects – the payment mechanism

Economy of funds for stages of development of the PPP projects

Improvement of quality of development, increased chance of successful tender

Promotion of the pool of PPP projects to the market, market sounding events

The action plan of public-private partnership in healthcare in the Republic of Kazakhstan

Thank you for your attention!

PPP Advisory Center, LLC

010000 Republic of Kazakhstan, Astana, st.

Dostyk, 18, a business center “Moscow”, 16 Floor

Telephone: +7 (7172) 79-04-50