The Philippine health sector is set to grow through a number of public-private partnerships

Though health care sector spending is on the rise in the Philippines, years of underinvestment have resulted in a deficit in both available facilities and services. Although improvements are being made – in 2014 the Philippine government spending on health care reached the 5% of GDP recommended by the WHO – to reach the levels of care planned for the universal health care system by 2016, integrating of the private sector is necessary. Health care provision is an important issue in the Philippines, but there has traditionally been trepidation about involving the private sector in what is viewed as a state responsibility. Such caution, which was often due to a lack of understanding regarding the distinction between public-private partnerships (PPPs) and privatisation, is one reason for the lack of investment in the sector. However, attitudes have begun to change as PPPs materialised in areas like transport infrastructure.

PPP BUILDUP: This momentum is now being built upon by the International Specialist Centre of Excellence on PPPs, which is focused on PPP implementation in several sectors. The centre was established by the Ministry of Health in Manila in 2012, under the auspices of the UN Economic Commission for Europe’s International PPP Centre of Excellence, which is also assisting with the drafting process. Several PPPs have been proposed for the health sector that satisfy the demands of the universal health care system, and the centre is also in the process of completing a guide on best practices for PPPs in health.

The administration of the President Benigno Aquino III and the Department of Health (DoH) have designated a particular focus on the modernisation and upgrading of hospitals, cancer centres, orthopaedics, dialysis as well as primary health care clinics. Providing an adequate number of hospital beds has been an enduring challenge in the Philippines, currently at 1.15 per 1000 people, according to World Bank data, while its lowest value reached 0.5 in 2002. However, as the role of the private sector continues to expand alongside the evolution of Philippine Health Insurance Corporation (PhilHealth) and accommodating government legislation, initiatives to incorporate “soft” infrastructure projects – in addition to the “hard” infrastructure projects under way – are also being considered. A combination of both under a well implemented and monitored PPP mechanism would allow the Philippines to keep pace with its neighbours.

CURRENT PROJECTS: The headline PPP within the health care sector thus far has been the P5.7bn ($128.3m) modernisation project for the Philippine Orthopaedic Centre, which began in mid-2013. The Megaworld-World Citi consortium, a joint venture between Megawide Construction and World Citi, was the sole bidder of the project that involves the construction of a 700-bed-capacity, super-specialty, tertiary orthopaedic hospital that will be located within the National Kidney and Transplant Institute Compound in Quezon City. It will replace the 68-year-old Philippine Orthopaedic Hospital that is currently located in Quezon City. Only 300 out of the 700 beds of the hospital are usable because of its current poor condition. Megawide’s partner, World Citi, operates the 276-bed World Citi Medical Centre.

In terms of financing, Megawide Construction entered into a P2.9bn ($65.3m) omnibus loan and security agreement with Land Bank of the Philippines, Land Bank of the Philippines-Trust Banking Group and Development Bank of the Philippines in October 2014. The consortium can finance up to 70% of the project cost through borrowings and the remaining 30% through equity. Under the build-operate-transfer arrangement with the DoH, the consortium will design, build, finance, operate and maintain the facility for 25 years. At the end of the 25-year concession period, the hospital will be returned to the DoH. During the 25-year programme, there will still be free services for the poor even as the modernised hospital makes its money from other patients to achieve a return on their investment. So far, Megawide has won four out of the eight awarded PPP projects of the Aquino administration, including the P17.5bn ($393.8m) Mactan-Cebu International Airport project.

Apart from the Philippine Orthopedic Centre, additional health projects that have been awarded include the modernisation of the following facilities: Bicol Medical Centre, Cagayan Valley Medical Centre and Cotabato Regional Medical Centre; as well as the construction of a vaccine production facility at the Research Institute for Tropical Medicine and the development of three regional cancer centres.

With the modernisation of Philippines’ hospitals being a flagship programme of the Aquino administration, in January 2015 the DoH confirmed its intentions to modernise at least 20 hospitals at a cost of approximately $20bn over the course of the next decade. Furthermore, the provision of additional hospital services is also being entertained, such as the construction of adjacent car parks via PPP.

PROJECTS: Apart from the focus on hospitals, the potential for PPPs elsewhere sector has also begun to be recognised. In 2014 former health secretary Dr Enrique Ona said, “All of our DoH hospitals are candidates for PPPs, but we have a lot of options for how to do this. For example, we can subject the PPP to major equipment, such as computed tomography scans, magnetic resonance imaging and even our oncology centres.” With regard to softer PPP projects, Dr Juan Nañagas, medical director of the Asian Eye Centre in Manila, told OBG, “While previously there has been quite a one-sided view towards the benefits of hard infrastructure projects, the government is now exploring new ways to fill gaps in service delivery via the private sector.” Health care providers are accustomed to enlisting the help of private sector players in fulfilling equipment needs, an area that could be developed further in light of government plans for comprehensive hospital modernisation over the next decade.

Many more opportunities for health PPPs are also resulting from the evolution of universal health care coverage and the increasing acceptance of generic drugs, demand for improved warehousing and distribution capacity for drugs being one poignant example. With a limited number of government distribution centres failing to accommodate demand, a method known as “telemedicine” is currently being rolled out which allows for treatment to be delivered to remote areas of the archipelago where access is limited.

In November 2014, the DoH in Region 4B, or Mimaropa, launched the first interactive telemedicine system in the country at the newly inaugurated Dr Damian J Reyes Provincial Hospital in Boac, Marinduque. The system provides medical consultation and diagnostics through video calls. The telemedicine project is a PPP programme of DoH-Mimaropa. The DoH-Mimaropa provided P10m ($225,000) for the installation of satellite equipment to support the programme and three hospitals will be linked by the telemedicine system: Santa Cruz District Hospital, Torijos Municipal Hospital and the Dr Damian J Reyes Provincial Hospital, which will be the hub.

Finally, disaster management and emergency services, such as the provision of vaccinations, are another area where PPPs are being considered by the government. Following Typhoon Haiyan in November 2013, the private sector became involved in contributing to the rehabilitation efforts, many of them coordinated under Manila’s cross-sector business associations such as the Philippine Disaster Recovery Foundation, League of Corporate Foundations and various foreign chambers of commerce, among others. This infrastructure has been vital to connect the Philippine government and international organisations with private sector companies, both local and international. One example under way via the Specialist Centre for Health PPPs is entitled “Last Building Standing”. Citizens in regions hit by natural disasters citizens can be rescued by teams of doctors housed in a solar-powered multitasked building, operating as both a hospital and command centre.

PPPS: Aside from promising hard infrastructure projects, which look to significantly aid the development of Filipino hospitals and health facilities, it is arguably the provision of medical services through a PPP model that looks most promising. While the current long-term structure of PPPs is undoubtedly more suited to hard infrastructure projects, a better model for the linking of health services has yet to be fully developed. Promising work is being undertaken by the International Specialist Centre of Excellence on PPPs, and domestic experts have suggested that the government should further examine the concept of public-private investment partnerships (PPIPs). PPIPs are of a medium term – at least 10 years – and deliver integrated services, among others. However, since a proper framework for PPIPs must first be developed, adequate monitoring and competition would allow them to thrive in the hands of local government units. Overall, it would appear that the government and DoH are making constructive efforts to involve the private sector, which is increasingly committed to PPP efforts.

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The Report: The Philippines 2015

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