Public-Private Partnership Stories India: Andhra Pradesh Radiology Photo © IWishMyNameWasMarsha/Flickr To help the state government improve access to and availability of advanced diag- nostics services, IFC assisted the government of Andhra Pradesh in structuring a novel public-private partnership (PPP) model for upgrading radiology services at four teach- ing hospitals attached to public medical colleges in Kakinada, Kurnool, Vishakhapat- nam, and Warangal. The project was completed in July 2010 and took only eight months. The project was awarded to the consortium of Wipro GE Healthcare Limited, an inter- national equipment manufacturer, and Medall Healthcare Private Limited, a chain of diagnostic services, after a competitive bid. The winning bidder, selected among three competitive bids, proposed an average price per scan which was nearly 50 percent less than the prevailing market rate, enabling the government to provide services to a larger number of underserved patients within the allocated budget. This series provides an overview of public-private partnership stories in various infrastructure sectors, where IFC was the lead advisor. The advisory work was supported by the Dutch Technical Assistance IFC Advisory Services in Public-Private Partnerships Trust Fund. 2121 Pennsylvania Ave. NW Washington D.C. 20433 ifc.org/ppp BACKGROUND sharing some infrastructure with the existing teaching hospital. In Andhra Pradesh, a state on the southeastern coast of India, access • Requiring the PPP to seek, obtain, and maintain the most recent to advanced diagnostic services is limited as in the rest of the country. quality accreditation in India throughout the contract, which few Few government hospitals outside the metropolitan areas are able to facilities nationwide have obtained. offer specialized services like CT or MRI scans and access to tertiary • Ennumerating key performance criteria in the contract. healthcare and advanced diagnostic services is particularly skewed. In an effort to solve this problem, the state has recently introduced BIDDING an insurance program to cover catastrophic health expenditures for Bidding documents were issued to five prequalified consortia. Three families living below the poverty line, but few public hospitals have competitive bids were received by the government and accepted as enough funds to purchase modern diagnostic equipment, or attract technically responsive. In addition to GE-Medall, bids were also specialists to manage the equipment and administer complex scans. received from two large Indian healthcare service providers—Apollo As a result, public hospital participation in the insurance program Healthcare Enterprises Ltd. and Vijaya Diagnostics Pvt. Ltd. has been disappointing. Evaluations were based on a pass/fail technical evaluation and a In addition, this PPP faced challenges due to the advanced age and financial bid based on a clear formula. poor condition of state-run medical facilities; complex upgrading The project was awarded to the GE-Medall consortium, composed by needs in the imaging and laboratory environments; the difficulties GE, an international equipment manufacturer, and Medall, a chain of negotiating approvals in a multilayered bureaucracy; and the need of diagnostic services. The consortium proposed an average price per for speedy completion of the project, tied in part to the local political scan at nearly 50 percent lower than the prevailing market rate, thus situation. To address these issues, IFC advisors worked closely with enabling the government to provide services to a larger number of local officials to create an innovative model that would allow other underserved patients within the allocated budget. states to implement similar partnerships for healthcare services. EXPECTED POST-TENDER RESULTS IFC’S ROLE • Diagnostic radiology services will be provided to The Andhra Pradesh Hospitals project leveraged IFC’s expertise in an estimated 100,000 patients per year throughout crafting novel PPP transaction structures that maximize development the four public hospitals, about 85 percent of whom impact and an equitable allocation of risks and rewards between the live below the poverty line. public and private sectors. IFC’s role included: • Advanced radiology services will be made available to underprivileged people at no additional cost via • Development of a PPP model that fused together private sector expertise and met public policy objectives. placement of diagnostic equipment at local hospitals. • Fast implementation of the transaction through establishment of a • Certified facilities will allow medical colleges to government steering committee to fast-track key public decisions. train doctors with state-of-the-art technology and techniques, helping to solve the specialist shortage • Formulation of a strategic framework for the state to provide in the state. direction for development of a robust institutional and regulatory framework and identify priorities for future PPPs. • It is expected that the framework for this partner- • Consistent focus during instances of civic unrest and major ship will influence the design of future public-private partnerships in the health sector in Andhra Pradesh political setbacks. and India as a whole. TRANSACTION STRUCTURE • The medical colleges will be better positioned to Key features of the transaction structure include: improve their use of public tertiary care health insurance and thus be able to attract additional • Responsibility of the private partner for building facilities, revenues that will help to improve infrastructure staffing, and providing services to all patients referred by doctors and retain skilled doctors. from the hospital. Though no volume guarantees were given, the public hospitals are under an obligation to refer all diagnostic test- • The winning bid proposed a price per scan of ing exclusively to the PPP facility. nearly INR 1700, about 50 percent lower than the prevailing market rate. • Providing the PPP with the opportunity to leverage unutilized capacity for services to private patients (fees-at-service) though • The concession will generate about $ 6 million in priority to public referral patients is a must during certain time- Investments throughout the seven year contract. frames. No tariff distinction is allowed between private and public patients. 02/2011 • Enabling public medical students to be trained on state-of-the-art equipment through co-location with an existing teaching hospital. • Giving the PPP the onus and authority for retaining qualified staff to both manage the equipment and conduct diagnostics while