Public-Private Partnership Stories Brazil: Hospital do Subúrbio Photo © Vaner Casaes/AGECOM Brazil’s first public-private partnership (PPP) in health dramatically improved emergency hospital services for one million people in the capital of the state of Bahia, Salvador. Located in one of the most underserved districts, the Hospital do Subúrbio was the first state hospital built in the Salvador metropolitan area in 20 years. The transaction closed on May 28, 2010 and a new 298-bed hospital opened in 2010. A consortium composed by Promedica, a leading Brazilian regional health care company, and Dalkia, a French company specializing in facilities management and non-medical services, won the bid. The concessionaire is responsible for equipping, maintaining and operating both clinical and non-clinical services at the hospital for a term of ten years. Promedica & Dalkia invested $23 million in the first year to equip the hospital, and is expected to invest an additional $9 million over the life of the concession. This series provides an overview of public-private partnership stories in various infrastructure sectors, where IFC was the lead advisor. Since it opened in 2010, the hospital has performed more than IFC Advisory Services in 1.8 million medical procedures, including 680,000 emergency Public-Private Partnerships 2121 Pennsylvania Ave. NW procedures. Washington D.C. 20433 ifc.org/ppp BACKGROUND The 298-bed facility provides traditional emergency care as well Hospital do Subúrbio is located in the metropolitan area of as specialized treatment for trauma, orthopedic and cardiac Salvador, the capital of the state of Bahia in northeast Brazil. The emergencies, and other complex injuries. The hospital is equipped country is characterized by widely diverging income levels across with a surgical center, a clinic, medical laboratories, a physical regions, cities and neighborhoods. Consequently, access and therapy unit, a hemodynamic unit, and a pharmacy. quality of health care is inequitable. Citizens with high income levels have access to private health services, whereas those with BIDDING low incomes must rely on public services which are often poorly The Subúrbio Hospital Project was auctioned at the Bovespa equipped and serviced, as well as overwhelmed with demand. Stock Exchange and was awarded to the Promedica & Dalkia According to the United Nations Development Program, the consortium. The consortium is composed by Promedica, a leading Subúrbio Ferroviario district of Periperi, where the hospital health care company in the Northeast of Brazil, and Dalkia, a is located, ranks much lower than the rest of the city and the French company specializing in facilities management and non- country in the Human Development Index (0.813 for Brazil, 0.79 medical services. This was the first time that a health PPP was bid for Salvador and 0.668 for Periperi). Therefore, the objectives of in a stock exchange. Promedica & Dalkia is expected to invest the government of Bahia for this PPP were to ensure that all its approximately $32 million over the life of the concession. Twenty- population had access to high quality emergency health services three million were invested just in the first year of the concession. while also establishing a new benchmark within the public health system that could be replicated throughout the country. EXPECTED POST-TENDER RESULTS • The transaction was the first health PPP in IFC’S ROLE Brazil and has served as a demonstration model In April 2009, the Government of Bahia engaged IFC to for minimizing health care bottlenecks and improv- implement a PPP for the operation and management of Hospital ing access to medical services in an underserved do Subúrbio, which was already under construction. IFC assisted urban area. the government to set up the PPP, including performing technical studies and feasibility analyses, structuring the transaction, • Since it opened in 2010, the hospital has performed drafting the legal documents, conducting a promotional road more than 1.8 million medical procedures, includ- show and managing the bidding process. The transaction followed ing 680,000 emergency procedures. best market practices and was completed in 14 months. • In the first year of operation, the hospital’s emergency demand surpassed forecasts by more TRANSACTION STRUCTURE than 50 percent. The project was structured as a ten-year concession contract that transferred the hospital’s operation and management—including • The hospital has created 1,200 new positions for clinical and non-clinical services—to the private partner. The doctors, nurses, physiotherapists and other health concessionaire also has the responsibility of equipping and professionals. maintaining the hospital, ensuring that technology standards • Six other Brazilian states are currently developing meet those of the best private hospitals in the country. The PPPs in the sector, including two in non-clinical concession contract may be renewed for an additional 10 years. services. The transaction was structured in such a way that payment to the private partner is linked to key performance indicators • Hospital do Subúrbio was chosen as one of the based on quantitative and qualitative targets, thus creating world’s most innovative projects by KPMG in its incentives for high levels of performance. Thirty-one different “Infrastructure 100: World Cities Edition” report. qualitative performance indicators were established, including the requirement to obtain accreditation for the hospital within 02/2013 24 months from the start of operations. In addition, the contract required regular auditing of all performance indicators by a qualified company, as well as auditing of financial statements in compliance with the highest Brazilian standards. Moreover, a payment mechanism was established to mitigate the government’s credit risk, thus increasing interest by the private sector and the possibility of obtaining financing for the project.