Effective use of Public private Partnerships will transform healthcare in Nigeria

Government has adopted Public — Private Partnerships (PPP) as a vehicle for national infrastructure development, seeing this strategy as a means of enhancing service delivery without having to bear the burden of sourcing the financial and technical resources required. There is an increasing number of PPPs in operation and many more under consideration, particularly in the oil and gas, transportation, and construction sectors.

The critics of this strategy point to prior inconsistencies in policy creation and implementation which, they maintain, deters long term institutional investors as well as the opacity of some agreements which may not be in the overall interests of the people.

These issues, critics claim, are even more pronounced in the healthcare sector which faces challenges in terms of complexity of service delivery, brain drain, and access to finance. Proponents of PPP, however, insist that the current challenges facing the healthcare industry in Nigeria (and in all countries with a deficit in service delivery) can best be met by promoting PPP as a means of driving convergence between the public and private sectors for the public good. This approach, backed by appropriate policy guidelines, will lead to standardisation of service delivery and ultimately lower healthcare costs.

PPPs allow access to the substantial financial, technical and management resources of the private sector, ensuring a transfer of skills and increased efficiency. In addition, project related risk is usually borne by the private sector operator. These tangible benefits greatly outweigh any apparent drawbacks to the adoption of PPP as a means of enhancing service delivery. PPPs can be established in a variety of ways: service contracts, management contract , lease contracts or concessions (Build Operate Transfer (BOT) or Build Own Operate (BOO)) are some of the more common arrangements. Private finance initiatives (PFI) will normally involve a concession contract to plan, finance, build and sometimes manage large hospitals, PFIs are increasingly common in the NHS of the UK. The extreme form of PPP is outright divestment by the government with the sale and transfer of ownership as well as the commercial risk to the private partner.

The realisation of the objectives for setting up PPPs will require that a clear and overarching policy framework be created and rigorously implemented. Service objectives must be clearly defined, and specific, referenceable standards must be applied to guide the delivery of these outcomes. The business model adopted by a PPP must be constructed to achieve mutuality for both the private vendor and the hospital, Furthermore, the vendor must be allowed to recoup the cost of capital as a priority in the arrangements. A reasonable sharing formula should be clearly defined, and the financial reporting system of the hospital must be sophisticated enough to track the realisation of all the financial goals. The service goals as clearly defined must also be tracked to ensure there is a service advantage as well as a financial advantage to the hospital. The pricing of the service must focus on the fact that a public hospital is a social service and not a profit-making arrangement so that the community can continue to be served. Regular scheduled meetings between management of all parties to iron out any kinks and resolve differences are an essential component of a managing a PPP relationship.

There are several key issues to consider before signing up to a PPP, the most obvious is establishing the rational for the partnership. In most cases the need for a PPP arises when the State, unsupported, is unable to deliver on its service mandate. The contractual risks, implementation risks, service risks and the financial risks must be identified and allocated accordingly within the contract of engagment.

Identifying the relevant signatories to a PPP agreement may involve multisectoral involvement with representatives of the Ministry of Health, for example, liaising with their counterparts from the ministries of works, water resources, environment, and justice in a turnkey project. The key issue is that the signatory and accountability must be local to the hospital where the service is being provided to allow for effective monitoring.

PPPs have played a major role in the development of healthcare in most countries in the world. PFIs are a big part of the National Health service strategy in the United Kingdom. Most hospitals in South Africa outsource such services as laboratory, radiology, and catering to name a few. Romania outsources outpatient dialysis services to the private sector and there are many examples of Build, Own and Operate hospital development contracts in Germany.

The healthcare value chain is a complex system and the shortage of skilled and experienced resources to effectively deliver the needs of large hospital in Nigeria coupled with the tremendous development in the private sector in Nigeria opens the door to significant opportunities for healthcare development. There is a need for a focused approach in developing a blueprint to ensure effective assessment and allocation of the contracting, financial, management and service risks to drive effective realisation of the objectives of the relationship. Public hospitals should consider deconstructing their value chain to get a sense of the services to outsource to ensure the intergrity of delivery to the community and the development of healthcare.




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Richardson Ajayi

Richardson Ajayi

“On the shoulders of giants we stand” transform yourself, transform others, transform society.

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