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PPPs in the healthcare sector – making operational frameworks the focus

Tuesday 25 October 2016

Public Private Partnerships (PPPs) in the healthcare sector are once more on the agenda with the NSW Government announcing in mid-September that it is looking to partner with established non-government hospital operators to deliver redevelopments of the hospitals at Maitland, Wyong and Shellharbour as well as to support the delivery of services into the newly redeveloped Bowral Hospital.

While waiting for the outcomes of the NSW Government’s EOI process, it is timely to reflect on why PPPs are well suited to major projects in the healthcare sector. They require less upfront spending commitment by governments allowing these savings to be reinvested back into the health services which are to be provided and effect the transfer of project risk to the private sector. They also bring market efficiencies to construction and design which can give rise to some interesting results (like purple-tinted façades at Victoria’s new Comprehensive Cancer Centre and meerkat enclosures at the Royal Children’s Hospital in Melbourne).

However, an important measure of the success of a PPP in the healthcare sector, and one that can sometimes be downplayed in the planning stages as the parties focus on the detail of the development and financing of the project itself, is the quality of the operational and other ancillary services which are to be delivered over the life of the project. These services include importantly clinical care services in the broadest sense and also cleaning, catering, security and waste management services.

In announcing its new proposed PPPs, the NSW Government has recognised the importance of each new project providing quality health care delivered by experienced operators as part of a sustainable health system rather than traditional asset focussed PPPs. This will mean that a critical element of the contracting process with each successful project partner will involve putting in place clear, robust and outcomes-based frameworks for the reliable and efficient delivery of those operational services. The approach reflects the learnings of the NSW Government from earlier experiences in partnering with private providers of clinical and non-clinical services.

These frameworks can take a number of forms such as a set of carefully and clearly delineated KPIs and an assessment procedure for reporting and recording the contractor’s performance against those KPIs. All KPIs should be flexible and robust enough to accommodate any operational changes which may be required during the term of the PPP.

As demands for quality, efficiency and value for taxpayers drive the delivery of health services by governments around Australia, PPPs will continue to play an important role in this delivery.

Authors:   
KATHRYN SUTHERLAND 1CM COLOUR JPG 2013 Kathryn Sutherland
Lawyer
61 3 9258 3692
kathryn.sutherland@maddocks.com.au
Ilana Brooks
Senior Associate
61 2 9291 6118
ilana.brooks@maddocks.com.au

Tuesday 25 October 2016

Public Private Partnerships (PPPs) in the healthcare sector are once more on the agenda with the NSW Government announcing in mid-September that it is looking to partner with established non-government hospital operators to deliver redevelopments of the hospitals at Maitland, Wyong and Shellharbour as well as to support the delivery of services into the newly redeveloped Bowral Hospital.

While waiting for the outcomes of the NSW Government’s EOI process, it is timely to reflect on why PPPs are well suited to major projects in the healthcare sector. They require less upfront spending commitment by governments allowing these savings to be reinvested back into the health services which are to be provided and effect the transfer of project risk to the private sector. They also bring market efficiencies to construction and design which can give rise to some interesting results (like purple-tinted façades at Victoria’s new Comprehensive Cancer Centre and meerkat enclosures at the Royal Children’s Hospital in Melbourne).

However, an important measure of the success of a PPP in the healthcare sector, and one that can sometimes be downplayed in the planning stages as the parties focus on the detail of the development and financing of the project itself, is the quality of the operational and other ancillary services which are to be delivered over the life of the project. These services include importantly clinical care services in the broadest sense and also cleaning, catering, security and waste management services.

In announcing its new proposed PPPs, the NSW Government has recognised the importance of each new project providing quality health care delivered by experienced operators as part of a sustainable health system rather than traditional asset focussed PPPs. This will mean that a critical element of the contracting process with each successful project partner will involve putting in place clear, robust and outcomes-based frameworks for the reliable and efficient delivery of those operational services. The approach reflects the learnings of the NSW Government from earlier experiences in partnering with private providers of clinical and non-clinical services.

These frameworks can take a number of forms such as a set of carefully and clearly delineated KPIs and an assessment procedure for reporting and recording the contractor’s performance against those KPIs. All KPIs should be flexible and robust enough to accommodate any operational changes which may be required during the term of the PPP.

As demands for quality, efficiency and value for taxpayers drive the delivery of health services by governments around Australia, PPPs will continue to play an important role in this delivery.

Authors:   
KATHRYN SUTHERLAND 1CM COLOUR JPG 2013 Kathryn Sutherland
Lawyer
61 3 9258 3692
kathryn.sutherland@maddocks.com.au
Ilana Brooks
Senior Associate
61 2 9291 6118
ilana.brooks@maddocks.com.au