01.03.2011 Public-private partnerships: increase in future use in the health sector as well?
Lead article. Governments are turning increasingly to private companies to ensure delivery of services and take the pressure off budgets. This form of cooperation between a public authority and a private-sector party is known as a «public-private partnership» (PPP). What opportunities and risks do such partnerships entail? And how important are PPPs in the Swiss health sector?
On account of dwindling public finances, recourse to private resources to deliver state services has been considered as a possible solution since the early 1990s. The UK opted primarily for the privatisation route, with results that were not always positive. As a response to the excesses of privatisation, the «third way» was chosen, i.e. a partnership between the state and the private sector. PPPs are intended to take some of the pressure off state budgets and make public sector services more efficient and less costly. This primarily involves building and operating infrastructure projects such as schools, railways or hospitals. A private enterprise, usually a consortium-based and often international «special purpose vehicle» (SPV), assumes responsibility on behalf of the state for the funding, building, maintenance and possibly also dismantling of an infrastructure facility or service. In return, the state pays an appropriate fee in what is basically a kind of leasing or rental system.
Great opportunities – or even greater risks?
Advocates of PPPs regard this form of financing as absolutely essential for both the state and the economy. On the one hand, it opens up new sources of funding for the state to finance public sector services and offers great potential for efficiency gains. The figure of about 20% is often bandied about as the efficiency gain compared with conventional financing and operational variants. But it is not only the state that benefits from PPPs: the model opens up to private companies a huge market for services previously delivered by the public sector. A classic win-win situation therefore? Critics of PPPs have their doubts about this. They not only mistrust the much cited efficiency gain of 20%, they also fear that the internationally convoluted conglomerates of firms could be harmful to the public purse. They raise such questions as what the purchase of these additional financial resources will cost the public sector. Will it be left to private companies, in many cases international consortia, to define the standards applied to public services? Will the state lose its influence over classic public sector services? Will private business take over the public sector? Will the state lock itself into agreements for decades and then no longer be able to extract itself or do so only at exorbitant cost? Will the state become dependent on consultants and the private sector?
Opponents believe that, throughout the overall duration of the agreement, the public sector ends up paying substantially more for an infrastructure facility or service governed by a PPP than it would for a conventional solution.
PPP’s in the Swiss healthcare system
Nevertheless, a number of cantons have already had positive experience with PPS. In the healthcare system, PPP projects have been implemented primarily in the hospital sector. One example is the cooperation between Lucerne Cantonal Hospital and the (private) Swiss Paraplegics Centre in Nottwil. The two partners together deliver services in the field of spinal surgery, pain medicine and neuromuscular disease, thereby joining forces to ensure medical care. This cooperation is often cited in specialist circles as a successful example of such a partnership and as «Switzerland’s first genuine PPP». There have not as yet been any PPP projects in the healthcare sector at the federal level, where scope is restricted because responsibility for most healthcare projects lies with the cantons. However, cooperation with private-sector partners exists at a national level in many areas. Private company involvement ranges from the short-term deployment of temporary staff, e. g. in connection with pandemic flu such as H1N1, to long-term cooperation with institutes such as privately owned laboratories. But these are not full PPPs, being more about the purchase of goods and services (outsourcing, service agreements, etc.).
Starting points available
The new alcohol campaign constitutes a specific departure point for PPP-based cooperation, as the possibility of having industry players take on a key role in the financing and implementation of the campaign is under discussion. PPPs are also an option in the field of e-health (IT). In connection with the «Migration and Health» Strategy, there are plans to invite tenders for a nationwide interpreter-phoneline service for intercultural translation. The aim is to establish the technical infrastructure, set up a network of interpreters and assure operation of the service. The PPP could be a model for delivering this service. The idea would be for a private-sector company to finance, develop and operate the nationwide interpreter-phoneline service and be able to use the solution drawn up for the FOPH in another context. This would increase the benefits for the company and make the project more attractive as an investment.
For the time being, it is difficult to estimate the opportunities and risks that any PPP might present for the FOPH. But the future will see greater recourse to PPPs in Switzerland. Under the revised Financial Budget Ordinance, the different administration units are urged to examine the possibility of concluding long-term, contractually agreed PPPs for the provision of services.
Ursula Ulrich-Vögtlin, Joint Head of Multisectoral Projects Division, email@example.com