New University Hospital in Bratislava

Friday, 29. August 2014, 15:46 and

HPI Expert opinion

The Ministry of Health (MoH) in August 2014 published a document [pdf] which aims to provide information on the project of a new university hospital in Bratislava, to be constructed as public-private partnerships (PPP).

We appreciate the Ministry of Health professional approach to the document, its structure, excellent English, as well as visuals. The document is clear and graphically appealing. Its conception significantly differs from the Ministry of Health standard materials.

HPI greatly appreciates the approach philosophy DBFOM

We consider the position of the Ministry of Health a key thing in the philosophy of the project. We very much appreciate that the Ministry of Health decided to implement the project DBFOM way (design, build, financing, operating and maintenance). By this approach it was removed one of the biggest risks that the new hospital would be built by one entity only and subsequently the Ministry of Health would have difficulties to find for this hospital another entity that would operate and maintain it. There was a threat for a scenario, that the construction of a new hospital would only be a contract for a construction company and not a modern hospital construction project with long-term functionality.

It is important to emphasize that this is the first comprehensive PPP project in the health sector, which successful outcome depends on the consistent executive and project management, quality contract between the public and private partners. The main prerequisite for this is high quality and reliable input data and hospital information about the macro environment and development in health care. The document itself is not entirely convincing in terms of data, and therefore we consider being very important that we publish key HPI comments on this document.

Table 1: HPI values and HPI comments

HPI values

HPI comments

  1. Philosophy of the project by DBFOM:
    1. Design
    2. Build
    3. Finance
    4. Operate
    5. Maintenance
  2. MoH’s effort to remove the upgrading deficit of Slovak hospitals
  3. Realizations by means of the private partner, which has the potential to allow modernization without burden on the public finances, but this will depend on the final form of the contract and the allocation of risks between the private and public partners
  4. Document structure, visual appearance and excellent English
  1. Document overstates Slovak Healthcare earnings  (both in EUR, also as% of GDP)
  2. The document instead of reliable information sources (Institute for Financial Policy, Institute for Health policy) uses less reliable sources, for example. Business Monitor International
  3. Document underestimates the risk of wage growth, particularly nurses and mid-level health personnel
  4. The document lacks information on hospital debt of 300 million. EUR and method of its solution
  5. The average income per bed in the new hospital will be double in comparison with the rest of Slovakia.
  6. Interconnectivity of the project to ICC project is unreasonable
  7. Ministry of Health problematic role in negotiating contracts with health insurance companies (mostly private), in the context of the recently prepared expropriation and timeframe of of the project (PPP is planned for up to 30 years)
  8. Document concealed the construction of two hospital projects in Bratislava (Hospital St. Michael. and NUSCH extension)
  9. According to the complexity of the project we think, that the indicative timeline is very ambitious and in the given schedule only hardly implementable.
  10. Document doesn’t mention fundamental change in hospital payment system – DRG is supposed to be implemented in 2016.

Source: HPI, 2014

Part 1 “The purpose of this consultation document”

No HPI comments

Part 2 “Background and basic framework of the Project”

In this section, it is not entirely clear, what is meant that the new hospital project is intended to function without relying on government support. In other parts of the document on there is mentioned the active role of government in the project (e.g. Government wants to ensure the contract for the new hospital with all health insurance companies).

3 The “Market Overview”

In this section, the government provides basic information about the sources of the healthcare sector, these, however, we seem embellished:

  • The document says that the volume of private healthcare resources is 1.3 billion. We have repeatedly pointed out the unreliability of data on private sources. According to the Statistical Office, there are three methodologies for measuring them, which differ significantly – from EUR 650 million up to EUR 2.2 billion, while HPI inclines to the value of EUR 650 million. At the same time, in such a document which serves foreign investors as a “teaser”, should place great emphasis on the relevance of data and in case of any doubt in the resources conservative estimates should be used.
  • The document in the text of expenditure claimed that the volume of total healthcare resources is EUR 5.2 billion. This amount is overstated. According to the current state budget proposal released by the Ministry of Finance is the amount of public funds in 2014 at EUR 4 billion. And when we added EUR 0.65 billion (conservative estimate) of private sources, we obtain an amount of about EUR 4.65 billion. At the same time on the same side of the document, there is a chart that already states a number of EUR 5.9 billion (source: Business Monitor International). Ministry of Health sends a message to potential private partners that there is EUR 5.9 billion in Slovak health sector, while there is actually more than a billion Euros less!
  • The document claims that the Slovak health expenditure is at 7.3% of GDP, according to HPI calculations it is about 6.3% – therefore the document overstates these expenditures much more than a percentage point of GDP.
  • On the expenditure side, the Ministry of Health underestimates the risks again. In the section on medical staff says that health care professionals’ wages are stabilized and in the future do not expect any dramatic growth in wages. Such an argument, in our view does not reflect the risks of wage growth in health care sector, particularly long-term requirements of nurses and paramedical staff to adjust their wages. The adjustment has not yet taken place and therefore in the future we can expect significant pressure on the growth. There is lack of the hospitals’ debts overview in this section, which now exceeds EUR 300 million, and there is missing information, how the debt will be addressed and how it affects the project of a new university hospital.
  • In the whole document, there is no mention of DRG to be introduced from 2016 as a payment mechanism for hospitals. Payment mechanisms significantly influence any business plan; this information should have been shared with the potential investors.

Part 4 “Specifics of the NUHB”

In this section it is important to note that the new hospital should operate on ¾ of catchment area of the current University Hospital, the operation of the existing hospitals should be finished later in 2019 simultaneously with the launch of a new hospital and after a transitive period. However, the document does not specify which operation in which hospitals should ever cease. We just recall that the current University Hospital today runs hospitals Kramáre, Ružinov, Antolská, Mickiewiczova and Podnajske Biskupice.

Part 5 “Anticipated features of the NUHB”

According to the document the new University Hospital will have 945 beds (about 4% of all beds in SR), while in the first year is to have revenues of about EUR 130 million (which is about 8 % of all spending of inpatient care in SR). Therefore the average income per bed will be of orientation double the rest of Slovakia.

6 The “Opportunity for Bidders and strategic obligations”

In this section can be seen a requirement that bidders should prepare proposals to maximize the new hospital project and ICC project (integrated care centers). Such a requirement is considered unreasonable while given very little information and ambiguous feasibility of 140 centers project, as well as because the centers are to be built from EU funds across the whole country, the new hospital is to be in Bratislava.

Second sticking point in this part is the commitment of Ministry of Health that will provide assistance in securing long-term contracts and contractual terms with insurance companies to ensure stable and continuous income for the private partner (PPP project is planned for 30 years). Are we to understand that Ministry of Health, which is two years “preparing” expropriation of private insurance companies will be actively lobbying contract for a new hospital in these insurance companies?

The third important thing in this part is the Ministry of Health’s commitment to the fact that the private partner will bear the risk of demand and Ministry of Health will avoid investment in new hospitals under its control in the region of Bratislava. The document, however, does not appear to inform that Bratislava is now preparing two large buildings:

  • Hospital St. Michael, joint-stock company, under the Ministry of Interior for EUR 50 million and 110 beds
  • Extension NISCH, joint-stock company under the NISCH sponsorship itself, joint-stock company for EUR 37 million.

7 The “Discussion with expert and public procurement process”

In this part the Ministry of Health calls for public debate on this project. HPI offers its expert capacity and know-how in this field and is ready for expert discussion with the Ministry of Health, as well as a Institute of Health Policy at the MoH. Our first contribution to this constructive discussion is this HPI expert opinion on this “teaser”.

8 The „Indicative timeline“

According to the complexity of the project we think, that the indicative timeline is very ambitious and in the given schedule (procurement contract closed in August 2015) only hardly implementable.

9 The “Next steps”

This section says that everyone interested in the project should express their interest in the project on the Ministry of Health email address until 20.8.2014. We hereby would like to ask the Ministry of Health for a list of all the companies that have expressed an interest until 20/08/2014 in this project by sending an “Expression of Interest”.

We recommend also:

Health Policy Basic Frameworks 2014-2016

In this HPI publication, in addition to macro prognosis of resources for health for the period 2014-2016, we are focusing on hospitals and the need for their modernization. The authors quantify the investment gap, looking for the resources to cover it, bring examples of modernization of hospitals abroad. A separate chapter is dedicated to the payment mechanism, as well as human resources in healthcare.