Case Study: Spain Public – Private Partnerships in the Spanish healthcare system 1. PPP Law/Legal Framework/PPP Policy in Health – SPAIN The General Health Law 14/1986 confirmed the constitutional universal right to health care, including irregular immigrants and visitors (Acerete 2011). Health benefits were and are defined centrally but responsibility for service delivery and funding was devolved to the 17 regional governments or “Comunidades Autonomas” (CA) as of 2002. Health provision is mostly taxfunded and has been free of charge at the point of delivery, except for copayments for medication. The Public Contracting Act of 1995, aligned with EU legislation, further confirmed the option of provision of local services by private operators, as determined by the Municipal Services Act of 1955. (Torres 2001). Law 15/1997 provided for new forms of health systems management, including contracting with foundations and public companies (100% public capital) as well as administrative concessions (private capital) . The Public Sector Contracts Law, (revised by Real Decreto Legislativo 3/2011, of 14-November) defined procurement procedures for public service administrative concessions, among other forms of public procurement, and provided for the maintenance of the financial equilibrium of these contracts. The Concession Law (Ley de Concesiones de Obras Públicas) passed in 2002 by the Spanish government facilitated the expansion of PPPs into other public service sectors beyond transport. (Allard, Cheng 2009). In terms of labour legislation, staff regulations differ substantially between the public and private sector. Public health personnel have the option to retain their SNS (national health system) statutory link, but about 70% have accepted contracting under private employment law in a number of cases. According to the Health Systems in Transition report (and SESPAS 2010), health expenditure in Spain was 8.5% of GDP in 2007, rising to 9.5% of GDP in 2011, still below the European average even though the population aged 65 and older was 16.75%, above average. The public sector provided for 71% of spending, (mostly taxpayer based), voluntary private insurance accounted for 5.5% and OOP, out of pocket payments was 24.5%, mostly in the form of co-payment for medication by patients under 65-years old. Public health expenditure breaks down into 54% for specialist care (in-patient and ambulatory), 16% for primary care, and 19.8% for pharmaceuticals. The 17 Autonomous Communities were responsible for about 90% of public expenditures on health, which absorbs between 30-40% of their total budgets. Funding comes from non-earmarked transfers from the central state budget and retention of tax revenues raised locally (50% of personal income taxes and VAT and excise taxes) and some special funds allocated on a per capita basis adjusted for age-based health needs. Health and Economics Analysis for an Evaluation of the Public Private Partnerships in Health Care Delivery across EU 98 2. Centralised PPP Unit on health at country level/ Decentralised decision making (devolved/decentralized approach used for management of PPP) Spain is considered unique among European countries in not having a central PPP agency (Allard 2008), preferring a “plural Spain” approach, also in the health sector. There has been no tradition of applying a public sector comparator (Allard 2008), no mandated standardization of project documents, and no overall articulated PPP strategy. Given this decentralised approach, the role of the central government consists of defining basic health policy, regulatory standards, and minimum expenditure levels, as well as general procurement law. Public civil servants may opt out of the SNS coverage; they have their own health mutual funds MUFACE, funded by payroll contributions and the taxpayers. 3. First PPP Contract: (year, name) In 1999, the Comunidad Valenciana granted a 10-year “administrative concession” contract to build, finance and manage a new public hospital in Alzira, under Law 15/1997. The single bidder was a “temporary union” of companies, Ribera UTE, with the sponsors being the insurer Adeslas SA with 51% and Ribera Salud SA with 45%. Adeslas was majority owned by Agbar SA and ultimately by La Caixa, a regional savings bank. Ribera Salud SA was controlled by regional savings banks Bancaja, CAM and Caixa-Carlet. CaixaCarlet failed and had to be absorbed by Bancaja, in part because of its outsized investment in La Ribera, SA. The construction companies Dragados and Lubasa each took a 2% of the project company RSUTE (Acerete 2011). The original project was funded on a corporate basis with loans from the savings banks channelled through the sponsors. RSUTE is not required to publish financial statements (key issue: single, local, in-house bidder). Since Ribera Salud UTE was ultimately dependent on regional savings banks controlled by CA Valencia itself, the procurement procedure could in fact have been characterized as an “in-house” transaction, substantially within the public sector. The hospital operator was remunerated by an innovative annual capitation fee which started out at only €204 in 1999, well below comparable benchmarks. Consequently, the (Alzira I) project accumulated losses. (best practice: capitation fee, applicable only in full health service provision PPP) The public partner CA Valencia chose to terminate the contract, with compensation for foregone profits, in 2003 and to retender it, again to Ribera UTE, with an expanded scope of services (Alzira II) to include the area’s primary care centres, a longer duration of 15 years and a correspondingly higher capitation fee (key issue: paying for foregone “potential profits”, Sindic opinion negative). Whereas the original capitation fee was indexed to consumer inflation, under the new contract the revised capitation fee was indexed to the overall health expenditures of CA Valencia. The successful project turnaround has confirmed the viability of the “Alzira II model” consisting of “primary plus hospital care remunerated by a capitation fee”, and it has been replicated in five other hospitals in Valencia, elsewhere in Spain and in other countries.