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Health and Economics Analysis for an Evaluation of the Public Private Partnerships in Health Care Delivery across EU 100 Administrative concession for full health service provision

. Total Number of PPP Contracts As of 2005, Spain had 15 health PPP projects, with accounted for 8,4% of total PPP project value. (Allard 2008). For the period 2004-11, the Spanish PPP market consisted of 20 hospitals, for a total of 7.000 beds, of which 11 hospitals included clinical services (con bata blanca) and 9 hospitals covered infrastructure and facility and support services only (sin bata blanca), plus medical equipment in the certain cases such as Burgos and Vigo (Acciona 2012). Since the establishment of the first (Alzira) concession model, other administrative concessions have been granted in Valencia: Torrevieja (2003), Denia (2004), Manises (2006) and Vinalapó (2006). Although no consolidated national health PPP list is available, there are at least two dozen health related PPPs in Spain, of varying scopes and durations. Besides Valencia, most other PPP hospitals have been developed in Madrid, with Valdemoro following the fully integrated “Alzira model” and other contracts limited to infrastructure and related services (PFI or Madrid model). 5. Models: Spain has had a long tradition in various forms of public-private partnerships, such as “conciertos”, contracts between official regional health services and private providers, mutual health organizations, or administrative health concessions which include the management of health services. (PWC 2012). Conciertos include out-contracting of testing, diagnostic and therapeutic procedures in order to relieve waiting lists. Some contracts cover an entire population area in areas with insufficient infrastructure. Noteworthy among others, Jimenez Diaz Foundation (Madrid), POVISA (Vigo), several hospitals in the Order of San Juan de Dios, several hospitals in Catalonia, etc.. Mutual health organizations cover about two million civil servants: MUFACE, MUGEJU and ISFAS. The financing is public and each year about 85% of the beneficiaries opt for private provision (through private insurers as Asisa Adeslas DKV and IMQ). Administrative health concessions, which include the construction of the hospital and management of health and non-health services. As of 2012, there were seven such hospitals operating in Spain (5 in Valencia and 2 Madrid), Central Clinical Laboratory (Madrid), plus 2 new hospitals in Madrid (Móstoles and Collado) and a new radiotherapy unit in the Canaries. • The company Ribera Salud, the Capio group and private insurers (Adeslas Asisa Sanitas and DKV) have been the main private operators. By taking overall responsibility for providing for the full health care needs based on capitation fees, the Alzira model used in Valencia is akin to an HMO – health maintenance organization. Other contractual models of varying scopes and durations are used elsewhere in Spain: ? PFI or administrative concession for construction and non-healthcare management (PFI model): In Spain this infrastructure-only model has been implemented in Madrid, Balearic Islands, Catalonia, Castilla-León and Galicia. These contracts go up to 28-32 years, remunerated mainly by rental fees. Health and Economics Analysis for an Evaluation of the Public Private Partnerships in Health Care Delivery across EU 100 Administrative concession for full health service provision, including primary care (Alzira model), implemented in Valencia and in one hospital in Madrid (Valdemoro), based on capitation payments. In Alzira profits were capped at 7.5% of turnover, with yields above this limit being returned to the public partner. Contract duration: 15-year contract, which can be extended to 20 years. 6. Payment System: Under (both) the Alzira models, Cumunidad Valenciana as payer pays an annual capitation fee (best practices: capitation fee; patient freedom of choice, money follows the patient). As a general principle in Spanish health care, money follows the patient, who has freedom of choice in selecting the health care provider. If a patient chooses not to use the designated hospital in his region, it must compensate the actual provider at 100% of the respective DRG. If a hospital treats patients from outside its zone, it receives 80% of the respective DRG (focus attention on service local population, discourage adverse selection and unjustified transfer of patients). Under the original Alzira Model (hospital care only), the capitation fee was set at €204 in 1999 , and indexed to inflation. Although no Public Sector Comparator was formally used, the fee proved to be too low (especially when compared to the capitation used at the time by MUFACE the public sector health mutual fund of €301) and to Valencia’s average per capita expenditures of €362 (Acerete 2011), which amounted to an aggressive under-pricing of 30 to 40%. The current capitation fee is indexed to the payer’s overall health spending and is about € 670 – still about 25% below comparable average costs for Comunidad Valenciana. The infrastructure and support services contracts are remunerated through rental payments. 7. Share of PPP contracts in total hospital investment plans N/A 8. Value for money consideration on a macro level In the recent past, C.A. Valenciana proved to be economically fragile and highly vulnerable to the bursting of the property bubble along Spain’s Mediterranean coast. It is the second most highly indebted of Spain’s regions after Castilla La Mancha. With debt equivalent to 25% of GDP and tax revenues reductions of over 30%, its sub-sovereign rating was cut to BB subinvestment grade in February 2012. It is also the region with the longest (884 days) delays in payments to the pharmaceutical companies (Maiquez,, Jun 2012). The regional Government had also accumulated past due health sector liabilities of over €2,4 billion at the end 2011. There appear to be some calls for increases in the capitation fees, but the budget cuts required by the austerity measures are likely to impact the regional health budgets, which will have to shrink rather than increase (key issue: test of compressibility of PPP liabilities in austerity scenario). The capitation fees paid to the PPP hospitals appear to have been consistently below Valencia’s per capita health costs.However, the reliance on the Government-controlled savings banks to provide both project equity and project debt can be seen, at least in retrospect, as a warning sign, especially after one of the savings bank sponsors failed in 2003 (clearly not the best

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