Win-win partnership in Bloemfontein
One of the success stories has been the Free State’s Pelonomi and Universitas Hospital PPP, the first of its kind in the country, according to the SAHR.
The three Bloemfontein hospitals ‘ Universitas, Pelonomi and National — were originally built, staffed, equipped and managed separately to serve the white and black communities.
After 1994, National Hospital became a district level hospital for Motheo health district, Pelonomi Hospital a regional hospital for the southern Free State and Universitas Hospital a tertiary level hospital for the province.
This resulted in a reduction of beds in the public sector, from 2 100 to 1 600. It also meant that some facilities now had excess infrastructure and excess capacity in services such as theatres, radiology and intensive care units.
On the hand, private hospital providers had an urgent need to increase beds in Bloemfontein and applied to government for private licensing.
However, licenses were not issued as the private sector had already exceeded the norms and standards for the number of beds in this region.
In 2000, the Free State Health Department decided to make wards in underutilized hospitals available to private hospitals in partnership with public institutions, the first of its kind in the country’s health sector.
They identified Pelonomi and Universitas Hospitals as suitable for the establishment of an independent private hospital using surplus infrastructure within both institutions, through a ‘co-location’ model of PPPs.
A co-location PPP occurs when the public and private sectors operate a similar service and collaborate rather than compete, resulting in the receipt of revenue by the public sector and the generation of profit in the private sector in a win-win enterprise.
In November 2003 the Free State health department entered into a 20 year concession agreement with Community Hospital Management (CHM).
CHM was allocated empty wards at Universitas and Pelonomi hospitals to operate a private hospital.
The public sector invested in upgrading facilities and the public sector also received a percentage of the turnover generated by the private hospital. The State retains ownership of all the buildings after the concession period.
The total capital investment by CHM in was R70,9 million. Of this total R41,6 million was allocated for renovations of the private ward, purchase of equipment and building of a medical centre at Universitas Private Hospital.
The balance of R29.3 million was used for renovations and upgrading of public wards at Pelonomi’s state wing as well as Pelonomi Private Hospital.
In terms of the contract, the health department was required to inject capital investment of approximately R11.03 million to upgrade facilities.
Authors Shadrack Shuping and Sipho Kabane said the significance and impact of this investment in infrastructure by both parties was that although the use of infrastructure will be shared by both parties, the public sector ultimately owns the infrastructure at the end of the contract.
‘This investment gain for the Free State health department and more broadly the Free State economy would not have been possible given the limited annual budgetary allocations in the public sector,’ the authors said.
According to the contract the private partners are expected to pay a fixed monthly rental fee of R40 000 per month for the use of the co-located facilities for the first five years and R60 000 per month thereafter. In addition to this, 1,32% of the annual turnover before profit is to be paid back to the public sector.
The total accumulated revenue for the financial year-end March 2007 was R9,58 million. ‘ Health-e News Service.
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Health-e News is South Africa's dedicated health news service and home to OurHealth citizen journalism. Follow us on Twitter @HealtheNews
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Win-win partnership in Bloemfontein
by healthe, Health-e News
December 4, 2007