Hospital PPPs have been sick for years – will COVID-19 be the cure?

Infrastructure decisionmakers and practitioners are actively debating what public–private partnerships (PPPs) should look like in the post–COVID world. In this blog, we look at hospital PPPs to review successes and failures in the past and how they might be adapted for the future.

Social infrastructure is continually beset by the dual challenges of under-investment and the high individual, societal, economic and political costs of failure. These challenges are perhaps most apparent in the health sector, where gaps and failures are literally matters of life and death.

The COVID-19 pandemic both spotlighted and intensified these challenges. Globally, governments had to address the urgent implications of the pandemic for hospital capacity and equipment, access to care, and equity in health outcomes. In many countries, the conclusion can only be that significant investment is needed. But in reviewing their options to fund health infrastructure, and hospitals in particular, governments may see challenges in relying on private partners. This is because:

• Hospital builds are complex. Government concerns about the quality and cost of construction often act as a deterrent to forming PPPs. This complexity is also a concern for private partners, as it adds cost and schedule risk. The complex interfaces between the hospital building and the requirements of clinical services mean that a private partner responsible for building or refurbishing a hospital will need to design and build in a way that satisfies the safety and technical requirements of the clinicians, whose delivery of clinical services typically remains the responsibility of the government. This can make it challenging to clearly see who is doing what and who is at fault in the case of delays.

• Examples of challenged projects are widely publicised and can raise public concern, as in the case of a parliamentary inquiry in New South Wales, Australia, which recommended in February 2020 that public–private partnerships no longer be considered for public hospitals after it found inequities in service delivery.

Yet, amid the hesitation, there is still appetite for forming PPPs in the health sector. Government stakeholders from both developed and developing nations told the GI Hub earlier this year that they wanted to see our PPP Risk Allocation Tool expanded to address hospital and other social infrastructure PPPs. (As a side note, this has now been done. The updated 2020 Risk Allocation Tool addresses hospital PPPs as well as schools, social housing, government buildings and prisons in addition to the other sectors originally included.)

By forcing governments and private operators to think differently about how hospitals need to be structured for inclusivity and future resilience, COVID-19 may help resolve some of the issues that have traditionally challenged hospital PPPs. Infrastructure decisionmakers and practitioners are now actively debating what PPPs should look like in a post–COVID-19 world. Here are a couple of things that we know about the new approach to PPPs:

• PPPs continue to be one of the most effective ways to attract private investment and make better use of the financial resources held by private investors. Private investment in social infrastructure declined by US$16 billion over the past decade, from $US19 billion in 2010 to less than US$3 billion in 2019, as reported in the GI Hub’s Infrastructure Monitor. The untapped potential for private investment and the opportunity to address fiscal and health needs with a hospital PPP should not be overlooked, provided the PPP can achieve the required economic, social and environmental outcomes.

• In the immediate term, hospital PPPs need to increase capacity while adding local jobs and stimulating the economy.
• Delivery of the PPP should not depend on taking clinical staff away from their clinical work. Clinical staff around the world continue to have their hands full in bringing the health crisis under control. That limits their ability to work with contractors to ensure safety and technical requirements have been met to effectively enable delivery of high-quality clinical services.
• Going forward, all PPPs need to consider supply chains. It is certainly possible to use PPP approaches to deliver hospitals, but the PPP needs to address the challenges inherent to these assets and services as well as those brought about by the impacts of COVID-19.

As with any PPP, the key is in awareness of potential issues and international best practices for addressing them. Resources like our PPP Risk Allocation Tool can help governments ensure they are procuring infrastructure in a way that is in the best interests of the communities they govern.