Ailing public hospitals in PNG: a radical remedy from Africa?

The Prime Minister of PNG publicly decries the state of PNG hospitals, and regularly approaches his near neighbor Australia for help to improve them. The poor state of PNG hospitals is a consequence of a long slow deterioration of infrastructure, and weakening governance and management. Initially hospitals were made delegated functions when decentralization was first implemented, and were then re-centralized, followed by a well-intentioned, but insufficiently thought through move to place them under independent Boards reporting directly to the Health Minister. Port Moresby General Hospital, the leading tertiary referral hospital in PNG, arguably is not of a standard that the government, the medical and nursing fraternity nor the general public find acceptable. The highly motivated Board have recently appointed an expatriate hospital manager to try and turn the trajectory for the hospital. Will this be enough? Or is more radical surgery worth considering? Let us at least pose the question, so that it can be debated publicly. Can PNG do what Lesotho did to turn its tertiary referral hospital around – radically, decisively and very much for the better?

What did Lesotho do?

Lesotho, a small mountain kingdom, surrounded by the Republic of South Africa was confronted with decaying and low quality publicly run hospitals. The flagship hospital of the health system was the Queen Elizabeth II (QEII), the country’s 100-year-old only national referral hospital, located in the capital Maseru. A legacy of British Colonial rule, QEII was crumbling, consuming increasing amounts of the government budget, and delivering poor and deteriorating services.

Rather than repeat the failed investments of the past, the Minister of Finance, Tim Thahane, decided to experiment with a radical new idea. What would happen, he asked, if we offered the private sector the same amount of money we spend today on this run down public hospital? What could they offer us? Could we get better quality and better services for the people of Lesotho, at the same price?

The answer has been a resounding yes.

Enter the Public Private Integrated Partnership

A Public Private Integrated Partnership (PPIP) is an innovative PPP in which the government enters into a long-term contract with a private operator to build, design, operate and deliver a full range of clinical services to a population. This model harnesses private capital and management expertise, while retaining public ownership and oversight of health services. Experience in other countries, particularly in Valencia, Spain, has shown that the model can have a significant impact on the quality and efficiency of health care. [1]

But can this work in a low-income country? Lesotho’s example is instructive.

Given that it had to make a major infrastructure investment on QEII, the PPIP solution met all of the government’s key policy goals by:

  • Making capital expenditures affordable in the near term
  • Providing Government budget stability through defined and predictable health expenditures
  • Transferring risk to the private sector for construction delays or cost overruns for a large and complex building project
  • Transferring significant operational risk for the delivery of complex health care services, while capturing the efficiencies of private sector management
  • Providing an economic engine for growth for locally owned businesses.

Working with the International Finance Corporation (IFC) as transaction advisors, the government issued an open international tender which posed a challenge to all bidders: for the same level of expenditure as QEII, how much more could the private sector deliver in quality, breadth, and volume of health care services?

After a formal and transparent bid process, the Tsepong Consortium was awarded an 18-year contract to build a 425-bed hospital linked to three primary clinics, offer a full range of secondary and tertiary care (some of which had previously been referred to South Africa); integrate hospital services with primary care for Maseru; and make a major commitment to enhancing the limited human resources capacities of the country. As in all PPIPs, the government retains ownership of the assets, and the facilities must provide services to the population originally served by the public facilities, at no additional cost to patients.

Tsepong is jointly owned by Lesotho doctors, who also provide specialist services to the hospital; doctors and specialists from South Africa, a local firm for Basotho women, members of the local chamber of commerce, and Netcare Limited, a South African hospital management firm, and a South African private health care provider.

The new arrangement represents a major shift in role for the Ministry of Health from a provider to a purchaser of care, with responsibility for improving value for money and quality of services provided to the people of Lesotho. To assist the Ministry of Health in this unfamiliar role, an Independent Monitor has been appointed to measure compliance with the detailed performance indicators specified in the contract and to assess associated penalties for not achieving performance levels. Indicators cover a full range of clinical service quality, equipment, drug supply management, information technology, and staff certification and training. For example, 85% of patients with a provisional diagnosis of myocardial infarction must receive aspirin within 30 minutes of evaluation; and the fully automated medical record system must be up and operational at least 99% of the time.  In addition, after an initial stand-up period, the hospital is required to obtain accreditation by the Council for Health Service Accreditation of South Africa.

And what about the money?

The PPIP structure provides for co-financing of capital expenditures for construction, refurbishment and equipping the hospital and associated clinics; and also provides for an ongoing payment from the government to the Consortium for service delivery at the facilities. Both repayments are contained in a single unitary payment. This payment did not begin until after the hospital was opened and started seeing patients. This was 3 years after the contract was signed. All upfront expenses were covered by the Consortium.

Under the contract Tsepong provides almost 30% more hospital admissions and 87% more outpatient visits for an estimated 7% increase in operating costs over Queen II. If service volumes exceed contracted amounts, additional fees are paid to Tsepong, but the government must approve these increases. Under this payment structure, the government is basically contracting for a fixed volume of  patients (inpatients and outpatients). This volume based payment structure, has not been without its problems, and the cost of the additional public activity has been a source of some tension between the government and the operator.

This is not the only payment structure option for a PPIP and it is worth looking at how other countries have dealt with payment structures differently. In the Turks and Caicos for example, the operator is paid on a capitation basis, similar to the Alzira model in Spain. This model has some advantages as it incorporates a broader healthcare picture which includes primary care, rather than the traditional “let’s build a big Hospital” approach.

The way it is now

The clinics and hospital were completed on time and on schedule. After one year of operation in the new Queen Mamohato Memorial Hospital, maternal mortality has decreased by 50% despite treating much more complex cases. Overall patient mortality decreased from 12% to 7% and there has been a large increase in patient satisfaction. A range of clinical capabilities have been established for the first time in Lesotho, such as neonatal intensive care, thus saving lives and reducing expensive referrals to South Africa. A fully electronic medical record and reporting system has been implemented to allow detailed performance monitoring on a large set of quality and service indicators.

A key objective of the government was to increase human resources capacity in the country. There has been extensive training of physicians and nurses. Previous shortages of doctors and nurses have been addressed through international recruitment and the return of Basutho professionals to the country.

The tangible increase in quality, service and facilities has come at a price. In the first year, the hospital surpassed its negotiated volumes. The PPIP represents an island of excellence in a sea of mediocrity. In the longer run, the strengthening of other parts of the health system (including district hospitals and outlying health facilities) remains a priority, so that patients will not need to travel to the capital to get quality care. But, given the previous state of affairs, this is a good problem to have.

Lessons for Papua New Guinea

This approach could be an option worth considering in PNG. However, it represents a significant change in mindset for PNG and the generally accepted view of how the health system operates. PNG has a tradition and comfort level with government-owned and operated hospitals. To follow Lesotho would mean that the government would need to make a paradigm shift from “provider” to “steward” of the health system. This would require both new skills, and a new way of understanding the  government role in ensuring health services are provided – but not necessarily providing them.

We expect that such a transition from a publicly owned and run hospital to a PPIP such as in Lesotho would be challenging. Doubtless, opposition politicians will accuse the government of privatizing the health care system, even though all facilities remain in public ownership. Most likely, trade unions would object. Initially, doctors with entrenched interests in the old ways may resist the change. But experience suggests that they quickly become converts once they experience the greatly improved working conditions and clinical opportunities.

These problems can be overcome but they require strong and bold political and technical leadership.

The fundamental driver of change is an unequivocal recognition that the current system is broken and that further investment will not fix it. Something new is needed. Public hospitals in Papua New Guinea are an extreme example of the inability of the post-independence period to maintain the standards that should be enjoyed by the population. Despite the best efforts of many and funding from government and donors alike, hospitals continue to under perform. If you keep doing as you have always done, you will get what you have always had… a new solution is needed.

The experience of Lesotho needs at least to be on the table and in the public debate. We believe that it is possible to change the discourse on hospitals in PNG – but is there the political will and courage to accept the radical surgery to do so?

Neelam Sekhri Feachem is the CEO of The Healthcare Redesign Group Inc. Jane Thomason is the CEO of Abt JTA
Information about the Lesotho PPIP is taken from: The Global Health Group, University of California San Francisco; and PWC, 2013, “Health system innovation in Lesotho: design and early operations of the Maseru public-private integrated partnership.” Healthcare public-private partnerships series, No. 1. Available here.

[1] See Sekhri, Feachem and Li, 2011, “Public-private integrated partnerships demonstrate the potential to improve health care access, quality, and efficiency,” Health Affairs.  Vol.30, No.8.; and Trescoli, Ferrer and Torner, 2009, “The Alzira model: Hospital de la Ribera, Valencia Spain,” in Rechel, Erskine, et al (eds.), Capital investment for health: case studies from Europe, World Health Organization, Copenhagen.

Neelam Sekhri Feachem

Neelam Sekhri Feachem is the CEO of The Healthcare Redesign Group Inc.

Jane Thomason

Jane Thomason is the CEO of Abt JTA.


  • You have been very generous with statistics on increased utilisation but less so about the costs that have “increased”. Please could you tell us by how much they have increased 10%? 100%, 1000% Is it true that costs have rocketed to the extent that the GoL even had to default on its payments last year?

      • Thanks Jane. Very interested to read the report – but the link just goes to a general project page. Do you know the direct link?

    • The increases in access and quality are much greater as a percentage, than the cost increase. There are many ways to look at the costs- for example, including capital expenditures, which would have occurred in any case because the hospital needed to be replaced, or looking only at increases in operating expenditures. The full report from Boston University is available on under Neelam Sekhri Feachem. Endline Report Lesotho final report. If you can not get it from there, please let me know and I will find another way to provide access to the report since it has not been posted yet on BU’s or World Bank sites.

      • Thanks for sharing the endline report – it makes for useful and interesting reading. I do want to point out a significant contradiction between an important point you make in favour of the Lesotho PPP in your article and what you have said in response to the endline report both here and in response to our article here. In your own article you placed great emphasis on the question:

        “Could we get better quality and better services for the people of Lesotho, at the same price?

        The answer has been a resounding yes.”

        Your analysis has since changed to say that of course you have to pay more to get better outcomes. This seems a bit confusing.

        Key elements missing from the endline report is a thorough assessment of the costs involved in this initiative and how much these have increased since the contract was originally drawn up, and are increasing to date. Neither is there an assessment of value for money. Some outcomes have improved but this is hardly surprising given the amount of expenditure. Should we have expected even greater improvements relative to cost? Could these same improvements been achieved through a different approach for less money? The report did not answer this question. What has been the impact of curtailing the range of services that were previously offered? Finally and crucially, as the report itself states, we are yet to understand the impact of the investment on access – by spending this much more (and this proportion of the MoH health budget) we would want to see significant improvements in the number of people in need of health care being reached who were previously excluded.

        I think these critical questions would need answering and lessons learnt before we start celebrating or advocating the replication of this initiative.

        • Thank you for your comment.
          The goal of a PPIP is to get more quality and better services for the same price. That is what the government contracted for – a 30% gain in hospital access and improved quality for the same price. It got much more than this. If there is a great deal of pent-up demand from a population for quality health care, and the only place to obtain this health care is the PPIP system, then demand will far exceed the predictions of the best economists and public health experts. Costs will also increase because of new services – such as the first national Neonatal Intensive Care Unit- so that more babies will live rather than die.

          Costs due to increased demand from patients on the Queen Mamahato hospital, can be relieved by upgrading the quality of district hospitals and outlying facilities so that patients would not choose to seek care at the national referral center for services that could more appropriately be provided at a lower level. It is unreasonable to expect that a single PPIP project can solve all the problems of a nation’s health care system. Lesotho’s PPIP has improved efficiency, access and quality for the people of the country.

          Neelam Feacham and Jane Thomason

          • Thanks again for making the report available (a very interesting read). As you point out, there is little doubt that improvement management and additional funding has resulted in improved service at the hospital. However, just to echo some of Anna’s comments:

            1. I’m not sure you can measure “efficiency, access and quality” purely at the hospital level. Lesotho is a health system, and as Anna points out concentrating resources at one point may have degraded outcomes at another (although I realise that would require a totally different study)
            2. In a related way, “upgrading the quality of district hospitals and outlying facilities” is not something you can consider as a separate issue/option. If the additional cost of the hospital means that money is not available to upgrade facilities at other points – that has to be taken into account.

            It’s not necessarily remarkable that better inputs result in better outputs (although some of the strategies described are immensely useful). However, drawing policy conclusions requires analysis of some of those bigger issues.

  • A simple statement of two facts will shed light on this and other Government Departments.

    Senior levels of the Government are populated by incompetents amenable to bribes from interested parties and it will take a great man to clean out these entrenched parasites.

    Our politicians are attracted to gaudily wrapped proposals that could be attractive or sold to an under-educated mass of voters and will overrule the few competent leaders that we do have. I could say this about parts of the UK economy from my reading of the Private Eye. I have to accept, that if the PE was lying, they would be bankrupted by the courts by now.

  • If we are to use examples to inform decision making in PNG it is important to get the facts right. The article here of the Lesotho privately operated hospital is almost entirely contradicted by John Lister’s analysis here.

    Far from being cost neutral the budget for the private hospital in Lesotho constitutes a massive 100% increase in that previously allocated to the public hospital. And all this with an unreasonably low cap on the number of patients to be seen and treated. For example, the contract stipulates a maximum of 20,000 inpatients per year but the average hospitalization rate for Lesotho is approximately 64,000 patients. Each patient over and above the 20,000 has to be paid for on top of the 100% increase in costs already paid for by the government. Does this sound like value for money? This skewing of resources towards tertiary care in the capital is to the extreme detriment of the majority of Lesotho citizens who live in rural areas.

    And let’s also not handpick one apparently successful example (although I am unfamiliar with it so wouldn’t be sure of its success) from Spain when the broad base of evidence demonstrates the these private financing and delivery deals lock governments into long term high interest inflexible debts to the benefit of profit-making companies and to the detriment of patients. In many cases these deals are bankrupting health services. The truth is that governments can borrow money at a much lower interest rate themselves rather than borrowing from private companies.

    In the UK where the government has gone furthest with experimenting with these types of models the evidence is very clear. Private Finance Initiatives have failed and services are being shut down directly as a result of the onerous interest rates charged. I’ll leave you with a summary quote from the right wing UK newspaper the Telegraph on the ramifications:

    The blame lies with politicians and the Department of Health who pushed through the ludicrous PFI deals in the first place. It’s the fault of the lawyers and managers who drew up the grossly unfair contracts that saw the pockets of private companies being lined with large wodges of taxpayers’ money for little return. It’s the fault of every myopic MP who voted for PFI and ignored the evidence warning that it would store up problems for the future. The local community, the doctors, the nurses and even the current managers are entirely innocent in all this, and yet it is they who are having to pay.

    • Thanks Anna for sharing John Lister’s analysis on Lesotho. As you correctly point out there is quite a body of literature on PPIPs from UK and Australia and elsewhere. We agree that this should inform consideration of any PPIP in PNG or elsewhere. Your comments emphasise, and we strongly endorse, the need for thorough due diligence by a team of experts, before embarking on such new models of service delivery.

  • When it is recognised and accepted that existing (public) health systems have finally failed and corrective measures have been ineffective, there apparently exists the only option of PPIP, unless you abdicate responsibility of healthcare by a total sell-off. PPIP, when well planned and formulated, stands a chance of providing alternative care, not necessarily for larger numbers. In regards to rising costs/investments, that has to be an accepted.

    • Thank you for your comment. I am not sure that a PPIP is the only alternative to ailing public hospitals, but as we suggest: “This approach could be an option worth considering in PNG.” The PNG government has made the rebuilding of major hospitals a policy priority. It is worth getting a range of options for financing and management on the table. We welcome suggestions from others.

      • Further to your comment and our response, we have just received from Boston University, the Final report [pdf] for the “Endline Study for Queen Mamohato Hospital Public Private Partnership,” September 2013. We highlight the headline findings. The data show substantial improvements in clinical quality, use and patient satisfaction compared to the baseline. The death rate fell by 41%, the maternity death rate fell by 10%, the paediatric pneumonuia death rate fell by 65% and the patient satisfaction rate grew by 22%. Access to health services improved significantly. Inpatient admissions were 51% higher, as were outpatient visits, including filter clinics (126%) and hospital deliveries (45%).

        The report shows that costs have also increased. In the iron triangle of health care – cost, quality and access, it is a given that if you improve quality AND access, costs will increase. The key factor to consider is value – what you are buying for the amount being spent. It is clear that the PPIP in Lesotho has provided much greater value for the people of Lesotho. The report provides a demonstration of how transformational in quality and access a PPIP arrangement can be in a low income setting.

        Neelam Feacham and Jane Thomason

  • PNG health problems are 3 fold:
    1. Create a good healthy community – develop the infrastructure (clean water, cheap simply clean houses, privacy for mental health and roll out health education). This lies squarely with the National government strategies for healthy country..
    2. Preventive health – treatment of lifestyle diseases and associated issues that are preventable, but the individual can choose to be treated or not (this includes HIV aids, heart disease, cigarettes and lung cancer). The media should be used to educate individuals.
    3. Need for more trained medical personnel

    • You are quite right – PNG has many health problems needing attention, some of which you highlight. Hospitals are just one of these.

  • In order to increase coverage of essential health services, especially for the poor, the Prime Minister of PNG has announced that he will remove user fees in public health facilities. This is a proven policy to improve health outcomes and reduce poverty but will require a substantial investment in district level health services notably in human resources and improving drug supply systems.

    Given this explicit policy priority it wouldn’t seem to be a good time to enter into an arrangement which will undoubtedly increase the share of the public budget spent on the central hospital in the capital. One can see from the blog above that this is exactly what has happened in Lesotho where despite promises that the PPP would be “cost neutral” increased demand from the population with good access to the unit has led to huge budgetary pressures. When this happens and funds are reallocated to the tertiary sector, the losers are poor people living in remote districts who are unlikely to ever visit the capital, let alone the central hospital.

    So if the Government of PNG wants its national free health care initiative to be a success they might be advised not to listen to these siren calls to tie-up millions of dollars of budget funds on a PPP which will only benefit a small proportion of the population.

  • I think a more reasoned article with examples from a broader range of countries would have been more persuasive. Oh, and maybe one not written by the CEOs of companies who would most likely be first in line to pick up tender documents…..

  • This example from one hospital experience in a small country should only be one example shared with the Ministry of Health in PNG as they struggle to make the most effective, efficient and equitable policy choices for their population. The case studies shared with the Ministry should include the very negative experiences that many developed and transition countries have had, in trying to establish PPIs to deliver health care.

    Countries such as the UK, Bangladesh and many countries in Latin America have invested in these PPI agreements, with specifically negative impacts on quality accountability and access for the poor. Health care does not work well under neo-liberial marketing principles.

    The example that should be shared with the Minister of Health in PNG is the history of how Sri Lanka has managed and financed their health system, one of the few good health systems at low cost in the world. They have positive health outcomes focusing on the principles of Alma Ata, focusing on equity of access, active engagement of the population and a multisectoral approach. The same principles that Margaret Chan and the World Health Assembly endorsed as a key approach for achieving universal coverage of health care in the 2008 World Health Report.

    Please share these references with the PNG MInistry: World Health Report 2008: Primary Health Care: now more than ever and Save the Children’s report on Sri Lanka: Bucking the trend, good health at low cost: Sri Lanka’s policy lessons for the 21st century and finally the London School of Hygiene and Tropical Medicine’s book on Good Health at Low Cost. These should all be offered to the Minister to read.

  • Thanks for this post and raising this important topic. A related conversation is that relating to Development Impact Bonds as put forward by the Center for Global Development and which you can follow here.

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