Analysis. How PPPs could be designed for Romania's healthcare sector

The expansion of public hospitals through public-private partnerships (PPPs) appeared on the public agenda for the first time last year, after the former government of Dacian Ciolos inked a memorandum exploring the financial advantages of such a mechanism.

With a new government in power, PPPs in the healthcare sector have remained in the shadows, as the authorities say they want to build eight new hospitals based on the country’s planned Sovereign Fund for Development and Investments (FSID).

According to initial plans, two hospitals in Bucharest should be upgraded through PPPs. The European Bank for Reconstruction and Development (EBRD) carried out a preliminary analysis for these two pilot projects and estimated that around EUR 99 million would be needed to build a new cardiology hospital in the Romanian capital.

Cleopatra Leahu, partner at Suciu Popa, suggested that PPPs could work in various areas of the economy, including healthcare, but Romania still needed “government will and capacity to leverage private financing to drive investment in these sectors”.

“PPPs may be regarded as enterprises that require a careful combination of technical, commercial, financial and legal conditions. This is essentially different from prescribing the requirements for a constructed facility, which is typically what the authorities are used to doing in conventional project deliveries. Instead, the public sector will be granting the private sector the right to operate an enterprise (be it a public service or infrastructure), within the bounds of a contract,” Leahu told BR.

PPPs overlooked in healthcare sector

And the healthcare sector doesn’t appear on the current government’s list of the public areas in which PPPs could be tested. The authorities have said that partnerships with the private sector could be negotiated for infrastructure, agriculture, culture and staff training.

Looking at the experience of other European Union members, Germany has been able to kick start investments based on PPPs in several sectors, including administration, healthcare, education, sports and infrastructure, according to Anca Hociota, manager of membership services and vocational training at the Romanian-German Chamber of Commerce and Industry (AHK Romania).

The association represents around 8,000 companies with German capital that have created 250,000 jobs in Romania following investments worth EUR 8 billion.

Gerd Bommer, commercial counselor at the Austrian Embassy in Bucharest, told BR that the healthcare sector in Romania has the potential to attract Austrian investors, as similar projects have been carried out in other European countries.

Anca Albulescu, partner, head of real estate and construction at law firm bpv Grigorescu Stefanica, told BR, “With respect to PPP projects in the field of healthcare, the new law might enable the local authorities to offer support (by availability payments) for certain medical services needed by local communities, which are otherwise unlikely to be made available there. However, the public partner’s contribution to such projects shall be made by observing the conditions and regulations regarding: state aid, use of public funds, transparency, non-discrimination, etc.”

The financial pressure on the public healthcare sector is striking by comparison with European figures. In 2014, Romania was the member state that spent the smallest share of GDP on healthcare, according to Eurostat, the EU statistics office. The country had a budget of EUR 7.7 billion, equivalent to EUR 388 per inhabitant, or 5.1 percent of GDP. In addition, in the past few years, journalists have unveiled major infection risks in some of the biggest public hospitals, with stories of patients who died due to bacteria they were exposed to while in hospital.

These investigations came on the back of the ongoing brain drain in the medical field, with doctors and nurses venturing abroad in search of better working conditions.

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