Project Information Memorandum
ORGANIZATION OF DIALYSIS CENTER
IN THE CITY OF BISHKEK
Prepared for the
Ministry of Health of the Kyrgyz Republic
Within the framework of the Contract of 2012-KfW – TA – 1
Oxana Abovskaya, PPP Consultant
July 25, 2012
Table of content
List of abbreviations ................................................................ Error! Bookmark not defined.
1.
Introduction and IM goals ................................................ Error! Bookmark not defined.
2.
Legal prerequisites .............................................................................................................. 4
3. Public health sector and prerequisites for Project organization ...... Error! Bookmark not
defined.
4.
Project description .............................................................................................................. 5
5.
Project structure ................................................................ Error! Bookmark not defined.
6.
Preliminary economic and financial analysis .................................................................. 10
a.
Basic assumptions............................................................. Error! Bookmark not defined.
b.
Preliminary calculation of expenses ................................. Error! Bookmark not defined.
c.
Assessment of the Project attractivess .............................. Error! Bookmark not defined.
7.
Risks and management ..................................................... Error! Bookmark not defined.
8.
Preliminary conclusion ..................................................................................................... 14
9. Recommendations and further steps for Project implementation ... Error! Bookmark not
defined.
List of Tables
Table 1: General information about dialysis departments in Bishkek for 2011 and 2012
.................................................................................................... Error! Bookmark not defined.
Table 2: Number of patients in the waitlists in Bishkek and Chui Region as of 01.07.2012
.................................................................................................... Error! Bookmark not defined.
Table 3: Information on financing of dialysis departments, excluding equipment purchase, in
Bishkek for 2011 ....................................................................... Error! Bookmark not defined.
Table 4: Start-up investments for the Project implementation . Error! Bookmark not defined.
Table 5: Financial earnings coming from the functioning object .......... Error! Bookmark not
defined.
Table 6: Calculation оf coefficients of the Project attractiveness .......... Error! Bookmark not
defined.
Table 7: Assessment of the Project risks and their distribution Error! Bookmark not defined.
Table 8: Calculation of the Project feasibility study ................ Error! Bookmark not defined.
2012-KfW – TA – 1\Organization of the Dialysis Centers
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List of Abbreviations
ADB
Asian Development Bank
CC
Civil Code of the Kyrgyz Republic
FOMS
State Health Insurance Fund
FS
Feasibility study
IFC
International Financial Corporation, a structure of the World Bank
IM
Information memorandum
KfW
German Development Bank
KR
Kyrgyz Republic
MoH
Ministry of Health of the Kyrgyz Republic
MEAP
Ministry of Economy and Anti-Monopoly Policy
PP
Public partner
PPP
Public-private partnership
PrP
Private partner
SGP
State Guaranteed Package
TC
Tax Code of the Kyrgyz Republic
USAID
US Agency for international development and cooperation
2012-KfW – TA – 1\Organization of the Dialysis Centers
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1. Introduction and IM goals
This Information Memorandum was prepared as a part of an assignment to assess
preparedness of the health sector to the introduction of mechanisms for public-private
partnership in the Kyrgyz Republic1. The assignment is performed as a joint initiative of the
Ministry of Health (MoH) and the German Development Bank (KfW) within the framework of
the German-Kyrgyz financial cooperation the "Sector Wide Approach in Health Sector II".
Project for organization of dialysis center in Bishkek to serve patients suffering from chronic
kidney disease in the terminal phase (CKD) was identified by the MoH as a potential PPP
project 2, which if approved by the relevant government authorities, can be implemented in
KR under the procedures established by the Law on PPP, adopted in Kyrgyzstan in January
2012.
The main reason to include this Project in the list of potential projects to be implemented
using PPP instruments is the fact that the public sector does not plan to invest in the
infrastructure; purchase of the dialysis equipment, consumable materials and the equipment
maintenance and repair costs cannot be covered in the full scale due to insufficient financing
while the waiting list for the dialysis treatment is steadily growing. As the PPP projects for
organization of dialysis centers sufficiently well represent the developed practice and
experience of many countries; it is assumed that a private partner will use its entrepreneurial
skills and opportunities in the service organization, thus improving the quality of the service,
using the equipment more efficiently and employing economies of scale for better
organization of dialysis procedures.
This Information Memorandum is only the first step to determine the essence of the Project,
preliminary potential earnings from the service delivery and the volume of investments
needed for the project. The Memorandum outlines the current situation in the health facility
and provides step by step guidance required for the Project implementation. It is assumed
that, if approved, a feasibility study (FS) for the project will be developed and an open tender
will be held to select a private partner. It should be noted that further project implementation
depends on the decision of the Government of the Kyrgyz Republic and the MoH in
particular, as restructuring of the currently established practice is supposed.
Thus, the main purpose of this Memorandum is a basic description of the Project and
presents two possible options for its implementation in the health institutions of Bishkek. This
Memorandum provides the basis for a feasibility study of the project, as well as a tool that
can be used by the MoH to inform private partners about possible initiatives in the health
sector.
2. Legal prerequisites
Information Memorandum is based on the Law "On public-private partnership in the Kyrgyz
Republic" (dated February 22, 2012 № 7) and international experience. It is assumed that in
the case of Project implementation, all project documentation will be developed on the basis
IM is prepared under the contract 2012-KfW – TA – 1 by an international expert Oxsana Abovskaya. The main
goals of the assignment include assessment of preparedness of the health sector to introduction of PPP
mechanisms, as well as a preliminary assessment of possible projects in the sector (the work was carried out
during the period from May 20 till August 1, 2012);
1
2
Applied for development of the project PPP definition is provided in Attachment 3 to IM;
2012-KfW – TA – 1\Organization of the Dialysis Centers
4
of recommendations and regulations developed by an authorized PPP state body (the
Ministry of Economy and Antimonopoly Policy (MEAP)) and the Ministry of Finance.
3. Public health sector and prerequisites for Project organization
Reforms in public health sector under the national programs “Manas” and “Manas Taalimi”
led to a substantial restructuring of the system of health facilities financing, their restructuring
and changes in their personnel policy.
Attempts are being made to introduce innovations in the sector, including management of
medical institutions, decentralization of management. There is a visible trend to engage
private sector in delivery of health services to the population and its further integration into
the public health system. However, the public health system is experiencing a sharp
shortage of funds for infrastructure and equipment. Often there is a lack of funds for
maintenance of the equipment purchased on account of donor funds.
Despite the recent almost double increase in salaries (in some health facilities salaries costs
amount up to 85% of the total budget of a health facility), the quality of services has not
changed. Furthermore, the knowledge and skills of the administrative staff in the health
system are very poor: many heads of health facilities got accustomed to working in the
system of budget financing and, as such, do not take an initiative to restructure a service
delivery, or optimize the process of service delivery.
Adoption in January 2012 of the Law on Public-Private Partnership opens new opportunities
for attraction of private financing of infrastructure projects and also for use of new
management and business strategies in organization of health services. This especially
applies to organization of such services as catering of patients, laundry and sterilization
services, laboratory services, organization of dialysis centers.
2012-KfW – TA – 1\Organization of the Dialysis Centers
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4. Project description
The project envisions organization of dialysis centers in Bishkek to provide services to the
patients with CKD from Bishkek and Chui region.
Currently 185 patients get dialysis services at the four medical institutions by means of 36
machines (out of 41 available).
Table 1: General information on the dialysis departments in Bishkek for the years 2011 and 2012.
(Source: survey data collected by the consultant in May – June – July of 2012)
Basic data for 2011
Acut
e KD
Staff
2.295
18
15
1,27
8
31
66
6.528
38
34
1,50
12
8
50
3.618
49
12
1,26
13
71
6.843
15
17
1,45
41
233
19.284
120
78
Instal
latio
ns
Patie
nts
Chui Regional Joined Hospital
8
46
National Hospital
National Centre of Maternal
and Child Health
National Centre of cardiology
and therapy named after ac.
M.Mirrahimov
12
Total
Dialysis department at a
medical institution
Basic data for January – July 2012
Load
per 1
installa
tion
CKD
AKD
Staff
Load
per 1
installa
tion
2.205
51
15
2,73
66
5.148
0
20
2,60
8
36
2.569
40
12
1,98
13
52
3.915
34
17
1,84
41
185
13.837
125
64
Insta
llatio
ns
Patie
nts
CKD
Since 2009 MoH is keeping a waiting list for dialysis procedures. The list is recorded as a
table filling in last name, first name, patronymic name, date of birth and address. Laboratory
analysis results are also included. At the moment of the IM preparation the waiting list
contains 526 patients. But the list does not indicate how many patients urgently need the
procedures (some patients have 2-nd or 3-rd stage of kidney failure of mild or moderate
severity, many years may pass until such patients would really need dialysis procedures3).
The analysis of the list by patient in Bishkek and Chui region gives the following table:
Expert assessment of chronic kidney disease control in the Kyrgyz Republic, The WHO
consultant’s Report, Dr. Hervig Holz, 2011
3
2012-KfW – TA – 1\Organization of the Dialysis Centers
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Table 2: Number of patients on the waitlist in Bishkek and Chui region as of 01.07.20124
Bishkek
Waiting
2009
2010
Chui
2011
2012
2009
2010
2011
2012
Up to 18 years
с 1994
2
18 - 25 years
1987 - 1994
2
4
4
1
5
26 - 35 years
1977 - 1986
1
3
9
6
1
4
7
36 -45 years
1967 -1976
5
4
12
8
2
2
13
6
46 - 55 years
1957 - 1966
2
8
18
13
1
6
19
7
6
12
39
21
1
7
23
9
14
29
82
52
5
20
67
24
3
6
9
9
56 and older
1956 and earlier
Total in the
waiting list
Died from the list
Died during
dialysis
Dialysis from the
list
13
6
7
9
Despite the substantially long waiting list and importance of this service for the survival of a
patient, the state does not expand this service due to shortage of funds.
The medical institutions that provide dialysis services are financed in the following way:
 Equipment purchasing is managed centrally and purchased on the account of the
republican budget;
 Every department gets a monthly payment per each treated case based on the
reports provided by medical institutions (in 2011 the payment amounted to 6504 som
and in 2012 about 8500 som) – these funds should be spent on personnel wages
and communal payments.
 Consumables for dialysis procedures are purchased under centralized management,
purchase is financed by the Fund of Innovation Technologies and materials are
distributed among the dialysis departments proportionally to the number of monthly
procedures/registered patients.
4
Data from the MoH waiting list of as of 05.07.2012
2012-KfW – TA – 1\Organization of the Dialysis Centers
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Table 3: Information on financing of dialysis departments, excluding equipment purchasing, Bishkek 2011
Payments for
the treated
case, per
annum, FOMS5
Consumable
materials,
Fund of
innovation
technologies6
Chui Oblasti Joined Hospital
3.312.000
7.380.600
10.692.600
4.659
81,74
National Hospital
National Centre of Maternal and
Child Health
National Centre of cardiology and
therapy named after ac.
M.Mirrahimov
3.434.112
21.667.800
25.101.912
3.845
67,46
3.902.400
10.503.917
14.406.317
3.982
69,86
5.541.408
22.924.400
28.465.808
4.160
72,98
Dialysis department at a medical
institution
Total
earned
Cost of 1
procedure
Cost of 1
procedure in
Euro
At present the equipment from various companies and manufacturers is used (Gambro 200
Ultra S, Braun Dialog, Frisenius 4008 S). Dialysis machines are delivered by different
companies. Such situation doesn’t permit to use economies of scale from larger
procurement volumes from one supplier of consumables or use economy scale from a
single equipment maintenance centre. As a result, when machine breaks several months or
even years may pass till the financing for maintenance/repair is found (e.g., in the
department of the National Hospital two installations have not been working for 8 months
due to shortage of funds for maintenance).
Besides, the existing dialysis departments can’t do necessary laboratory tests, and when the
need appears patients have to address to private laboratories.
The expenses of MoH might be cut through optimization of the service structure and
increased use of the equipment (more efficient use) (as estimated 3.5 to 4 procedures per
day per one installation).
This Project Proposal contains two options and MoH during preparation of the feasibility
study needs to define the appropriate method of implementation of these options. They may
be implemented jointly or separately. In the case of the parallel implementation the private
partner could use the economy of scale while managing two dialysis departments for 24
beds.
Option 1: Reorganization and merger of two existing departments in Chui Oblast Joint
Hospital and National Centre of Mother and Child Health, and creation of a department for
12 beds.
The essence of the project is in optimization of the available resources and use of the
economy of scale in operation of the existing equipment and operating personnel (no
necessity of additional financing).
In this case all resources provided by various state sources financing these two departments
(according to 2011 data the financing amounted to €690.000, excluding equipment
purchasing, see Table 3, or €10.300 per patient per year) are transferred to a private partner
and PrP organizes the functioning of the merged dialysis department providing services to
5
Approximate amounts based on a standard 6500 som per each treated case; a standard of 6000 som per
treatment was taken for the estimation of Chui Regional Joint Hospital, which is second grade institution.
6
According to the data obtained at the medical institutions during the survey conducted jointly with MoH in
June 2012/
2012-KfW – TA – 1\Organization of the Dialysis Centers
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67 patients. To increase efficiency of the department operation it is proposed to increase the
number of the patients served to 80 (to use equipment more effectively) and install 12 new
machines. To increase patient motivation and responsibility for the treatment it is proposed
to introduce comparatively small additional payment in the amount of €2 per one procedure
(this payment might include laboratory test, which patients pay themselves at private
laboratories).
Option 2: Organization of the additional dialysis department for 12 beds (additional financing
is needed).
Such department might serve minimum 80 patients at the load of 3 procedures per device
per day. Here we can consider the question of providing private dialysis procedures (70
patients are served from SGP and 10 more patients are served from time to time in case or
urgent need). Such practice is currently widely used in private dialysis centers in KR and it is
considered acceptable due to shortage of state financing to provide dialysis procedures to
the patients who urgently need them at the center operated by a private partner.
The Attachment 1 to this Memorandum contains modeling for both two options.
It is assumed that a private partner will be provided with premises in one of the existing
medical institutions, and it will be repaired according to the quality standards of hemodialysis
service and requirements of the companies-manufacturers of equipment.
The project is based on the following basic assumptions:
 The Ministry of Health will be the public partner (PP) in the Project being the owner of
the newly created dialysis centers;
 Private Partner (PrP) will be selected through an open tender;
 PP will buy the service from a PrP: dialysis procedures for the patients strictly under
the MoH referral;
 PP pays to the PrP dialysis services based on the agreed tariff and predetermined
number of patients;
 PrP develops a design project for rehabilitation of provided facilities and agrees it
with the PP, which in turn, will provide support with approval of the project
documentation with the relevant authorities;
 PrP repairs the provided facility and equips it with the necessary equipment, in an
amount necessary to provide good quality service to the patients;
 PrP develops case management protocols for the patients with various stages of
disease and various clinical indications and gets their approval from the PP;
 PrP provides to the contractual patients the procedures in the amount and quality
according to the approved clinical protocols;
 PrP is responsible for the delivery and maintenance of the equipment in the proper
condition;
 After the end of the contract term (after 5 – 10 years) PrP undertakes an obligation to
transfer the renovated building with the equipment in the operational status to the
PP;
 If the PPP is a success the contract of the PP for the delivery of dialysis services by
the PrP may be extended.
It is assumed that the PrP will be granted tax preferences (according to the provisions of the
Article 12 of the Law on PPP of the KR), which were previously given to the existing dialysis
departments, so the payment will be performed from the funds of the State guarantee
program (SGP) and PP will ensure the fundamental right for medical treatment to those
patients who live only because they receive dialysis procedures.
2012-KfW – TA – 1\Organization of the Dialysis Centers
9
5. Project Structure
Commercial opportunities offered as a result of this Project implementation, as well as
relative clarity of the way of its implementation and experience of the companies Gambro,
Braun and Frisenius in implementation of such projects worldwide make it attractive enough
for the suppliers of dialysis machines and consumable materials.
Given the commitment of the MoH of the KR for introduction of the innovative methods of
organization of medical assistance to the population of the country under conditions of rather
scarce funding there is a reason to assume an increase of financing directed to support
hemodialysis procedures both from the budget funds and due to optimization of use of the
available resources. Besides, a clear growth trend of the incidence of hypertension and
diabetes mellitus is observable, which will inevitably lead to future growth of demand for
supporting kidney therapy. The demand will steadily grow if quality treatment will improve the
lives of patients who receive hemodialysis procedures (due to increased life duration).
The project is planned as a contract PPP (BOT: building, operation, transfer), in the form of a
concession 7. Main financing will be ensured as the payment from the SGP funds
(availability-based PPPs) for the provided services.
On the basis of the existing work experience of the hemodialysis centers in European region
and in the countries of Eastern Europe it is possible that for the implementation of this
Project it might be necessary to establish a project company (equipment manufacturer, local
operator, PP and a bank (which might be local financial institution and/or international
development bank)).
6. Preliminary economic and financial analysis
a. Basic assumptions
The following basic assumptions were taken as a basis for calculations:
i.
Upfront investments:
Table 4: Upfront investments for the project implementation
Type of payment
ii.
Option 1
Option 2
Construction/repair of premises 500 sq.m
€ 200,000
€ 200,000
Equipment for 12 bed dialysis department
Total upfront capital to start the project
In som, exchange rate of August 2012
€ 450,000
€ 650,000
37,050,000
€ 450,000
€ 650,000
37,050,000
Expected revenues from operation
It is assumed that the dialysis department will be able to receive the following
revenues from delivery of its services:
7
The definitions are provided in accordance with the draft Instruction for application of forms of
participation of a private partner in PPP projects developed by the MEAP and submitted for review of
profile ministries in August 2012.
2012-KfW – TA – 1\Organization of the Dialysis Centers
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Table 5: Financial earnings from the object functioning
Item
1
2
Patients of SGP
(144 procedure
per year per 1
patient)
Additional
payment
Option 2
Option 1
Number
of
patients
Cost of
one
procedure
Total per
year, in
euro
80
€ 70.00
806,400
80
€ 2.00
23,040
0
€0
0
€
829,440
Number
of
patients
Cost of
one
procedure
Total per
year, in euro
70
60
€65.00
€2.50
655,200
21,600
10
€75.00
108,000
€
784,800
3
Private patients
Total earnings
in the 1 – 3rd
year
iii.
Interest rate in case of a credit - 10% annual rate for loans in euro.
iv.
Calculation takes into account inflation and growth of service cost starting from the
third year of operation (from the 3rd to the 6th year – 15% of the initial cost, and from
the 7 to 10 years - 25% of the initial cost).
a. Preliminary calculation of the operational costs
The following basic assumptions were taken into account in the preliminary costing:
i.
Fixed costs
o Depreciation costs for equipment and building
o Maintenance of the building and equipment in a proper condition
o Payroll and related taxes and benefits
o Utilities
o Transportation costs
o Rent of a land plot at the minimum rate
Total fixed costs amounted to 100,000.00 euro during the first year – third year
of operation for the both options with a subsequent growth (taking into account
inflation and increase of the service price).
ii.
Variable costs:
o Purchase of consumables, laboratory reagents, utilities, office costs for 11520
procedures per year
Total variable costs amounted € 423,200 during the first – third year of
operation for the both options with a subsequent growth (including inflation and an
increase of the cost of the food package).
iii.
The debt service rate and taxes were calculated as separate expenditure items.
Preliminary calculation of revenues, expenditures and annual distribution of payments for
debt services are provided in the Attachment 1 (Table 2: Forecast of cash flows, option 1
and option 2).
2012-KfW – TA – 1\Organization of the Dialysis Centers
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b. Calculation of project attractiveness
For the preliminary calculation of the project attractiveness the following indicators were
applied:




Debt-Service Coverage Ratio (DSCR/ ratio between net income and debt service
Net Present Value (NPV)/ net discounted project cost (net present value)
Internal Rate of Return (IRR)/Profitability ratio (internal project profitability)
Return on Equity (RoE)/ Fixed assets return
Ratio Calculation based on the basic assumptions is given in the Attachment (Table of Ratio
Calculation ).
Table 6: Project Ratio Calculation
Coefficient
Index
Option 1
1.52
Index
Option 2
1.18
Net Present Value (NPV)/ net discounted project cost
(net present value) – at the discount rate 15.74%
€ 1,341,043
€1,548,246
Internal Rate of Return (IRR)/Profitability ratio
(internal project profitability)
48,43%
47,88%
94%
77%
Debt-Service Coverage Ratio (DSCR/ ratio between
net income and debt service
Return on Equity (RoE)/ Fixed assets return
All calculations are preliminary and based on the data collected during the consultant's work
with the staff of the medical institutions, the MoH and suppliers of consumable materials and
equipment (with whom MoH has signed delivery contracts). It is assumed that during
preparation of a detailed FS more precise calculations will be made.
Pay-off period of the project is 3 years for both options, operation of the departments has a
positive cash balance since the first year, in spite of the debt service.
For comparison, taking into account that at present the MoH and the FOMS pay in total
about €690.000 to both departments (which are proposed for merger) for providing services
to 70 patients (which equals €9.850 per 1 patient per year), in the proposed option 1 total
cost of providing service would amount to €10.080 per 1 patient including equipment and
repair costs, i.e. cost of service will increase by € 230 per annum, but the MoH will be
released from its obligations for equipment purchasing, maintenance and procurement of
the consumables in long term prospect.
7. Risks and Management
At the time of the Memorandum preparation unfortunately the Risk Assessment Guidance
has not yet been developed by the Ministry of Finance of the Kyrgyz Republic (as the
authorized body for risk management), and therefore risk assessment was made on the
basis of the previous experience in similar projects8.
8
European PPP Expertise Center: A Guide to Risk Guidance, 2010
2012-KfW – TA – 1\Organization of the Dialysis Centers
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The following risks may affect development and operation of the Project:
Table 7: Assessment of Project Risks and their Distribution
Risk
Degree
Management
Engaging PrP in this
project
(commercial
risk/supply risk)
low
During the consultations with PrP in the
course of the Memorandum preparation the
manufacturing companies (Gambra and
Braun) expressed their interest in the Project;
Fresenius will be ready to consider the
opportunity after a detailed study of the pricing
policy.
Macro-economic
situation
high
The PP undertakes the long term financial
obligations for the duration of PPP Contract,
comprising the long term obligations of the
government to creditors and investors and this
can highly influence the project development
and its value for money evaluation. The
decision to implement the project will depend
on the will and ability of the Government to
finance this vitally necessary service.
(macro-economic risk)
Construction and
transfer of the building
(construction and
transfer risk)
Economic solvency of
the project
(commercial demand
risk/economic viability)
medium
medium
Project management
(operational risk)
medium to
high
To manage those risks clear qualification
requirements to PrP shall be defined at the
stage of preparation of tender documentation
and requirements to construction/repair of the
building shall be clearly defined in the
feasibility study. It is necessary to define at
this stage who of the partners will have the
building on the balance until its full transfer to
the PP – as it entails certain risks related to
operation of the building and the contract cost.
In order to confirm availability of funds in the
SGP it will be necessary at the feasibility
study stage to conduct a detailed analysis
of the available funds and their distribution
along the budget lines. The preliminary
calculation shows that the financial resources
provided by the state institution for the
procedure are sufficient to cover expenses
and produce profit in the long term view
(Option1)
Open and transparent process for company
selection at the tender stage and opportunity
to get information about the company financial
status may bring down the risk during
implementation period.
Responsibility for
risk management
PP
PrP
PrP
PrP
PrP
In order to establish the standards for the
service quality the tender evaluation should
be based on clinical protocols and
recommendations of International/European
Association of Nephrologists. Further on,
before the department will start operation PrP
shall present for approval clinical protocols for
patients with CKD adapted for KR.
2012-KfW – TA – 1\Organization of the Dialysis Centers
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Project administration
by PP with
participation of PrP in
project management
medium to
high
(government
intervention and
government maturity)
Risk of change of
conditions of financing
of the project.
medium to
high
(financial risk)
This project may be one of the first to be
implemented in health sector and thus the
abilities of the MoH in management of such
project shall be developed via certain trainings
and development of the certain operational
procedures. Roles, rights and obligations as
well as periodicity and forms of reporting for
both parties shall be clearly defined in the
Contract. Additionally, PP support may be
necessary in case of frequent inspections of
the state tax authorities as the risk of such
inspections and interventions is very high.
Monitoring criteria should be defined at the FS
stage in order to permit PrP to elaborate
clearly its strategy and types of necessary
reporting.
Change of the financial conditions and
revision of the Loan Agreement by financial
institutions is rather high, especially taking
into account political instability. Analysis of the
options for financing from stable sources (for
instance, funds of development partners or
banks having stable credit policy) and
preference to project proposals with larger
share of own capital can minimize the risk.
Establishment of the project company with
participation of a credit institution can also be
considered as an option.
Political stability
(political stability)
high
Risk of changes in the political strategy in the
KR is very high, political instability was
mentioned by all market players.
Legislative risks
(legislative risks)
high
The Law on PPP was adopted only in January
2012 and by now not all regulations are in
place (for instance, on the use of land plots for
construction of PPP projects, taxation,
changes in TC and so on). As this project by
90% depends on the state financing it is
necessary to foresee the possibility to render
the project tax preferences under the Article
12 of the Law on PPP (at least for the first 5
years since the Contract signature).
PrP
PrP
PP/PrP
PP
Given the nature of this project, the overall risks evaluation associated with its
implementation is estimated as manageable, in case of demonstration of political will on the
side of the state to provide decent life level to the citizens who need this vital service. For the
PP the risk is minimal because the risk of financing, construction and operation is entirely on
the PrP. In the case of PrP’ failure to execute the contract during the phase of the project
implementation (i.e. after completion the construction and equipping of the building) the PP
can choose another operator – for this the contract terms shall include a clear system of
monitoring, conditions of contract termination and transfer of fixed assets on the balance of
the PP.
8. Preliminary Conclusion
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14
Taking into consideration sufficiently wide experience of implementation of similar projects
abroad, the Project provides a good opportunity for its implementation. At the same time it is
necessary to take into account some obligations that the PP is ready to undertake for a long
term.
 Additional working places are created in the institution (18 persons per 12 devices)
 The process is optimized – at present 10 devices are served by 20 people (НГ), and
there are centers where 5 devices are served by 15 people
 Requirement to the private partner to ensure 3 procedures as a minimum on one
device per day.
 The calculation was performed with account of maximum salaries and includes cost
of equipment, depreciation costs and salary taxes.
 The dialysis machines have performance life of 7 years and should be considered as
consumable material.
9. Recommendations and further steps for project implementation
The following issues require further clarification before the final decision on the Project
implementation is taken:






Final decision of the Government on the future of the project and the structure of the
PPP (including a contract and risks distribution);
Discussion of the proposed tariffs with the anti-monopoly committee and its approval
prior to the signing of the contract;
After approval of tariffs and general concept of the project and clarification of
payment volumes, which are currently provided to the two dialysis departments
(Option 1) – it is necessary to perform more detailed financial and economic analysis.
In case a positive result is obtained, the feasibility study may be launched;
Identification of the procedures, upon which the tender process will be based (Law on
Public Procurements or Regulations (yet to be developed and approved) on the
basis of the Law on the PPP of the KR);
Evaluation of risks and mitigation measures for its management, depending on
distribution of risks referred to in Chapter 7;
Identification of methods of disputes resolution, assessment of financial and
environmental performance of the Project.
After clarification of the above issues the following steps shall be taken for the project
implementation:
A1. PP shall approve the Project proposal with the Ministry of Finance, the Government
Direction, the authorized state body (MEAP) and take a decision for its further
implementation;
A2. PP shall appoint a responsible officer who will coordinate the detailed preparation
and subsequent implementation of the Project;
A3. PP shall prepare a detailed feasibility study of the Project, which will include:
a. Location of the department and the requirements for its design;
b. Outline of the minimum requirements and quality standards of the provided
service;
c. Risks identification based on the guidance of the Ministry of Finance of the
KR, if it is developed at the time of preparation of the document;
d. Definition of the PP and PrP obligations;
e. Definition of the indicators of service monitoring
A4. Finalization of the financial and economic analysis of the Project
A5. Further consultations with private sector representatives and development partners
2012-KfW – TA – 1\Organization of the Dialysis Centers
15
A6. Depending on the method of procurement to prepare tender documents for PrP
selecting
According to the consultant’s assessment about 100 calendar days are necessary to prepare
a detailed feasibility study and the following expert assessments:
Table 8: Calculation of the cost of feasibility study
Type of expertise
Type
expertise
Team leader
of
Number
of
working days
Daily rate
Approximate
in euro
cost
15
950,00
14.250,00
Doctor – nephrologist
local
10
100,00
1.000,00
Doctor – nephrologist
international
5
950,00
4.750,00
Architect/Construction
Engineer
local
3
100,00
300,00
Financial
Analyst
,
experienced
in
risk
assessment (for instance,
Monte Carlo model)
international
5
1.200,00
6.000,00
Financial
Analyst
(financial calculations)
local
10
200,00
2.000,00
Lawyer
preparation)
(contract
local
10
200,00
2.000,00
Lawyer
preparation)
(contract
international
5
1.000,00
5.000,00
Overhead expenses
1
3.500,00
3.500,00
Total
64
38.800,00
It is assumed that all approvals to be issued by the authorized state body (МEAP) including
the approval of the tender documentation and obtaining permissions will be made by an
authorized officer of a profile ministry (MoH).
2012-KfW – TA – 1\Organization of the Dialysis Centers
16
Attachment 1
Preliminary economic and financial analysis
2012-KfW – TA – 1\Organization of the Dialysis Centers
17
Attachment 2
Basic requirements to a dialysis department
This department is envisaged for providing hemodialysis to outpatients with chronical and acute kidney
insufficiency. The department must have easy access, be located if possible at the ground floor, otherwise must
have elevators. The main requirements to the department work organization:

Conduct regular analysis of creatine in serum to estimate glomerular filtration rate;

Should be conducted bedside monitoring of electrolytes and acid-base balance for the consequent
control over dialysis procedure and dietic food;

it is recommended to make in the department systematic tests for indicators of urea, phosphates,
ferritin, parahormone, markers for viruses (hepatitis and immune tests);

it is recommended to invite psychologist and dietitian to work with the patients.
Each hemodialysis cubicle is equipped with:

Electrical bed and haemodialysis chair, with electrically controlled 3 or 4 sections and a thick
comfortable mattress, arm rests and foot rest, for a maximum patient comfort during the 3 to 4 hours
dialysis sessions

Haemodialysis machine, that will pump, filter patient blood through dialyzer, and monitor the process.
Each patient is connected his haemodialysis machine via venous or arterial catheters.

Examination light
In addition, the unit is equipped with the following:

Resuscitation cart, with defibrillator

Multiparameter patient monitor

ECG recorder, for monitoring cardiac activity that can be affected by blood pressure and fluids or ions
removal during dialysis process.

Vascular Doppler, for assessing the quality of peripheral blood flow before setting-up haemodialysis
connexions.

Ultrasound scanner for vascular purposes, to give a more detailed overview of a patient’s vascular
function in various parts of the body.

Point-of-care haematocrit analyzer, to assess patient hemostasis function

Patient hoist

Suction unit

Weighing scales, electronic and mobile

Diagnostic sets and thermometers
2012-KfW – TA – 1\Organization of the Dialysis Centers
18
Patient elevator
Vascular Doppler
Ultrasonic scanner
To ensure high purity of the water used by haemodialysis equipment, a space is dedicated to the
production of purified water by reverse osmosis and quality checks.
It includes:

Reverse Osmosis water treatment system
The water treatment system is used to produce ultra-pure water used by
haemodialysis machines when purifying patient’s blood. After several filtering
and softening steps, the reverse osmosis process removes all electrolytes from
water.

Conductivity meter and tester
Conductivity of input and purified water is monitored in the water plan room and
Typical installation for water
purification and treatment for the
dialysis department
at haemodialysis machines as an indicator of purification process and water
quality.
Personnel Load Calculations for the dialysis department for 12 beds
Load per
staff
member,
machines
Total machines
Nurses
Doctors
Head of the
Department
Technician (8 hours
working day)
Nr of staff
per shift
12
No of shifts
Monthly
salary in
euro
Annual
salary, in
euro
3
3
4
12
200
28800
12
1
3
400
14400
1
1
600
7200
1
1
300
3600
1
1
300
3600
Accountant
Total
57600
2012-KfW – TA – 1\Organization of the Dialysis Centers
19
List of the recommended equipment for dialysis department for 12 beds
1
2
3
4
5
6
7
8
9
10
11
construction
water treatment
clinical equipment
dialysis machine
patients lift
lab refrigerator
lab freezer
meds refigerator
EPO refrigerator
ice machine
oxygen equipment (portable)
infusion pump
IV Pole
glucometer
thermometer
stethoscope
ultrasonic mini doppler
mobile BP modules
infectious waste hampers
emergency evacuation kit
bed pan
trash can
bio-medical equipment
Electrical analyzer/tester
conductivity meter
dialysate meter
water analysis test kit
heat block
portable tool chest & tools
water hardness test kit
Nex-one (for machine repair)
clinical furniture
staff lounge/fixtures
storage fixtures/equipment
business office fixtures
reception/waiting area
computer system
Other/not foreseen costs
TOTAL CAPITAL COST
number
500
1
cost per unit
400
30000
25000
1000
160
285
150
150
300
750
1800
125
90
153
10
600
205
100
155
4
35
12
1
2
1
2
1
1
1
1
1
1
2
6
1
6
2
1
12
12
2300
250
280
25
475
300
35
2100
16300
3000
2000
10000
2000
5000
67.796
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
total cost
200,000
30,000
308,139
300,000
1,000
320
285
300
150
300
750
1,800
125
90
306
60
600
1,230
200
155
48
420
5,765
2,300
250
280
25
475
300
35
2,100
16,300
3,000
2,000
10,000
2,000
5,000
67.796
620.000
2012-KfW – TA – 1\Organization of the Dialysis Centers
20
Attachment 3
PPP definition
To prepare this document the consultant has used the following definition of Public-Private Partnership:
Public-Private Partnership (PPP) means an arrangement between a government / government owned entity on
one side and a private sector entity on the other, for the provision of public assets or public services, through
investments being made and/or management being undertaken by the private sector entity. The agreement
clearly defines a specified period of time of such co-operation, allocation of risks between the private sector and
the public entity. The private entity receives performance linked payments that conform (or are benchmarked) to
specified and pre-determined performance standards, measurable by the public entity or its representative.
Main PPP characteristics in the health sector include:

Initiated by the public sector;

Cooperation of various players, united with the common goal of improvement of public health
based on the earlier agreed roles and principles;

Experience and assets of each sector (public and private) get united for creation of assets or a
company, and delivery of services for the welfare of the whole society;

Financing, long-term management and maintenance of the public infrastructure and/or delivery of
services to the population by a private sector;

Public partner buys a service from a private partner of a certain quality in compliance with the
adopted standards and at the agreed earlier cost;

Based on contract relationships, which are limited in time;

Each of the parties share risks and benefits, emerged from the delivery of services and/or entity
operation.
2012-KfW – TA – 1\Organization of the Dialysis Centers
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2012-KfW – TA – 1\Organization of the Dialysis Centers
22
Attachment 4:
PPP Project cycle
PPP Agencies under the
PPP Law
Project Preparation Stage*
Review
Review
MOF/RMU
LINE MINISTRY
LOCAL GOVERNMENT
Approval of Contract Award
Review or Approval**
GOVERNMENT
PPP AUTHORITY/MEAP
Project Transaction/Execution Stage
Review
Review***
Project
Identification
Information
Memo (Data
Analysis)
Review*
Feasibility
Study (FS)
Consultation
Pre
Qual
Bidding
Bid
Evaluation
Contract
Finalization
and Signing
Construction
and
monitoring
* Main steps shall be made during the project preparation. They may be required to be approved at all the levels:
First, it is a decision on the necessity of a project and feasibility study financing (identification of the sources of funding). Second, it is the
approval for start of the tender procedure after completion of the feasibility study.
** List of decisions/approvals of the Government shall be specified in the Rules of Regulations of PPP Projects, which shall be developed after
enactment of the Law On PPP.
*** In accordance with the Rules of Regulations of PPP Projects it is required for the projects requiring public financing.
**** May be the Information Memorandum, which includes feasibility study project and the budget for conducting of a feasibility study9.
9
Based on recommendations of ADB TA 7819 KGZ for development of PPP mechanisms