06 Aug 2010

The latest research into healthcare PPPs - implications for Australia

by Stuart Cosgriff

The report and the planned ongoing research and analysis are valuable and welcome additions to the discussion on the use of the PPP model in the healthcare sector in Australia.

The key findings of a new report into operating healthcare Public Private Partnership (PPP) projects in the United Kingdom emphasises the benefits that the PPP "whole of life" procurement model can continue to bring to the procurement and operation of healthcare facilities in Australia. Those findings include:

  • PPP hospitals have better patient environment ratings than conventionally procured hospitals of comparable age, in which facilities management services are provided either in-house or by an external third party.
  • PPP hospitals have higher cleanliness scores than non-PPP hospitals of similar age; and
  • the average cost of cleaning for PPP hospitals appears similar to that of non-PPP hospitals. However, the cost of cleaning in PPP hospitals appears to be less variable over the study period.

The report, Operating Healthcare Infrastructure - Analysing the evidence by KPMG and University College London, explores the long-term performance of healthcare infrastructure procured using the PPP model in the UK (also known in the UK as PFI/P3). It provides a comprehensive analysis of key aspects of the operational performance of healthcare PPPs in the UK.

What the report means for Australia's procurement scene

Importantly, the research which underpins the findings of the report is based on an analysis of performance data collected and held by UK's National Health Service.

Australia as a nation is wrestling with the challenge of a growing, yet ageing, population which will place increasing demands on existing resources and infrastructure within the public healthcare sector and must necessarily drive further capital investment in healthcare facilities. The agencies responsible for the procurement of new and upgraded healthcare infrastructure will need to decide not only how to deliver the necessary high quality healthcare facilities, but how to ensure that they operate to a high standard, despite ongoing budgetary constraints.

While the ongoing capital investment in healthcare facilities that is required in Australia will need to undertake many forms, it is likely that procuring agencies will continue to consider PPPs for the delivery of the most complex and capital-intensive healthcare infrastructure projects.

Supporters of the use of the PPP model in the healthcare sector in Australia have tended to highlight the benefits the model brings to the efficient and timely delivery of healthcare facilities. Their arguments have been supported with data on the delivery of facilities using the more traditional procurement models. While supporters of the PPP model have also championed the whole-of-life benefits that the PPP model brings to the management of an operating healthcare facility, there has been less data available in support of these arguments.

It is important that the PPP model can provide value for money over the lifecycle of the PPP project as well as in the delivery of a healthcare facility. The findings of the report indicate that the PPP model does provide that value for money in that it facilitates higher standards of accommodation and cleanliness than traditionally procured hospitals for an equivalent operating cost.

The report and the planned ongoing research and analysis are valuable and welcome additions to the discussion on the use of the PPP model in the healthcare sector in Australia.

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Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this communication. Persons listed may not be admitted in all States and Territories.