Health System Innovation in Lesotho: Design and Early Operations of The Maseru Public-Private Integrated Partnership

Health System
Innovation in Lesotho
Design and early operations
of the Maseru public-private
integrated partnership
Healthcare public-private partnerships series, No. 1
Copyright © 2013 PwC and The Regents of the University of California
The Global Health Group

Global Health Sciences
University of California, San Francisco
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San Francisco, CA 94105 USA
Email: ghg@globalhealth.ucsf.edu
Website: globalhealthsciences.ucsf.edu/global-health-group
PwC
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New York, NY 10017
Website: www.pwc.com/global-health
Ordering information
This publication is available for electronic download from the Global Health Group’s
and PwC’s websites.
Recommended citation
Downs S., Montagu, D., da Rita, P., Brashers, E., Feachem, R. (2013). Health
System Innovation in Lesotho: Design and Early Operations of the Maseru Public-
Private Integrated Partnership. Healthcare Public-Private Partnerships Series, No.1.
San Francisco: The Global Health Group, Global Health Sciences, University of
California, San Francisco and PwC. Produced in the United States of America. First
Edition, March 2013.
This is an open-access document distributed under the terms of the Creative

Commons Attribution-Noncommercial License, which permits any noncommercial
use, distribution, and reproduction in any medium, provided the original authors
and source are credited.
Images
Cover photo provided courtesy of Richard Feachem.
Table of contents
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
UCSF®/PwC report series on public-private partnerships . . . . . . . . . . . . . . . . . . 6
About the UCSF® report series. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
About the Global Health Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
About PwC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
About public-private partnerships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
About public-private integrated partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Audience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Country profile: Lesotho healthcare system and population health status. . . 13
National population and health status. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Healthcare system. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Summary statistics: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Health system need: Replacement of Queen Elizabeth II Hospital. . . . . . . . . . 16
PPIP procurement and contracting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Bid design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Bid response . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Bid evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PPIP contractual design. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Financial terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Capital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Operating expense and financial model. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Unitary payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
User fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Operational terms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Co-location of private services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Access to hospital services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Excluded services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Healthcare public-private partnerships series, No. 1 3

Broader impacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Health system strengthening. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Local economic empowerment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Community development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Independent monitoring and certification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Construction and early implementation:
Financial close to launch of hospital services . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Opening of the filter clinics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Transition from QEII to QMMH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Queen ‘Mamohato Memorial Hospital: The first year. . . . . . . . . . . . . . . . . . . . . 40
Human resources management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Staffing levels and recruitment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Policies and procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Training. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Change management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Information systems. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Quality management and utilization management . . . . . . . . . . . . . . . . . . . . . . . . 43
Supply chain management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Independent monitoring of clinical operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Partnership between Government and Tsepong. . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Public response. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Ongoing and future initiatives in support of the PPIP. . . . . . . . . . . . . . . . . . . . .48
Lessons learned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Lessons learned: Appropriate expertise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Lessons learned: Leadership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Lessons learned: Plan early, plan often . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Lessons learned: PPPs are not a panacea. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Lessons learned: Contractual flexibility. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Opportunities for future evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
4 Health System Innovation in Lesotho

Acknowledgements
We are grateful for the expertise and experience so generously shared during the
development of this report. While the report was prepared by the UCSF® Global
Health Group and PwC, information and insights contained in the report were
provided by the following organizations:
• Apparel Lesotho Alliance to Fight AIDS (ALAFA)
• Clinton Health Access Initiative (CHAI)
• Ditau Health Solutions
• The Healthcare Redesign Group
• Lesotho Boston Health Alliance (LeBoHA)
• Lesotho Ministry of Health and Social Welfare
• Lesotho Ministry of Finance and Development Planning
• Millennium Challenge Corporation
• Netcare Limited
• Partners in Health
• Tsepong (Pty) Ltd
• The World Bank Group

UCSF®/PwC report series on
public-private partnerships
About the report series Health Group has identified public- transport, infrastructure and energy.
This report on the Queen ‘Mamohato private partnerships in general, and While starting considerably later and
Memorial Hospital and the public- public-private integrated partnerships much more cautiously, a parallel trend
private integrated partnership in particular, as a promising model has emerged in the health sector. In
(PPIP) formed for the design, to improve health systems globally, the past ten years, there has been a
construction and operation of the including in developing countries. rapid expansion and acceleration of
hospital (including the provision of interest in public-private partnership
clinical services) is the first in a series For more information about (PPP) models for health, across many
of publications on public-private the Global Health Group, visit: continents and income levels.
partnerships (PPPs) to be jointly globalhealthsciences.ucsf.edu/global-
authored by the UCSF® Global Health health-group. PPPs are a form of long-term contract
Group and PwC. This series aims between a government and a private
to highlight innovative PPP models About PwC entity through which the government
globally and to disseminate lessons PwC is one of the largest healthcare and private party jointly invest in the
learned and leading practices for the professional services firms, advising provision of public services. Through
benefit of current and future projects governments and private enterprises this arrangement, the private sector
around the world. on every aspect of business takes on significant financial, technical
performance, including: management and operational risks and is held
consulting, business assurance, tax, accountable to defined outcomes. PPPs
About the Global can be applied across many sectors
finance, advisory services, human
Health Group resources solutions, and business and typically seek to capture private
The Global Health Group at the sector capital or expertise to improve
process outsourcing services.
University of California, San Francisco provision of a public service.
(UCSF®), Global Health Sciences is an PwC’s Global Healthcare practice
“action tank” dedicated to translating includes more than 5,000 health PPPs are characterized by the long-
major new paradigms and approaches professionals with expertise in public- term nature of the contract (typically
into large-scale action to positively private partnerships, medicine, 20+ years), the shared nature of the
impact the lives of millions of people. bioscience, information technology, investment or asset contribution and
Led by Sir Richard Feachem, formerly clinical operations, business the transfer of some risk from the
the founding Executive Director administration and health policy. public to the private sector. These
of the Global Fund to Fight AIDS, features distinguish a PPP from
Tuberculosis and Malaria, the Global As healthcare becomes increasingly other contracts existing between
Health Group works across a spectrum, interconnected with other industries, governments and the private sector,
from research and analysis, through PwC’s global reach and resources help which might not be considered PPPs.
policy formulation and consensus governments, businesses and industry
building, to catalyzing large-scale players accomplish their missions in a PPPs provide governments with
implementation of programs in dynamic and competitive environment. alternative methods of financing,
collaborating low- and middle- infrastructure development and/or
income countries. For more information visit www.pwc. service delivery. Ideally, PPPs also give
com/global-health private parties the opportunity to “do
One of the Global Health Group’s well while doing good.”Ref 9 PPPs can
programmatic focus areas is the role About public-private make private capital investment more
of the private sector in health systems attractive to the private sector, reduce
partnerships the risk profile for private investment
strengthening. The Global Health
The past three decades have witnessed in new markets or otherwise ease
Group studies a variety of innovative
a growing tendency by governments barriers to entry in new markets, all in
delivery platforms that leverage the
of countries at all income levels to service of defined public policy goals.
strengths of the private sector to
seek out long-term partnerships with
achieve public health goals. The Global
the private sector in domains such as

In healthcare, the public-private aim to be “cost neutral” to patients, A successful PPIP must exist for a
partnership approach can be applied who incur the same out-of-pocket decade or more to give both public
to a wide range of healthcare system payments, usually zero or minimal, and private partners sufficient time
needs: construction of facilities, as they did in the previous, often to develop sustainable systems,
provision of medical equipment or dilapidated and perhaps poorly run processes and overall operations
supplies or delivery of healthcare public facilities. These facilities revert based on informed strategic
services across the spectrum of care. to government ownership at the planning and improvement through
While relatively simple “design, end of the contract term, ultimately feedback loops.
build, finance and maintain” models, guaranteeing government ownership
like the British hospitals built under of the facilities. Ref 7,23 • Risk transfer: Under the DBOD
private finance initiatives (PFIs), model, the private partners, not
remain the most commonplace, an PPIPs are characterized by the the government, are responsible
increasing number of governments following four key attributes: for meeting defined service quality
are experimenting with or considering benchmarks. In this way, the private
• A design, build, operate and partners assume risk for delays and
more ambitious models, including
deliver (DBOD) model: The cost overruns in the construction
public-private integrated partnerships
private partner or consortium phase as well as ongoing operational
(PPIPs), which include the provision
designs, co-finances, builds, risk including human resource
of clinical services within the private
operates and delivers clinical care issues and failure to achieve
sector scope of the PPP. Ref 23
in one or more health facilities, efficiency in service delivery.
often including a tertiary hospital Governments remain involved in
About public-private and surrounding primary and ensuring service quality through
integrated partnerships secondary facilities. This model regulation, contract management
This case study focuses on the Queen is commonly called a “DBOD”. and/or monitoring activities. Ref 7,23
‘Mamohato Memorial Hospital, a PPIP Unlike other PPPs, PPIPs go beyond
in the Kingdom of Lesotho. private investment in buildings and PPIPs are further characterized by
maintenance, as the private partners their motivating policy goals:
PPIPs are a special form of PPP, are also responsible for delivering
designed to achieve significant and all clinical services at the facilities, • Quality of care: Improved quality
sustainable improvements to health from surgery to immunization to of care for all at the PPIP facility and
systems at national or sub-national ambulance services. possibly across the health system;
levels through both capital investment
and service delivery. Ref 7,23 • Government ownership of • Equity of access: Unrestricted
assets: The healthcare facilities access to PPIP facilities by all,
PPIPs position a private entity, or are ultimately owned by the regardless of income level or
consortium of private partners, government upon termination social status;
in a long-term relationship with a of the PPIP contract.
government to co-finance, design, • Cost neutrality: No change in
build and operate public healthcare • Long-term, shared out-of-pocket costs for patients
facilities and to deliver both clinical investment: A PPIP comprises utilizing a PPIP healthcare
and non-clinical services at those a long-term commitment by both facility and, in some cases, cost
facilities for a long-term period. PPIPs the government and the private neutrality for the government’s
enable governments to prudently partners to provide health services annual expenditure for the PPIP
leverage private sector expertise and for a defined population. Both facilities and services relative to
investment to serve public policy partners invest significant resources conventionally built and operated
goals, specifically the goal of providing into the project, supporting long- facilities. Where both measures of
high-quality and affordable preventive term dedication and a common cost neutrality are achieved, the
and curative care to all citizens. PPIPs interest in successful outcomes. PPIP has achieved “cost neutrality
squared,” or “(cost neutrality)2”;

• Predictable government health budgeting departments) can ensure Methodology
expenditures: Fixed payments to that upon completion, cost-efficiency Between January and October
support predictability in healthcare and other data from the project are 2012, study researchers conducted
budgeting and stability of national made available to the public. In qualitative interviews in Lesotho,
health expenditures; and developing countries, project data South Africa, and the United States.
have not been made publicly available, Participants included employees of
• System-wide efficiency gains: but greater transparency should be an Tsepong (Pty) Ltd, Netcare Limited,
High and transparent standards important goal for future projects. the Lesotho Ministry of Health and
for service delivery and outcomes Social Welfare, the Lesotho Ministry
with the potential for raising We hope that this report and of Finance and Development Planning,
performance expectations and associated publications, including the World Bank Group and multiple
accountability for the entire national future reports in this series, will non-governmental organizations
healthcare system. Ref 7,23 enhance the literature and evidence (NGOs) with operations in Lesotho.
base for PPIPs (and other innovative
Finally, effective management of PPP models) and contribute to The authors of this publication also
inherently complex PPIPs necessitates a growing understanding of this conducted grey and peer-reviewed
careful monitoring being carried out important alternative for improving literature reviews on PPPs, PPIPs and
independently when necessary. In healthcare infrastructure and clinical the Lesotho PPIP specifically to inform
an ideal model, a jointly appointed delivery around the world. Some the development of this case study.
independent monitor routinely have argued that PPIP solutions are Print and web references are listed at
assesses project performance against not scalable or generally applicable, the back of this report, and citations
metrics and outcomes mutually especially in very low-income settings. throughout the document refer to
developed by both the public and While low income settings will require sources by the numbers established in
private partners. Appropriate penalties careful specification of required this list of references.
and/or rewards are clearly tied to services versus nonessential services
assessed performance. Ref 7,23 In previous and careful consideration of the long-
publications, the Global Health Group Audience
term affordability of contract design,
has noted that data collection around The primary audience for this report
the example presented here clearly
PPIPs is challenging. Ref 7 In general, is the governments of low and middle-
demonstrates that a PPIP solution
while showing a positive trend, the income countries (LMICs), including
is possible even in a resource poor
available academic literature is lacking policymakers in ministries of health
environment. Still, each PPIP must
analyses of—and even summary and ministries of finance. This report
be tailor-made for its unique purpose
information on—PPIPs. Often there may also be helpful to others studying
and circumstances. There are common
are commercial sensitivities and how best to leverage the private sector
lessons and themes, but there are
legalities that inhibit both public to strengthen health systems, including
also myriad details which are site-
and private actors from revealing donor agencies, non-governmental
and context-specific. These details
financial data, health outcomes and organizations, academic institutions
matter and getting them right is, and
other project details. In high-income and private health entities.
will continue to be, at the heart of
countries, political and regulatory success. Ref 7,23
factors (including national audit and

Executive summary
After a decade-long planning effort, Following a competitive tender consortium contributed approximately
Queen ‘Mamohato Memorial Hospital process, Tsepong (Pty) Ltd, a $500,000 in equity toward capital
(QMMH) opened to serve the people consortium comprised of the private expenditures. Annual unitary
of Lesotho on October 1, 2011. The South African hospital operator payments of approximately $30
project represented the first time a Netcare and various local partners, million, which reimburse Tsepong’s
Public Private Integrated Partnership was selected as the preferred bidder capital and operating expenses, were
(PPIP) was established in sub-Saharan and ultimately contracted with the not scheduled to begin until hospital
Africa and, moreover, in a lower Government to design, build and construction was complete, so a $6.25
income country anywhere in the construct a 425-bed (390 public beds, million grant from the World Bank’s
world. The project was also the largest 35 private beds) hospital and attached Global Partnership for Output-Based
government procurement of health gateway clinic, refurbish and re-equip Aid (GBOPA) was arranged as part of
services in Lesotho history. three urban filter clinics and then the PPIP contract.
provide all clinical and non-clinical
Lesotho is a small, mountainous nation services for the duration of the 18-year With the contract, the Government
of 11,720 square miles (30,335 sq km) contract. Taken together, the hospital greatly expanded the scope, quality,
entirely surrounded by the Republic and filter clinics formed a health and volume of services available
of South Africa, with a population of district that supported application of through the new national referral
around 2 million people. Lesotho’s integrated care to improve efficiency hospital with an approximate 7.5%
greatest healthcare challenge is the and expand access to services for increase in annual operating cost as
HIV/AIDS pandemic: 23% prevalence Maseru and the Kingdom of Lesotho. compared to QEII. User fees at QMMH
in the adult population. The Lesotho This ambitious project placed were equal to fees at other public
healthcare system is predominantly particular emphasis on health system hospitals, so patients paid no more for
publicly funded (61% of total health strengthening and local economic significantly improved care at QMMH,
expenditure, 57% public hospitals), development and, if successful, could which is accessible by referral only.
and healthcare spending represents provide a template for similar projects
11.1% of GDP. Independent monitors were appointed
across the African continent.
to evaluate the quality of both
In 2000, it became apparent that the The Government made significant construction and operations phases,
national referral hospital and district up-front payments for hospital and formal structures were established
hospital for Maseru (Lesotho’s capital), construction and construction in the PPIP contract for joint oversight
Queen Elizabeth II (QEII) required site preparation (approximately by Tsepong and the Government.
replacement. After conducting a US $58 million) so as to reduce
feasibility study and evaluating the risk profile of the project and
multiple alternatives, the Government reduce downstream annual unitary
elected to proceed with a PPP solution payments. Approximately $95 million
for hospital replacement. After in financing was arranged through
engaging transaction advisors, the the Development Bank of Southern
Government issued a tender for a Africa (DBSA) and the Tsepong
PPIP project, posing the question to
the private sector: for the same level
of expenditure at QEII, how much
more can the private sector provide
in quality, breadth and volume of
healthcare services?

Figure1:1—PPIP
Figure contractual
PPIP contractual design
design
Construction Operations
Independent monitor
PD Naidoo Direct agreement Direct agreement Turner and Townsend
and Associates • Independent monitor
Regular inspections
Review & final certifications
• Independent certifier
Direct agreement Direct agreement
Government of Lesotho
Lenders PPIP
Financers/owners
Payment
direct agreement agreement
Debt/equity Tsepong, LTD

Development Bank of
• Netcare—40%
South Africa
• Excel Health—20%
• Lender/Bank Capital/interest • Afri’nnai—20%
• Women Investment Company—10%
• D10 Investments—10%
Payment Payment
RPP Lesotho 1 National hospital Facilities management Netcare hospitals

Construction
Sub-contracting
• Construction 1 Gateway clinic Clinical services • Clinical services
contractor 3 Filter clinics • Soft facilities &
Facilities equipment management
management
Clinical services
Botle Facilities
Management
• Hard facilities
Patients management
While the hospital had only been open • Significant cultural change for including improved clinical
for one year at the time of our data nurses, physicians, and staff outcomes for patients and an
collection visit, numerous lessons can working at QMMH; improved work environment for
still be learned through the Lesotho employees. Operations at QMMH
experience. Notable challenges to • Negative media reaction during the have been transformed through
date include: project’s first months; application of strong management
systems and leadership, installation
• Significant, immediate demand • Challenges for physician
of new equipment and current
for healthcare services at the recruitment due to comparatively
information technology. Early
newly opened filter clinics and low salaries; and
achievements include:
hospital that has greatly exceeded
• Delays in establishing PPP units in
contract targets in the first year • Opening of the first Intensive Care
the Government and strengthening
of operations; Unit and Neonatal Intensive Care
the Government’s contract
Unit in Lesotho;
• Payment delays (both the GBOPA management capabilities.
grant and periodic unitary payments • Reported improvement in maternal
Despite these challenges, both
from the Government); and infant mortality, post-surgical
public and private parties reported
mortality, and clinical management
significant early achievements,
of HIV/AIDS and related diseases;

• Establishment of guidelines and similar PPIP or PPP initiatives, • Build government capacity for
incentives that have translated into including the need to: contract management from the
improved staff performance; outset of the project.
• Customize the PPP solution to local
• Investment in significant training healthcare needs, as established Overall, the case study of QMMH
programs to enhance the skills in comprehensive baseline or demonstrates the ability of a lower
of QMMH employees and feasibility studies; income country to engage the private
strengthen the broader Lesotho sector in new ways and, in a relatively
healthcare system; • Access broad, appropriate expertise, short period of time, transform the
including local knowledge; quality of care being provided to
• Immediate reduction in costs its population. Future success will
associated with drug purchasing • Assign strong project leadership
depend on the project’s ability to
and the treatment abroad and develop a pipeline of next
weather changes in public and private
program; and generation of public and private
leadership and manage significant
leaders early on;
demand for healthcare services to
• Formation of a strong partnership
• Develop extensive plans and avoid allowing QMMH to become
between public and private parties.
training programs early in the “an island of excellence” within a
Despite the early stage of the project, project effort; and struggling health system. Future
the Lesotho experience already holds evaluation and greater availability and
many lessons for others considering transparency of project data will be
essential to establish the impact and
success or failure of the project.
Figure 2: PPIP timeline

Figure 2—PPIP timeline
October 2008:
Contract execution/
commercial close,
subject to financing clause
March 2009: October 2011:

Financing clause QMMH and Gateway
signed/financial Clinic open for
Hospital replacement IFC retained as close. Construction business under
need identified transaction advisors begins Tsepong management
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2026
Completion of May 2010: March 2026:

initial feasibility Refurbished Completion of
study to evaluate urban filter clinics 18-year contract
options for open for business
replacing QEII under Tsepong
management
Project tender October 2007: December 2007:
documents Deadline for Preferred bidder
issued vendor announced
response/bid
submission

Introduction
After a decade-long planning effort, This report describes in detail the

Queen ‘Mamohato Memorial Hospital history and structure of the Lesotho
(QMMH) opened to serve the people PPIP, comments on the project’s early
of Lesotho on October 1, 2011. experience and extracts “lessons
The project was the first PPIP to be learned” for others considering similar
established in sub-Saharan Africa and, initiatives to improve healthcare
moreover, in a lower income country infrastructure and clinical services
anywhere in the world. Ref 7 The through a PPP. While the project has
project also represented the largest been described in snapshot documents
government procurement of health and presented at conferences around
services in Lesotho history. Ref 1 the world, this report presents for the
first time a comprehensive description
The PPIP replaced the aging national of the project design and outlines the
referral hospital, Queen Elizabeth implementation experience to date.
II (QEII), which also served as the
district hospital for the population
of Maseru, the capital city. Similar
to QEII, the new hospital also
serves as the major clinical teaching
facility for all health professionals in
Lesotho. The ambitious project places
particular emphasis on health system
strengthening and, if successful, could
provide a template for similar projects
across the African continent. While the
hospital had only been open for one
year during our data collection visit,
numerous lessons can still be learned
from the Lesotho experience, from
project conception to early execution.

Country profile: Lesotho healthcare system and
population health status
National population and Lesotho’s greatest current healthcare Over time, with improved HIV/
health status challenge is the HIV/AIDS pandemic. AIDS treatment and continuing
Lesotho is a small, mountainous nation Lesotho has the third-highest demographic trends, Lesotho’s
of 11,720 square miles (30,335 sq km) HIV/AIDS prevalence rate in the health focus is expected to shift from
entirely surrounded by the Republic world: 24% prevalence in the adult infectious to non-infectious diseases.
of South Africa. It has a population population.Ref 26 The pandemic has In planning for replacement of the
of around 2 million people (0.8% per also contributed to high rates of QEII hospital, the Government of
annum population growth between tuberculosis infection (17% and Lesotho (“Government”) anticipated
1996 and 2006; 2.194 million people 14% among male and female adults, a rise in chronic diseases, including
in 2011). Ref 26 Local currency is the Loti respectively) and a significant decrease diabetes, heart disease and chronic
(plural, Maloti, abbreviated M), which in life expectancy, which has decreased treatment for HIV/AIDS patients who
is pegged at a value equal to the South from 59 to 48 since 1990. Ref 26 live longer on advanced treatment. Ref 2
African Rand. Seventy percent of the
Rising maternal and child mortality
population is employed in agriculture
rates are also a significant and
Healthcare system
(often subsistence agriculture). The Lesotho health system is funded
increasing healthcare issue for
Other local industry includes limited through a combination of domestic
Lesotho. Although 92% of pregnant
diamond mining and textile factories. government and international donor
women receive prenatal care and
The national unemployment rate is funds. Lesotho spends $109 per
62% of births are performed by
25.3% Ref 26 and many seek work in capita on health and the country’s
medical professionals (up from 55%
surrounding South Africa. Lesotho total expenditure on health is 11% of
over the past five years), maternal
earns a significant portion of its GDP. Ref 5, 26
and infant mortality rates (MMR and
national revenue through a share in
IMR, respectively) are the highest The Government is the major
regional customs receipts distributed
in southern Africa and appear to be source of health funds, and has
through the Southern African Customs
trending upwards (MMR is at 1200 increased its contributions to health
Union (SACU) and the export of
per 100,000 live births; IMR at 63 spending over the past decade. This
water from the Lesotho highlands to
per 1,000 live births).Ref 26 Under- contributes to the health system’s
South Africa.
five mortality is also on the rise at relative sustainability compared to
Divided into 10 administrative 86 per 1,000 live births, with 80% other countries in southern Africa.
districts, Lesotho varies from of deaths occurring in the first year While the Government provides
western lowland river valleys to of life. HIV/AIDS is certainly one a high percentage of funding for
foothills to high mountains, where significant factor in this trend. Low antiretroviral drugs, donors still
much of the country is accessible rates of breast feeding and early provide the majority of funding for
only via air or horseback. Lesotho is introduction of supplemental foods HIV/AIDS programs, thus making the
mostly rural, with only 27% of the may also contribute to stunting and fight against HIV/AIDS vulnerable to
population living in urban areas. Ref 26 malnutrition and impact health donor withdrawal. Ref 5
Approximately 225,000 people live status; 39% of children under age
in or around Maseru, the capital city five experience stunted growth and
and home to the new QMMH. Official 15% experience severely stunted
languages are English and Sesotho; growth. Ref 26 Meanwhile, the fertility
and the population is 99% Basotho rate has declined over the past three
(singular Mosotho). decades, with a total fertility rate of
3.0, one of the lowest in sub-Saharan
Africa. Ref 26

Public and private expenditures as a Tertiary facilities in Lesotho, namely Lesotho has been an early adopter of
percentage of total health expenditure the QEII, its successor the QMMH, the many programs and demonstrates a
are 76% and 24% respectively, with Tuberculosis Hospital and the Mental willingness to innovate in response
private expenditure being almost Hospital, are all located in Maseru. to existing and emerging healthcare
entirely out-of-pocket (96%).Ref 5,26 challenges. In recent years, the
The distribution of hospitals is also The Lesotho health system faces Ministry of Health has supported
primarily in the public sector (57%), significant challenges in human new programs aimed at addressing
with the non-profit and for-profit resources for healthcare (HRH). access problems due to challenging
private sectors representing 38% There are insufficient numbers geography, new HIV/AIDS testing
and 5%, respectively.Ref 5 Since 2007, of health professionals in several programs to support improved follow-
Christian Hospital Association of cadres (pharmacists, medical up with patients who may test positive
Lesotho (CHAL) non-profit hospitals doctors, dentists) and an inability and new contractual relationships
have been financed primarily by the to produce select cadres of staff with private healthcare providers. The
Government, such that these facilities (medical doctors, radiographers, QMMH PPIP is the most recent and,
are effectively government-funded but physiotherapists, dental therapists) perhaps, the most striking example
privately operated. in the country. Furthermore, regional of Lesotho’s willingness to innovate
and international demand for through ambitious healthcare projects
Each of Lesotho’s ten administrative HRH is causes scarce resources to to improve the delivery of care to
districts has a district hospital emigrate. The lure of higher salaries its citizens.
providing primary and some for healthcare professionals in
secondary services. Each district South Africa is particularly serious
also has a network of primary health for Lesotho given the proximity and
care centers or local clinics. Ref 5 close economic ties between the
Despite significant demand for two countries. The very high HIV
hospital services, occupancy rates at prevalence rate and resulting increase
the district and CHAL hospitals are demand for healthcare resources will
regularly below 50%. Likely due to continue to exacerbate Lesotho’s HRH
patients’ perceptions of service quality, shortage. Ref 5
occupancy rates at CHAL hospitals are
consistently higher than at Ministry
of Health-run district hospitals.Ref 2

Summary statistics:
Table 1: LESOTHO SUMMARY STATISTICS
Population 2.194 million
Median age Male: 22.8 years
Female: 22.9 years
Total: 22.9 years
Percent urban / rural Urban 27%
Rural 73%
Unemployment rate 25.3%
Adult literacy rate Women: 95%
Men: 83%
Gross national income per capita US $1,220
Per capita total expenditure on health US $109.00
Total expenditure on health as percent of gross domestic product 11%
Private expenditure on health as percent of total expenditure on health 24%
Life expectancy at birth (male / female) Male: 48
Female: 47
Maternal mortality rate (MMR) per 100,000 live births 1,200
Infant mortality ratio (IMR) per 1,000 live births 63
Under 5 mortality rate per 1,000 live births 86
Total fertility rate (TFR) 3.0
Pregnant women receiving prenatal care 92%
Percent births attended by skilled health personnel 62
Prevalence of overweight in adults age 15+ Women: 71%
Men: 30%
HIV prevalence in adults age 15-49 24%
TB prevalence rate (per 100,000 population) 402
Source Key
Lesotho Bureau of Statistics: http://www.bos.gov.ls/
CIA The World Factbook: https://www.cia.gov/library/publications/the-world-factbook/
World Bank: http://databank.worldbank.org/

Health system need: Replacement of
Queen Elizabeth II Hospital
In 2000 the Lesotho Ministry of Health Further, many services were existed. Only a single PPP project had
undertook a comprehensive strategic unavailable through the Lesotho public been executed prior to groundbreaking
planning exercise, which identified health system and required referral for on the hospital project: at the
that the QEII hospital, the national treatment in South African facilities at suggestion of the Ministry of Finance,
referral hospital and district hospital premium prices. In 2001 this treatment the Ministry of Health’s headquarters
for the population of Maseru, required abroad program cost the Government were consolidated into a single
either replacement or extensive M10 million ($1.2 million)1 and building that was constructed through
refurbishment. The facility was periodic price increases at contracted a PPP and completed in November
plagued by dilapidated infrastructure, Bloemfontein facilities indicated 2007. The project was deliberately
poor management systems and human this program would fast become pursued as a testing ground for future
resource shortages, all of which were unsustainable. Ref 2 PPP projects and was seen as a success:
contributing to a significant decline the Ministry of Health’s headquarters
in service quality. Spending was In response to this identified need, were notably of higher quality than
inefficient and escalating at a fast the Ministry of Health commissioned similar buildings and supported more
pace: the operating budget for QEII the Lesotho Boston Health Alliance efficient operations for the Ministry
had grown by 50% between 1995 and (LeBoHA) to conduct a feasibility of Health without a significant up-
2000, during the same period that study to evaluate various options for front capital expenditure by the
service volumes and quality were replacement of the aging facility. The Government. This initial success on
declining.Ref 2 Rigid public service rules study confirmed the need to build a a smaller project and the experience
undermined an effective, responsive new facility to replace QEII and noted gained through the process was
operation that might have better the limited management capacity of sufficient to give the Government
evolved to meet new healthcare the Ministry of Health, which was confidence to pursue a PPP option for
challenges and correct operational judged insufficient to effectively replacement of the new hospital.
inefficiencies. In the Lesotho Ministry operate a hospital as complex as the
of Health, these challenges included national referral hospital. This initial At the outset of planning, the capital
a highly centralized organizational study, finalized in 2002, suggested that cost for building a new hospital was
structure that concentrated a private or parastatal entity should estimated at M120 billion ($14.2
decision-making power in only a few be contracted to manage hospital billion), but the annual Ministry of
individuals, a slow and burdensome operations, and that an “arms-length” Health capital budget was only M80
personnel disciplinary process, a relationship between the Ministry and million ($9.5 million). Given this
promotion and reward structure the new entity be established. Ref 2 capital constraint, four options for
focused on educational credentials hospital replacement were considered:
Prior to embarking on the QMMH
and seniority rather than skill
PPIP, Lesotho had limited experience 1. Finance the full capital sum from
advancement, a slow accounts payable
with public-private partnerships in any the Government domestic budget
process that often led to significant
sector. No PPP framework or policy with the Government overseeing
delays in vendor payment and a weak
the construction phase and
data collection and reporting process 1 The OANDA currency calculator, available
at www.oanda.com, was used to convert subsequently managing clinical
to support planning and operations.Ref 2
project costs into US dollars. Currency and non-clinical services in the
conversions are based on exchange rates in new facility.
August 2012.

2. Borrow from the World Bank or
other third party who might lend Transaction advisors
money on concessional terms
with the Government overseeing Transaction advisors are independent advisors often engaged
construction and subsequently by governments embarking on complex PPP arrangements.
managing clinical and non-clinical These advisors (individuals, firms or a consortium of firms and
services in the new facility. individuals led by a primary advisor) can provide a government
3. Construct the new hospital with a range of transaction advisory services, including strategic
building under a PPP arrangement planning, feasibility and market studies, project marketing,
similar to the Ministry of Health tender issuance and evaluation support, financial and commercial
headquarters project with the expertise and implementation and post-deal support. Transaction
Government managing clinical
and non-clinical services following
advisors may also be engaged by private sector parties responding
construction. to a tender. These private sector transaction advisors might support
the private sector through feasibility studies, financial structuring,
4. Tender for a single operator to negotiation support, and implementation and post-deal services.
design, build, partially finance and
operate the hospital, including In the case of the QMMH PPIP, the IFC served as the primary
full provision of clinical and non- transaction advisor and drew on technical experts, such as LeBoHA
clinical services and employment researchers, as required to advise the Government throughout the
of all personnel. Ref 24 PPP process.
In 2006, after evaluating alternative
options, the Government elected to
proceed with a PPIP model (Option 4 • Government budget stability The decision to pursue a PPIP
above) to replace QEII and engaged through defined and predictable approach was made by the Prime
the International Finance Corporation expenditures over the long-term; Minister and his entire cabinet.
(IFC) of the World Bank Group as While the project was initiated and
transaction advisors. • Cost neutrality for patients; managed primarily by the Ministry of
Finance and the Ministry of Health,
The decision to pursue a PPIP model • Transfer of risk to the private sector
the broader cabinet was consistently
was bold given the Government’s for construction delays or cost over-
updated on project progress and
limited experience in managing PPPs, runs on a significant and complex
educated on key issues related to
the lack of a legal framework for PPPs, building project;
the project. The Minister of Finance
and the complexity of the project and Development Planning served
• Transfer of significant operational
under consideration. Nonetheless, the as a strong champion of the project,
risk for a complex healthcare
Government determined that a PPIP working to build broad government
operation to the private sector,
model would best serve the policy support for the initiative. Additionally,
while capturing efficiencies from
goals of the Government by offering: he led relations with major external
private sector management; and
parties such as the World Bank /
• A comprehensive solution that made
• Opportunities for Basotho-owned IFC and the Development Bank of
capital expenditures affordable in
businesses and local economic Southern Africa.
the short-term;
empowerment. Ref 19

Table 2—Key players—Public sector & advisors:
Organization Description Role Date of First Involvement
Ministry of Health and The mission of the Ministry of Health and The Ministry of Health initiated the 2002
Social Welfare Social Welfare is “to facilitate an establishment assessment of alternatives replacement
and system that delivers quality health care of QEII between 2002 and 2006. Once
efficiently and equitably, and that will guarantee a PPIP approach was selected, the
social welfare for all.” Ministry was extensively involved in
planning for healthcare operations and
(http://www.gov.ls/health/)
delivery of care in QMMH. Now that
the PPIP is operational, the Ministry
provides primary operational oversight
on behalf of the Government for
QMMH operations.
Ministry of Finance The Ministry of Finance and Development The Ministry of Finance was 2006
and Development Planning is a central coordinating Ministry in instrumental in advocating for a PPIP
Planning charge of: solution for replacement of QEII and
served as a major champion of the
• Economic policy formulation, advice and
project at the Cabinet level. During the
analysis;
tender process, Ministry representatives
• Operation of public financial management
spearheaded contractual negotiations
and financial reporting;
and financing and led relations with
• Collection, analysis and dissemination of
the World Bank/IFC and other external
statistical data;
stakeholders. Now that the PPIP is in
• National development planning, monitoring
operation, the Ministry participates
and evaluation;
in formal project oversight activities
• Formulation and monitoring of Government
with a focus on controlling costs and
budget;
ensuring project activities conform to
• Private sector capacity building, pension and
contractual requirements.
medical aid scheme, maintaining a record of
all government assets;
• Provision of loan bursaries to students; and
• Evaluation of internal controls and systems
and advice.
(http://www.finance.gov.ls/home/)
Lesotho-Boston The collaboration of Boston University and Initially hired by the Ministry of Health 2002
Health Alliance Boston Medical Center activities in Lesotho is to evaluate various alternatives for
(LeBoHA) officially known as the Lesotho-Boston Health replacing the QEII Hospital, LeBoHA
Alliance (LeBoHA), a registered public trust in eventually became consultants to the
Lesotho. IFC and the Government throughout
the PPP process. From 2002 to 2010,
LeBoHA aims to strengthen management,
LeBoHA researchers developed
policy, planning and clinical capacity in the
multiple reports to establish health
health sector of Lesotho.
needs, health status baselines and cost
(http://www.bu.edu/lesotho/) baselines for the health system. Their
2002 report laid the groundwork for the
hospital facility and services design and
suggested an “arms-length” relationship
between the Ministry of Health and the
hospital operator.
International Finance IFC, a member of the World Bank Group, is a Engaged as transaction advisors to the 2006
Corporation (IFC) development institution focused exclusively Government, the IFC advisors consulted
on the private sector in developing countries. on and facilitated contract creation
Strategic priorities include addressing and financing arrangements. Following
constraints to private sector growth in commercial and financial close, the IFC
infrastructure and health in emerging markets. mobilized for consulting support and
other arrangements to strengthen the
(www.ifc.org)
Government’s ability to manage the
QMMH PPIP.
PPIP procurement and contracting
Figure 3—PPP procurement process

Generally, PPP procurements proceed according to the following process: Ref 6
Stage 1: Project identification
Government authority conceives PPP idea and Government sponsors engage external
develops business case transaction advisors
Stage 2: Preparation
Government develops Government conducts Government develops Government issues public

project plan risk assessment and tender document procurement notice
and timetable financial and
commercial analysis
Stage 3: Project selection
Vendors submit Government Vendors submit Government holds a Government

pre-qualification selects short-list bid documents bidders conference evaluates tenders
questionnaire of vendors to and engages in and identifies a
receive an competitive dialogue preferred bidder
invitation to tender
Stage 4: PPP contract and financial close
Government negotiates PPP Financial agreements conclude Deal consummates with financial
contract details with the between Government and and commercial close
preferred bidder preferred bidder
Bid design • To improve the quality of services; and making some tough decisions, such
With IFC engaged as a transaction as the size of the PPIP hospital. While
advisor, the Government finalized • To accomplish expanded access LeBoHA projections anticipated that
its project concept and proceeded and improved quality within the demand for hospital beds at the new
with the procurement process in Government’s affordability limit.Ref 4 PPIP hospital would reach 435 beds
2006 and early 2007. Throughout the by 2006, and 653 beds by 2026,Ref 2
Throughout the initial planning
bid design process, the Government the Government needed to balance
process, the Government worked to
and its advisors balanced three this need against the affordability
ensure that the outcome of the tender
competing demands: of the project in the near and long-
process would be affordable for future
term. In the end, the Government and
• To procure as many services for as budget allocations over the lifetime of
its advisors elected to plan for just
many people at the hospital and the PPIP contract. Ref 4 This included
425 beds.
filter clinics as possible;

To define the clinical services that
should be included in the project QMMH PPIP at a glance: Policy goals
tender, the Government and the
IFC consulted with a broad range of In concept and design, the bid request furthered multiple
stakeholders that included Ministry of policy goals defined by the Government and its transaction
Health staff, QEII clinical employees, advisors. Through the project, the Government hoped to address
private practitioners in Lesotho and the following:
international technical advisors
(including LeBoHA researchers). Quality of Care:
This process helped to build broad
• Improvement in quality of services delivered to the population of Maseru and
support for the project while balancing
those referred to the national referral hospital from outlying districts;
affordability with expansion of
services. Ref 4 • Expansion of clinical services available in Lesotho;
Cost Neutrality:
In advance of formally issuing the
tender, the Government and IFC • Fees for patients relatively equal to fees at all other Ministry of Health facilities;
facilitated discussions with the private • Future healthcare expenditures at or near the current level of expenditure for
sector to gauge and cultivate interest in QEII after adjusting for inflation;
the project. The final tender document
Efficiency to Expand Access:
was further refined through this
market research and conversations • Greater efficiency in deployment of healthcare resources, with the PPIP
with private sector parties with hospital treating more patients per annum than QEII with a similar budget;
previous PPP experience. • Expanded access to healthcare services and maximized value per healthcare
dollar spent in the Maseru health district;
The project was announced as a
package comprising construction of Predictable Government Health Expenditures:
a new 425-bed hospital and gateway • Future healthcare spending pegged to an annual unitary payment so other
clinic, refurbishment of three existing government funds can be devoted to other programs
urban filter clinics and provision of
both clinical and non-clinical services System-wide Efficiency Gains:
in these facilities over an 18-year
• Remediation of national human resource shortages through improvement of
contract (including the construction
the healthcare work environment, long-term improvement in compensation
period). The tender required that any
and both improvement and expansion of healthcare training programs;
international respondents partner with
local businesses for the bid response, • Systemwide efficiency gains driven by private sector management practices
with a goal of growing local private through training of health professionals, strengthening of national drug
sector capacity through the project. supply system;
• Local economic empowerment through project activity including capital
expenditures, local private sector partner investment and escalating rates of
local leadership at the new hospital.

The project concept represented In their response, bidders were
a significant shift in role for the required to propose a total package
Government: the Government would of services (required service plus
become a formal purchaser of health any selected optional services) and
services rather than a provider of that propose maximum inpatient and
care,2 with the goal of improving both outpatient volumes, all of which
the value for money of government would be covered by the annual
The project concept spending and the quality of services unitary payment established in the
provided to the people of Lesotho. tender documents. Ref 4 In essence, the
represented a significant With this shift in role, the Government question posed to the private sector
shift in role for the faced an immediate need to increase through the tender documents was: for
its role in private sector regulation, the same level of expenditure at QEII,
Government: the which required skills and experience how much more can the private sector
Government would become in contract management and provide in quality, breadth and volume
performance monitoring - all relatively of healthcare services?
a formal purchaser of new areas for both the Ministry of
health services rather than Health and Ministry of Finance.
a provider of that care, The final tender outlined an annual
with the goal of improving unitary payment (roughly equivalent
to the QEII operating budget plus
In essence, the question
both the value for money
capital expenditures), minimum posed to the private
of government spending patient volumes (16,500 inpatients sector through the tender
and the quality of services and 258,000 outpatients per annum),
a minimum package of services, documents was: for the
provided to the people and quality parameters for each same level of expenditure
of Lesotho. listed service.Ref 20 The tender also
included a list of optional services. at QEII, how much more
2 In parallel to development of the PPIP, the
can the private sector
Government expanded its participation in
purchasing rather than delivering healthcare
provide in quality, breadth
services: a Memorandum of Understanding and volume of healthcare
with the Christian Health Association
(CHAL) of Lesotho was established in 2007, services?
whereby the CHAL facilities essentially
function as public facilities and rely on the
Ministry of Health for the majority of their
budget. The facilities remain under private,
not-for-profit management. This is a less
comprehensive and defined arrangement
than the QMMH PPIP, with far fewer
performance standards and monitoring
requirements established, but similarly
reflects an expansion of the Ministry of
Health’s health purchasing activities.

Bid response
While initial interest was significant Bid response expense:
(the Government presented to 14
companies during an investors’
Responding to PPP tenders is an expensive investment for the
conference during the tender private sector; costs can total millions of dollars per bid response,
period),Ref 11 ultimately only two even for bidders that are not successful. As a result, prior to
consortia, both anchored by private responding, private parties conduct multiple assessments of a PPP
South African hospital operators, tender to evaluate strategic benefits against risks and costs. Having
submitted full tender responses by the
October 2007 deadline.
a number of projects open for tender at a given time can distribute,
and thereby reduce, the risk and expense of a failed bid. In the case
of the QMMH PPIP, however, Lesotho issued a single, large project
for tender. Thus, responding to the tender represented a high,
concentrated risk for a private sector respondent. Given that this
was the first project of its kind in Lesotho, and indeed across all of
sub-Saharan Africa, the potential risk and cost for the responding
bidders was particularly high, and almost certainly one driver of
the limited number of vendor responses.
An ongoing challenge for governments considering issuing PPP
tenders will be balancing policy needs, vision and practical
requirements against creation of conditions that facilitate broader
private sector engagement. Some governments offer varying
degrees of bid cost reimbursement to encourage bidding, while
others position specific tenders as “pilot” projects or otherwise
indicate a pipeline of projects that can give the private sector
confidence that the risk in responding will be reduced by the
possibility of future opportunities. These approaches should be
assessed on a case-by-case basis and considered in the context of
the specific market and related projects.
Netcare, a private South African healthcare company, together with an

assembled local consortium, was one of the respondents. Netcare reported
pursuing the project primarily driven by corporate responsibility goals. At
both the corporate and individual levels, Netcare leadership identified the
Lesotho tender as an opportunity to expand quality services to an underserved
population by leveraging their prior experience with PPP arrangements in the
United Kingdom (UK).

Bid evaluation special purpose vehicle (SPV)3 formed multiple public-private partnerships
To evaluate the bids, the Government specifically for the project, comprising within the UK National Health
and its transaction advisors assembled a group of equity shareholders, Service.
review committees comprising many of whom were also engaged as
individuals with diverse skills and subcontractors for specific hospital • Excel Health (20%): An investment
expertise selected from across the functions: company for doctors and medical
Ministry of Health, the Ministry of specialists from Lesotho. Along with
Finance and the IFC. These committees • Netcare Limited (40%): A for-profit, Afri’nnai, jointly responsible for
evaluated each bid according to three publicly traded South African supplying specialist physicians for
high-level technical criteria: healthcare company with operations QMMH operations.
in South Africa and the UK, where
• Service coverage: Bidders’ responses a subsidiary organization (General • Afri’nnai (20%): An investment
stated their commitment to provide Healthcare Group) has operated company for doctors and medical
all mandatory services as well specialists from South Africa.
3 Special purpose vehicles (SPVs), also Along with Excel Health, jointly
as select optional services. The called special purpose entities (SPEs),
winning bid proposed to include are legal entities formed to fulfill narrow,
responsible for supplying specialist
95% of optional services. specific or temporary objectives related to physicians for QMMH operations.
a specific project or investment, generally
• Patient volumes: The bidder offering to insulate a parent company from the • Women Investment Company
the highest maximum number of
financial risk associated with the project. (10%): An investment company for
SPVs also might be formed to allow
patients for the annual service Basotho women. Sub-contractor
other investors to share in the risk of the
payment received maximum points. project, bring management and technical for soft facility management
The winning bidder committed capacity and/or to protect the interests (e.g., housekeeping) and other
to delivery of services to 20,000
of both lenders and investors. SPVs are services for QMMH.
generally prohibited from undertaking
inpatients and 310,000 outpatients business outside the defined project. • D10 Investments (10%): The
per year. SPVs are a key feature of many PPPs.
investment division of the local
If both the government and the private
• Service delivery plan: Bidders were party have invested in the SPV, then Chamber of Commerce. Sub-
evaluated on their approach to
it is often considered a joint venture contractor for transportation and
arrangement.Ref 25 other services for QMMH. Ref 24,7
quality, effectiveness and efficiency;
compliance with service standards;
and the feasibility of the proposed Figure 4—Tsepong equity stakeholders:
plans. Ref 4
Bidders were required to submit

10%
separate, sealed, technical and
financial proposals. Financial offers 10% Netcare Limited
were opened only after technical
evaluation was complete. Ref 4 40% Excel Health
Based on this evaluation process, Afri’nnai

the Government selected Netcare’s 20%
Women Investment Company
consortium, Tsepong (Pty) Ltd as the
preferred bidder in December 2007 D10 Investments
(Tsepong means “a place of hope” or 20%
“hope” in Sesotho). Tsepong was a

The local partners joining Netcare Table 3—Key players—Private sector partners:
in the consortium were identified
Organization Description
through two avenues. In the early
stages of the bid process, the Ministry Netcare (Ltd) A publicly traded company incorporated and listed on the
Johannesburg Stock Exchange in 1996, Netcare operates a private
of Health hosted a bidders’ conference
hospital group, primary care network and medical emergency service
that assembled a wide range of in South Africa.
potential partners to learn about the
Netcare also provides private acute care hospital services in the
project and allowed for connections United Kingdom and is an independent service provider to the UK
among bidders. Additionally, a National Health Service (NHS).
Netcare executive who had previously Before the Tsepong consortium, Netcare had prior experience
worked in the Free State (the South partnering with governments on healthcare service delivery. In South
African province that borders Lesotho Africa Netcare entered into PPPs with the Health Departments of the
to the west; the capital of which Free State and Eastern Cape as well as a number of private public
is Bloemfontein) and had local initiative (PPI) contracts relating to healthcare delivery in South Africa.
Netcare UK has also fulfilled several PPP contracts since 2001 on
connections in Lesotho was able to behalf of the UK National Health Service (NHS).
call upon his professional network
Excel Health An investment company formed by Lesotho-based general practitioners
to identify potential partners for and specialists for the purposes of the Tsepong partnership.
the project.
Afri’nnai An investment company formed by Bloemfontein-based specialists
and general practitioners for the purposes of the Tsepong partnership.
To meet the requirements of the
PPIP contract, over time, the equity Women An investment company for Basotho women established to encourage
investment in Tsepong will shift from Investment Company business and professional women to invest in profit-making ventures
and financial instruments, and to assist rural women and girls in
Netcare to local partners through engaging in activities leading toward poverty eradication.
purchase of Tsepong shares held by
D10 Investments An investment arm of the Lesotho Chamber of Commerce and
Netcare. Local investment began at Industry (LCCI), a non-profit institution, which aims to serve and
40% in Year 1, and will increase to promote the interests of the Lesotho business community by playing a
45% in Year 8, and 55% by Year 13. Ref 24 leading role in socio-economic development.
Founded in 1976, LCCI is an independent and non-aligned
Upon selection, the Government organization; its members come from all political backgrounds
and Tsepong engaged in a 12-month and affiliations.
negotiation process. Throughout (http://www.lcci.org.ls/)
this process, both Tsepong and the
Tsepong (Pty) Ltd The Tsepong consortium is governed by a Board comprised of
Government continued to draw on directors from each of the investor organizations.
a broad range of expertise across
their respective organizations to
discuss details of the financial model,
clinical and operational design and In parallel, the Government, Initial interest rates had been
other contractual aspects. Defined Tsepong and their advisors worked estimated at 7%, but after the global
committees convened on specific to arrange capital finance through economic crisis emerged during
topics met regularly, reporting to the Development Bank of Southern the course of negotiations, the final
a central coordinating Committee, Africa (DBSA). Ultimately an M800 interest rate exceeded 9%. This
which reported to the Prime Minister’s million ($94.9 million) loan was increased cost of borrowing added
Cabinet through the Ministers of made to Tsepong, with a Direct more cost than initially anticipated
Finance and Health to keep the Lender agreement signed by the during project planning.
Cabinet apprised of project progress. Government to improve the project’s
The parties reached agreement and risk profile. Financial close followed in
commercial close on October 1, 2008. March 2009.

Figure1:5—PPIP
Figure contractual
design
Construction Operations
Independent monitor
PD Naidoo Direct agreement Direct agreement Turner and Townsend
and Associates • Independent monitor
Regular inspections
Review & final certifications
• Independent certifier
Direct agreement Direct agreement
Government of Lesotho
Lenders PPIP
Financers/owners
Payment
direct agreement agreement
Debt/equity Tsepong, LTD

Development Bank of
• Netcare—40%
South Africa
• Excel Health—20%
• Lender/Bank Capital/interest • Afri’nnai—20%
• Women Investment Company—10%
• D10 Investments—10%
Payment Payment
RPP Lesotho 1 National hospital Facilities management Netcare hospitals

Construction
Sub-contracting
• Construction 1 Gateway clinic Clinical services • Clinical services
contractor 3 Filter clinics • Soft facilities &
Facilities equipment management
management
Clinical services
Botle Facilities
Management
• Hard facilities
Patients management
The October 1, 2008 contract defines the national referral hospital) to be together, the hospital and filter clinics
the structure, requirements and independently managed by Tsepong formed a health district that supports
incentives for an 18-year contract with oversight by the Government and application of integrated care and
between the Government and Tsepong. independent monitors.Ref 3 Through population care principles to improve
Totaling more than M2.2 billion the contract, Tsepong committed to efficiency of healthcare delivery and
($256.8 million)4 over the 18 years, design, build and construct a new expand inpatient hospital capacity in
the contract represented 425-bed hospital and attached gateway the Maseru district.Ref 4 The hospital
the single largest health procurement clinic, refurbish and re-equip three also provides an upgraded and
by the Government in the nation’s urban filter clinics, and then provide comprehensive tertiary referral facility
history.Ref 1 The contract structures all clinical and non-clinical services for the whole nation.
a district health system (including for the duration of the contract. Taken
4 Calculated based on net present value from

financial close based on a 9.5% discount
rate.

Financial terms Public capital expenditure • M800 million ($94.9 million):
The terms of the PPIP contract included both capital contribution Loan to Tsepong from the DBSA
require both public and private to construction costs and to with an approximate interest rate
capital expenditure for construction, infrastructure improvements necessary of 9.5%; Tsepong is responsible
refurbishment and equipping of to provide basic services to the for repaying the loan (largely or
the hospital and the filter clinics hospital site: wholly from funds received from
as well as ongoing payments from the Government via the unitary
the Government to Tsepong for the • M400 million ($47.5 million): payment), but to secure financing
operation of these facilities. Both Initial capital payment paid by for the project the Government
capital and operating expenses are the Government to reduce project offered certain loan assurances to
bundled into a single unitary payment debt (and, as a result, the unitary DBSA through a Direct Lenders
that flows from the Government payment) and improve the project’s Agreement; and
to Tsepong. risk profile for Tsepong; and
• M4 million ($474,665): Equity
• M86 million ($10.2 million): capital investment by Tsepong.
Capital expenditure Additional expenditure for For local (non-Netcare) partners,
Construction was jointly financed infrastructure improvements at the shareholder loans from DBSA and
with public (37.7%) and private funds construction site (e.g., extension Netcare Ltd were arranged to assist
(62.3%). Public funds were made of sewers, water, electricity), local partners in satisfying their
available at the outset of the project commonly referred to as enabling equity requirements.Ref 24
to reduce the capital repayment works. Ref 24
portion of the downstream unitary
payments and therefore reduce future Private capital expenditure was largely
government expenditure over the life funded through a loan from the DBSA,
of the contract. with a small equity contribution by the
Tsepong consortium:

Figure 6—Capital investment:
Total private capital investment Total public capital investment
M 800,000,000 Initial capital

investment for
construction
M 400,000,000
DBSA loan Total public
capital investment
Tsepong equity 37.7%
investment
(M 486,000,000)
Total private
capital investment
62.3%
(M 804,000,000)
Enabling works
M 86,000,000
M 4,000,000
Capital cost over-runs due to construction delays or other issues are the responsibility of Tsepong.
Operating expense and Further details of the cost model Unitary payment
financial model were not available for review during The contract defined an annual unitary
The initial financial model for the preparation of this case study. payment of M255.6 million ($30.3
project was based largely on the results In general, only limited financial million) toward capital repayment
of the LeBoHA baseline studies, with information about the PPIP operations and operating expenses. The contract
total operating expense pegged to the and cost is publicly available at prescribes upward adjustments to
annual recurring budget for QEII. this time. the annual unitary payment by an
Tsepong expects to break-even on its annual inflation index and potential
Perhaps due to limited availability deductions via performance penalties
of data, there were no specifications investment between the 10th and 12th
years of the contract. Any deductions based on quarterly independent
within the financial model based on monitor reports.Ref 24 The unitary
services, case mix, or any other factors from the unitary payment based on
performance penalties would impact payment is based on treatment of a
related to healthcare need or service maximum of 310,000 outpatients
delivery. Rather, financial model cost dividends and therefore this break-
even projection. and 20,000 inpatients per annumRef 4
estimates for patient volumes bundled and the contract requires that any
in the unitary payment (up to 310,000 treatment of additional volume
outpatients and 20,000 inpatients per beyond these numbers be jointly
annum) as well as for incremental fees approved with the Government before
for treating patients above the agreed incremental payment according to
upon service levels, were estimated negotiated rates. Minimum annual
only by “inpatient” and “outpatient.” service levels for inpatients and
outpatients (16,500 and 258,000,
respectively Ref 4) were also specified in
the contract.

Unitary payment The apparent doubling of annual expense through
the unitary payment (M255.6 million vs. M135
Those involved in the QMMH PPIP assert that
million) reflects repayment of the capital outlay
the operating budget at QMMH is approximately
required for hospital construction and clinic
equal to that of QEII, therefore achieving cost
refurbishment, a capital expense that would have
neutrality for the Government (and also cost
been required under a traditional procurement
neutrality2, given that user fees also have not
method as well, had the Government undertaken
increased in the transition between QEII and
the project itself. Still, these capital expenses
QMMH). The exact breakdown of the unitary
(M110 million per year in addition to the M486
payment into capital and operating components
million paid up front at financial close) represent
is considered proprietary and confidential, but
a significant outlay by the Government that may
some basic assumptions on capital cost confirm
pose a drain on future Ministry of Health budgets.
that operating expenses between QEII and QMMH
In 2007, operating expenditure at QEII alone,
remain relatively flat, as designed and repeatedly
excluding the filter clinics, represented nearly 40%
stated by the Government and Tsepong. In 2009,
of the Ministry of Health’s operating budget. Ref 13
the recurring budget for QEII and the filter clinics
The QMMH budget will likely represent a similarly
was M135 million per year.Ref 24 Assuming 9.5%
large expenditure in the years to come. One
interest on the capital expenditure, the operating
important point of future evaluation will be
component of the unitary payment would be
whether this large expenditure at a single national
approximately M145 million per year, or a 7%
referral hospital impacts care in the broader
increase from the 2009 budget. This 7% increase
health system. These impacts might be negative
covers a significant increase in the type, quality
if too great a proportion of health spending is
and volume of services provided to the people of
directed to QMMH, or positive if Tsepong and
Lesotho and also presumably provides some return
the Ministry of Health can achieve some of the
to the Tsepong consortium.
health system strengthening goals outlined in the
PPIP contract.

Table 4—Budget and service levels: QEII vs. QMMH
Taking our estimate of the operating component of the annual unitary payment as a proxy for
operating budget at QMMH, we calculated that a 7.4% increase in the operating budget between
QEII and QMMH yields a significantly larger increase in the volume of services provided through the
application of a PPIP model.
QMMH— % Change— QMMH— % Change—
Minimum Minimum Maximum Maximum
QEII Service Levels Service Levels Service Levels Scenario
Annual operating budget M135 million M145 million 7.4% M145 million 7.4%
(estimated) (estimated)
Annual inpatient admissions 15,465 16,500 6.7% 20,000 29.3%
Annual outpatient encounters 165,584 258,000 55.8% 310,000 87.2%
(Hospital outpatient+filter clinics)
Unitary payments were not scheduled interim period when the refurbished other public facility in the country, and
to begin until the hospital opened on filter clinics were operating but the patients pay no more than they paid
October 1, 2011, however; thus the hospital had not yet opened (May 2010 previously for services at QEII.
Tsepong consortium was required to to October 2011). These funds were
use its own funds to cover operating specifically arranged to improve the Incentives in the PPIP contract provide
expenses at the filter clinics and all project’s risk profile for the private for a small percentage of QMMH
other costs for nearly three years sector partner. and associated clinics’ user fees to be
following commercial close. retained by Tsepong if target collection
User fees rates are achieved.
To address this gap and the risk it
presented, the parties arranged for The contract required that user fees for
all patients be charged in accordance
Operational terms
additional funding from the outset of
the project. The World Bank-housed with Ministry of Health policy, under Co-location of private services
Global Partnership for Output-Based which no user fees are collected for Of the 425 beds at QMMH, 390 are
Aid (GPOBA)5 committed a grant primary care services accessed at public beds and 35 were built as private
of $6.25 million intended to cover health centers. Generally, fees only beds in a separate private wing. As of
Tsepong operating expenses during the apply to hospital or specialty services this case study’s publication, the private
(e.g., dentistry, radiology). wing at QMMH had not yet opened.
5 The Global Partnership on Output-Based
Aid (GPOBA) is a partnership of donors Under the terms of the PPIP contract, Private and public beds were intended
and international organizations working Tsepong applies the Ministry of Health
together to support output-based aid (OBA) to differ only in their amenities (e.g.,
approaches. GPOBA’s mandate is to fund, fee schedule, collects user fees on privacy, television) and source of
design, demonstrate and document OBA behalf of the Ministry of Health and payment. Private and public patients
approaches to improve delivery of basic returns these fees to the national are expected to utilize the same shared
infrastructure and social services to the Treasury (per Government policy, user
poor in developing countries. The goal facilities and medical staff. Specialists
is to mainstream OBA approaches with fees are not retained by the Ministry of who visit patients in the private
development partners, including developing Health), just as public district hospitals wing would also serve the patient
country governments, international financial and health centers do. Thus, fees at population in the public hospital.
institutions, bilateral donors and private QMMH remain the same as at any
foundations. (http://www.gpoba.org/gpoba/
about).

The contract allowed for some revenue Excluded services • All elective cardiac and great
sharing with the Government through vessels surgery;
a percentage revenue allocation for In certain cases, specific services
use of shared services (e.g., radiology) were explicitly excluded from the • All chemotherapy and radiotherapy;
by private patients. A rental fee for PPIP contract. Exclusions were based
on Ministry of Health assessment • In vitro fertilization (IVF) and
private wing space was calculated
of cost and the utilization patterns advanced fertility treatments;
during contract negotiations and
reduced the unitary payment amount for these services, largely based on
• Plastic surgery other than basic,
paid to Tsepong on a prospective basis. the LeBoHA feasibility and baseline
essential reconstructive surgery
studies. In their 2002 report, LeBoHA
with medical need; and
Access to hospital services researchers analyzed the cost and
volume of specific treatments being • Cosmetic dentistry.
As established in the PPIP contract, referred to Bloemfontein, South Africa
patients can be seen at QMMH only in 2002 and considered whether
by referral, either from filter clinics Under the terms of the new PPIP
patient volumes would support a local contract, the treatment abroad
in the Maseru health district, or from treatment program in Maseru.Ref 2 They
other district hospitals or private program administered through referral
also considered ongoing operational to South Africa is jointly managed by
practitioners. Because there is no costs of certain treatments (e.g.,
gating system to access care at the Tsepong and the Ministry of Health.
chronic renal dialysis) and whether Both Tsepong leadership and Ministry
urban filter clinics and no fees are these services could be supported
assessed for clinic services, patients of Health leadership review each
within Lesotho’s health system case and both must approve referral
presenting for hospital services at expenditure limits. Largely based on
QMMH must be first evaluated at the for treatment to facilities in nearby
these studies, the Ministry of Health Bloemfontein, South Africa. A review
onsite QMMH gateway clinic, and excluded a series of specific services
be treated or referred to the hospital process and referral protocols were
from the tender, including: established in the contract.
based on clinical assessment.
• All transplants other than corneal
The QMMH referral system and filter transplants; The parties agreed that if treatment
clinics designated to support it are abroad data demonstrated sufficient
a key element of the PPIP design, • All joint replacement other than hip need for specific additional services,
and were developed to support a replacements; services could be incorporated into
population-based care approach the PPIP contract through the project
• Chronic (end stage) renal disease variation process.
that allocates care delivery to the treatment;
most appropriate and cost-effective
setting and provides a mechanism
for managing demand for hospital
services. Referral protocols and
requirements are defined in the PPIP
contract based on Ministry of Health
policy and are consistent with other
referral requirements across the
health system.

Treatment abroad programs at significant public expense, sometimes only
for the most privileged citizens. In the Turks &
While the treatment abroad budget that supported
Caicos Islands for example, the large TAP was a
referral care in South Africa was a factor during
significant driver of that country’s PPIP project
the Ministry of Health’s assessment of the need for
and establishment of a national insurance
a new replacement hospital, the initial feasibility
scheme. Ref 23
study conducted by LeBoHA determined that
“despite the total cost . . . the volume of cases sent Even in Lesotho, where the TAP was not a primary
to any specific referral service in Bloemfontein is focus of the PPIP, the private management of
relatively low . . . most currently referred services Tsepong has resulted in better management and
are well below the critical volumes needed to stricter control over TAP spending. The PPIP
support a standalone tertiary care service.” Thus, contract requires joint management of TAP
in the final design of the PPIP contract, the Lesotho referrals by both Tsepong and the Ministry of
Treatment Abroad Program (TAP) was not a Health, and Tsepong employees review invoices
significant motivation for the PPIP project. received from the South African facilities
providing TAP care. Through this review, Tsepong
Many other countries, however, including most
has identified errors in billing and overcharging
small, lower income countries, do have significant
and thereby reduced the cost of TAP care through
TAPs. These are often overlooked or poorly
tighter management control.
understood programs that support overseas care
Employment ultimately the Government decided Broader impacts

Under the contract, Tsepong has full to require an open application process
Health system strengthening
human resource responsibility for for all positions at QMMH, which
was described in the PPIP contract. The PPIP contract was designed
employees of QMMH and the filter
Employees of the Ministry of Health to incentivize Tsepong to engage
clinics, including hiring, termination
(across all facilities and departments, in health systems strengthening
and performance evaluation. Full-
not only QEII) were free to apply for activities through and beyond QMMH
time physicians are employees of
posted positions at QMMH, as were operations. For example, QMMH and
Tsepong. This arrangement differs
non-Ministry of Health employees associated clinics were required to
from Netcare’s traditional business
(although priority was given to purchase 80% of all pharmaceuticals,
model under which the majority of
current Ministry of Health employees). by price, through the Lesotho National
their physicians in South Africa are
Employees of QEII and the filter Drug Supply Organization (NDSO),
independent contractors rather than
clinics who did not wish to apply for with the intention of strengthening
salaried employees.
positions at QMMH were transferred Lesotho’s national drug supply chain.
While an automatic and wholesale to other Ministry of Health facilities
transfer of QEII employees to the upon closure of the QEII and older
employ of Tsepong was considered, filter clinics.

The PPIP contract also required Thirty percent of all capital Independent monitoring
Tsepong to sponsor one medical expenditures to be directed through and certification
student’s fees and accommodation local enterprises. In Years 1-5, 50% of Independent monitors were
costs each year in an effort to build operating expenditures to be directed established for both the construction
human resource capacity for the through local enterprises, escalating phase (monitor: PD Naidoo and
Lesotho healthcare system. Similarly, to 70% of operating expenditure in Associates) and the operations phase
QMMH replaced QEII as the primary Years 6-10, and 100% of all operating (monitor: Turner & Townsend). The
site for the training of healthcare expenditure in Years 11-18. independent monitors were jointly
professionals in Lesotho. Nursing appointed by, and are responsible to
students from Lesotho’s multiple Community development both Tsepong and the Government.
nursing schools, pharmacists,
The PPIP contract also required
pharmacy technicians and other The PPIP contract sets out a formal
Tsepong to provide specific healthcare-
healthcare professionals all now governance structure for the project
related community development
complete their practical training at and establishes two committees
activities in addition to the broader
QMMH and its associated clinics. for oversight and management of
health systems strengthening and local
empowerment goals: project exceptions: the Joint Services
Local economic empowerment Committee and Liaison Committee.
From its initial issue of the project • Tsepong funds treatment of These Committees, which include
tender, the Government clearly stated congenital heart disease, cleft lip representatives of Tsepong and the
a requirement for local economic and palate defects to an agreed cost Government (Ministry of Health,
empowerment (LEE) through the PPIP each year; Ministry of Finance), are charged with
project. Contractual requirements reviewing the independent monitors’
• Extending the Netcare “Sight for reports, overseeing the quality of
defined specific targets for LEE
You” program, Tsepong provides project operations and revising
performance, which escalated over
ophthalmology services to the local contract terms as required over the
the duration of the 18-year contract.
community; and course of the contract. They meet at
Across all contract years, 80% of staff
employed at QMMH were required to least quarterly.
• At its own cost but in cooperation
be local. By Year 2 of the contract, 50% with the Government, Tsepong
of management staff were to be local, maintains and operates a Women
increasing to 80% by Year 5. Further, and Rape Crisis Management center
25% of management staff were at QMMH.
required to be local women by Year 2,
and 40% of management were to be
local women by Year 5.

Independent monitoring and Government would be highest. This extension of
the certifier role was crafted specifically for the
certification QMMH project by the Government’s transaction
Assignment of an independent monitor is a advisors.Ref 4 The independent monitor supports
standard practice in capital infrastructure PPP the Government’s oversight of the project’s
projects to certify the satisfactory completion of operation phase much in the same way that the
the assets. The monitor serves as an independent independent certifier supports the construction
reviewer and certifier of work performed based phase: bringing a higher level of technical
on contractual terms and the monitor’s expert expertise than may reside in the Government to
assessment. Often the independent monitor brings support the public sector’s contract management
a higher level of technical expertise than may function. In countries where contract
reside in the government, thereby augmenting the management capabilities are more established
public sector’s contract management program. within the government, the monitor role is
typically fulfilled by a government department
The QMMH PPIP not only assigned an
or committee rather than an independently
independent certifier for the construction phase
contracted monitor, although such arrangements
of the project but also assigned an independent
can be less satisfactory in guarding the public
monitor for the 15-year operations phase of the
interest than an independent monitor.
project when contract management demands on
the Government and the contract expense to the
Table 5—Independent monitors for QMMH:

Organization Description & Role
PD Naidoo & PD Naidoo & Associates (PDNA) is a multidisciplinary consulting and engineering practice based in South Africa with 14
Associates offices across the country.
(http://www.pdna.co.za/)
Scope: Certification of construction of hospital and refurbished clinics
Reporting: Certification upon completion of construction programs for clinic refurbishment and hospital construction.
Turner & Townsend Turner & Townsend is a global professional services firm with offices on 5 continents. They maintain South African offices
in Johannesburg, Pretoria, Durban and Cape Town.
In South Africa, Turner & Townsend provides commercial assurance services to public and private companies, including
consultancy and contract management services. The QMMH project is the first time that the Firm has provided
assurance services for clinical hospital operations.
(http://www.turnerandtownsend.com/southafrica.html)
Scope: Independent monitoring of ongoing clinical operations of QMMH and associated filter clinics.
Reporting: Quarterly inspections and reports issued to both Tsepong and the Government. Reports reviewed quarterly
by the Joint Services Committee and may be escalated to the Liaison Committee, as required.

Key monitoring terms and Performance indicators were defined performance indicator than on a
performance indicators for hospital across a range of topics and areas to facilities management indicator that
and clinic operations were established cover the range of QMMH operations less directly impacted patient care.
in the PPIP contract and have been and functions. Performance indicators
adapted to a model or formula were established for patient volumes, The hospital and clinics will be
by Turner & Townsend. Tsepong clinical quality standards, client accredited by the Council for Health
is required to generate quarterly satisfaction, equipment supply and Service Accreditation of Southern
performance reports and otherwise maintenance, facilities management, Africa (COHSASA). After an initial
produce data for review by the information technology, and staff ramp-up period, accreditation by
independent monitor and the Joint certification and training. Certain COHSASA is a necessary requirement
Services and Liaison Committees. indicators were weighted more heavily of the ongoing PPIP contract.
The independent monitors also than others.Ref 4 For example, Tsepong
conduct separate site visits to validate might receive a greater financial
reported data. penalty for a failure on a clinical
Table 6—Sample performance indicators:
The LeBoHA baseline study provided initial performance indicators for the PPIP contract. The following
are sample pre-accreditation targets (i.e., targets for the initial period of the PPIP prior to COHSASA
accreditation) for a number of performance indicators.
In general, these are demanding targets that would far exceed care standards provided at QEII or
similar public facilities. For example: in a typical public sub-Saharan African hospital, lab results are
often never received by clinicians. At QMMH, Tsepong is measured on its ability to provide test results in
less than 60 minutes in 90% of cases. QMMH Clinicians report vastly improved lab turn-around-time
and a resulting improvement in the quality of care being provided.
Sample performance indicators:

Myocardial infarction treatment times: Percentage of patients with provisional or proven diagnosis of myocardial infarction who receive aspirin
within 30 minutes of evaluation.
Initial (pre-accreditation) Target: at least 85%
Decubitus ulcer rate: Rate of hospital-acquired decubitus ulcers
Initial (pre-accreditation) Target: less than 10%
Laboratory services: Lab test turnaround time for six key lab tests to be agreed upon.
Initial (pre-accreditation) Target: less than 60 minutes in 90% of cases
Medical records availability: Medical records available
Initial (pre-accreditation) Target: at least 75% of cases
Information management & technology uptime: System uptime based on a three-month average period
Initial (pre-accreditation) Target: At least 99% over 3 months

Table 7—Key contract terms:
Key contract terms:
Contract duration 18 years
Financial terms
Total capital expenditure M1.29 billion / $153.1 million
Public funds M486 million / $57.7 million (37.7%)
Private funds M804 million / $95.4 million (62.3%)
Annual unitary payment M255.6 million / $30.3 million
Total project cost, capital + operating (18 years, net present value) >M2.2 billion / $256.8 million6
Facility specifications
Built area 29,000 m2
Number of beds 425
Number of public beds 390
Number of private beds 35
ICU beds 10
Surgical theaters 8 major procedure rooms + 1 minor procedure room
Affiliated clinics 3 filter clinics, 1 gateway clinic
Annual patient volume requirements, per unitary payment 258,000 – 310,000 outpatients / 16,500 – 20,000 inpatients
Table 8—Summary of contracted risk and responsibility:

Risk or responsibility Tsepong Government Notes
Enabling works Owner Government required to provide enabling works to hospital site.
Construction Owner Oversight Tsepong responsible for all design and construction activities and risks; Tsepong passed
and design along some of this risk to subcontractors to incentivize on-time completion.
Demand volume Shared Shared Tsepong is contractually required to deliver services to up to 310,000 outpatients and
20,000 inpatients per year. Beyond this cap, additional treatment must be authorized by
the Government and will be paid at predetermined rates established in the PPIP contract.
Case mix Owner The PPIP contract makes no allowances for case-mix adjusted payments. Tsepong must
deliver care to established minimums and maximums regardless of case severity.
Technology change Owner Tsepong is required to provide and maintain equipment and information technology
systems according to schedules established in the PPIP contract. Maintenance and
replacement schedules were established such that equipment and technology will still be
current at the end of the 18-year contract.
Human resources Owner Tsepong employs all employees and otherwise contracts directly for necessary services to
meet PPIP service requirements.
Other operational risk Owner Tsepong owns all operational risk unless an issue raises to the level of a relief or
compensation event or contract default, in which case the Government shares in the
negative risk.
Service performance Owner Oversight Tsepong is responsible for meeting service levels established in the PPIP contract. The
Government serves in an oversight role and may participate in approving resolutions to any
service deficits.
Treatment Abroad Shared Shared Both Tsepong leadership and Ministry of Health leadership may review cases for evaluation
Program (TAP) and approve referral for treatment to facilities in nearby Bloemfontein, South Africa. A
review process and referral protocols are established in the contract.
6 Calculated based on net present value from financial close based on a 9.5% discount rate.
Construction and early implementation:
Financial close to launch of hospital services
Construction
Construction of the hospital began Transfer of construction risk
in March 2009 on a designated
greenfield site outside central Maseru
The increased efficiency through private management of the
in Botsabelo. Refurbishment of the construction process can be a significant benefit from a PPP
filter clinics also began in March 2009 arrangement; among Private Finance Initiative (PFI) projects in
following financial close. In both cases, the UK, nearly 90% of construction projects were completed on
construction was sub-contracted by time.Ref 10 In the case of QMMH, Tsepong did not receive unitary
Tsepong to RPP Lesotho, a subsidiary
of a South African construction
payments until hospital construction was completed and was
company. RPP outsourced as much responsible for any cost over-runs, as is the case in most PPP
construction activity as possible to projects. Tsepong passed this risk onto its construction contractor,
local Lesotho contractors but was RPP Lesotho, to strengthen the incentive for on-time and on-
reportedly limited by the expertise budget completion. With proper incentives, private management
that existed within Lesotho firms.
of construction can avoid hidden costs due to delay or off-balance
Tsepong was fully at risk for sheet costs that are often associated with traditional public
construction budget over-runs or procurements.
delays. To manage this risk, Tsepong
passed these same risks to RPP Lesotho
through a subcontracting agreement
for construction services. The filter
clinics opened in May 2010 and The Government, its transaction advisors and the Tsepong consortium initiated
the new QMMH opened in October multiple initiatives that were active while hospital construction and clinic
2011. In both cases, construction was refurbishment were underway. Human Resource representatives toured the
completed ahead of schedule. country to educate Ministry of Health employees on the new PPIP project,
potential job opportunities, and projected impact on their positions. The
Ministry of Health and Tsepong separately and jointly engaged in planning
and communications efforts focused on the transition of patients, services and
employees from QEII to QMMH and the filter clinics.

Opening of the filter clinics
Almost immediately upon opening Islands of excellence
in May 2010, the patient volume at
the filter clinics exceeded anticipated
From the outset of the QMMH PPIP project, all parties have
demand, reportedly driven in part been concerned about how to avoid establishing an “island
by patients’ perceived improvement of excellence” at QMMH that is soon overwhelmed by a sea of
of care, now being delivered under demand. Indeed, this is a concern for many PPIP projects in lower
Tsepong. New outdoor structures were income countries. The initial demand at the Maseru filter clinics
promptly built to shelter the patients
who lined up outside the clinics each
seemed indicative of this trend and concern. Similarly, QMMH was
morning to receive care. operating near full capacity almost from the day of opening. In
the first year of the hospital operations, the volume of outpatient
services at QMMH and the associated clinics significantly exceeded
the maximum service volumes established in the PPIP contract and
covered by the unitary payment.
Tsepong and the Ministry of Health are collaborating closely to
manage the flow of referrals from district hospitals and to develop
training programs for district physicians and staff. Many of the
educational programs envisioned in the PPIP contract (e.g., nurse
training programs, support of medical education for Basotho
students) as well as others currently being considered (e.g.,
training for district administrators, rotational programs for
Ministry of Health employees to orient them to QMMH operations)
are aimed at broader health system strengthening to reduce the
demand and burden at QMMH. While it is too early to determine
whether these programs will be sufficient to manage the health
system demand, the management of demand for Tsepong services
is clearly a focus of both the public and private partners in Lesotho.

During the interim transition period,
primary care and other basic services Payment delays
were provided at the refurbished filter
clinics and patients were referred Generally, significant payment or funding delays lead to contract
to QEII if more advanced care was default under many PPP agreements. Netcare’s ability and
required. During this time, Tsepong willingness to loan money to Tsepong when the expected GBOPA
relied heavily on remote management grant was not received demonstrates its commitment to the
from Netcare and its subsidiary
PPP project and may not be typical of all projects. On at least
companies based in South Africa to
supplement a locally hired onsite one occasion, delays in receipt of the unitary payment from the
manager and nurse leaders. As hospital Government have caused Tsepong to default on its financing
opening approached, senior managers agreement with the DBSA. The SPVs usually formed for PPP
(Hospital Manager, Financial Manager, projects generally have few financial reserves and their sponsoring
Pharmacy Manager) were seconded,
companies generally have a limited appetite for lending money
assigned, or transferred from Netcare
to Tsepong to plan for the opening to these limited recourse companies. Identification of the right
of QMMH and to manage project private partner and a financing organization who are committed
operations going forward. to the goals of a project, even at the expense of its margins, can be
The PPIP contract anticipated a $6.25
an important success factor, particularly for projects that might
million grant from GPOBA to Tsepong encounter early financial obstacles.
to cover the significant expense of
operating the urban filter clinics
before the first unitary payment was
made upon opening of the hospital.
Unfortunately, these funds were not
received during this period, and, as
of Fall 2012, were still being pursued
by Tsepong. In place of this grant,
Netcare made loans to Tsepong to
cover operations through October 2011
when unitary payments began.

Transition from QEII to QMMH
QMMH opened for operations on not hired by Tsepong were re-assigned private wing of the hospital. For a
October 1, 2011. Based on the plans to other district facilities that were not period, QMMH was unable to provide
co-developed by the Ministry of Health uniformly prepared to accept the new tuberculosis treatment or antiretroviral
and Tsepong, patients, services and employees. In some cases, Ministry of drugs, leaving a significant care gap for
employees were transitioned from QEII Health employees found themselves the Maseru Health District following
to QMMH over the course of a single unable to effectively perform in their the closure of QEII.
day. Additional transport was arranged new jobs for more than 6 months—a
to move inpatients from QEII to demoralizing situation for the Overall, the first three months of
QMMH and employees were on hand employees and a drain on the Ministry hospital operation proved particularly
at both sites to manage the transition. of Health’s budget since salaries were challenging to employees and
still paid but the employees were patients who were adjusting to new
Not unexpectedly, the transition unable to provide needed services. expectations, new work norms, new
between the facilities was challenging. facilities, new equipment and other
To the extent possible, Tsepong The Ministry of Health also changes. In some cases, the transition
employees had been trained and experienced delays in providing the caused gaps in care, but the Ministry of
oriented to the new equipment and necessary licensing and permitting Health and Tsepong were able to work
facilities at QMMH, but nurses, of the hospital, which was required productively to address these gaps and
physicians and other staff necessarily for QMMH to purchase certain drugs resolve them as quickly as possible.
faced steep learning curves while for patients and also to open the
managing a heavy patient load,
literally overnight.
Despite efforts to communicate to the

health system and the public, neither Transitions to new facilities
referring physicians nor patients
fully understood the referral process It is likely that these transitional challenges would have occurred
required to access care at the hospital. in any transition between facilities, as the nature of the challenges
During the referral and admission is not unique to a PPP or PPIP arrangement but rather associated
process, patients were troubled by long with the overnight transition between an old facility and a new
waits due to new triage procedures
hospital. In fact, evidence from Lesotho suggests that private
and new data entry requirements
associated with the advanced sector management and expertise were essential in reducing and
information technology systems in addressing the transitional challenges for QMMH staff. Similar
place at QMMH. transitional challenges for employees transferring from QEII to
The Ministry of Health also faced
other Ministry of Health facilities were greater and more persistent
challenges in managing this major than the transition experience for the operations of QMMH and the
transition. QEII employees who were employees of Tsepong.

Queen Mamohato Memorial Hospital: The first year
With the opening of the new hospital, better individual performance, team
healthcare services available to the work and coordination and uptake Introduction of strong
people of Lesotho in their own country of new organizational models and
(as opposed to via referral to South technology. Netcare has assigned
management systems
Africa) expanded in significant ways. experienced managers to lead the and leadership by the
The new hospital introduced: project. This leadership team is private sector has been
implementing Netcare’s best practice
• The nation’s first Intensive Care policies and procedures while transformative to the
Unit (ICU); educating and grooming QMMH delivery of care and the
staff toward future leadership and
• The nation’s first Neonatal Intensive
management roles.
experience of QMMH
Care Unit (NICU);
healthcare professionals.
As of this report’s publication,
• 9 operating theaters (as opposed
operations at QMMH are very much a
to QEII’s 2 operating theaters)
work in progress, as would be expected as reported by QMMH employees,
equipped for a wider array of
for any newly established hospital, have translated into improved
surgical services (e.g., endoscopy);
let alone one testing an innovative patient outcomes. Further, all
• New imaging modalities including arrangement for the first time. The Tsepong employees interviewed, who
CT and MRI machines; and discussion below focuses on the early previously worked at QEII, reported
achievements and challenges for a vastly improved work environment.
• Other equipment to support QMMH operations during the first year Benefits ranged from an increased
modernized clinical operations of operations, October 2011 to October sense of physical security, an improved
(e.g., laryngoscopes to allow for 2012. Statements and conclusions are ability to focus on patient care rather
intubation, which were not available based on in-person interviews, and than administrative-related stressors,
to physicians at QEII). previously published accounts of the greater recognition, and a greater
project. sense of accomplishment in daily work.
Beyond the improvement in facilities
and equipment, the introduction of
strong management systems and
Human resources Staffing levels and recruitment
leadership by the private sector has management During the project ramp-up period,
been transformative to the delivery A senior Netcare Human Resources Tsepong recruited employees from
of care and the experience of QMMH (HR) manager was seconded to across Ministry of Health facilities
healthcare professionals. QMMH Tsepong for a 1-year period to assist to positions at QMMH. External
operations are marked by strong in the establishment of a strong HR applicants were also evaluated and
leadership and communication, infrastructure and to mentor local HR hired to appropriate roles. Recruitment
empowerment of appropriate decision- staff who will ultimately take over the was initially slow and extensive
making throughout the organizational leadership role. In a short period, the education was required to address
structure, strategic training programs, HR team made strides in establishing employee concerns about risks, real or
well-defined operational norms and a new work culture and norms, perceived, associated with a transition
performance-based incentives for implementing a strong performance to Tsepong.
all staff. Ref 14 In combination, these management system, and establishing
management systems incentivize new performance expectations that, Also of note, significant financial
incentives existed for more senior
employees to remain in a Ministry
of Health position. According to
Government policies, pensions
are paid in a lump sum to vested
employees after age 50. As a result,
most senior nurses and some senior

physicians from QEII elected to Primarily due to the HR challenges physicians would often not report to
transfer to another Ministry of Health experienced across the Lesotho work or would not work full shifts,
facility rather than join QMMH and healthcare system, the majority employees of QMMH, including
forego their seniority vesting in the of physicians are expatriates from nurses and physicians, must
Ministry of Health pension program. across Africa and around the world, hand swipe at installed terminals
No arrangements were made to credit with few Basotho physicians on staff whenever entering and leaving
Tsepong service toward a Ministry of (approximately 10% of physicians are the facility. This time reporting
Health pension and while Tsepong Basotho). Over time, Tsepong aims system impacts employees’ pay if
does offer a pension program for its to increase the proportion of Basotho their absences exceed vacation and
employees, it is not paid as a lump physicians employed at QMMH. Nurse sick allowances or document fewer
sum. Thus, more senior employees staffing is basically complete and hours of attendance than required
were heavily incentivized to remain in almost all QMMH nurses are Basotho. by their shift schedules. Supervisors
Ministry of Health employ. review their direct reports’ time
Policies and procedures and attendance and sign off on the
Over time, however, momentum built data prior to submission for payroll
and a near-full staff complement was Employment policies and procedures
processing. In acknowledgment
assembled. Netcare’s reputation and at QMMH are notably different from
of the significant cultural shift
the opportunity to work in a private established policies or traditions
associated with implementation of
environment within Lesotho were two at QEII, and support significant
a strict time and attendance system,
major incentives reported by nurses improvements from QEII operations.
QMMH leadership phased in this
who joined Tsepong from employers Terms of employment at Tsepong are
system over a six-month period.
other than the Ministry of Health. governed by Lesotho’s Labor Code,
Employees used the system for the
whereas terms of employment at the
first six months although it was not
Recruitment continues for specialist Ministry of Health are governed by
linked to payroll systems during that
physicians, but the leadership of the Public Service Code. This shift
time. As of summer 2012, the system
QMMH has been able to ameliorate prompted multiple changes for QMMH
was fully in effect for all employees.
many of the staffing shortages employees previously employed by the
experienced at QEII. Junior, non- Ministry of Health, including the need • Performance standards and
specialist physician staffing is for time reporting, overtime and leave accountability: Performance
complete and has improved from QEII. allowances and the loss of a Global standards have now been defined
Recruitment of specialist physicians Fund salary supplement made to some and are continuously enforced in
is complicated by comparatively low Ministry of Health employees. a very different way than at QEII.
salaries in Lesotho, but Tsepong has Managers from QEII reported that
been able to hire multiple specialists This change in legal code along with
the disciplinary system under the
to address pre-existing gaps from introduction of strong management
Lesotho Public Service Code is
QEII, including anesthesiologists, principles resulted in significant
slow and cumbersome. Supervisors
intensivists and other internal changes in HR policies and procedures.
reported feeling powerless or
medicine specialists. Recruitment Notable changes include:
ill-equipped to enforce standards
continues for additional surgeons. for conduct and care. As a result,
• Time and attendance
Visiting specialists from South Africa at QEII, negative behavior was
accountability: Whereas at QEII,
cover some services not fully staffed by rarely addressed in a formal way
employees reported that nurses and
full-time, employed physicians.

and was often simply ignored. well as international experts who fly both hospital shifts to support quality
At QMMH, physicians are able to in for periodic courses. Training will training for all students assigned to
reassign nursing or clerical support continue as a priority during the first QMMH.
members who are not performing few years of facility operations, due
to established standards; to the comparatively large population Change management
employees are formally notified of of inexperienced nurses who will
The shift to a new management system
performance deficiencies; and, if require extensive on-the-job training
and a new level of service represents
these deficiencies are not addressed to expand their skills and experience,
a significant cultural change for the
over a period of time, the poor a desire to increase the skills of
nurses, physicians and other staff
performance may culminate in Tsepong physicians, and the need to
previously accustomed to different
termination. QMMH has begun improve data entry compliance among
policies and management systems at
to develop, and continues to administrative staff to ensure data
QEII. During our data collection visit,
refine, performance standards for quality for performance monitoring
QMMH staff, almost universally, noted
each employee role so that the and reporting.
a high workload that was particularly
performance system is transparent
In partnership with the Ministry demanding in the initial months of
and consistent.
of Health, Tsepong has opened its facility opening but improving over
• Performance incentives: training programs to physicians based time. This sense of high workload
Patient satisfaction surveys are in the district hospitals. By supporting has aggravated concerns around
available on every inpatient ward this system strengthening, Tsepong compensation.
and elsewhere throughout the also seeks to address skill gaps that
In general, nurses, physicians and
hospital. Surveys are assessed generate unnecessary referrals to
other staff are receiving equal or
regularly, and wards or departments QMMH. Future system-wide trainings
higher compensation to salaries paid
with high patient satisfaction results are planned to continue this effort.
at QEII. With overtime allowances
are recognized for their efforts Tsepong is considering establishing
(with approval), physician and staff
and success. Similarly, individual a rotational program through which
salaries can reach 40-50% more than
employees are recognized based on clinicians assigned to other Ministry
QEII salaries. Physicians are also
“employee of the month” awards of Health facilities will practice at
permitted to maintain private practices
and similar recognition programs. QMMH for a defined period of time,
in addition to their QMMH service.
Staff were also thanked for their thereby enhancing their clinical skills
Expectations for salaries at QMMH,
service through a year-end holiday and gaining a greater understanding of
however, were very high. Despite
party approximately two months the operations of the national referral
communications to the contrary, many
after hospital opening. Similar hospital. A training program for
staff expected that they would receive
programs were not available to staff administrators from district facilities is
payment in line with South African
when employed at QEII. also being considered.
private hospital salary scales, which on
Similarly, nurse training programs average are significantly higher than
Training salaries offered in Lesotho.
have been expanded to accommodate
Training has been a particular focus a greater number of nursing students
since opening of QMMH. To date, Over time, Tsepong hopes to address
completing practical training at
training programs have focused on salary concerns but feels that current
QMMH. Tsepong has invested in hiring
remediation of identified skill gaps, salaries are appropriate to the level of
a greater number of nurse supervisors
including customer service, infection skill and experience possessed by each
to participate in training of nursing
control, accident and emergency triage employee. Over the long-term, nurse
students. At QEII, nursing students
and specific clinical competencies. managers and physicians feel that
completed training programs only
Training is conducted by local staff as elevation of salaries may be required
during the day, but at QMMH, student
to prevent excessive staff turnover and
rotations have been established across
resulting impact on care.

QMMH managers have addressed much of the data required for The installation and ongoing
change management concerns through quarterly performance reports issued maintenance of SAP and related
strong and accessible leadership. Staff to the independent monitors and the systems is managed remotely by
interviewed universally stated that Government. Netcare’s IT team in Johannesburg.
Tsepong management is accessible The PACS is similarly remotely
to them and is fair and supportive QMMH also has a full picture and monitored by the system vendor.
through a challenging time. They archiving system (PACS) for radiology Only one IT support staff is onsite at
state that support from executive images and provides digital access QMMH on a daily basis, primarily to
leadership for decentralized decision- to laboratory test results, which troubleshoot hardware and other IT
making empowers staff, sets a high are managed by a laboratory sub- user “help desk” issues. Connectivity
standard for performance, and contractor. Overall, these new issues including limited bandwidth
allows for efficiency in responding to systems facilitate the flow of patient have limited Tsepong’s ability to
emerging challenges. While at times information, strengthen coordination establish back-up systems.
overwhelmed by the new challenges of care, and support improved financial
presented by the new facility, almost and clinical outcomes. Clinicians
report that these improvements
Quality management and
all staff and managers at QMMH
report feeling motivated by the to clinical information technology utilization management
systems have supported more precise The leadership of QMMH has begun
new challenges they face and the
treatments and resulted in a decrease to institute a quality program to
opportunities and support presented to
in mortality among non-infectious continually improve quality of care
them by hospital leadership.
patients on the medicine wards and efficiency of operations. This
and ICU. includes extensive infection control
Information systems training programs to address identified
Tsepong has installed a fully integrated Currently, QMMH information deficits in knowledge and practice,
enterprise resource planning (ERP) systems do not extend beyond Tsepong establishment of a recurring morbidity
system, SAP, which links financial facilities. QMMH employees must print and mortality review for physicians
and operational data to patient reports and develop other manual and formal censure of clinical staff
health records. This system is fully work-arounds to deliver clinical when inappropriate care or other
implemented at QMMH and is now information to other healthcare issues are identified. Defined clinical
being expanded to the filter clinics. facilities in the health system, protocols and policies and procedures
This is an advanced system that is including referring facilities. The are being implemented as Netcare’s
more sophisticated and advanced Millennium Challenge Corporation best practice policies are adapted to
than many of the IT systems installed (MCC) is supporting the Ministry of the local environment based on clinical
in Netcare’s South African facilities. Health in its refurbishment of facilities and management review.
This system supports the first and information technology at health
electronic medical record in Lesotho. facilities around the country and Significant improvements to clinical,
Other public systems rely upon a additional PPPs are being considered quality, and utilization management
paper-based health passport system to support maintenance of IT systems have already been made, including
(called a “bukana”) to document and at Ministry of Health health centers the introduction of a triage system
communicate patient treatment and and district hospitals. Further value in the Accident & Emergency
medical histories. The QMMH medical may be extracted from QMMH’s department, stricter management
record captures patient demographic information systems if they are linked of the referral process from other
information, all treatments and with IT systems installed across facilities, improvement of information
diagnostics given to a patient and the Lesotho’s many primary care health and laboratory systems, and enforced
supplies utilized in their care. This centers and district hospitals. infection control standards. Taken
sophisticated system also generates together, this program represents

a profound change from QEII, survival following major surgical
which relied upon outdated nursing procedures, and decreased mortality After one year of hospital
practices, lacked basic clinical for non-infectious patients requiring
oversight programs and enforced intensive care treatment. After one
operations, QMMH
clinical policies and procedures, had year of hospital operations, QMMH Managers report tangible
few to no information technology Managers reported tangible reductions reductions in patient
systems, and lacked consistent in patient mortality from 12% to 7%
enforcement of proper housekeeping and a reduction of maternal mortality mortality from 12% to
or hand-washing techniques.Ref 2 to less than half the national average 7% and a reduction of
(495/100,000 vs. 1,115/100,000).
Improved availability of testing data Overall, physicians we spoke to
maternal mortality to
has been a key input to increased reported an improved ability to plan less than half the national
quality and efficiency. For example, treatment and manage medications
Tsepong outsources laboratory average (495/100,000 vs.
based on the greater range of
functions to a subcontractor and investigative tools at their disposal and 1,115/100,000).
manages performance of that the timeliness of reporting at QMMH.
subcontractor to strict service level
agreements. Certain tests must define their supply and medicine needs
be delivered with a 60-minute
Supply chain management
Supply chain management of both and manage ordering proactively.
turn-around-time unless adequate
medical supplies and pharmaceuticals
explanation is provided. Lab reports As compared to QEII and other
has been improved at QMMH, as
are readily available to physicians in a Ministry of Health facilities, QMMH
compared to QEII, through the
short period of time, which supports has a distinct advantage in ordering
application of rigorous management
better clinical decision-making and supplies and medicine due to its ability
and leading practice policies
more precise titration of treatments. to order outside of the Ministry of
and procedures.
Similarly, introduction of PACS for Health systems. The Lesotho National
radiology procedures allows physicians As an example, under the oversight of Drug Supply Organization (NDSO)
to more easily and quickly access a seconded Pharmacy Manager from is often unable to place orders with
imaging results to guide treatment Netcare, new inventory systems have suppliers due to significant payment
decisions. Integration of primary care been instituted in the pharmacy to delays or outstanding balances. This
clinics with the hospital operation expedite fulfillment of prescriptions, delay in payment is caused both by
permits outpatient lab testing and inventorying and re-ordering. delays in the Government payment
imaging, which has supported Additionally, the fully integrated SAP processing system and by delays
decreased lengths of stay.Ref 14 system supports stock management in payment from client facilities
by linking use of specific supplies and (NDSO’s primary income comprises
While detailed outcomes data were fees paid by each district hospital and
drugs to individual patient accounts.
not available for this case study, health center to the NDSO based on
With these new systems, the QMMH
both nurses and physicians report purchasing activity). This inability to
pharmacy has reduced the number
improvement on clinical outcomes make timely orders was a significant
of stock-outs, a frequent occurrence
as a result of changes in HR policy, driver of stock-outs at QEII. While
that negatively impacted patient
infection control programs, equipment QMMH must direct the majority of
care at QEII. While stock-outs have
and technological advances and its orders through NDSO (80% of all
been reduced, they have not been
improved facilities. These outcomes purchases by price), Tsepong can also
eliminated, and the pharmacy is
include increased survival of low access supplier relationships through
working closely with clinical staff to
birth-weight babies, increased

established Netcare relationships and likely due to the QMMH practice of
issue payment through independent verifying deliveries against placed More resources and
accounts payable systems. In the first orders and requesting refunds of
six months of operation, Tsepong undelivered goods. This strong control
focused investment in
has exercised this option as required against theft or loss of drugs and building government
and has been diligent in making on- supplies while in transit has resulted in capacity will be essential
time payments to all vendors so that cost savings and greater efficiency.
this alternate channel remains open to the long-term success
for purchases. Independent monitoring of of the PPIP project.
These alternate purchasing clinical operations
arrangements, as well as a focus on Key monitoring terms and
concentrated in only a few individuals
coordinated planning, have allowed performance indicators were
in the Ministry of Health and the
the QMMH pharmacy to support established in the PPIP contract for
Ministry of Finance.
physicians with obtaining the best both construction and operations.
treatment for an individual patient. For While monitoring of the construction While plans to build PPP units both
example, specific antibiotics or other phase of the project did not experience within the Ministry of Health and the
specialized treatments can now be many challenges, the application Ministry of Finance have been in place
ordered with shorter order timelines of independent monitoring to since project launch, resources and
than were possible at QEII. QMMH has clinical operations has proven more staff have not been made available to
been able to share this benefit with complicated. establish fully functioning units. At
other healthcare facilities across the both ministries, the long-term leaders
Prior to launching the QMMH PPIP,
Lesotho healthcare system as well. On of the project are beyond retirement
the Government had very limited
occasions when the NDSO is unable age and are serving in contract
experience with PPPs, and very little
to obtain a particular medication positions. To date, these leaders have
institutional experience to manage
but QMMH is able to purchase the been unable to assemble complete
a complex PPP project. Since the
drug directly from manufacturers or teams beneath them, relying on a few
initiation of the PPIP project, the
distributors, QMMH has shared these key staff members in each ministry.
Government has focused on building
drug purchases with other Lesotho In our assessment, this lack of broad
capacity in both the Ministry of
healthcare providers (e.g. CHAL, government capacity represents the
Finance and the Ministry of Health
Partners in Health), at cost. biggest risk to the project’s long-
to manage the complexity of the PPIP
term success. A capable Government
The new, formalized and enforced contract and ensure capacity of the
unit or units must be established to
systems at QMMH have also led to Government to be a strong public
supplement the independent monitor
reduced shrinkage and waste. The partner. While progress has been
function and manage this PPIP project
NDSO has observed that the QMMH made in this regard, more resources
and others going forward.
pharmacy is ordering lower quantities and focused investment in building
of drugs and supplies than were government capacity will be essential Despite these challenges, Government
previously ordered by QEII. While to the long-term success of the project. monitoring has proceeded during the
some of this reduction may be tied Currently, knowledge of, and capacity
to tighter inventory controls and for managing, the project remains
discipline in purchasing, it is more

discuss outcomes of the quarterly • Specialist physicians:
In our assessment, this monitoring assessments and to adjust Recruitment is ongoing and an
the monitor’s findings and resulting area of continued focus for all
lack of broad government financial penalties. At issue are parties. Some discrepancies exist
capacity represents the specific performance indicators (or, between Government expectations
biggest risk to the project’s in some cases, the lack of specific and Tsepong’s achievement of
performance indicators) as well as recruitment targets to date;
long-term success. Turner & Townsend’s adaptation of
those indicators to an evaluation • Clinic schedules: Filter clinics
model. The contract allows for are currently open only during
first year of hospital operations and the flexibility in adapting the performance weekdays for most services,
first two years of the project. Multiple indicators through the Joint Services and the cost model was based
independent monitor reports have and Liaison Committees, and some on this assumption. However,
been formally reviewed by the Joint revisions have already been made in patient volume and Government
Services and Liaison Committees and the first year based on joint agreement expectations may call for weekend
both public and private parties have between Tsepong and Government hours at the clinics.
engaged in productive discussions representatives serving on these
to adjust monitoring measures committees. Changes will likely • Payment delays: Payment
and address emerging concerns. continue in the near-term from the Government to Tsepong
Government representatives have until the independent monitor’s has been delayed on more than
particularly focused on managing evaluation model is fully tested one occasion, most likely due
deviations from the original contract against operational realities. to challenges with Government
design to guard against escalating payment systems in general rather
project costs. than any issues specific to the PPIP
Partnership between project. On at least one occasion,
As noted from the outset of the Government and Tsepong this payment delay resulted in a loan
project, the QMMH PPIP represents The Government and Tsepong have default according to the terms of the
the first foray by the Government, built strong relationships during a financing agreement with the DBSA.
its transaction advisors and the relatively short period. During our Tsepong and Netcare have done
contracted independent monitor visits, we observed open lines of their best to work collaboratively
(Turner & Townsend) into a PPP communication on emerging issues with the Government to resolve
design with such a broad scope of and a commitment to collaborative these delays which, over time, could
clinical operations.Ref 13 From the success on both sides. Together, the significantly impact Tsepong’s ability
outset of performance indicator parties have been able to productively to deliver according to the cost
development, LeBoHA understood address some significant points of model established in the contract.
and acknowledged that many of the concern that have arisen over the first
measures might require revision over year or so of the project, including: These issues were jointly managed
the course of the 18-year contract. Ref 24 both through the formal governance
• Physician salaries: Concern structures established (Joint Services
That prediction proved true in the first was raised over the compensation Committee, Liaison Committee) and
six months of the project. Tsepong, of physicians, but a joint analysis through regular contact between
the Ministry of Health and Turner showed that physician salaries Tsepong leadership and various
& Townsend have met repeatedly to are, on average, 30% higher than leaders at the Ministry of Health,
QEII salaries;

Government encouraged patients and employees of Tsepong to call the station
This strong partnership and air their grievances and complaints. This media campaign highlighted
long patient delays, the high workload for employees at Tsepong and specific
bodes well for the ability of instances of patient morbidity or mortality. In many cases, those working in the
the combined project team health sector (both Tsepong employees and non-Tsepong employees) perceive
to collaboratively confront that these complaints against service at QMMH were strongly linked to a general
dissatisfaction with the Government or government services.
and resolve emerging
In early stages of the project, the Ministry of Health and Tsepong issued multiple
issues in the years to come. public communications to explain the PPIP project to the public of Lesotho. It
seems that these messages had limited impact, however, as many patients arrived
including the PPP Coordinator, the at QMMH not understanding how to access care (i.e., through being referred)
Director General and the Minister and/or confused about whether the hospital was public or private.
of Health and Social Welfare.
Recognizing a need, QMMH has hired a Public Relations Officer who is
Ministry of Finance leaders have
developing a program to address public misconceptions and to better represent
been primarily involved through the
the care provided at Tsepong facilities.
formal governance committees. Day-
to-day management, monitoring and
issue resolution have been primarily
managed by the Ministry of Health
and QMMH leaders, and these daily Communication leading practices
working relationships form the core In general, PPP projects will benefit from a comprehensive and
of the partnership between Tsepong proactive communications plan that aims to engage stakeholders
and the Government. This strong
partnership bodes well for the ability and the public throughout all stages of the project life cycle. Many
of the combined project team to countries or regions with established PPP programs require a
collaboratively confront and resolve communications plan for all projects. These communication plans
emerging issues in the years to come. should be as inclusive as possible rather than narrowly focusing
Continued commitment from both only on those stakeholders directly involved in the process or
Tsepong and the Government will be
required to maintain and nurture this approval bodies.
collaborative relationship, and this
commitment will require continuity
PPP projects in many countries are treated with suspicion by
across changing governments various stakeholder groups and the media. While recognizing that
and leaders. some information may be of a sensitive commercial nature, it is
only by being as open as possible that an informed debate about the
Public response merits of PPPs can take place.
As the filter clinics and hospital
opened, there was significant negative
media coverage about the new
hospital. Local radio stations known
to highlight complaints against the

Ongoing and future initiatives in support of the PPIP
The QMMH PPIP represents an

ambitious, important step in the PPP regulatory framework
evolution of the Ministry of Health.
For the first time, the Ministry of In general, existence of a regulatory or policy framework for
Health formally pursued its policy public-private partnerships is cited as an important precursor
goals through a commissioning rather to development of any PPP project or, at least, of any significant
than a delivery strategy, moving pipeline of projects. Lesotho has pursued multiple PPP projects
forward as a purchaser rather than
without any regulatory or policy framework in place: the Ministry
a provider of care. With this project,
the Ministry of Health tested its of Health headquarters construction, the QMMH PPIP and
ability to fulfill its mission through multiple PPP projects under consideration or in the tender process
alternative and evolving models. at the time of this report’s publication. However, the Ministry
The Government and its advisors of Health and Ministry of Finance acknowledge the importance
recognized that, for the long-term
of a defined framework for long-term management of a PPP
success of this innovative PPIP model,
further innovation and action are portfolio. The Government is in the process of defining a regulatory
required to prevent an “island of framework for PPPs and also working to establish dedicated PPP
excellence” from being swamped by units in both the Ministry of Finance and Ministry of Health.
healthcare demand across the system. This effort will be particularly important to ensure that the
Thus, the Government has already
Government maximizes its negotiation strength by engaging with
implemented multiple initiatives
aimed at strengthening its capabilities the private sector on a consistent basis, particularly where multiple
in managing PPP projects, and the line ministries are involved, and the same bidders are involved in
Ministry of Health’s ability to deliver multiple bids.
effective care of increasing quality.
These initiatives include:
• PPP regulatory framework: renovation, reconfiguration, services will be provided through

The Ministry of Finance, with expansion and construction of up to these PPP arrangements, but
support of the IFC, has completed 138 health centers in order to bring winning bidders will be required
a first draft of a PPP regulatory all national health centers up to a to provide ongoing non-clinical
framework and policy to be applied common standard (www.mca.org. services including maintenance
to all future PPP projects in Lesotho, ls/projects/hcentres.php); and equipment upgrades; and
across all sectors;
• Health Center PPP for • Government capacity
• MCC Health Center equipment and information building: The IFC has mobilized
refurbishment: The Millennium technology: With the support of funds to engage consultants to
Challenge Corporation (MCC) the IFC, the Ministry of Health has assist the Ministry of Health in
is working with the Ministry of initiated a PPP tender for equipping building their capacity for contract
Health to refurbish health centers health centers around the country management and oversight.
around the country. These centers with equipment and information Consultants will work closely
play a primary role in HIV/AIDS technology. The PPP also with the Ministry of Health to
prevention, TB treatment and encompasses facilities maintenance build systems for performance
maternal and child health services. to ensure the continued quality of monitoring and other contract
Project activity focuses on design, the MCC-refurbished facilities and management activities.
other health centers. No clinical

Both the Government and Tsepong Beyond increasing the pool of local
recognize that, over the long term, health professionals, other health
more expansive action will be required system strengthening will also
to address health system deficits be required. A notable number of
for human resources. While QMMH referrals to QMMH are due to resource
has addressed some of the “push” shortages (e.g., no doctor present
factors (dilapidated facilities, lack in the facility, no sutures available)
of strong management structures, at the district hospitals. Addressing
lack of professional development these supply chain limitations and
opportunities) that encourage improving human resource allocation
local doctors and nurses to seek across the system will benefit QMMH
employment in South Africa and as well as other healthcare facilities.
elsewhere, a large salary gap and Strengthening functioning at NDSO
other “pull” factors continue to draw and developing strong management
Basotho healthcare professionals to capacity at district hospitals will also
South Africa and beyond. Addressing be important to improved health
the salary gap and other issues will system functioning and reduced
be essential to strengthening the pressure on QMMH. Potential
health system more broadly, thereby expansion of a PPIP program to
benefiting both the QMMH PPIP district hospitals and/or to district
and the broader health system. As a health centers, has been discussed
long-term goal, Lesotho also hopes by the Government, but no specific
to establish a medical school for plans have been developed awaiting a
Basotho students and build a pipeline more formal assessment of QMMH’s
of physicians for Lesotho health performance.
facilities. Again, such an initiative will
benefit not only the QMMH PPIP but
the broader health system and the
population of Lesotho.

Lessons learned
The development of this case study • Further, discrete plans should be Think local: Local expertise
report allowed for many of the actors developed to ensure full knowledge is critical—knowledge of local
involved in the development of the transfer from expert transaction conditions and traditions is important
QMMH PPIP to reflect on what they advisors to the Government partners for adapting international leading
might have done differently and that will manage the project going practices to local needs, expectations
what positive lessons were learned forward. Efforts were made in this and limitations. While transactional
through the project experience. The regard for the QMMH PPIP, but advisors can fill some of these
following sections summarize these participants report that broader and roles, the project will benefit from
“lessons learned,” as reported by more complete knowledge transfer widespread local involvement from
project participants in case study might have improved Government the earliest stages of the project and
interviews or previously published capacity for contract management. early inclusion of leaders (both public
analyses of the project. We hope this and private) who will be responsible
catalog of “lessons learned” assists in Diversify project committees for project success post-financial close.
generalizing the details of this case from an early stage: PPPs and The Lesotho project demonstrated this
study for the benefit of future PPPs PPIPs are complex projects that require leading practices of widespread local
and PPIPs in Lesotho and elsewhere. a wide range of expertise, including involvement by assembling review
knowledge and experience in finance, committees with diverse expertise
contracting, legal frameworks and a from both the public and private
Lessons learned: spectrum of healthcare operational sectors. Reflecting on this effort,
Appropriate expertise disciplines. It is important to involve the Lesotho participants expressed
Engagement of skilled advisors representatives with this diverse their wish that involvement had been
is only the first step for expertise in the earliest stages of a even more widespread and that a
project success: Engagement of project. For example, failure to include broader range of participants had been
transaction advisors was essential for hospital operations experts during more deeply involved in key project
the Government, but Government contract design and negotiation decisions from the earliest stages. Such
project leaders realized quickly that might result in a final contract that is involvement would have produced
other elements were required to extremely difficult to implement. In greater institutional knowledge of the
ensure efficient decision-making Lesotho, effort was made to include project, allowed for better integration
and knowledge transfer back to diverse expertise during the planning of local knowledge at earlier stages,
Government staff. and negotiation phases. Still, QMMH incorporated deeper operational
management encountered contract expertise during negotiation and
• Once transaction advisors
terms that were difficult to implement ultimately benefited the project in its
are engaged, clear roles and
or not operationally sound, which implementation stages.
responsibilities must be defined
required early revision to some
between the Government sponsor
contract terms such as performance
and its transaction advisors.
indicators. Greater integration of more
Establishing ground rules at
senior operational expertise during
the outset will better facilitate
planning stages might have reduced or
information flow and timely
avoided these early revisions.
decision-making; Ref 19 and

Lessons learned: Leadership demonstrating steadfast policy between June 2007 and June 2008. Ref 3
Engage the broader leadership commitment and political leadership. These findings documented the
team in project development: Equally, these government leaders current state of services at QEII,
Throughout the project, the Prime have remained dedicated to joint helped to scope the current and future
Minister’s cabinet was engaged in success during the challenging early healthcare needs for Lesotho, and
decision-making about the PPP and months of hospital operation. Private provided baseline utilization and cost
kept abreast on project developments. and public sector partners in future data for services provided at QEII
Leaders of the QMMH PPIP identified PPP projects would be wise to assign and the existing urban filter clinics.
this broad government support as a senior, tested executives to support Similar health systems analyses would
key success factor for the project’s early project success. The Lesotho be essential to any future PPIPs to
development, and consciously experience suggests that appointment assess or validate healthcare needs,
cultivated broad government buy- of capable leaders at the outset of a produce the necessary baseline
in with regular updates to the project is a critical success factor for data for scoping and costing the
cabinet. Broad cabinet engagement any PPIP project. PPIP project and position a large
supported the QMMH PPIP through project in a health systems context to
political transition. For example, the Develop a succession plan from support good policy decision-making.
appointment of, and transition to, a Day One: A challenge for the QMMH Without sufficient data on health
new Minister of Health during the PPIP will be sustaining the strength of system needs or current volumes and
project’s early stages was relatively management systems as operational cost, neither Government nor the
smooth due to the full Government’s needs evolve over an 18-year project. private sector can make informed
engagement and commitment. Succession planning and investment decisions about PPP design or the
in leadership development have begun appropriate cost model to support
Strong, experienced, dedicated and will be significant areas of effort a long-term relationship. Indeed,
public and private leaders are in the coming years. Initiatives to a lack of such information would
essential: Dedication of strong groom the next generation of leaders likely pose challenges to any provider
and senior leaders, both at Tsepong began with the hiring process prior to (government or private sector)
and in the Government, has been a commencement of hospital operations attempting to specify requirements for
critical success factor for the QMMH and will continue. new healthcare facilities regardless
PPIP. The strong leaders at QMMH of whether a conventional or PPP
have bolstered the development Lessons learned: Plan early, procurement model was used to
of a solid partnership with the plan often realize those facilities.
Ministry of Health, established strong Early identification of
relationships across the Lesotho Begin government capacity
healthcare needs supports
healthcare system, won the confidence building at the earliest
alignment of a realistic PPP
and support of QMMH staff, pioneered stages of PPP conception: For
design with healthcare system
a new culture of performance and any government without strong
needs: The original feasibility study
leadership at QMMH, preserved the contracting and management
by LeBoHA provided important context
financial viability of the project and experience, building capacity to
and documentation of healthcare
overall established a robust foundation manage the complex, high value
needs for the subsequent PPIP. This
for future success. No less important, contracts necessarily associated with
research team, very knowledgeable
leaders at the Ministry of Health and PPPs and PPIPs will require significant
on the Lesotho healthcare system,
Ministry of Finance conceived a bold investment of time and resources. This
continued to provide health systems
new strategy for healthcare delivery investment is essential to ensure that
and clinical analysis support to the
and have since navigated the project contracts remain affordable over the
Government throughout the PPIP
through the political landscape, project life cycle and deliver on the
effort, conducting four surveys

policy goals stated at the outset of the These activities all represent an Set ground rules for new
project. Participants in the QMMH upfront cost for both the private partners: Governance of the
PPIP wished that the development of operator and the Ministry of Health, Tsepong consortium has presented
the Government partner’s capacity which would require estimation challenges in the first year or so of
had begun earlier, even at the project’s and design during the contract project operations. Differences in
first conception in 2000, and that negotiation process. business culture and experience exist
those efforts had been more focused between Netcare and its local partners,
at earlier stages of the project. Efforts Develop a transition plan, and many local partners have faced
in Lesotho to build capacity are still then keep on planning: QMMH a steep learning curve on hospital
in their infancy, more than 10 years leadership developed an extensive operations and clinical standards.
after the first discussions of a possible transition plan that supported the As the hospital operator, and to
hospital PPP. nearly overnight transition from ensure the long-term financial health
QEII to QMMH. This plan allowed of the project, Netcare has had to
Devote resources to planning for the transport of all patients renegotiate the service sub-contracts
and training early in the project, in a single day and a near-instant that were granted to Tsepong investors
and hire accordingly: The Lesotho activation of the new hospital. for specific services (e.g., security,
experience demonstrates the need for Not surprisingly, there were some ambulance transport)—a complicated
significant implementation planning. issues not fully anticipated in this endeavor for new partners in the
In reflecting on the transition plan. For example, some equipment consortium.7 Informal arrangements
experience from QEII to QMMH, many needed for clinical operations had not formally documented in contracts
expressed the wish that they had to be transferred from QEII after the or agreements have similarly caused
joined the project earlier and allowed transition when clinicians realized controversy among the partners. To
more time to plan for operations, the equipment was not available at date, the end result: has been that
training needs and project launch QMMH. Tsepong employees also Tsepong board meetings have focused
logistics. The project teams engaged in reported feeling overwhelmed and more on financial matters than on
extensive planning but still found the would have preferred to have patients questions of strategy or contract
efforts insufficient. Lessons learned be transferred in waves rather than all delivery. Formation of SPVs with
through missed opportunities include: at once. Likely, no transition plan will new partners will necessarily require
be perfect, but investment in a strong an adjustment period, and future
• Assign onsite project leadership transition plan will be essential to projects may prefer to draft specific,
early in the process, well before opening any new facility (whether or formal agreements to govern all group
facilities open for operation; not a PPP facility). In the case of a PPP interactions or otherwise anticipate
hospital, transition planning may be the acclimation that will be required
• Develop a comprehensive
even more complicated due to greater to bridge gaps across corporate and/
communications and public
coordination demands between or local cultures. The balance of
relations plan; and
governments and private contractors. control on the SPV Board is also a
• Invest heavily in training and point for close consideration for future
orientation for staff at the projects to ensure proper controls over
new facility. consortium action.
7 These renegotiations did not impact cost

to the Government but did affect the funds
flowing to specific consortium members
participating in the operating subcontracts.

Lessons learned: PPPs are Do not underestimate the need for One point of future renegotiation may
not a panacea education of patients, the public focus on payment structures, both
Without systemwide planning, and prospective employees: While refinement to the existing cost model
PPP projects can become Tsepong is now establishing a Public and addition of previously excluded
“islands of excellence” soon Relations program to address public services. Despite the extensive work
overwhelmed by the sea of misconceptions, patient confusion and of LeBoHA throughout the PPIP
demand: Introduction of strong employee concerns about QMMH, both development process, availability
management systems and a well- the Ministry of Health and Tsepong of historical utilization and cost
designed PPIP have the potential would have preferred to start this data was limited during cost model
to greatly improve the efficiency program earlier. Future PPIP projects development. The current cost model
and quality of care provided to a should account for the extensive for QMMH operations is based on
population. PPIP projects, however, public education campaign that may either “outpatient” or “inpatient”
are still limited by the total resources be necessary, especially if there is no treatment; over time it may be
available for the project and, precedent for a PPIP-like arrangement desirable to refine the cost estimates
moreover, to the entire health system. in the country or region of the project. based on actual experience and service
At the outset of the project, using line-specific data, which has been
the LeBoHA feasibility analysis and Lessons learned: collected by Tsepong on a prospective
baseline studies, the Government basis since hospital opening. Any
Contractual flexibility addition of previously excluded
and their advisors made difficult Contractual flexibility for long-term
decisions about service levels and services will also require negotiation of
healthcare services contracts is
trade-offs necessary due to resource incremental payments to Tsepong from
necessary to cope with the rapid pace
constraints. These tough decisions the Government.
of change in healthcare technology,
about excluded services, number of delivery systems and evolving
hospital beds, number of patients healthcare needs of a population.
served and other considerations were This is likely especially true for
necessary to ensure the project would Lesotho, given the relatively short
remain affordable to the Government negotiation timeframe and limited
over the lifetime of the contract. The data availability.
Government identified this realism
about project scope and health system
status and limitations as a critical
success factor for the future of the
QMMH PPIP. Ref 24 Not surprisingly,
given these trade-offs, QMMH was
operating near full capacity during its
first month of operations. Over time,
Tsepong and the Government will
need to strengthen the broader health
system to alleviate the intense demand
at QMMH.

Opportunities for future evaluation
As previously mentioned, given limited • Achievement of policy goals, based

data availability and short duration of on comparison to baseline LeBoHA
hospital operations to date, a formal studies, including:
evaluation of QMMH performance
was not possible at this time. At a −−Quality of care;
future date, however, a rigorous and
−−Cost neutrality;
independent evaluation of the PPIP’s
performance will be necessary on −−Greater efficiency and expansion
many levels: to address concerns raised of access to care;
publicly and privately about whether
the cost of the project is justified, to −−Predictable government health
evaluate QMMH performance against expenditures; and
Ministry of Health facilities and policy
goals and to judge success and failures −−System-wide efficiency gains.
with an eye towards improvement of
The impact of a future evaluation
future projects.
of the project will be enhanced by
Possible points of evaluation include: improved transparency for project
data and contractual details. A move
• Quality of care provided at toward greater public disclosure
Tsepong facilities; will allow for factual discussion of
the PPIP project and its impact, as
• Sustainability of the annual unitary opposed to conjecture or suspicion
payment (and, when applicable, based on misinformation. As Lesotho
additional payments to Tsepong moves forward with an expanding
for either excluded services PPP project pipeline, we strongly
or additional patient volume encourage greater transparency and
beyond the negotiated package public disclosure of project details
of services) in the context of the and results.
healthcare system;
• Impact of Tsepong facilities on

human resource availability across
the Lesotho healthcare system; and

Conclusion
Ongoing reporting and evaluation transparency and programs to address Despite the inherent political and
of the QMMH PPIP will be required poverty across the country. The PPIP financial risks and implementation
to measure the long-term success project weathered previous leadership challenges, Ref 7, 23, PPIPs offer the
or failure of the project and to transitions (specifically, a transition potential for significant improvement
determine whether the Lesotho in Minister of Health in 2007), largely in quality and efficiency in healthcare,
approach may establish a new model due to Cabinet-level buy-in for the at a time when many publicly-
for improvement of publicly provided project. Now with turnover across owned and run facilities are in poor
care across Africa and indeed across the entire Cabinet, including new shape. The case study of the Queen
the world. While early signs point to Ministers of Finance and Health who ‘Mamohato Memorial Hospital
improvement in clinical services and were appointed in June 2012, the demonstrates the ability of a lower
management efficiency, continued PPIP must educate and navigate the income country to engage the private
dedication and effort will be required new Government leadership structure sector in new ways, and in a relatively
to maintain and expand these and build new working relationships short period of time transform the
successes over the remaining 15 years quickly. As turnover in public quality of care being provided to its
of the PPIP contract. and private leadership continues, population. While many challenges
establishment of strong PPP units and lie ahead and more time is needed
Perhaps the greatest challenge in other oversight mechanisms will be to collect data and conduct a formal
the near term will be maintaining extremely important. evaluation before the project can be
performance despite leadership judged a success, early signs indicate
changes at many levels. Tsepong Over the longer term, the project that the strong project concept and
expects to transition leadership must grapple with the overwhelming policy vision, coupled with strong
seconded from Netcare and demand for services experienced in management systems introduced
from expatriate leaders to local the first year of operations at QMMH by the private sector, are having an
management in two to three years. and its associated clinics. Without immediate impact.
Another significant change is already significant investment in the broader
underway: in May 2012, Lesotho health system, and thoughtful
witnessed its first peaceful transition coordination between QMMH and
of power through an electoral process, outlying district facilities, the QMMH
when the Prime Minister of 15 years PPIP will fast become unaffordable
ceded his post following a democratic for both public and private partners
election and formation of a coalition and threaten the future of the
government led by Opposition leader, project. While balancing the need for
Tom Thabane. Prime Minister Thabane evaluation and Government capacity
immediately implemented changes building, the Government must rapidly
in Government policy, pledging upgrade the surrounding health
improvement in services, greater system to preserve and expand upon
the early successes of QMMH.

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Healthcare public-private partnerships series, No. 1 3

4 Health System Innovation in Lesotho

• Apparel Lesotho Alliance to Fight AIDS (ALAFA)

• Clinton Health Access Initiative (CHAI)

• Ditau Health Solutions

• The Healthcare Redesign Group

• Lesotho Boston Health Alliance (LeBoHA)

• Lesotho Ministry of Health and Social Welfare

• Lesotho Ministry of Finance and Development Planning

• Millennium Challenge Corporation

• Tsepong (Pty) Ltd

• The World Bank Group

Healthcare public-private partnerships series, No. 1 5

6 Health System Innovation in Lesotho

Healthcare public-private partnerships series, No. 1 7

8 Health System Innovation in Lesotho

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Direct agreement Direct agreement

Debt/equity Tsepong, LTD

RPP Lesotho 1 National hospital Facilities management Netcare hospitals

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Figure 2: PPIP timeline

March 2009: October 2011:

Completion of May 2010: March 2026:

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After a decade-long planning effort, This report describes in detail the

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Figure 3—PPP procurement process

Stage 1: Project identification

Government develops Government conducts Government develops Government issues public

Stage 3: Project selection

Vendors submit Government Vendors submit Government holds a Government

Stage 4: PPP contract and financial close

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Netcare, a private South African healthcare company, together with an

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Bidders were required to submit

Based on this evaluation process, Afri’nnai

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Direct agreement Direct agreement

Debt/equity Tsepong, LTD

RPP Lesotho 1 National hospital Facilities management Netcare hospitals

4 Calculated based on net present value from

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Total private capital investment Total public capital investment

M 800,000,000 Initial capital

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Employment ultimately the Government decided Broader impacts