As an emerging market country that was accepted as a candidate for European Union membership in 2005, Turkey faces several major issues in its healthcare sector. These include poorly operating public hospitals that lack essential facilities. The inefficiencies in the healthcare system and the low level of funding for public services have been amply demonstrated by the Turkish Ministry of Health (the "MoH") over the last decade. There is also inappropriate use of many public hospitals and hospital outpatient departments – including university hospitals – as university hospitals are usually the first point of contact for even minor complaints. Additionally, ineffective management at both the macro- and micro-levels of the state, and administrative inefficiencies, both within the healthcare service providers and the MoH itself, evidence the necessity to employ personnel who are trained in healthcare and hospital operations, administration and healthcare financing.
Background
The existence of multiple systemic healthcare problems has acted as a catalyst for the government to embark on healthcare sector reform, enacting various laws and regulations to address growing dissatisfaction. In accordance with Provisional Article 7 of the Fundamental Healthcare Services Law ("Law No. 3359")1 and the Regulation on the Construction of Health Facilities on a Lease-and-Build Basis and the Restoration of the Services and Areas in Facilities Other than Medical Service Areas on a Restore-and-Operate Basis, (the "Regulation")2 the MoH has initiated several tenders3 for the construction and provision of products and services for integrated healthcare campus projects under the Build-Lease-Transfer model ("BLT") located in different parts of Turkey (i.e. Kayseri, Ankara Etlik, Yozgat, Ankara Bilkent, Manisa, etc.) through the Department of Public-Private Partnerships of the MoH (the "PPP Department"). These projects, through their autonomous financial and managerial status, are designed to give hospitals financial and administrative autonomy. Financial autonomy entails independence in generating and spending resources, whereas managerial autonomy refers to employment procedures and outsourcing.
There are many charming aspects of these projects that will most certainly catch international investors' attention and will also create a comfort zone for international financiers in terms of financing these projects. For instance, according to Law No. 3359, the Ministry of Finance may transfer real properties of the Undersecretariat of Treasury to real persons or private legal entities for the purpose of the implementation of these projects, at no charge. Additionally, upon the MoH's request, the Ministry of Finance may create superficies rights in favor of the project companies, for up to 49 (forty nine) years.
BLT Tenders
Pre-qualification for tender participation and bid submission is open to all local and foreign applicants that are joint ventures and consortiums in the form of partnerships may apply for pre-qualification. The PPP Department may establish economic and financial qualification criteria that includes the requirement to hold an average turnover amount from the last five years prior to the year of publication of the pre-qualification notice at no less than TL 250,000,000 and/or equity of no less than TL 220,000,000, among other criteria. After awarding the tender, the winning bidder will be required to establish a special purpose vehicle (the "SPV") for execution of the agreement with the MoH. The Regulation does not stipulate any specific SPV form such as a joint stock corporation or a limited liability partnership.
The Regulation also set forths that tender documentation to be prepared by the MoH must include specific information concerning the performance bond and bid bond (i.e. total amount, validity) methods for the determination of the lease amounts and lease term, conditions for inspection, monitoring and acceptance of the project, particulars of the land to be allocated to the health facility that will be constructed thereon, and methods that may be used for resolution of disputes. Aside from these tender documents, the MoH will also provide a draft form of implementation contract and direct agreement in the tender documents package.
Additionally, and more importantly, the Regulation states the MoH will provide a guarantee in respect of the timely lease payments in consideration of the work performed by the appointed company.
Recent Examples of the MoH PPP
The first tender of the MoH's public-private partnership model program concerned the construction and operation of the Kayseri Integrated Health Campus that was finalized on 1 April 2011. The Kayseri Project is a health campus investment with a total capacity of 1,548 beds consisting of a 1,048-bed Education and Research Hospital, a 200-bed Physical Therapy and Rehabilitation Hospital, a 200-bed Psychiatric Hospital and a 100-bed High-Security Psychiatric Hospital. The contractor who won the tender – YDA İnşaat Sanayi Ticaret A.Ş. and INSO Sistemi Per Le Infrastrutture Sociali S.P.A. Joint Venture – will provide and ensure the financing, building design, construction work, medical devices and other equipment for the health campus, as well as maintenance for the facilities, including the provision of support services such as imaging, laboratory and other medical support services, as well as information processing, sterilization, laundry, housekeeping, security and catering. The timeframe for this project includes a construction period of three years, in addition to the operational period, which is 25 years. During the operational period, the liability of the contractor is limited to non-clinical costs since all clinical operations will be carried out by the MoH. The upcoming tenders will be realized for the Manisa and Elazığ projects, with a total capacity of 1,350 beds, on 15 April 2011 and 27 May 2011, respectively.
Privatization and private-sector participation have been on Turkey's agenda since the early 1980s as fundamental tools of liberal economic policy designed to make the economy more responsive to market needs and, thus, to increase industrial efficiency and economic growth. The Turkish private sector participation process has proven to be an important source of funds for the government, since privatization – together with the BOT, BO and TOR models – has decreased the burden of state economic enterprises on the national budget and this has, in turn, stimulated Turkey's economy. There are many ongoing infrastructure BOT projects in Turkey related to tunnels, motorways, dams, hydroelectric power plants and so forth, but private-sector participation in public healthcare services – a reflection of the hot Turkish PPP agenda – is still a young concept. As a consequence of the implementation of these healthcare PPP projects, the MoH's desire to be transformed into a policy-making and regulatory authority that defines standards, controls health service providers and supervises the appropriate use of resources will inevitably be realized.
Footnotes
1. Published in the Official Gazette dated 15 May 1987 and numbered 19461.
2. Published in the Official Gazette dated 22 July 2007 and numbered 26236.
3. Under the Regulation, three different tender procedures are foreseen for health care projects. These are (i) open tender; (ii) tender among selected bidders; and (iii) bargaining procedure. The procedure of each tender is determined by the MoH on a project basis.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
