IFC-Negotiated Privately Run Hospital Sapping Lesotho Budget

By Carey L. Biron Reprint | | Print |

WASHINGTON, Apr 7 2014 (IPS) - The world’s first hospital to be built and run in a developing country under a public-private partnership is taking up more than half of the health budget in Lesotho, according to new estimates, diverting resources from populations outside of the capital.

The unique funding arrangement for the Queen ‘Mamohato Memorial Hospital, which opened in 2011 in the capital city of Maseru, came about under a deal brokered by the International Finance Corporation (IFC), the World Bank’s private sector arm.

Yet while the Washington-based IFC was negotiating on behalf of the Lesotho government, the final agreement will see returns of around 25 percent for the private company running the hospital.

Now, critics from civil society and within the Lesotho government are warning that the contract, which lasts for 18 years, is already forcing officials to cut back on health and other services, particularly for the country’s rural areas – where 75 percent of the Lesotho population lives.

“The big promise was that the new hospital would cost exactly the same as the old hospital and bring better results, but that’s clearly not the case. Even at the point the contract was signed [in 2009], costs had already escalated beyond what was agreed to be affordable,” Anna Marriott, a health policy advisor with Oxfam Great Britain, a humanitarian and advocacy group, told IPS.

“It’s very concerning that the deal was structured to give a 25 percent return to a private company – that’s a phenomenally high rate – and the idea that the World Bank would advise on a deal of that type is truly surprising. It feels as though the IFC was negotiating on behalf of the company rather than the government.”

In a report released Monday, Marriott writes that the new hospital is costing around 67 million dollars a year, three times more than the old hospital. Further, it’s currently accounting for some 51 percent of the country’s health budget, even while rural services are being cut, including for agriculture and education.

“The [new] hospital has had a bad impact on how we’ve allocated resources over the last two years,” the report quotes an anonymous senior Ministry of Health official as stating. “There are less and less resources for primary health care and district services.”

Non-competitive bidding

While the Lesotho government has proposed a significant increase in its health budget for coming years, a large majority – some 84 percent – of this will be earmarked for the new hospital. Yet most people in Lesotho can’t easily make use of these facilities.

“For many people, travelling to urban areas or the capital can take two days or more,” Lehlohonolo Chefa, director of the Lesotho Consumers Protection Association (CPA), which co-authored the new report, told IPS.

“For a long time, the government has been relying on the Christian Health Association of Lesotho to provide most of the primary health-care services in rural areas. But with the advent of this project, the majority of funding goes to financing the federal hospital while sacrificing that primary health care.”

Chefa is in Washington ahead of semi-annual meetings between the World Bank and International Monetary Fund (IMF), which are taking place later this week.

Lesotho is one of the poorest and most unequal countries in the world. The new Queen ‘Mamohato Hospital replaces the country’s previous central health service provider, a century-old institution that nearly everyone agreed needed to be renovated or overhauled entirely.

Yet when the government of Lesotho went to the World Bank to request funding to do so, Oxfam’s Marriot says the bank’s window had already closed for the concessional assistance that would typically be used in such a situation. Instead, officials were pointed towards the IFC, which took over the main technical advisory role for the deal.

That process resulted in a contract between the government of Lesotho and Tsepong, a consortium headed by Netcare, a South African company that has long experience in the private health-care business.

Critics point to a host of problems with the negotiating process and structure of the eventual contract, however, including that only two companies engaged in the bidding process. In addition, the contract significantly underestimated the number of patients the hospital would see, while requiring the government to pay Tsepong for visits over that number.

Further, Tsepong’s priorities are at times at odds with those of the government. Lesotho, for instance, has the world’s third-highest rate of HIV/AIDS, yet CPA’s Chefa says the new hospital has scaled back these services.

“Most of the HIV/AIDS treatments are not provided in the new federal hospital, so people have to look elsewhere,” he says. “For the private sector, HIV/AIDS is not profitable – we’re seeing the same problem with mental health services.”

Landmark model

The deal was quickly lauded by the IFC, which continues to embrace the project’s broader aims.

“The World Bank Group shares Oxfam’s concern that the health network in Lesotho is being overburdened as it attempts to fulfil greater than anticipated public demand for basic health services,” Geoffrey Keele, an IFC spokesperson, told IPS in a statement.

“The World Bank Group is supporting the Government of Lesotho in strengthening the country’s health system so that everyone in Lesotho, especially the poorest, can access the essential health services they need.”

Keele notes that the project has improved the quality of care for around a quarter of the country’s population, while the overall mortality rate at the new hospital has fallen by 41 percent.

Indeed, the IFC started making plans to replicate the project in other countries almost immediately.

“The landmark deal might serve as a model for aging and overburdened health care systems across Africa,” the IFC said in a statement at the time. “The real potential of the Lesotho project becomes apparent if it could be scaled up across populous countries such as Nigeria, where there could conceivably be scope for 20 or more such hospitals.”

Currently, the IFC is advising on similar projects in Nigeria and Benin.

Oxfam is now urging the World Bank to investigate the IFC’s role in the project. Meanwhile, CPA’s Chefa says the Lesotho government will need to renegotiate the contract, but warns that the contract details remain under wraps.

“Renegotiating the contract is the only way out of this mess, and whether that’s possible is based on the government’s and the IFC’s willingness to change,” he says.

“For the moment, there is incredible secrecy around the project. But if this is a flagship project, how can they not be open about what’s in the contract?”