Over the past seven years, the United Kingdom's National Health Service (NHS) has experienced the biggest new hospital building program in its history under the Private Finance Initiative (PFI). In England alone, 64 major capital schemes worth over £11 billion have been given the go-ahead, 21 are already completed and operational, and a further seven have signed contracts and are under construction. All the completed hospitals have opened on or ahead of time, which never happened under traditional public sector infrastructure development.9
While the UK Government recognizes that like any major new initiative, there have been some growing pains in the design and planning of PFI hospitals, it is hard to argue with the positive effect it has had on communities throughout the country. In 1997, half the buildings in the NHS were older than the NHS itself, which was created over 50 years ago. Today this figure stands at less than a quarter. By 2010, as new hospitals and primary care premises are opened, 40% of the capital stock will be less than 15 years old. The Minister also recognizes that PFI is not the only model being used to build new hospitals. He said: "We are not cutting back on public capital investment. Quite the opposite, PPPs are in fact helping to add value to this massive increase in public investment not detract from it."10
Canada also has some noteworthy examples of hospital development using non-traditional financing, construction and operation.11 The East Coast Forensic Hospital in Nova Scotia is financed under a 25-year lease/sublease. This co-located facility with the Central Nova Scotia Correctional Centre is the first of its kind in Canada. It was able to stay on budget and experiences annual cost savings in the order of $250,000 due to operational efficiencies and shared services.
The University Health Network's bond offering also broke new ground in hospital financing in Canada. It allowed the hospital redevelopment to be approved sooner (three months in total) and construction to be completed faster than through traditional grants-based funding, which would have meant an estimated 15 - 25 year project timeline.
The Royal Ottawa Health Care Group's operating contract has proven to be a model for success. The contract stipulates a fixed annual fee, allowing for predictable multi-year budgeting and additional costs borne by the private operator. Total savings of over $6 million have been achieved over the first five years and the project's tripartite agreement between the hospital, private partner and union is a model of effective employee transition.
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9 Rt. Hon. John Hutton, Minister of State for Health, Government of the United Kingdom, "Address to the 11th Annual Conference on Public-Private Partnerships" November 24, 2003.
10 Ibid.
11 For more information, see The Canadian Council for Public-Private Partnerships publication "The Canadian Case for Hospital PPP Projects", November 2003.