As we have seen, PPPs can be fragile structures. We have seen how flawed estimates about demand were able to turn Indiana Toll Road from a plausible, profitable PPP to a fundamentally unsustainable one. We have discussed how reducing demand is important to optimize healthcare outcomes. But what if efforts to "narrow the funnel" are unsuccessful? What if demand exceeds expectations? Can a PPP successfully mitigate unexpected levels of demand?
Effective engagement is all about flexibility. Assuming that no financial projection is perfect, it stands to reason that PPPs must establish structures to help weather unexpected circumstances. The private sector, however precise in its financial models and exacting in its contractual agreements, is far from infallible. Maintaining receptiveness to unforeseen circumstances is essential to sustaining a PPP. However, contract law is often less amenable to flexibility, as contracts are designed to be as rigid and specific as possible, to avoid confusion. But flexibility of agreements does not necessarily translate to imprecise contracts. To examine how flexibility can create sustainability, let's return to Lesotho's National Referral Hospital.
CASE STUDY Lesotho National Referral Hospital We have already examined how Lesotho's pioneering set of performance-based metrics were able to ensure an effective allocation of risks and opportunities. But Lesotho's model was sophisticated in other ways as well. One concern the project faced was how to manage the increased demand that would accompany success. Ironically, the better the quality of healthcare at the new hospital, the more patients who would flock to it. Would citizens bypass the 180 additional clinics scattered around Lesotho, choosing to seek treatment at the new hospital in Maseru? That kind of demand would be untenable, but there was no way to predict the threshold at which demand would exceed supply. To address this problem, the PPP agreement established a joint services committee, with representatives from the Ministry of Health and the special purpose vehicle, which would meet quarterly to revisit the performance indicators. If it was agreed that the contract needed to be revisited to adjust for increasing demand, changes would be quickly sent back to senior principals to amend it. With all parties in agreement that changes and modifications were to be expected, an ongoing relationship of trust and understanding was established. The flexible structure proved successful. Today, crowds do gather every day outside the hospital at around 6 a.m. But most days, by 11 a.m., all patients have been either treated or referred. |