Contracting (PPP) in Sawai Man Singh Hospital, Jaipur2

Background Under the Rajasthan Health System Development Project, one of the significant steps taken by the Government of Rajasthan, in 2000, was to equip government hospitals with the latest diagnostic and treatment machines through the involvement of the private sector. The government also created Medicare Relief Societies in district hospitals and large referral hospitals, which have administrative powers to take decisions related to any initiatives, including private sector involvement in the hospitals. A Medicare Relief Society has the authority to decide the number and type of diagnostic and treatment machines required for the efficient functioning of hospitals. New diagnostic equipment and machines are hired through Rajasthan Medicare Relief Society funds. If a government machine is under-utilized, the society can transfer it to the private sector. Once the machines are installed, doctors cannot refer patients to other private centers for tests in areas for which facilities are available in the public hospitals. Established in 1947, with 300 beds, the Sawai Man Singh (SMS) medical college hospital has become one of the largest hospitals in this region with almost all services located within its premises. Situated in Jaipur, the hospital is accessible to whole city as well as its rural hinterland. Patients come from all over Rajasthan, and the neighboring states. Most patients come are from lower middle class, urban slums and from rural poor. Although its physical premises are large, the hospital is overcrowded. In 2004, SMS hospital had 285 doctors from different specialties, 800 nurses and over 1,200 paramedical staff; 45 wards and a total of 1,609 beds. Gynecology, obstetrics and maternity services are provided in a separate Mahila (Womens) Hospital. In 2004 SMS treated over one million patients. Tariffs and charges for medical services are in two categories. Services are free for patients below the poverty line (BPL) as well as for widows, pensioners and those over 70 years of age. For all others, service charges are at rates decided by the RMRS in the form of user-fee tariffs. Selected standard services for paying patients are priced as follows: Table 1: SMS Standard Tariffs Services Rupees Out-Patient Card 2 In-Patient Registration 10 ECG 20 X-Ray 50 CT Scan 750
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Prepared by Dr.A.Venkat Raman, Faculty of Management Studies, University of Delhi, for the WBI-NIHFW Flagship course on Health Policy, at Ahmedabad (28th January to 1st February, 2008). A longer version of this case study was compiled under IDPAD research study, in collaboration with Prof. JW Bjorkman, ISS, The Hague. The case is for discussion purpose only.

MRI 2 500 Public/Private Partnerships at Sawai Man Singh Hospital a) Life Line Fluid Drug Store Started in 1996, the objective of Life Line Fluid Drug Store (LLFS) is to provide good standard medicine and surgical items to patients at the lowest possible rate compared to market prices, but with a marginal profit for the private contractor who would run the pharmacy store. The authority controlling LLFS is the Rajasthan Medicare Relief Society (RMRS). Through competitive bulk purchasing, RMRS obtains medicines at low cost. The LLFS operates on a contractual basis. Through an open tender, RMRS invites bids from suppliers to procure medicines that LLFS sells to SMS patients at the procurement prices. Due to the tendering process, the prices of drugs and supplies are much cheaper than retail prices. A committee within the hospital determines the list of items to be sold and negotiates the sale price of such items. Instead of a tendering process, lowest-price certificates from the manufacturers are used, and promotional offers are passed on the customers. The committee also selects the contractor who would operate the LLFS drug-store on a 24-hour basis. Bidders for the contract had to fulfill eligibility criteria even to apply. With a fixed salary and a onepercent commission on all sales, the contractor appoints and manages staff from the receipts. Salaries of contract employees are the responsibility of the contractor. The medical superintendent of the hospital is the overall supervisor in charge of monitoring the store and its functioning. The period of the contract usually two years, is renewable on the basis of good performance. SMS Hospital has no liability for the contract employees working in the store. A separate account is maintained for LLFS, which is added to the RMRS account at the close of each financial year. SMS Hospital provides all medicines to the drug store, and the contractor has no power to purchase or sell medicines himself. The rates as well as the subsidies on medicines are fixed by the committee. Compared to market rates, the LLFS drug store provides medicines cheaply often 30% lower than in the market. Daily sales at the SMS Life Line Fluid Drug Store are approximately Rs 200,000. SMS Hospital provides electricity, water, computers for daily operations, physical space, stationary and medicines. The contractor provides all staff and their salaries, daily operations and distribution of medicine, maintenance of records and monthly reports to SMS Hospital. He also has responsibility for daily collection of cash sales and deposits of cash to the account. The contractor provides a security deposit of Rs 40,000 and the contract can be terminated at any time if the contractor is involved in undesirable practices. Sales in 2004 were approximately sixty million rupees, and these are increasing. It is an advantage for the private agency to continue to provide its services. But the contractor also has risks. The contractor summed up the problems that appear in daily operations: computer breakdowns (leading to errors records or delays in reporting), shortages of medicines (leading to deal with irate public), and erratic electricity. Contract staff report

directly to the medical superintendent who has responsibility to resolve all the problems, which aggravates the problem for the contractor. b) MRI and CT-Scan Equipment Directed by the RMRS, in August 2004, SMS hospital issued open tender inviting applications from interested private agencies to install, operate and maintain CT-scan and MRI services in its premises. The minimum desirable technical specifications of the equipment to be installed were indicated in the tender document (appendix a and b).The tender was announced in leading newspapers. A pre-bid conference was held with interested private contractors to finalize some of the terms and conditions because this was the first time that the government was contracting such services to the private sector. After extended opposition by local political leaders, the SMS Hospital obtained a private provider for CT-scan and MRI services. Due to a high-profile case involving celebrities, it took two years to resolve the conflicts about partnerships with the final decision being given by the High Court of Rajasthan. CT-scans began in 2004 and MRI in 2005. An open tender (appendices 2-a and 2-b) invited potential partners to bid, and the lowest bid by XYZ (P) Ltd was awarded the contract to provide services around the clock. The objective was to provide facilities to patients within the premises of the hospital at the lowest possible rate. Technical and financial bids (including the rates per test) were submitted separately. Financial bids were allowed only by private agencies whose technical bids were found to be suitable. Rates quoted in the financial bids, if approved, would remain fixed for the entire period of the contract. The technical specifications of the equipment to be installed were pre-approved by the RMRS committee. Approved agencies were given a period of four months from the date of signing the contract in which to install the machines. Any delay would be penalized by Rs10,000 per week. If the delay lasted more than one month, the contract would become void and the security deposit forfeited. Annexures to the tender announcement provided specifications for the machines to be installed, the tests to be performed on the machines and the rates for each test. The agreement period is for seven years, with a one-time security deposit of two million rupees per machine, and the contract period is renewable on the basis of performance. The security money would be forfeited in case of any breach of contract agreement, or failure to install the machine within specified time. The contractor also pays a monthly rent of Rs5,000 per machine. In exchange, the contractor is obligated to provide free services to 20% of all patients. Such patients are from poor economic categories and their eligibility for free services is to be verified by the hospitals Medical Superintendent. The number of free patient services is reviewed on a monthly basis, and any shortfall or excess is adjusted in the following month. At the end of the year the total volume of patients is reviewed by the RMRS committee. Priority is given to the patients of SMS hospital but, if a machine is free after finishing cases of SMS hospital and its attached units, the licensee can use the machine in its spare time for outside patients (if any) at the approved rates. 3

In case any machine is out of order or broken (even for a day), the licensee must make alternative arrangements for investigations of hospital patients at the approval rates. While the license is valid for a seven-year period, the contractor must upgrade the machines after four years of operation. The medical superintendent and the head of the radio-diagnosis department quarterly review the performance of the contract in terms of its stipulated conditions, including the quality of tests. SMS hospital provides infrastructural support and physical space for installing the machines. The licensee is responsible for the installation of machines and equipment, modification in infrastructure according to requirements for machine operations, arrangement of and payment for electricity and water connections, staff salaries, security, daily operations, maintenance of premises, records and monthly reports to SMS Hospital. The licensee must post an adequate number of qualified radiologists, adequately trained radiographers and para-medical staff to run the machines around-the-clock. However, the hospital administration is not responsible for any loss or damage to the machines or to property due to natural hazards. Computer-generated receipts for tests are issued by the licensee, and reconciliation of accounts is done weekly. The licensee cannot sell or transfer any proprietary right or entrust the operations of the spiral CT-scan and MRI machines at SMS hospital to any third party. But the facility may be used for teaching and training graduate and postgraduate students as well as for training and research by faculty members without any extra payment to the licensee. Fifteen employees work on contract, each with a fixed responsibility and with salaries paid by the contractor. SMS Hospital has no liability for contract employees at the CTscan and MRI unit. MRIs for approximately 100 patients and CT-scans for 100-150 patients are performed monthly. The open tendering process was transparent, and the terms and conditions of the contract are very clear. No poor patient can be refused service and one-fifth (20%) of all investigations must be for BPL patients. Cases of accidents, of course, have priority. Initially there was great opposition in the media about starting this private facility in the SMS Hospital. Some patients still do not cooperate and sometimes complain about the short sized films given by the contractor. To handle grievances, the contract staff report problems directly to the medical superintendent who is responsible for resolving all problems. In the CT-scan and MRI facilities, the private contractor has advantages of a higher volume of patients and also a greater variety of cases. Though patients get superspecialized services at affordable prices the BPL patients still have to complete many formalities and run from pillar to post to many authorities to prove that they are the BPL beneficiaries in order to get their tests done free of cost. There are reports of undesirable practices such as saving films in clinical reports. The private agency allegedly recycles its films in order to minimize expenditures on one test report. Though it is obligated to give free tests to BPL patients, who are supposed to comprise at least 4

20% of all patients, there are still complaints that the private agency gives priority to clients who pay directly. Most contract employees complain about low salaries and high workload, and especially that the contractor provides no benefits other than a consolidated salary. Feelings of job insecurity persist among most contract staff. They do not have any arrangements for complaints and grievances. According to one of the contract staff, Though formally we could put our complaints in monthly meeting with higher authorities of the public agency, in reality we have to resolve our problems ourselves. Another contract staff reported that most of the time we face problems in dealing with public staff but since the contract is more in favor of public hospital we dare not to say anything against the public agency. Although the staffs have many problems, they work under contract for various reasons such as getting professional experience, having contacts with government officials, obtaining more exposure through a variety of cases, and getting recognition through working at a government hospital. According to the CT-scan/MRI contractor, The arrangement of public private partnership is really an advantage for poor patients. It brings specialized services at lowest rate. It is more in favor of SMS hospital and private agency could not get chances of making profit in its business. But the private agency has expanded its business and obtained popularity that could serve future business opportunities. Most patients are unaware of the government policy on contracting this facility under public/private partnership mode. However, beneficiaries appear to be satisfied about the availability of all the facilities at SMS Hospital, about their treatment by doctors, about access to medicines and about CT-scans and MRIs at low (and often free) rates. Some patients complained about the short-sized films of report (the private agency often provides x-ray on shorter films, compromising the quality of the exposure). According to many patients there is a perception that although the private agency is required to do free tests for BPL patients, it often gives preference to private patients in order to make more money. Patients also complain about the lack of information and directions, staff behavior, and ignorance of administrative procedures for BPL patients. No arrangements exist for making BPL patients aware of procedures and rules; as a result, they lose benefits. The father of one patient reported:
My son was admitted in the hospital last month. Doctors suggested getting CT scan and I have done it free by showing my BPL card. Again the doctors suggested getting an MRI done. When I went to the MS office to get my form attested for free service, he signed the form and mentioned CT scan was done freely by mistake instead of MRI. Again I went to get it cleared for MRI but he refused to sign for free MRI and started blaming me for showing fake BPL card. MRI is urgent for my son and I have spent two days in order to make him clear about my status. I have my BPL card with me; also I bought vote card for identification but there is difference in age of one year which was filled by government official by mistake and, being an illiterate person, I could not verify both. I have already spent lot of money on treatment; now I do not have any other source to arrange money as already I borrow money from my relatives. I came from remote area where we do not have good medical facilities. I came here for free treatment as I heard that it is free for BPL patients, but nobody is giving attention to my problem and I am feeling helpless. I cannot take my son back to my village in this situation and I do not have money to pay for such expensive test.

Appendix A: Private participation for MRI/ CT scan machine Eligibility conditions Terms and conditions included in the tender notice. Minimum investment Deposit for the tender is mentioned; For MRI Machine 1.5 tesla, earnest money in the form of DD3 is Rs.2 Lacs4 For Spiral CT Scan machine 16 slice, earnest money in the form of DD is Rs. 2 Lacs. The tender fee of both is Rs. 100 each. Procedures followed the entire process. Initially the open tender will be announced and followed by pre-bid conference for finalizing contracting and terms and conditions. The tender will be separately marked (sealed envelop) as technical bid and financial bid technical bid which includes technical specifications of machines, and financial bid which include the details of various test and rate of per tests. The hospital administration will issue the license to the bidder. The license shall not sell or transfer any proprietary right / entrust to any other third party. Member and secretary of RMRS would have the right to accept or reject the tender. Scope of service The priority given to the patients of SMS hospital. In case the machine is free after finishing cases of SMS hospital and its attached hospitals, the licensee would be allowed to use the machines in its spare time and capacity of outside patients (if any) at the approved rates. Licensee shall ensure best quality of tests. SMS medical college and attached hospitals will refer OPD and IPD patients to the CT/ MRI scan centre for the test. And this centre will be used for the purpose of teaching and training of graduate and postgraduate student. And licensee shall make alternative arrangements for investigations of hospital patients at the approval rates in case the machine is out of order / broken even for a day. Payment mechanisms The approved licensee will have to provide bank guarantee of Rs.20 lacs per machine as security money for the entire period of the license. The licensee will have to pay monthly rent of Rs.5000 per machine Duration of the contracts

3 4

DD = demand draft (certified bank cheque) Lac or Lakh = one hundred thousand

 The approved license shall be valid for a period of seven years from the date of approval by the hospital administration. It could be cancelled at any time after providing an opportunity of hearing by the licenser, in case the licensee does not follow rules and regulations. Free service to the poor patients 20% cases shall be done free for the poor category patients as referred by the superintendent principal SMS medical college or their authorized signatory. Details of the quality control The quarterly review of performance and observations of terms and conditions, including quality of tests, shall be carried out by the medical superintendent and head of the department of radio-diagnosis. Physical infrastructural support Adequate area / space shall be provided by the hospital for installation of the machine. All the pre-requisites such as civil, electrical, air conditioning, computer or any other changes in the site for installation of machines will be executed by the licensee, with due permission of the administration. Expenses on account of electricity, water, maintenance of premises and the machine, security or any other expenses incurred in the day-to-day running of machines shall be borne by the licensee. Electric connection and water supply will be providing by the hospital by putting a separate meter. The Hospital administration will not be a responsible for any loss / damage to the machine / property due to natural hazard. In order to protect against this, licensee may take adequate insurance to cover at his own risk. Performance parameters No mention. Reporting / Performance parameters Reporting of CT/MRI scan will be done by the faculty of this medical college along with radiologist of the licensee, around the clock. Exit options/ Penalties and fines After completion of the tenure of tender, the licensee will be allowed to vacate the space within a period of 30 days. In case the licensee fails to vacate the premises, a penalty of Rs.15, 000 per day shall be charged.
Appendix: B: Rajasthan Medicare Relief Society: Private Participation for MRI/CT scan machine Two envelopes separately marked technical bid and financial bid; otherwise tenders will not be considered and shall be rejected. Technical terms and conditions, technical specifications of machines, tests performed on the machines, etc should be included in technical bid and financial

rates of the test to be performed, financial terms and conditions be submitted in financial bid. Financial bids shall be opened only of those tenders who shall qualify technically. Specifications of the machine to be installed are enclosed at annexure I & II. Machine shall not be in anyway of lower specification/ configuration as mentioned in the tender. Otherwise the bid shall be rejected. Approved firm will install new Spiral C.T.Scan / M.R.I. machine within four months from the date of signing of the agreement. For delayed installation a penalty of Rs.10,000 per week shall be leviable. If the delay is for more than one month the order would stand automatically cancelled & security deposit shall stand forfeited. 20% cases shall be done free for the poor category patients as referred by the Superintendent / Principal SMS Medical College or their authorized signatory. Number of free cases shall be evaluated on monthly basis and they shall be carried forward to the next month also. Ultimately the figures would be calculated at end of the year. If the number of free cases came less than 20%, then the amount so exceeded shall be paid by the RMRS to the licensee. The formula for payment shall be the actual ratio of various tests done for the poor category during the year. In 20% free category patients, the contrast is to be provided by the hospital. For other categories, the contrasts will be provided by the patient. License shall be valid for a period of seven years from the date of approval by the Hospital Administration and it could be cancelled at any time after providing an opportunity of hearing by the licensor, in case the licensee does not follow the rules, regulations and terms and conditions of the contract. The machine shall be suitably upgraded by the licensee after completion of 4 years period. The level of up-gradation shall be under taken (after 4 years) by mutual agreement of licensee and hospital administration. Approved licensee shall have to provide Bank Guarantee of Rs.20 lacs per machine as security money, in favor of Member Secretary, RMRS SMS Hospital Jaipur, for the entire period of the license. The said Bank Guarantee could be forfeited in case of any breach of conditions on the part of the licensee or if he does not install the machine within the stipulated period or he discontinues the contract before expiry of the contract period. Licensee will pay monthly rent of Rs.5000 per machine to the Rajasthan Medicare Medicare Relief Society SMS Hospital Jaipur. Adequate area / space shall be provided by the hospital for installation of the machines. All the pre-requisites such as civil, electrical, air-conditioning, computer or any other changes in the site for installation of machine will be executed by the licensee, with due permission of the administration. The expenses thereof shall be borne by the licensee. The hospital administration will not be responsible for any loss/ damage to the machine / property due to natural hazard or otherwise and licensee may take adequate insurance cover at his own risk and liability. Premises shall immediately revert back to the possession of RMRS at the expiry / termination of the contract. In case the licensee fails to vacate the premises, a penalty of Rs.15,000 per day shall be charged. Expenses on account of electricity, water, maintenance of premises and the machine, security of any other expenses incurred in the day-to-day running of the machine shall be borne by the licensee.

Licensee will post adequate number of qualified radiologists having a Post-Graduate Degree in Radiology and Imaging. He will keep adequately trained radiographers and para-medical staff to run the machine round-the-clock. The generation of the reports of hospital cases including MLC shall be done together by the faculty of Radio-diagnosis Department of SMS Hospital, Jaipur and Radiologists of Licensee. Besides the use of these machines for teaching and training purposes of the under-graduate and post-graduate students as per the directions of the Superintendent / Principal, the faculty members of SMS Medical College Jaipur shall also be allowed to perform any biopsy or any other invasive procedures of their patients as may be necessary on the said machines, with prior fixation of time for performing of such procedures. No extra payment shall be made to the licensee for the above purpose. Licensee shall ensure best quality of tests and protocols as set by the hospital administration or other recognized professional body. The bad quality scans will be repeated at no extra cost. However, with regard to doubtful observations, a repeat scan will only be carried out after mutual discussion between the faculty member and the radiologist of the licensee. Quarterly review of performance and observance of terms & conditions including quality of tests shall be carried out by Superintendent SMS Hospital & Head of Department of Radio-diagnosis with the licensee. The licensee shall abide by all the guidelines issued by the Government and the hospital administration. In case of violation the license could be cancelled after providing an opportunity of hearing to the licensee. In case the machine is free after finishing cases of SMS Medical College and its attached Group of Hospitals, the licensee would be allowed to use the machine in its spare time and capacity for outside patients (if any) at the approved rates. However, priority shall always remain for the patients of SMS Hospital. Licensee shall make alternative arrangements for investigation of hospital patients at the approved rates in case the machine is out of order / broken down even for a day. The receipts for the tests done shall be issued by the licensee through computer on the receipt books provided by the hospital administration and reconciliation of accounts would be done on weekly basis. SMS Medical Colleges and attached Hospitals shall refer all their OPD & IPD patients to the CT/MRI centre located in the SMS Hospital Premises exclusively. The licensee shall not sell or transfer any proprietary right or entrust to any other third party for running the Spiral CT Scan and MRI machine of SMS Hospital Jaipur. The licensee shall take a third-party liability policy to cover patients sent by the hospital administration against any mishap at the Spiral CT Scan & MRI machine. Conforming to the provision of the consumer protection act shall be the sole and absolute responsibility / liability of the licensee.

If the lowest bidder fails to install the machine within the period stipulated in clause 3 above, the society shall be free to award the contract to the second-lowest bidder through negotiation of rates. The following decision taken in the pre-bid conference meeting at 2.00 PM on 24.08.2004 regarding suggestions made by the attended persons, for private participation of installation of Spiral CT Scan and MRI machine against tender notice no. 564 dated 13.06.2004. 1. For collection of charges the receipt book will be provided by hospital administration. 2. A Radiologist which will be appointed by the licensee should have the M.C.I. approved P.G. degree in Radiology [M.D./ D.N.B.]. 3. Transformer for electric supply will be provided by the hospital. 4. The cable work from main line to machine will be borne by the firm. 5. Electric connection and consumption rates will be charged as RSEB rates. Sub-meter will provided by the SMS Hospital. 6. Water supply will be provided by the hospital by putting a sub-meter. 7. Generator will be installed by the licensee. 8. Licensee can put the signboard for indicating the location of the CT Scan and MRI machines. 9. Common parking place for vehicle is available in the hospital campus on payment basis. 10. In place of the Bank Guarantee licensee can submit the joint FDR and interest on FDR will be paid to licensee. 11. If patient will ask for CD / floppy, patient will bear the expenses. 12. The image record of academic / MLC cases will be kept by the licensee and register / requisitions of all other patients will be kept by the licensee. 13. 20% poor cases shall be done free for the poor category patients as referred by the Superintendent / Principal, SMS Medical College or their authorized signatory. The ratio of free patients will be 80% + 20%. It will be done on the basis of proportion of patients. 20% ratio of free category will be of medical college/ hospital patients only. 14. In case of increasing of workload, first preference will be given to the hospital patients and after that outside patients can be taken up. 15. In case of any unforeseen circumstances like high increase in the rates of consumables and raw materials, the matter will be brought into the notice of the hospital administration and then it will be decided in the meeting of the Executive Committee of Rajasthan Medicare Relief Society. The decision of the Executive Committee of Rajasthan Medicare Relief Society will be final. 16. Reporting of the CT Scan and MRI will be done by the faculty of this medical college along with Radiologist of the Licensee, round-the-clock. 17. The existing CT Scan machine will not be functional after installation of new machine by the licensee. 18. The contrast media will not be supplied the hospital except to free / BPL category patients. 19. The contrast media will be of non-ionic type, preferably. 20. The licensee will quote the rates for supply of at least 2 CT films. 21. The CT KUB region will be treated as whole abdomen CT. 22. The CT Joint be included along with Serial No.10 and quoted in the list of annexure III. 23. After completion of the tenure of tender, the licensee will be allowed to vacate the space within a period of 30 days. 24. The reporting of MLC cases of CT Scan and MRI will be done and signed by the faculty member of this medical college.

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25. In case of breakdown of the machines of CT Scan and MRI, Licensee shall make alternative arrangement for investigations on machines preferably on specifications/ any of the Spiral CT Scan / MRI. 26. NLC court evidence will be attended by SMS Medical college / Hospital faculty.

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