Managed Equipment Services – A sustainable model for public-private partnership in emerging markets?

With more than 11 million children succumbing to preventable diseases annually, health access in Africa continues to be disparate. Although the continent has been gradually winning the battle of communicable diseases in the recent times, burden of non-communicable diseases is observed to be mounting.

Healthcare challenges in other emerging regions such as Latin America and ASEAN are also in transition. While infectious diseases accounted for majority of deaths earlier, 68% of mortality in Latin America is now attributed to chronic diseases such as diabetes, CVD, etc. Nevertheless, in all three emerging regions, unequal access to healthcare remains the precursor for high mortality.


With the intention of resolving challenges related to health access, multiple financing models such as government financing, multi-vendor and maintenance contracts, structured loans, etc. have been implemented. However, innate challenges peculiar to the continent have been the key hindering factors towards realisation of outcomes. Issues such as lack of skilled labour, inadequate training, disparate distribution of healthcare personnel among others, are overriding persistent challenges around scarcity of funds. Though financing forms the backbone of strategic models envisaged to deliver health access, gradual shift towards provision of holistic solution rather than traditional financing mechanisms is expected to gain thrust.


Why do transactional equipment provision models fail?

Absence of skilled technicians to operate and repair procured devices – Approximately 40% to 70% of the medical devices in low and middle-income countries remain unused. This is mainly attributed to lack of basic infrastructure required to operate the machines. Absence of skilled technicians and biomedical engineers to use the device and handle breakdown is another aggravating factor.  In many cases, lack of understanding of healthcare delivery system itself has rendered into copious amount of wastage. Other equipment provision mechanisms such as trusted partnership, corporate structured loans, donations, linked sales, etc. have been able to supply the necessary equipment. However, little deliberation is given to the availability of local capabilities that can provide maintenance and operate the machines.

Non-availability of spare parts: Absence of readily obtainable spare parts is another major factor hindering smooth functioning of several medical devices. Furthermore, exclusion of technical personnel during procurement process has frequently resulted in purchase of devices unfit for healthcare facilities. For instance – compact and space constrained neonatal intensive care unit in Mulago University hospital in Uganda is equipped with about 20 incubators. However, 13 of them are dysfunctional and one had instructions written in Dutch – language majority Ugandans may not follow. Similarly, oxygen concentrator donated to Gambian tertiary hospital remains unused due to voltage incompatibility. An X-ray machine in another hospital in Gambia lay unused due to unavailability of spare parts and dependence on engineers abroad to fit it.

Given the challenges posed by traditional donating and financing mechanisms, policy makers have been looking to devise models that will consider clinical as well economic outcomes achieved. UK and Australia launched the concept of Private Finance Initiative (PFI) – a way of funding public infrastructure project with private capital. After being subjected to scrutiny, PFI was upgraded to PF2. Scotland envisaged an alternative model known as non-profit distributing (NPD) model that is distinct in two ways:

  • Returns for participating private entity are capped to ensure normal ROI is maintained
  • Operational surpluses made by the private company are reinvested into public sector

While these models bring out economic outcomes, successful PPPs in healthcare are also a function of other underlying factors such as availability of training, clinical outcomes and overall health of the population. Financial and transactional models may remain means to an end especially in healthcare sector.

Thus, models that institute holistic health partnership with respect to provision of equipment, training and capacity development through universities and colleges are likely to succeed in countries with limited infrastructure. One such outcome based model-managed equipment services (MES) has been gaining popularity in few sub-Saharan countries.

Could Managed Equipment Services (MES) transform equipment supply in healthcare?

An innovative risk sharing model – MES exemplifies comprehensive management of hospitals and clinical depts. It involves integrated provision of various operational components such as planning, procurement, installation, training, maintenance, repair, performance monitoring, technology upgrades, replacement services, vendor management, etc. Along with independent third parties, OEMs such as GE Healthcare, Philips Healthcare and Siemens Healthineers have been executing MES contracts with Governments directly in many developed nations.

Advantages of MES for country’s healthcare delivery system:

  • Reduces the need for upfront capital payment
  • Effective budget planning
  • Enables predictive analysis
  • Long term savings
  • Reduces cost of training, maintenance and repairs
  • Improved workflow and productivity
  • Performance monitoring and associated clinical outcomes

Capacitate technology upgrades thereby fostering innovation and advancement in the field of medical equipment

  • Creation of job opportunities
  • Retaining of staff and clinicians
  • Enhanced risk mitigation and risk sharing model
  • Superior access to clinical research and outcome based reporting


Challenges to widespread adoption of MES

While MES model may have manifold benefits for patients, hospitals, clinicians and the trust (ministry of health, hospitals, etc.); for the equipment supplier, provision and purchase of equipment before payment may require robust support from financiers. Thus, suppliers with strong in-house financing capabilities have been able to participate effectively. Despite contractual agreements, milestone based release of payment may be deferred mainly due to lack of transparency between budgeting committee and trust (hospital administrative dept. ministry of health, etc. Since payments are made once certain predefined criteria are met, absence of evidence based tracking may further result into delayed payments.

MES – The way ahead

Limitations in traditional financing mechanisms have been paving way for innovative risk-sharing models. While developed nations have already embarked on such models, developing nations are yet to match. However, the question that many policy makers continue to pose is – whether the time is right for milestone and outcome based contract for medical devices in emerging markets? Implementation and performance monitoring of MES in Kenya may highlight the prudence of executing such models in developing countries. While innate challenges in these countries are resolved, long term benefits of holistic models such as MES are probable.

Traditional finance may require the Government to furnish bank loan or issue a bond. In both these cases, despite being a long-term project, expenditure would have to be documented in Government’s balance sheet.

MES model on the contrary may function on the concept of project financing. In addition, performance monitoring is conducted by the MES partner. Government may have to pay only once certain service outcomes are met. Thus, risk is transferred to MES partner throughout the project enabling positive returns on investment.

  1. Sh38 billion worth Kenya MES project envisaged in 2015 under PPP model between ministry of health in Kenya and five equipment manufacturers is expected to transform healthcare delivery. GE Healthcare won the tender for modernization of radiology equipment, Philips Healthcare was appointed for provision of critical care services and Mindray Company bagged the tender for supplying theatre equipment. While clinical outcomes are yet to be documented effectively, the project is reported to be on course.
  2. MES partnership worth $30Mn between GE Healthcare and Anfas medical care in Riyadh is expected to cater to chronic pulmonary patients requiring long-term rehabilitation and intensive care.
  3. GE Healthcare and Heritage Valley Health System (HVHS) in USA signed a 14 years deal towards provision of advanced imaging equipment to drive technology improvement which is otherwise out of reach for many small hospitals.
  4. Philips Healthcare and MacKenzie Health in Canada inked a strategic partnership based on risk sharing model (worth $226 million) to develop ‘smart hospitals’ meant to improve patient access and lower overall operational cost.
  5. GE and Temple University health center signed a 7 years agreement to provide high-end radiologic equipment to save hospital’s operational cost of more than $39 million.
  6. Ministry of Health of Murcia (Spain) signed a 15 year old MES contract with Siemens healthineers to provide 20,000 medical equipment including mammography unit, ultrasound etc. for two regional hospitals in Spain. Initiated in 2010, within 5 years a 25% reduction in operational cost was observed and 15% decline in procedure cancellation or rescheduling due to technical issues with equipment.
  7. Zans Medical Center in Netherland, signed a 13 year MES contract with Siemens Healthineer in 2013. With significant reduction in system downtime and lowering of annual cost of equipment and services, the hospital documented manifold improvement.

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