Alternative Financing Models in Public Facilities : The case study of Medical Campuses, Healthcare PPP Program in Turkey

The healthcare sector is expanding in the world in parallel to changing medical challenges, growing populations and also increasing number of senior citizens are creating higher demand for healthcare services. The Turkish healthcare market has also been shaping by the very same drivers and is expected to continue its growth with growing population and upsurge in healthcare spending. The healthcare providers are the Ministry of Health, universities and the private sector, with the Ministry accounting for two-thirds of country's hospitals in Turkey. A large majority of health infrastructure in Turkey is old and out of date and is no longer appropriate to meet healthcare needs considering large and increasing population. Furthermore, the budgetary pressures on the government is forcing to explore alternatives to traditional public sector provision. In response to the need for large capacity investments in healthcare systems, the Turkish government launched its Health PPP Program in 2010. The aim of the program is to develop new healthcare facilities and to improve service delivery. The government is also seeking private sector participation in the hospital infrastructure sector in Turkey. The Health PPP Program will consist of 50 projects with an estimated EUR 20 billion investment value. Around 15 projects under the Program are at various stages of tender, financing and construction. PPP is a common model to finance such public facilities in Turkey with various applications such as Build-Operate-Transfer, Build-Operate-Own or Transfer of Operation Rights. The Build-Lease-Transfer model was introduced into Turkish legislation in 2013, commonly known as the City Hospitals/Medical Campuses Law, and it was specifically introduced to support healthcare PPP's. Under the Build-Lease-Transfer model, the private sector finances and builds a facility and then leases it to the relevant public authority, with the state providing the public service. The infrastructure facility is leased for a maximum of 30 years and the public authority pays a lease fee to the private investor and operates the facility during the lease period. This paper is aimed to investigate the new financing model in healthcare facilities in Turkey. Turkey's medical campus programme, also known as hospital PPP's, has been one of the most discussed topics in the country's infrastructure sector and legal environment. The healthcare facilities projects are structured on a Build-Lease-Transfer model with strong demonstration effects for the rest of Turkey by promoting the use of PPP contracting, and demonstrating good practice in international PPP standards. This new financing model is attracting not only participation of Turkish private sector, but also international financing institutions, such as ICF and EBRD.