NEW PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: Report No.: LATIN AMERICA AND CARIBBEAN Country

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1 Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Project Name 1 NEW PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: Report No.: Federal University Hospitals Modernization Project Region LATIN AMERICA AND CARIBBEAN Country FEDERATIVE REPUBLIC OF BRAZIL Sector Health (100%) Lending Instrument SIL Project ID P {If Add. Fin.} Parent Project ID N/A Borrower(s) FEDERATIVE REPUBLIC OF BRAZIL Implementing Agency Ministry of Education Environmental Screening B - Partial Assessment Category Date PID Prepared March 7, 2011 Estimated Date of Appraisal August 3, 2010 Completion Estimated Date of Board March 31, 2011 Approval Decision I. Country Context 1. Over the past generation, Brazil has consistently and successfully reduced poverty and inequality, and at the same time has grown and diversified its economy. While the Brazilian health system has gone through several significant reforms, hospitals have been left largely untouched, with a few notable exceptions. Federal University Hospitals (FUH) are quite important in the context of the national health service and tertiary education in Brazil. Most of the FUH are large hospitals, although there is large variation in size, infrastructure and technology, human resources, qualifications and management. FUH operate under different ownership, governance and management arrangements. Studies in Brazil and in other LAC countries have shown that hospitals with autonomous management perform better than hospitals under direct public management. Financing of the FUH is a serious problem. Fees paid by the SUS do not cover FUH spending, and the hospitals have become progressively short of funds. Multiple sources of funding make budgeting, accounting, costing, resource mobilization and overall system management extremely difficult. Staffing issues are also affecting FUH performance. FUH should to be part of health networks to regulate the adequate use of their facilities. Federal funds for investment in infrastructure did not materialize in the last years, and as a result infrastructure deteriorated, old equipment was not replaced, and operation and maintenance processes were not fully developed.

2 2 II. Sectoral and Institutional Context 2. In this context, the Government issued the Decree 7082 instituting the Federal University Hospitals Program (REHUF), and has asked the Bank to assist modernization of infrastructure and management of 46 Federal University Hospitals. The Decree aims at renewing management processes, improve financing mechanisms, establish information systems and upgrade equipment and hospital infrastructure which deteriorated over the years. The decree was regulated by an inter-ministerial legal agreement signed by the MEC, Ministry of Health (MOH), and Ministry of Planning, Budgeting and Management (MPOG). 3. The REHUF program has two components, the renovation of the hospitals physical structure and the modernization of its governance and management. In the renovation component, the MEC prioritized some hospitals in worse conditions, as well as the most important areas within each hospital. Overall, MEC infrastructure plans are justified and the specific projects for each hospital were judged to be of good quality. In the area of governance and management, the MOPG, MEC and MOH have been agreeing on issues related to financial, clinical and human resource management, and governance of the hospitals under the REHUF Program. The Program supports the dissemination of information systems developed in the Clinical Hospital of Porto Alegre (HCPA). III. Project Development Objectives 4. The objective of the Project is to strengthen the performance of the REHUF Program, by: (i) improving hospital governance and management by results; (ii) modernizing of the Borrower s hospital technology; and (iii) improving hospital care, research and education processes. 5. The Project will track 28 Project Development Indicators (PDIs) to measure progress made by MEC and the FUHs towards the achievement of the PDO. Five of these indicators are Disbursement-Linked Indicators (DLIs), which will trigger disbursements. Project indicators focus on the quality of care, hospital efficiency, governance and management, financial management, transparency and accountability, clinical and environmental management, teaching and research, and the modernization of the physical infrastructure. IV. Project Description 6. The Project consists of the following Components: (i) Component 1: Modernization of the FUH: Support the implementation of the Eligible Expenditure Program under the REHUF Program. This Component is structured as a Sector Wide Approach (SWAp) to co-finance the Ministry of Education (MEC) REHUF Program, disburse against results and use the country financial and fiduciary systems to the extent possible.

3 3 (ii) Component 2: REHUF Program Institutional Strengthening : (a) Support the strengthening of the governance, management and innovation capacity of the FUH through the provision of technical assistance, training and equipment, in the areas of governance and management, infrastructure and technology, health care, education and research, as well as transparency and accountability. (b) Financing of FUH Subprojects in line with REHUF Program priorities to improve managerial, clinical, teaching, training and research processes. Component 2 will finance a series of training and technical assistance activities to support institutional strengthening. V. Financing Source of Financing Amount (US$m) Borrower/Recipient 412 IBRD 150 IDA - Others (specify) - Total 562 VI. Implementation 7. At the central level, the proposed Project will be implemented by the Ministry of Education (MEC), which is responsible for formulating and implementing the national education policy, as well as for system planning, assessment and control. Notwithstanding the multi-sector characteristics of the project, no roles were attributed to the Ministry of Planning (MOPG) or the Ministry of Health (MOH), except for the ones defined in Decree 7082 that are not related to the Bank-financed Project implementation. 8. The Project will be coordinated and implemented by MEC s Secretariat of Tertiary Education (SESU) through the Department of University Hospitals and Health Residencies (DHR). The DHR has been the primary agency involved in project preparation and will assume responsibility for loan coordination and implementation as part of its ongoing responsibilities. No separate Project Implementation Unit will be established because, to the extent possible, it is expected that the project activities will use existing Government capacity, staff, and systems. However, the DHR may need some reorganization and some new staff or consultants to ensure that it has the proper technical and fiduciary structure to implement the program and the activities supported by the Project. 9. The SESU/DHR has a range of responsibilities for implementing the REHUF Program. These include: (i) promoting the Program and the Project at the federal and FUH levels to ensure proper and timely implementation; (ii) maintaining the political and technical dialogue with Government agencies, both within MEC and between MEC and other Governmental bodies such as MOH, MOPG, and the FUHs, and with the Bank; (iii) monitoring project indicators and results and facilitating the use of lesson learned for policy-making; (iv) overseeing project implementation and legal obligations; (v) serving as the Bank s counterpart during project implementation; (vi) coordinating procurement (of civil works, equipment, and non-consulting services) and the selection of consultants with the Secretariat of Administrative Matters (SAA),

4 4 and with the National Fund for Education Development (FNDE); (vii) providing technical and fiduciary assistance to participating FUH; and (viii) selecting and monitoring the FUH subprojects. In addition, the DHR will be responsible for implementing a range of activities in the FUHs aimed at improving governance and promoting a culture of results-based financing. 10. At the decentralized level, 46 FUHs will benefit from the REHUF Program and this Project. In operational terms, since procurement processes and payment functions will be centralized in MEC, the FUHs will: (i) monitor civil works that will be centrally procured and paid for by MEC; (ii) receive and monitor the installation, training, and maintenance of equipment centrally procured by the FNDE and paid for by MEC; and (iii) propose subprojects that will be selected competitively and financed under the project s Component 2. During project implementation, it may become more appropriate to decentralize procurement and payment functions to selected FUHs. If this is the case, this transfer of functions will only be made after a procurement capacity assessment and a financial management assessment of those FUHs have been carried out. MEC will then sign Subsidiary Agreements with these FUHs containing all procedures, including the Bank s anti-corruption clauses. VII. Safeguard Policies (including public consultation) Safeguard Policies Triggered by the Project Yes No Environmental Assessment (OP/BP 4.01) Natural Habitats (OP/BP 4.04) Pest Management (OP 4.09) Indigenous Peoples (OP/BP 4.10) Physical Cultural Resources (OP/BP 4.11) Involuntary Resettlement (OP/BP 4.12) Forests (OP/BP 4.36) Safety of Dams (OP/BP 4.37) Projects on International Waterways (OP/BP 7.50) Projects in Disputed Areas (OP/BP 7.60) * 11. The proposed project triggers two World Bank Operational Policies: OP 4.01 Environmental Assessment and OP4.10 Indigenous Peoples. OP 4.12 Involuntary Resettlement Policy is not triggered. OP 4.11 on Physical Cultural resources may eventually be triggered. These policies and any mitigation measures will be reflected in the Project Operational Manual (POM). Bank supervisions will follow up on compliance. 12. OP4.01 is triggered as the activities in the Eligible Expenditure Program (EEP) that will possibly be supported by the project may potentially have environmental impacts that require an environmental assessment (renovation of hospital infrastructure). Project activities will not result in increased hospital waste, but the project will carry out an assessment on health care waste and implement a Hospital Waste Management Action Plan to monitor the proper disposal of health care waste by the Federal University Hospitals according to national norms. The project will not involve any resettlement. * By supporting the proposed project, the Bank does not intend to prejudice the final determination of the parties claims on the disputed areas

5 5 13. The activities that will be supported by the project may have environmental impacts that require an environmental assessment. Actual expenditures being considered include hospital construction, expansion and rehabilitation. The construction of two new hospitals is being considered, for which a full environmental assessment will be undertaken as per Brazilian legislation, which is quite strict and of international quality. The sites for both new constructions are in urban settings, which are property of the Universities, in the same place as existing health facilities. Given these site locations no natural habitats will be affected, neither will any forest area. The sites are equally not situated in flood plains or geologic fault lines. The construction, expansion and rehabilitation of hospital infrastructure will follow Brazilian legislation with respect to civil construction residues. It will also follow strict guidelines that reduce the impact of dust, noise and sources of on the job localized site contamination (e.g. fuel residue). These measures will all be included in the Operational Manual and reflected in the bidding documentation when appropriate. 14. The second source of environmental concern is that of health care waste (HCW). It is not expected that project activities will increase HCW. However, the project will support the monitoring of the proper disposal of health care waste in the Federal University Hospitals (FUH). The project will also support a capacity building effort to homogenize Health Care Waste Management (HCWM) across all FUH to the high standard already existent in some of the hospitals in the south of the country (Rio Grande do Sul and Parana). 15. A third source of environmental concern relates to the substitution of old medical equipment including those that use radiation technology. The project will establish that the winning bidder for new equipment will be responsible for the removal and appropriate disposal and final destination of this equipment following all the national norms for dangerous materials and radioactive residues. Project supervision will accompany this process to ascertain that this is done to acceptable standards. 16. OP4.10 is triggered as the project includes 46 Federal University Hospitals, and one third of them are being accessed by ethnic minorities. in Some of the Hospitals modernized under the project are located in Indigenous regions, or may be accessed by Indigenous Peoples residing in contiguous areas. A social assessment and stakeholder consultations were conducted and an Indigenous Peoples Planning Framework was published by the MEC. The social assessment assessed whether, and how, indigenous peoples would benefit from the project, and the capacity of the Federal University Hospitals to implement safeguards instruments. 17. The project is expected to have a significant social impact on the health of the population in the area of intervention of these hospitals, as well as on medical residents, and nursing and multi-professional students and programs taught at these hospitals. The FUH are important in the generation of knowledge to improve the quality of health care in the regions they cover. 18. Consultations carried out during project preparation indicated the urgent need to rehabilitate the infrastructure and replace the equipment of these hospitals, to be able to respond to the demands of students in residency programs, and of the populations assisted in these health facilities. Consultations also revealed the need to support the efforts of hospitals accessed by

6 6 ethnic minorities, adapting the delivery of certain services to respond to their special needs, under the HumanizaSUS program. As observed during consultations, hospital facilities rehabilitated under the project in regions of high concentration of indigenous peoples (Hospitals in Alagoas, Belem, Manaus, Mato Grosso do Sul,) would not have as much positive impact on the indigenous population as expected if tertiary services are not culturally pertinent. VIII. Contact point at World Bank and Borrowe World Bank Andre Medici and Joana Godinho Title: Sr. Economist (Health) and Sr. Health Specialist Tel: (202) and (202) Fax: (202) and Borrower Federative Republic of Brazil Ministério da Fazenda Procuradoria Geral da Fazenda Nacional (PGFN) Esplanada dos Ministerios Bloco P, 8º andar Brasilia, DF Brazil Facsimile: (55-61) Implementing Agency Ministério da Educação Secretaria de Ensino Superior (SESU) Esplanada dos Ministérios, Bl. L, 8º Andar Brasilia, DF Brazil Facsimile: (55-61) I. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C Telephone: (202) Fax: (202) pic@worldbank.org Web: