Study on Economic Partnership Projects in Developing Countries in FY2013 Study on Project for Construction of Advanced Japanese Perinatal Medical Center in Vietnam Final Report SUMMARY February 2014 Prepared for: The Ministry of Economy, Trade and Industry Ernst & Young ShinNihon LLC Japan External Trade Organization Prepared by: International Total Engineering Corporation SHIMIZU CORPORATION Kyudenko Corporation
(1) Background and necessity of this project (1)-1 Background In line with rapid, sustained economic growth in Vietnam, the country s health index has also continued to steadily improve. With the population of the country expected to exceed 100 million by 2020, the qualitative and quantitative reinforcement of hospital beds, equipment, materials, and healthcare and medical personnel to accommodate such growth has become an urgent issue facing Vietnam s healthcare and medical administration. In particular, there is a considerable mismatch between demand and supply concerning perinatal medical care in urban areas. The rate of hospital bed utilization far exceeds 100 percent and is expected to worsen as urban populations increase. In these and other ways, a serious issue is at hand. Against this backdrop, infection control and service improvements as well as the cultivation of medical personnel for regional hospitals have been pushed back and there is concern over the securing of medical safety as illustrated by mistakes made over the identification of patients and newborn children. Eliminating hospital bed shortfalls and improving the quality of medical services provided in connection with perinatal medical care are truly pressing issues for the Vietnamese government. (1)-2 Necessity The reinforcement of hospitals specializing in such areas as obstetrics, oncology, and pediatrics has been identified as an issue of concern in the five-year development plan (2011 2015) formulated by Vietnam s Ministry of Health. Based on this plan, the prime ministerial government determined in January 2013 that it would, as first-step measures, develop and expand specialized hospitals in key cities with the aim of quantitatively and qualitatively expanding urban hospitals specializing in obstetrics and other such areas (prime ministerial government decree No. 92/QD-TTg). This project to construct Japanese-style perinatal medical centers will be planned in order to contribute to the satisfaction of the aforementioned prime ministerial government decree No. 92/QD-TTg. With this project, Japanese-style perinatal medical centers will be developed in Vietnam s big three urban centers: Hanoi, Da Nang, and Ho Chi Minh. If this project is implemented, congestion at obstetrical and gynecological hospitals in cities is expected to ease. In addition, improved medical safety, such as in terms of infection prevention and the prevention of misidentified patients, is expected by way of the enabling of appropriate hospital bed control measures. Reducing excess loads placed on implementing organizations will result in a reinforcement of training and research functions on the part of these organizations as they operate in their role as top referral hospitals, which in turn will contribute to improvements in the quality of perinatal medical care in Vietnam.
(2) Basic policy applicable to the determination of project contents (2)-1 Organizational system for implementation of this project Implementing organizations for Japanese-style perinatal medical centers to be developed in Hanoi, Da Nang, and Ho Chi Minh shall constitute, for each site, a top referral obstetrical and gynecological hospital. The responsible organizations and implementing organization for each site are as presented in the following table. Table S-1 Responsible organizations and implementing organization at each location Site Responsible organization Implementing organization Hanoi Ministry of Health National Hospital for Obstetrics and Gynecology Da Nang Ho Chi Minh Da Nang City People s Committee and Department of Health in Da Nang City Ho Chi Minh City People s Committee and Department of Health in Ho Chi Minh City Da Nang Ob-Gyn and Pediatric Hospital TuDu Hospital Source: Produced by the Investigative Group (2)-2 Demand projections The appropriate number of hospital beds desired at this time by each implementing organization was calculated based on the rate of hospital bed utilization. If we were to presume that the targeted rate of hospital bed utilization is 90 percent (average rate of hospital bed utilization at Japanese medical facilities is 81.5 percent), then the National Hospital for Obstetrics and Gynecology is short 385 beds, the Da Nang Ob-Gyn and Pediatric Hospital is short 630 beds, and TuDu Hospital is short 616 beds. Based on changes in future estimated population figures and changes in the population of persons of childbearing age, it is expected that between 300 and 600 additional hospital beds will be required. By promoting the development of hospitals by the private sector in Vietnam, it is predicted that medical demand primarily among the wealthy will be accommodated. For this reason, the development of 300 hospital beds is assumed for this project. Table S-2 Comparing the number of actual patients to the number of hospital beds at implementing organizations Target site Hanoi Da Nang Ho Chi Minh Implementing organization National Hospital for Obstetrics and Gynecology Da Nang Ob-Gyn and Pediatric Hospital TuDu Hospital Number of hospital beds 700 600 1,200 Number of actually admitted patients 948 1,170 1,694 Rate of hospital bed utilization 135.5% 195% 141.1% Shortfall in the number of hospital beds supplied (where the rate of hospital bed utilization is 90%) 318 630 614 Source: Produced by the Investigative Group based on statistics provided by each implementing organization
(2)-3 Prospective locations for construction In Hanoi, a development site on the outskirts of the city has been secured. As it is located about 30 minutes from the National Hospital for Obstetrics and Gynecology by automobile, no issues with linking to the existing hospital are posed. As this prospective location is located near an arterial road leading to Noi Bai International Airport, there are also no problems with the state of transportation access and infrastructure development. In Da Nang and Ho Chi Minh, prospective locations from which close integration with existing hospitals to be capable of cooperating will be possible have been selected. Table S-3 Prospective locations Target site Hanoi Da Nang Ho Chi Minh Implementing organization Prospective location National Hospital for Obstetrics and Gynecology Outskirts of Hanoi Da Nang Ob-Gyn and Pediatric Hospital Development site adjacent to Da Nang Ob-Gyn and Pediatric Hospital Lot area Approx. 4 ha Approx. 4.8 ha Other prospective location Bac Ninh Province location Tay Tuu location Source: Produced by the Investigative Group TuDu Hospital Present B/C building on premises of TuDu Hospital Approx. 2,300 m 2 (building area) - Binh Chanh District location (3) Project outline (3)-1 Basic policy applicable to the determination of project contents This project aims to resolve issues affecting perinatal medical care in Vietnam through the development and introduction of Japanese-style perinatal medical centers in line with prime ministerial government decree No.92/QD-TTg. The basic policy for this project is as presented below. 1 Reinforcing top referral functions through the development of Japanese-style perinatal medical centers With a shortage of over 300 hospital beds at each implementing organization, the impediment caused to top referral functions by excess loads is an issue. These Japanese-style perinatal medical centers will be operated as tertiary medical facilities specializing in high-risk cases by the implementing organizations, which are considered the top referral obstetrical and gynecological hospitals in their respective regions. The existing hospitals will be operated as medical facilities corresponding to a level between secondary and tertiary in order to satisfy medical demand in their respective regions.
2 Improving hospital administrative abilities through the adoption of a Japanese-style hospital operating model In Vietnam, reinforcement of hospital operations has become an issue in recent years. Due to inadequacies in statistical data, hospital executives find it difficult to quantitatively ascertain the state of operations. By developing statistical data that can contribute to hospital operations and management and reviewing clinical paths and other processes of medical examination, patient services will be improved and a system for providing streamlined medical care will be developed. 3 Constructing safe, secure, reliable hospitals through the adoption of a Japanese-style facilities and systems operating model In order to enable medical facilities to appropriately fulfill their original roles, the day-to-day management of facilities will be important. In Vietnamese hospitals, many facilities exhibit functional impediments due to a failure to address problems and failures and inadequate maintenance. In order to operate Japanese-style perinatal medical centers with no negative impact on operating rates, training concerning the operations of facilities and systems as required of technical staff members will be administered. By formulating a feasible maintenance management plan, efforts will be made to improve the quality of maintenance management after the applicable hospitals start operating. 4 Improving the quality of medical examinations through the provision of technical support and collaborations in the area of medical science and care Japan boasts the world s best level of technology with respect to perinatal medical care. The sharing of Japanese know-how on perinatal medical care with Vietnamese medical organizations will be useful for improving the level of perinatal medical care in Vietnam. By undertaking personnel and technology exchanges, the quality of medical examinations will be enhanced and direct collaborations in the area of medical science and care, such as in terms of remote diagnosing systems and the bilateral transportation of patients, will be introduced. 5 Adopting ICT technology that can also accommodate the provision of regional medical care Given the importance of managing high-risk pregnancies in regional areas, reinforcing the ability to manage patients based on the use of ICT (Information Communication Technology) in the area of perinatal medical care will be effective for improving the perinatal index. By introducing a remote diagnosing system and other ICT technologies that can also accommodate the provision of medical care to regions and remote areas, a more efficient referral system will be constructed. (3)-2 Design methodology This project entails not just the development of facilities but also the introduction of a Japanese-style package of medical facilities that integrates software and hardware needs as anticipated for subsequent operations.
In Vietnam, medical facilities are not designed according to hospital operations. Thus, various operational issues arise after hospitals begin operations. By formulating a hospital functions and operations plan at the preliminary stage of construction planning, the development of medical facilities in line with post-development operations and management will be enabled. (3)-3 Estimate of total project costs An estimate of total project costs is as presented in the table below. Total project costs as denominated in Japanese yen is approximately 10.4 billion yen, of which approximately 9.4 billion yen will be the amount of the primary contract and of which approximately 1.0 billion yen will cover the consulting costs. It is expected that approximately 3.6 billion yen, 39 percent of the primary contract, will be required to cover technical costs incurred in Japan. Table S-4 Total Project Cost Items Foreign Currency (1,000 yen) Local Currency (1,000 VND) Notes Total Project Cost 13,896,000 3,488,265,000 1. Body Contract Amount 10,890,000 3,488,265,000 1 Construction Costs (general) 1,800,000 2,259,900,000 2 Construction Costs (advanced technology) 1,500,000 0 3 Medical Equipment Costs 4,500,000 911,250,000 4 Information Systems Costs 2,100,000 0 5 Reserve Funds 990,000 317,115,000 10% of 1-4 2 Consultant Costs 3,006,000 0 6 Hospital Management Training 450,000 0 7 Design Consulting Costs 2,556,000 0 10% of body contract amount Source: Created by the Investigative Group (Exchange Rate 1=202.5VND) (3)-4 Preliminary financial and economic analyses As the target facilities will incur losses at the stage of current balance every year, it is difficult to calculate FIRR; therefore, in the financial analyses, preliminary calculations are conducted for when the substituting goods are approximately α% cheaper on average, STEP s competitive edge will be lost as compared to the general ODA. In the economic analysis, the lost profits are calculated based on the assumption that if there are no new perinatal medical centers to be constructed in this project, the demand for the increase in the number of childbearing cannot be corresponded and by comparing with the total of discounted cash flow of the public expenditure calculated in the financial analyses, the economic significance of this project shall be indicated.
1 A financial analysis in Hanoi The result of the financial analysis in Hanoi is indicated below. The present value of public spending by Vietnam (a sum of repayment of interest and principal for loan assistance for 20 years after the start of operation and the capital-related operating costs with the base year set to 2020) is estimated at two billion 460 million yen for general ODA and two billion 236 million yen for STEP. Given the financing by the national government and other sources for the hospital s current balance, the present value of public spending is estimated at two billion 770 million yen for general ODA and two billion 537 million yen for STEP. Assuming that a certain percentage of items acquired in Japan in the estimate will be replaced with cheaper substitution items in non-step projects, it is estimated that STEP loses its advantage when substitution items are 18.5% cheaper on the average. This project lacks the ability to generate surplus funds as long as our assumption is based on the management of the National Hospital for Obstetrics and Gynecology used as a reference. In terms of the basic ability of operational cash flow generation, it does not cover the total present value of the capital-related operating costs for a period of 20 years. 2 A financial analysis in Da Nang In Da Nang, as the collected financial information was limited as compared to Hanoi and Ho Chi Minh, it was inevitable to conduct rough calculations. The result of the financial analysis is indicated below. The present value of Vietnam s public expenditures (the sum of the repayment of principal and interest for the loan assistance and capital-related operating costs for 20 years after the start of the operation with the base year being 2020) is expected to be 2,406 million yen in the case of general ODA and 2,236 million yen in the case of STEP. Assuming that the Japanese portion of the estimate is replaced in a non-step project by alternative items that cost less by a certain percentage or more, it is estimated that the advantage of STEP is lost if the costs of alternative items are about 18.5% or more lower than the Japanese counterparts on average. 3 A financial analysis in Ho Chi Minh The result of the financial analysis is indicated below. The present value of Vietnam s public expenditures (the sum of the repayment of principal and interest for the loan assistance and capital-related operating costs for 20 years after the start of the operation with the base year being 2020) are expected to be 2,406 million yen in the case of general ODA and 2,236 million yen in the case of STEP. Taking into account national subsidy and other revenues with respect to the operating balance of the hospital, the present value of public expenditures are estimated to be about 3,575 million yen in the case of general ODA and about 3,405 million yen in the case of STEP.
Assuming that the Japanese portion of the estimate is replaced by alternative items that cost less by a certain percentage or more in a non-step project, it is estimated that the advantage of STEP is lost if the costs of alternative items are about 18.5% or more lower than the Japanese counterparts on average. This project lacks the ability to generate surplus funds as long as our assumption is based on the management of the TuDu Hospital used as a reference. In terms of the basic ability of operational cash flow generation, it does not cover the total present value of the capital-related operating costs for a period of 20 years. 4 An economic analysis In this economic analysis, we assumed that existing perinatal medical delivery system in the urban regions in Vietnam cannot cover the expected increase in demand for childbearing at all; in other words, the childbearing-impossible population and compared the human loss (= lost profits) with the discounted cash flow of the public expenditure in Vietnam calculated in the financial analyses. In the economic analysis, only the STEP case was considered. The calculation results are as follows. Table S-5 Results of Economic Analysis for Each City Item Hanoi Da Nang Ho Chi Minh Economic Benefit (in hundreds of millions of yen) Sum of the present value of public expenditures (in hundreds of millions of yen) About 96.2 About 27.4 About 324.0 About 25.4 About 22.4 About 34.1 Difference (in hundreds of millions of yen) About 70.8 About 5.0 About 289.9 Source: Produced by the Investigative Group (Exchange rate: 1=202.5VND) As shown in Table S-5, At all cases in Hanoi, Da Nang, and Ho Chi Minh, their economic benefits exceed the sum of the present value of public expenditures by a large margin. This analysis demonstrates that the economic benefits outweigh the sum of the present value of public expenditures even if the number of childbirths for Hanoi is set to one third and that for Ho Chi Minh is set to one ninth. 1 (3)-5 Consideration to the environmental and social impact The environmental and social impact by this project will be considered by the method and contents below: Implement an inspection of the three construction sites proposed, Hanoi, Da Nang, and Ho Chi Minh, and list the influences expected for the natural environment and social environment for each site. Based on the information and issues found from the inspection, specify the environmental and social influences expected from the implementation of this project and list up the avoidance and mitigation measures by comparing with related subjects in Japan Bank for International Cooperation Guidelines for an Environmental and Social Consideration Check by JBIC and Guidelines for Environmental and Social Considerations by JICA. Furthermore, along with the inventory of the environmental checklist, examine the necessary points for the next stage of the inspection. 1 In Table S-5, 96.2/25.4 3.7 and 324.0/34.1 9.5.
Obtain the environmental laws in Vietnam related to this project and the procedure and the order of EIA. List up the items required to be prepared by the implementing organizations in the said country before the implementation of this project. As stated above, if this project is to be implemented, it is determined that it will not have significant negative impact on the natural environment and social environment, and instead, the social advantage will be significant as the required medical needs will be fulfilled and further, it will become possible to provide better medical services and facilities. (4) Implementation schedule The implementation schedule of the project is presented as follows. Table S-6 Implementation schedule Year Months First Year Second Year Third Year Fourth Year Fifth Year Sixth Year Seventh Year 6 12 18 24 30 36 42 48 54 60 66 72 78 84 FS conducted by Vietnam (4 months) Written Request FS conducted by Japan (12 months) Inter-governmental consultations (12 months) EN conclusion LA conclusion Selection of consultant (6 months) Detailed Design (12 months) Bid-related Matters (12 months) Construction Work (20 months) Facilities/Equipment maintenance management guidance/training Equipment and materials procurement/installation/maintenance management guidance/training (16 months) Hospital openings Employment Coordination (30 months) Hospital operations training (12 months) Defect liability period (12 months) MOH grounds maintenance (12 months) Source: Produced by the Investigative Group (5) Feasibility of a yen-loan request and implementation With respect to this project, the governmental upper-level department with the authority to make implementation decisions and the governmental upper-level department with the authority to make a decision on a yen-loan request are the Planning and Investments Department of the Ministry of Health and the Ministry of Planning and Investments. For this investigation, an explanation of this project was provided to these departments, and it was confirmed that this project conforms to Vietnamese policy and that the full cooperation of the concerned authorities in Vietnam shall be extended.
Confirmation as to the feasibility of project implementation and the yen-loan request was obtained as follows. While large-scale projects such as international airport expansion projects, the development of international ports, and the construction of north-south highways are being implemented and planned based on Japanese yen loans, this project is comparatively small. In addition, the Ministry of Health would like to put in a request for and implement this project as a yen-loan-based project at an early date from the standpoint of the expected benefits in terms of the qualitative and quantitative upgrading of perinatal medical care. (6) Advantage of Japanese products and services Japan boasts the world s best track record in terms of perinatal medical care, the area that is subject to this project, on a global index. Table S-7 International index comparison with Japan as it pertains to perinatal medical care Japan United States Germany Vietnam Population (10,000 persons) 12,650 31,309 8,216 8,879 Number of live births (10,000 persons) 107 432 70 146 Crude birth rate (per 1,000 persons) 8 14 9 16 NMR (per 1,000 live births) 1 4 2 12 IMR (per 1,000 live births) 2 6 3 17 U5MR (per 1,000 live births) 3 8 4 22 MMR (per 100,000live births) 5 13-59 Source: UNICEF, International White Paper on Children 2013 Factors behind Japan s track record for perinatal medical care consist of the fact that systemic measures including universal health insurance coverage and the use of maternity passbooks have been the basis for extensive improvements, as well as the fact that a multidisciplinary approach involving linkages with sophisticated technological means and other specialized fields for high-risk childbirths and neonatal care has advanced to a significant degree. With the backdrop of such factors, Japan s presence for perinatal medical care is high in the world, and particularly in the aspect of software such as the system, operation, technology, etc., it can be said that it is a field in which building of a long-term cooperative relationship by our country with the view to the conditions after hospitals commence operations is easily obtainable. Regarding facility design, in Japan, on the basis of experience at the time of repeated disasters as represented by earthquakes, various energy-saving technologies and know-how have been incorporated in hospitals from the viewpoint of BCP and in view of the infrastructure in Vietnam that is still vulnerable, our country has a number of facilities and equipment technologies and know-how that can contribute to the stability and safety of medical care as top referral hospitals. We will describe such technologies in detail in chapter 3 but in the smart grid technology
that efficiently manages various energy resources, many of our country s companies are involved in the advanced technological development along with Europe and the United States. Our country s individual technology in the fields of new energy and energy saving is in the world-leading class, and in terms of the integration of new energy/energy-saving technologies and disaster countermeasures, our country s technologies, experience, and know-how have a high level of competitiveness compared to other countries. The technology of Japan, a country that produces and develops medical equipment, is either on par with or, depending on the field, is backed by a track record that exceeds technology originating in Europe and the United States. Japan is home to a broad range of manufacturers producing everything from instruments used in surgical operations to such sophisticated medical equipment as diagnostic imaging and therapeutic devices. Table S-8 Track record of exports of ultrasonic diagnostic equipment to Vietnam Machine scanning type ultrasound diagnostic equipment First Second Third Japan 38.5% Korea 27.6% The U.S. 15.0% CT Japan 41.0% China 21.8% The U.S. 13.2% MRI Japan 30.1% Germany 25.8% China 25.2% Electrocardiograph Japan 46.0% China 23.3% The U.S. 13.4% Source: JETRO, Global medical equipment market: the possibility of expanding the medical equipment business overseas It also bears noting that medical equipment and materials previously delivered through Japanese ODA (grant aid) are being utilized at key points within the National Hospital for Obstetrics and Gynecology in Hanoi, a site that is also being looked at for this project. That the implementing organizations for this project are familiar with Japanese-made medical equipment will provide a significant boost to orders for Japanese-made products upon the implementation of this project. (7) Task and issues for the project implementation To formulate Yen Loan, relevant authorities in Vietnam shall conduct a feasibility study, based on this Study. The study report shall be submitted to the Ministry of Planning and Investments through Ministry of Health. The Study report will be evaluated by Ministry of Planning and Investments, and shall be nominated on a short list in order to request Yen Loan project officially from Vietnamese Government to Japanese Government. Since Ministry of Planning and Investments is concerned about recent increase of yen-loan project, subdividing the project into each site shall be considered. In this case, priority will be following order: Hanoi, Ho Chi Minh, and Da Nang, according to the discussion with Ministry of Health. As for land procurement, it will become difficult for each implementing organization to keep current candidate site. Therefore, early implementation of this project is required.
(8) Site Map Figure S-1 Project map Source: Produced by the Investigative Group based on the use of Google Maps