Lebanon Health Sector Development Republic of Lebanon Health Sector Reform Project PROJECT CONCEPT NOTE MNA MNSHD Date: Country Director:    Joseph P. Saba Sector Director:   Michal Rutkowski Sector Manager:  Setareh Razmara Project ID: PO 88832 Lending Instrument:  SIL Team Leader: Sectors:  HH (70%), BI (30%) Themes:  Health System Performance, Public    Expenditure Project Financing Data: [* ] Loan     [ ] Credit     [ ] Grant     [ ] Guarantee     [ ] Other: For Loans/Credits/Others: Total Project Cost (15$m.):                           Cofinancing:  (2$m) Total Bank Financing (13$m.): Source Local Foreign Total Borrower IBRD/IDA Others Borrower: Responsible Agency: Project Implementation Period: 12/31/05 . 12/31/00 Sector Unit Estimate of Resources Required for Preparation and Approval Source of Funds Identification and Preparation Expenses to Date (US$) Estimate of Resource Requirements (US$) Bank Budget From system Trust Funds Estimate of Bank funds required for preparation and approval relative to average for this sector in this regionÂ¹ *75% or >150% Example:  If you estimate 100 and the average is 200, select 50% Â¹Click here for historic completion cost data by region, sector, and country.  For LCR Regional norms click here  Introduction:- In May 2003 the Government of Lebanon (GOL) reiterated a request for a new investment loan to build on specific reform efforts initiated under the previous Health Sector Rehabilitation Project ($37.5 million).  The former project, despite a slow start and difficult post-conflict conditions, succeeded in implementing a series of far-reaching policy reform initiatives . in addition to rehabilitating public hospital service provision.  These reform efforts encompassed the areas of provider payment, national health accounts, health sector mapping and hospital accreditation. The GOL now seeks Bank assistance in expanding these initiatives and implementing new reforms, particularly in the pharmaceutical sector.  Key Development Issues and Project Rationale: - The health sector in Lebanon, notwithstanding the positive results of the project, still faces many significant challenges.  Health expenditure as a percentage of GDP (12.3 percent) is the highest in the region and more than half the population is formally uninsured. The overall health financing system is inefficient and inequitable.  Six different public funds exist and almost 60 percent of health spending is paid out of pocket. Spending on drugs is exorbitantly high given the lax regulatory environment and little generic substitution exists.  Service delivery is highly skewed in favor of curative-based hospital care and the primary health care system remains relatively weak.  In view of the overall positive GOL-Bank partnership in health and the explicit commitment of the Ministry of Health toward health sector reform, evidenced by the political capital and financial resources already committed to certain initiatives (e.g. GIS-based health mapping, public health insurance integration efforts and hospital accreditation),  serious consideration ought to be given to the GOL loan request. Other international partners such as  the U.N. agencies (WHO, UNICEF and UNFPA) are involved only programmatically in the areas of disease surveillance, health promotion, child health, nutrition, immunization and primary health care and are not invested more substantially in the high-level health policy reform discussions of the country. WHO assisted with the implementation of several policy studies under the previous project. At the bilateral level, one Italian sponsored project is focusing on primary health care and small-scale experiments with new provider payment methods (i.e. capitation for perinatal care services).  The Bank is currently the only international organization in Lebanon positioned to play a significant policy  role in the area of health care reform. The mix of flexible financing, convening power and  technical expertise (including a  long-standing relationship) offered by the Bank is not easily  matched by other development organizations. The objectives of the proposed project, moreover, are fully aligned with the client.s sector strategies (as indicated in the GOL.s Policy Note of January 2003) and the 1998 CAS objectives of institutional development and poverty reduction. The project will similarly reflect the macro-economic efficiency arguments of the newly proposed CAS for Lebanon.  One of the major lessons learned from the previous Bank-assisted project is the virtue of simplification. Simple and transparent implementation arrangements, with a single entity responsible for project performance, will ensure much better results at completion. The Ministry of Health (MOH) should be fully in charge of implementation and procurement arrangements under the new project with minimal outside involvement of the Council for Development and Reconstruction (CDR).  Proposed Project Development Objectives: -  There are three proposed development objectives for the considered project:  Â·   Enhancing the quality of  clinical outcomes of hospital service provision  Â·   Improving efficiency by reducing MOH expenditure on hospital care & pharmaceuticals  Â·   Strengthening equity by making MOH expenditure better targeted towards the poor  These development objectives are specific enough to allow for effective monitoring of implementation progress. Linking a specific .outcome. to a particular intervention from the very beginning can better guide the monitoring and evaluation (M&E) process and help substantiate any inferences about attribution. Hospital accreditation, for example, can be reasonably linked to improvements in certain indicators such as annual hospital mortality rates, re-operation rates, and infection rates. The pre-requisite to effective M&E is good base-line data and a non-trivial amount of effort should be devoted to collected these data during the project preparation stage.  The primary target group of interest for the proposed project are the poor in Lebanon who utilize the MOH as an .insurer of last resort. for hospital care coverage; who spend a large part of their disposable income on out of pocket expenditure on pharmaceuticals; and who use the service provided by the primary  health care system.  Secondary target groups could include important stake-holders like private hospital owners and pharmaceutical importers since their induced behavioral change will be critical to the overall success of the reform initiatives. A last target group could be the MOH staff. The project would seek to improve their capacity to sustain these and other policy initiatives over the long run.  Preliminary Project Description: - There are five general components being currently  considered for the proposed project. Some of them will continue earlier work (e.g. hospital accreditation) while others will explore new policy reform areas (e.g. pharmaceutical reform).  These components have all been discussed with the GOL during an identification mission at the beginning of June, 2004.  The five components are as follows:-  Â·   Health Financing Reforms: - Under this component, three sets of activities have been considered for implementation: (i) updating and institutionalizing national health accounts (critical to track health expenditures . particularly relevant for evaluating the pharmaceutical reform component); (ii) further developing the case-based payment system for hospital reimbursement; and (iii) working towards greater coordination between the public sector insurance funds. The last activity is highly sensitive given the differential benefits covered by each insurance fund (i.e. military versus civilian) and careful consideration ought to be exercised in moving ahead with this activity.  Â·   Primary Health Care: - This component will focus on increasing the overall  utilization of primary health care services in both the public and private sectors; and strengthen the referral process to more specialized hospital care services (i.e. to reinforce the .gatekeeping. mechanism).  Three types of broad policy interventions are currently envisaged.  The precise action steps and details would be elaborated later in close consultation with the MOH and primary health care/managed care experts who have implemented innovative policy reforms in this area. The three areas of intervention relate to:  i)  changing the financial incentives facing the Lebanese populace to reinforce the principles of gate-keeping and patient referral; ii) improving the service delivery capacity of select public sector primary health care facilities; iii) enhancing the academic training, professional status and financial rewards of general practitioners in the country.  Â·   Hospital Accreditation: - This component will consist of several inter-related activities:  i) moving from basic and .process. oriented accreditation standards to ones based on clinical outcome information; ii)  ensuring stakeholder participation (i.e. Private Hospital Association) through continuous educational efforts (particularly if the MOH continues to link reimbursement to hospital accreditation); and iii) institutionalizing, financially and administratively, the survey work necessary for the preparation of the hospital accreditation audit reports.  This last activity is paramount to the future sustainability of the initiative and needs to be given sufficient attention.  Â·   Pharmaceutical Reform: - This component, based on the observations of a Bank pharmaceutical expert Mr. Andreas Seiter (HDNHE) who recently visited Beirut, should concentrate on policy reform measure to reduce overall expenditures on pharmaceuticals. These measures include: (i) separating drug .registration. procedures from the price-setting process (by modifying the .country of origin rule); ii) altering the pricing scheme by changing the fixed percentage mark-ups given to drug wholesalers and retailers; iii) promoting consumer and stakeholder acceptance of generic substation through educational and continuous surveillance efforts. On this component the GOL expressed a keen interest in moving ahead rapidly with project preparation measures.  Â·   Health Information System: - Two sets of activities are currently contemplated for this component, one feeding into another. The first activity involves building in-house MOH capacity to gather and analyze essential data for health policy-making. This component clearly intersects with the activities of other components namely health financing and hospital accreditation. The desired range of data could cover areas such as demography, epidemiology (mortality, cause of death, morbidity) health care expenditure, utilization and unit-costs. The second activity would be to continue to develop the GIS-based health mapping system for monitoring and possible regulatory purposes . using the first activity to continually update the health mapping system.  Potential Risks and Mitigation: -   There are two main potential risks to effective project preparation and implementation. These risks fall into two distinct categories: political change and  stake-holder opposition.  Lebanon is scheduled to hold presidential and parliamentary elections over the next year auguring possible changes at the cabinet and undersecretary levels. Aside from these changes, stakeholder opposition, particularly to the proposed pharmaceutical reform  measures could be significant. Options for mitigation of the  first risk could include front-loading policy and legislative commitments and conditioning effectiveness on a post-election policy risk assessment. Mitigating the second risk would involve extended and skillful stakeholder consultations during preparation to ensure a winning coalition of stakeholders favoring the reform initiatives. Two risks associated with the previous project, procurement arrangements and sustainability, are no longer a major concern.  The project will only include some minor procurement . leaving  the MOH fully responsible for project performance. The  sustainability issue has been addressed by a recent Cabinet decree to convert the status of key members of the former Bank PCU from short-term MOH consultants to extended-term Cabinet consultants seconded to the  MOH.  Guidance Sought: - Guidance is sought on several important issues: -  Â·      Realism of Project Concept Note: - Is the project concept note realistic given the proposed five year period for the new project? Is it over-reaching in its proposed objectives given the policy environment?  Â·   Resources Required for Effective Preparation: - What is the appropriate level of resources required for project preparation on the client side given the proposed set of  activities and estimated loan amount ($15 million)? How much should be requested from the PHRD funds?  Â·   Probable Gap in Effectiveness: -- What is the best way to avoid a long time lag in effectiveness given the upcoming elections and annual parliamentary calendar in Lebanon?  Proposed Preparation Schedule, Team Composition and Budget Estimate: -  The proposed preparation schedule is as follows: -  Â·    Quality enhancement review -  September 2004  Â·   Appraisal . May 2005  Â·   Negotiations . July 2005  Â·   Board Approval.August 2005  Â·   Effectiveness . January 2006  The team composition, aside from the external consultants, would  consist of a senior health specialist,  health specialist (TTL),  procurement specialist, financial management specialist, an operations officer, and a program assistant. The estimated budget for the preparation and approval phase covering staff time, operational missions, outside consultants is $ XXX.