How do Public-Private Partnerships Affect Public Service Principles? A Case of City Hospitals in Türkiye

Abstract

Public-private partnership (PPP) policies have been on the Turkish Government’s healthcare agenda for a long time. Türkiye has implemented a series of policies with various elements of neoliberal reforms over the last 20 years and the Turkish Government initiated the PPP policy in 2013 as the final step of the Health Transformation Program. This article reviews the policy process that led to extensive collaboration with the private sector in public health and also examines the effect of the policy on the principles of public service. Türkiye’s policy experience has elements that reinforce the principles of continuity, variability, and equality in many ways. However, this policy was found to have weakened the long-term financial viability of healthcare and led to its fragmentation and the government eventually abandoned this policy in the construction of new hospitals. Türkiye’s experience demonstrates that governments seeking to establish sustainable PPP policies for healthcare must consider the unique dynamics inherent to public service.

Keywords

healthcare reform public service principles public-private partnership hospitals

Introduction

Reforming healthcare presents a formidable challenge, particularly when striving to establish ongoing reforms and maintain an acceptable level of public service. Neoliberalism drives health policies by emphasizing decentralization, privatization of assets, private sector financing, and cost-cutting initiatives to increase efficiency and effectiveness in healthcare (Rushton & Williams, 2012). Governments see this policy and economic instruments to meet society’s ever-changing and growing health needs.

At the same time, neoliberal policies have reduced public investment, expanded private health services, cut funding for public health programs, and increased medication co-payments (McGregor, 2001) However, they have also been instrumental in the costly process of building and upgrading infrastructure (Yescombe & Farquharson, 2018). Neoliberal agents such as the World Bank, OECD, and IMF have recommended partnerships with the private sector to leverage it to strengthen health infrastructure (Schrecker, 2016).

One of the roles played by neoliberal health policies, which have materialized as public-private partnerships (PPPs), is to serve as intermediaries in financing healthcare, constructing infrastructure, and delivering health-related services (Ghasemi et al., 2022). The Private Finance Initiative (PFI) program in the UK is one of the first examples of PPP policies in healthcare. The Labour Party launched PFI in the United Kingdom in 1992 to eliminate the inefficiencies in service delivery and the inability of the public sector to provide needed investments healthcare. In the following years, the program was an example for developing countries to increase the efficiency and quality of health services by utilizing the resources and knowledge of the private sector (Holden, 2009). Consequently, numerous countries, particularly Anglo-Saxon nations, along with France, Spain, Portugal, Brazil, and China, have implemented PPP policies to increase opportunities for the private sector to participate in the delivery of healthcare (Ghasemi et al., 2022; In Job & Lefort, 2022).

Türkiye has embraced the "global wave of health reform" driven by neoliberal policies (Agartan, 2015; Konuralp & Bicer, 2021). The country embarked on this journey with the assistance of World Bank projects in the 1990s. Despite their lack of sustainability, the reforms gained substantial momentum in healthcare (Akdag, 2015).

Problem Identification: Turkish Health System

Considering the social aspect of health and the necessity for ongoing adaptation in healthcare, policymakers must strive to implement sustainable reforms. However, in Türkiye, due to prolonged periods of political instability and economic crises (Konuralp & Bicer, 2021), planned health reforms could not be implemented (Oguz, 2020). This disruption of health reforms has led to a convoluted organization, financial challenges, and the delivery of inefficient and low-quality services (Yasar, 2011). Thus, the country has experienced elevated mortality and morbidity rates (Figure 1).

Figure 1.

Health indicators of Türkiye between 2000-2003. (Ministry of Health, 2003; OECD, 2003).

The Justice and Development Party (JDP) assumed power in 2002 and initiated the Health Transformation Program, which Horton and Lo (2013) described as a "remarkable revolution". The Health Transformation Program (HTP) aimed to effectively, efficiently, and equitably reorganize, finance, and deliver health care (Akdag, 2015). Throughout this process, various institutional and legal measures were taken, including the establishment of a full-time performance-based payment system in 2004, the introduction of a central insurance institution in 2006, the implementation of administratively and financially autonomous hospital administrations in 2007, and the creation of Public Hospital Unions resembling National Health Trusts in 2011 (Agartan, 2015; Akinci et al., 2012). Additionally, health services were categorized into support services (such as catering, security, parking, and maintenance-repair), medical support services (including imaging, laboratory, and sterilization), and core health services (covering medical treatment and care). Furthermore, the Ministry of Health (MoH) facilitated the marketization of medical and non-medical support services and encouraged private-sector initiatives (Oguz, 2020; Yasar, 2011).

Due to quantitative and qualitative infrastructure deficiencies, the goal of the JDP government was to enhance healthcare infrastructure to improve service quality, satisfaction, and accessibility (Akinci et al., 2012). Health infrastructure indicators from that period revealed that Türkiye ranked last among OECD countries in terms of the number of hospital beds per thousand inhabitants (2.49‰) and the proportion of qualified beds (11.7%) (OECD, 2003). Furthermore, Türkiye requires more resilient and secure hospitals because of the country’s vulnerability to earthquakes. Additionally, the overcrowding of patient rooms with more than two patients and the absence of advanced health technologies also contributed to reduced efficiency and effectiveness of medical treatments (Ministry of Health, 2021; Yasar, 2011).

Given these challenges, the JDP sought to implement the PPP policy to modernize the infrastructure. Drawing inspiration from international precedents (Roehrich et al., 2014; Yescombe & Farquharson, 2018), policymakers asserted that hospitals should be swiftly renovated without burdening the public debt (Oguz, 2020; Top & Sungur, 2019). Consequently, the aim was to leverage the financial and managerial capabilities of the private sector in the construction, renovation, and management of hospitals.

Formulation and Legislation: the City Hospital Model

Since 1984, Türkiye has had a long-term practice with PPP policy in public utilities such as energy, transportation, and communication. Prior to the Health Transformation Program, it was considered infeasible to introduce neoliberal policies within healthcare due to the established welfare regime (Konuralp & Bicer, 2021). With the unveiling of the HTP, policymakers charted a path towards a PPP policy, taking cues from the best practices of advanced nations such as the United Kingdom, Portugal, and Spain, as well as the guidance of the World Bank (Oguz, 2020).

The Ministry of Health divided the country into 30 health regions based on demographic, geographic, and health needs for PPP policy. City Hospital Campuses were planned in each region, consisting of general and branch hospitals such as cardiovascular, gynecology, pediatrics, and orthopedics. The objective was to enable citizens to access more efficient and effective services in a single campus, eliminating the need to travel outside their residential region. Additionally, the Ministry of Health aimed to rapidly increase the number of public hospital beds to 3.2 per thousand and ensure their quality (Top & Sungur, 2019).

The initial action was taken in 2005 by including an article in the Basic Health Law (No.3359). This additional article governs the private sector’s construction of healthcare facilities on state-owned land, with the state paying rent for 49 years in exchange for the operation of all services and areas except for core medical services. However, policymakers delegated complex matters to sub-regulations and only sought opinions from a few stakeholders. As a result, opposition parties and professional chambers expressed their dissatisfaction with the Law (Sozer, 2014).

Opposition parties raised concerns about regulating such a wide-ranging policy through an additional article, arguing that the marketization of health services would undermine the public nature of health and that the privately financed debt could indirectly lead to high costs for the state (Sozer, 2014). Professional chambers also expressed their concerns, stating that the division of health services into support, medical support, and medical services would infringe upon the rights of healthcare personnel and disrupt labor harmony (Erbas, 2014). In response, opposition parties brought the Law before the Conseil D'état, requesting a suspension of its execution and a review of its provisions. After the review, the Conseil D'état halted the feasibility and tender processes, necessitating the development of new comprehensive legal regulations and delaying policy implementation until 2013.

In response to the criticism, policymakers developed a more comprehensive law, enacted as the Health PPP Law in 2013 (No.6428). However, similar criticisms were voiced against the new Law, although it was later examined by the Constitutional Court and deemed lawful. Law No. 6428 establishes that private partners will be responsible for constructing necessary hospitals under the build-lease-transfer model. The Ministry of Health (MoH) will select a private partner through a competitive bidding process, and the contract duration will be limited to 30 years (Top & Sungur, 2019). The new Law covers hospital construction and encompasses the renovation of existing facilities and the operation of non-medical services and areas within the facilities. In return, the MoH commits to making two separate payments to the private partner in the form of rent and service fees, which will be adjusted for inflation and the foreign exchange (FX) rate. Additionally, the treasury guarantees external financing and offers land (Konuralp & Bicer, 2021). While the state bears significant responsibilities, there are similarities with developed countries regarding contract durations, the unilateral termination authority of the public sector, asset ownership rights, and the adjustment of service prices (In Job & Lefort, 2022).

Implementation: the Advertising Face of Politics

The JDP remained determined to implement the policy and resumed the tendering and contracting processes, which had previously been halted due to legal proceedings. Consequently, the Ministry of Health entered contracts with special purpose companies, comprising domestic and foreign consortia, to develop 18 City Hospitals, amounting to a total investment value of $12.6 billion (Presidency Of Strategy And Budget, 2021).

The City Hospitals are strategically distributed across various country regions, focusing on metropolitan cities. The contracts stipulate a construction period of 3 years and an operational period of 25 years. In addition to constructing the hospitals, the private partners are responsible for operating support services, medical support services, and social facilities surrounding the hospitals. The MoH provides utilization guarantees of up to 70% for services based on quantity (such as catering and laundry) and pays rent and service fees to private companies. However, the MoH retains responsibility for providing core medical services and overseeing the activities of private companies (Top & Sungur, 2019).

The first City Hospital to implement the PPP policy was inaugurated in 2017. Over the past six years, the government has established 17 City Hospitals through the build-lease-transfer model, The City Hospitals collectively offer a bed capacity exceeding 27,000 (avg. 1636 beds/hospital). These hospitals stand out from traditional public hospitals due to their high-quality beds, advanced health technologies, and structural resilience against natural disasters. Additionally, their management differs from conventional hospitals, incorporating a facility concept that combines specialized branch hospitals (Top & Sungur, 2019). Within City Hospitals, senior positions for coordinating top physicians have been introduced above the chief physicians of branch hospitals. Furthermore, managers representing the special purpose company responsible for other aspects of hospital operations are also present.

Evaluation: City Hospitals in Terms of Public Service Principles

Public service principles originated in France and were advocated by jurists such as Léon Duguit, Gaston Jèze and Roger Bonnard. They played a significant role in shaping the concept of public service and its underlying principles. The principles of public service encompass continuity, variability-adaptability, and equality. These principles aim to establish a framework for the operation and delivery of public services in the best interest of the public (Bell et al., 2008; Yasar, 2014).

Continuity

The principle of continuity pertains to the uninterrupted provision of high-quality healthcare by the state to meet the public’s needs. It does not imply that a public service must be available 24/7 without any breaks, but rather, it should maintain a level of continuity that adequately addresses the public’s requirements (Yasar, 2014). For instance, ensuring that educational services are provided 6–7 hours a day, five days a week, or limiting public transportation services during nighttime unless there is a demand, satisfies the principle of continuity. However, certain public services such as healthcare, law enforcement, and fire brigade services must always be readily available, as the public may require them at any moment. Notably, healthcare distinguishes itself from other public services by its time-sensitive nature. Although individuals' health needs may vary, they often necessitate urgent attention. As a result, healthcare must be consistently accessible, requiring the provision of infrastructure, equipment, qualified personnel, and medical supplies to meet the general and everyday needs of the public (Cakir, 2015).

The principle of continuity encompasses various aspects of public services. It not only pertains to the uninterrupted provision of services over time but also encompasses the quality and content of the services. The primary objective of the principle of continuity is to ensure that public services adequately meet social needs, striving to achieve a reasonable level of satisfaction. However, more than temporal continuity is required to achieve this goal. Additionally, services must meet certain quality standards, incorporating technological advancements and scientific developments (variability).

Moreover, they need to be sustainable regarding financial and human resources (sustainability). Only under these circumstances can public services be provided without causing unrest or turmoil among the recipients. Another crucial aspect of continuity is the accessibility of public services in terms of geographic availability and accommodating the diverse needs of different age groups and educational levels (accessibility) (Cakir, 2015; Yasar, 2014). Thus, even if a service is provided continuously in time, the principle of continuity can be considered disrupted if outdated technology is employed, the methods employed fail to meet current needs, an insufficient number of health personnel are employed, or citizens encounter difficulties in accessing the service (Cakir, 2015).

Indeed, it can be asserted that the city hospitals model reinforces the principle of continuity. The model enhances uninterrupted services by constructing modern healthcare facilities and increasing the capacity of high-quality beds. Moreover, utilizing contemporary health technologies ensures that services align with current standards and conditions. Additionally, the city hospitals' reinforced structures resistant to natural disasters contribute to the uninterrupted delivery of healthcare even in times of danger or emergencies.

In healthcare, accessibility is crucial and as important as the quality of the service provided. However, the city hospitals model raises concerns regarding the principle of accessibility. The model does not operate in parallel with existing state hospitals; rather, it centralizes healthcare services in city hospitals by closing other facilities. Along with inadequate transportation infrastructure, this approach negatively impacts accessibility.

Furthermore, the principle of sustainability, a sub-principle of continuity, is particularly significant in PPPs and Yescombe and Farquharson (2018) have drawn attention to their financial sustainability of PPPs. Whiteside (2011) states that PPP hospitals in Canada are not cost-effective due to questionable value for money, lack of transparency, and high transaction costs. An Australian case has demonstrated that PPPs can yield a "net present cost" saving of 2% compared to public financing, albeit without accounting for potential financial crises over extended contract periods (Jefferies et al., 2013). Due to analogous criticism regarding the efficiency of the PFI projects in the United Kingdom (Hodge & Greve, 2007; Roehrich et al., 2014), in 2012, the UK government transitioned to a different model called PF2.

Likewise, the PPP policy in Türkiye has been criticized for putting a strain on the health budget due to high rental fees (Figure 2). The policy carries significant financial risks, especially with guarantees for quantity-based services and payments made to the special purpose company in foreign currency. As depicted in Figure 3, Türkiye’s foreign exchange and inflation rates are highly volatile. The PPP policy becomes questionable because of the assumed risks and the profits gained by the private partner over the extended contract period (Demirag et al., 2020). Consequently, the Ministry of Health abandoned the PPP policy due to escalating costs and instead began using public financing to construct new city hospitals. However, the existing contracts remain in effect.

Figure 2.

City hospitals within the budget of the Ministry of Health (Turkish liras). (Plan & Budget Commission, 2022).

Figure 3.

Inflation and FX rates in Türkiye. (Central Bank of the Republic of Türkiye, 2023).

The principle of variability and adaptation pertains to the modernization of healthcare to meet current health needs and benefits and fulfill service requirements and provide superior health care (Cakir, 2015). In this regard, the city hospitals model represents a positive step in terms of the principle of variability and adaptation, as it offers care at international standards through its designs, structures, technologies, and diverse range of services.

The legislation concerning city hospitals in Türkiye explicitly addresses the maintenance of continuity in health services during the operational phase. According to Paragraph 7 of Article 4 of the Health PPP Law, if the operator fails to fulfill its contractual obligations and health services become unsustainable, the administration will step in and provide the services on behalf and at the contractor’s expense. The conditions under which health services may become unsustainable are clearly defined in Article 57 of the Implementing Regulation, leaving no ambiguity. However, the fact that health technology is not specified among the prerequisites enumerated is a critical flaw in maintaining the continuity principle.

Under Article 4/7 of the Health PPP Law, if a contractor fails to fulfill its obligations, the administration must notify the contractor through a notary public. If the contractor fails to meet its obligations even after receiving such notice, the administration is empowered to initiate negotiations and take necessary measures to complete the work on behalf of the contractor and at their expense. This provision ensures that if the contractor neglects the required technical infrastructure, the administration can involve a third party to address the deficiencies, thereby upholding the principles of variability and continuity.

Equality

The principle of equality in public service signifies that service is offered to everyone under the same conditions and with impartiality. It serves as a fundamental mechanism to establish equality of opportunity within society. Providing services to all individuals on equal terms ensures a minimum level of equality across different segments of society (Yasar, 2014). Consequently, individuals can access essential public services like education, healthcare, and transportation, regardless of inherent disparities such as ethnicity, gender, or social differences, including economic status, educational attainment, or geographic location. Public services are thus regarded as mitigating inequalities in society.

Article 56 of the Constitution stipulates that "everyone has the right to live in a healthy and balanced environment" and outlines the responsibilities of the state in this regard. Regarding public service, it is imperative for the principle of equality and the state’s obligation that all segments of society receive healthcare at an equal level and with equitable opportunities, regardless of their location in urban or rural areas. Consequently, healthcare facilities should be planned and constructed across all country regions to uphold the principle of equality. Regrettably, due to limited financial resources, it is currently only feasible to provide equal healthcare services in certain parts of the country in practice.

However, the city hospitals model represents a significant stride towards achieving equality for citizens who face disparities in accessing quality services due to regional differences between the East and West and the country’s urban and rural areas. Furthermore, since the city hospital model leverages the resources of the private sector rather than relying solely on state resources for investing in infrastructure, it becomes more attainable to deliver equal health care in every region where hospitals are established. But, the provinces of city hospitals gain an advantage over neighboring provinces, leading to intra-regional inequality. In other words, although the city hospital model aims to promote inter-regional equality, it inadvertently creates regional disparities.

Gratuitousness

In French administrative law, gratuitousness is not considered a public service principle. Although neither the doctrine nor the judicial decisions accept that all public services should be provided in Turkish administrative law, gratuitousness is adopted as a principle (Yasar, 2014). The compulsory provision refers to public services gratuitousness or for a nominal fee. It aims to involve the beneficiaries in financing the services and ensure that those facing financial barriers can access them, ensuring their continuity. This principle is closely tied to both the welfare state principle and the principle of accessibility.

The principle of gratuitousness is explicitly recognized in the provision of healthcare by the state. As healthcare is financed through taxes, citizens generally do not incur fees when benefiting from these services. However, there may be certain nominal charges imposed. These practices are primarily intended to prevent moral hazards and misuse of free services (Izci, 2021). Considering that the MoH covers the services provided in city hospitals through its budget, the PPP policy does not create financial inequality, thus preserving the principle of gratuitousness.

Conclusion

Türkiye’s PPP policy has facilitated public hospitals' access to advanced medical equipment and services and improved the quality of care. It also made public health services accessible through new health centers, such as the regional facility concept. However, achieving the desired balance of risk and responsibility in PPP has proven challenging. The state has shouldered significant financial and legal obligations due to high rental costs, foreign exchange-related price fluctuations, and Treasury guarantees.

City hospitals have focused on expanding public bed capacity before carefully assessing the costs to the public sector compared to examples in the UK, Canada, and Australia. At the same time, policymakers in Türkiye implemented 18 projects simultaneously without considering the problems in international examples, which led to managerial and financial bottlenecks for practitioners. Existing contracts cannot be canceled due to high contract termination fees and remain a burden on taxpayers.

Türkiye’s neoliberal journey highlights the importance for policymakers to carefully consider the financial, legal, and managerial advantages and disadvantages when adopting PPP policies in healthcare. Implementing PPPs in healthcare should ideally commence with pilot and small-scale projects, allowing for observing outcomes over the medium term. Otherwise, PPP policies may undermine the principles of public service and increase inequalities.

Footnotes

Declaration of Conflicting Interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Yunus Emre Aydin

Author Biographies

Yunus Emre Aydın is a Ph.D. student at Hacettepe University in the Department of Health Management. He has been actively involved in PPP projects during 2020–2021. Aydın is a lecturer in the Department of First and Emergency Services at Kütahya Health Sciences University. His research area is health policy and law.

Halil Altındag is Associate Professor at Istanbul Medeniyet University Faculty of Law. He received his Ph.D. from the Istanbul University Department of Public Law with the thesis "Re-evaluation of the Expansion of the Legality Block in the Judicial Review of the Administration." His research areas are personal data law and administrative law.

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