Chile’s Healthcare Expansion Lurches Forward

Veering between government and private spending, Chile, much like Brazil and Colombia, is building its healthcare infrastructure in fits and starts.

El Carmen Hospital, pictured here, opened in Santiago, Chile, in 2013 through a public-private partnership.
El Carmen Hospital, which opened in Santiago, Chile, in 2013, was developed as a public-private partnership. Photo courtesy of Lamp Lighting

It took an earthquake to prompt it, but in 2010, Chile embarked on one of the most ambitious healthcare capacity building efforts ever seen in Latin America.

In the aftermath of the 8.8 magnitude quake, there were new calls for refurbishment of existing health facilities as well as development of new construction. Dr. Thomas Leisewitz, manager of strategy and business development for Red de Salud UC Christus, which operates both a 500-bed and 100-bed hospital in Santiago, said that the quake immediately reduced the country's hospital capacity by 10 percent. “After that earthquake, the annual capital spending in healthcare infrastructure and equipment experienced a five-fold increase compared to previous presidential periods,” he said in an email note.

Today, there are some US$5 billion in Chilean hospital construction and refurbishment projects currently in the pipeline, according to Dr. Ignacio Astorga, a health lead specialist with the Inter-American Development Bank in Washington, and who advised the Chilean Health Ministry on hospital development between 2009 and 2014. That’s a significant investment, given that the Chilean government’s total healthcare spending is less than US$11 billion annually. Chile's President Michelle Bachelet has committed national resources to healthcare infrastructure growth, pledging US$4 billion in 2014 to complete the construction of 20 new and renovated hospitals by the time she leaves office in March 2018, with an additional 20 projects under construction and another 20 in the pre-feasibility and design process.

Chile is not alone. Colombia and Brazil, too, have begun following the lead of their more industrialized counterparts in a critical way: spending more on healthcare infrastructure, and doing it with a combination of public monies and public-private partnerships. But the process is complex, thanks to changing political winds, fluctuating commitments of public investments, and innovative models of partnering with organizations outside of country borders for development and management of new facilities.

Public-private partnerships on hospital construction — with government agencies and private firms each managing various aspects of the project — were encouraged in Chile under the administrations of Presidents Sebastián Piñera (2010-2014), Ricardo Lagos (2000-2006) and Bachelet (during her earlier tenure of 2006-2010). Indeed, two relatively recent hospital projects in Santiago — El Carmen Hospital and the La Florida Metropolitan Hospital Clinic — are public-private enterprises. Both opened in 2013.

But during Bachelet's current term, she has pivoted and is now avoiding public-private partnerships. To date, just Hospital Comunitario Cristina Calderón, financed through the National Fund for Regional Development, has opened since Bachelet started her new presidential term in 2014. Leisewitz and Dr. Daniel Capurro, the chief medical information officer for Red de Salud UC Christus and an associate professor at Pontifica Catholic University in Chile, say that Bachelet's preference for government-only construction has slowed down the country's ability to get new or reconstructed hospitals in line. “There has been more hesitation,” Capurro says.

At the same time, private care in Chile is on the rise: while the overall number of hospital beds in Chile dropped 10.6 percent in the 15 years between 1999 and 2014, according to the Organisation for Economic Co-operation and Development, the number of beds in privately-owned facilities has increased by more than a third in the past 10 years. The Sacyr Group, a Spanish company with a large presence in Chile, is finishing up what will become Chile’s largest hospital, in the coastal city of Antofagasta. The contract to build the 671-bed, US$264 million facility was part of a public-private partnership awarded in 2013, during the Pinera administration. Sacyr will manage the non-clinical operations of the hospital after it opens in partnership with the Spanish company Dominion, which in 2015 acquired a 30-percent stake in the project’s construction and operation. The hospital has been designed to withstand earthquakes and other natural disasters such as tsunamis, and to be able to function on its own if necessary.

That’s not the only hospital in Chile getting investment and management aid by a non-Chilean organization. In 2013, Red de Salud — which treats both public- and privately-insured patients at two facilities— began negotiating with Christus Health, a Texas-based not-for-profit hospital chain to assist in managing its operations. In 2014, Christus bought a 40-percent stake in Red de Salud, which was renamed Red de Salud UC Christus. Capurro, the organization’s chief medical information officer, says that the deal brings fresh administrative expertise to the hospital.

“Hospitals in Chile have been traditionally run by doctors, using mostly clinical criteria,” Capurro says. “Only in the past 10 or 15 years have there been people specifically trained in hospital administration and management. But the numbers of people trained in hospital administration is not very large.” Among the first projects being undertaken by the new joint operation is the construction of a large clinic and ambulatory surgical center expected to open in 2018. It will accept both public- and privately-insured patients, and is expected to ease some of the congestion at Red de Salud UC Christus's two hospitals.

Chile’s healthcare spending rose to 8.8 percent of its gross domestic project (GDP) in 2014, up from 7.8 percent in 2012 and 6.2 percent in 2006, according to Clinicas de Chile, the national hospital lobby. This makes it one of the stronger healthcare countries in the region: Latin America's overall spending on healthcare grew from about 3 percent of its GDP on average in the mid-1990s to just over 4 percent as of 2013, according to a recently released report by the Inter-American Development Bank.

This computer-generated image by Safdie Architects shows the Centro Hospitalario Serena del Mar, currently under construction in Cartagena, Colombia.
The Centro Hospitalario Serena del Mar is currently under construction in Cartagena, Colombia. Photo courtesy of Safdie Architects

Other countries in the region also are seeing spurts in development, particularly from the private sector. In Colombia, the number of hospitals nationwide shrank from 1,251 in 2010 to 1,169 in 2015, while the subset of public facilities shrunk from 899 to 817, according to BMI Research, a division of Fitch. While spending on healthcare as a percentage of the GDP has been relatively strong — 7.4 percent in 2014 — little public money is being spent on hospital construction. “In the last five to ten years, most of the investment in hospitals has been in the private sector,” says Jaime Arias Ramirez, president of ACEMI, a trade group representing health insurance companies. While BMI Research declared hospital construction in Colombia “stagnant” in its Q1 2017 Colombia report, there has been some new activity, including the recently completed International Hospital of Colombia in Bucaramanga, and the Centro Hospitalario Serena del Mar under construction in Cartagena, which was designed by renowned architect Moshe Safdie. These projects revolve around specialty as opposed to primary care, which Ramirez notes is more profitable than general medicine. There has been public-private partnership bidding to construct six new and replacement hospitals accounting for 2,000 hospital beds in Bogota, according to the business publication Confidencial Colombia. All this comes as Colombia has made health coverage a national priority: In 1993, the country overhauled its healthcare system, expanding national insurance coverage from less than a quarter of the population then to nearly universal coverage today, with over 97 percent of the population now covered.  

Meanwhile in Brazil, where the company’s National Health System, known as SUS, is the largest public health system in the world, the number of public hospitals increased from 2,109 in 2010 to 2,353 in 2015, according to BMI, but there has been important activity in the private sector, as well — at the higher end. Rede D'Or São Luiz, Brazil's largest private hospital group, operates 32 hospitals throughout the country. Its recently opened Copa Star facility, in Rio de Janeiro, was constructed at a cost of about US$119 million and boasts wood-paneled corridors and rooms where patients can control the drapery and beds using iPads. The U.S. private equity firm Carlyle Group LP bought an 8.3-percent stake in Rede D'Or in 2015 for US$603 million, not long after Brazil’s then-president Dilma Rousseff allowed foreign investment in hospitals.

But the severity of Brazil's current economic downturn has dampened private spending on healthcare in the past year. According to BMI, it dropped by nearly 23 percent in 2015, and was forecast to grow little more than 4 percent in 2016, although more robust low double-digit growth is estimated for 2017. Meanwhile, the number of hospitals in the country has been mostly flat. The number of privately-operated facilities shrunk from 4,689 in 2010 to 4,478 in 2014, although that number rebounded to 4,554 in 2015. The number of public hospitals, while up overall from previous years, dropped from 2,402 in 2014 to 2,353 in 2015.

The recently opened Copa Star, pictured here, is a 5-star hospital facility in Rio de Janeiro's famous Copacabana, and a part of the Rede D'Or hospital group.
The recently opened Copa Star, in Rio de Janeiro's famous Copacabana, is a part of the Rede D'Or hospital chain and boasts wood-paneled corridors and rooms where patients can control the drapery and beds using iPads. Photo from Globo.com

One of the bottom line lessons from hospital development activity is that commitments to healthcare expansion are often easier said than done. After Bachelet began her second stint as Chile’s president and denounced public-private development as being too expensive, her government canceled contracts with the private sector and stopped the award process on planned projects. One cancelled project was a US$390 million plan by Consorcio Hospitales Salud, an investor group led by the Spanish construction company Grupo Ferrovial SA, which would have built the Hospital Sótero del Rio, in Santiago, to replace a hospital damaged by the earthquake. The concession had included a plan for private operation of the hospital for 15 years. That project is now in limbo. And despite Bachelet’s pledge to build 20 new hospitals between 2014 and 2018, only one hospital has been completed so far and only five others are under construction.

One question is whether the country can afford to move more slowly on healthcare infrastructure development. Chile has raised its commitment that patients with specific needs will have access to care by promising what is known as the Regime of Explicit Health Guarantees, or AUGE. It's a list of medical conditions — ranging from cancer to diabetes — and states that patients are guaranteed to see providers near their homes and receive care within specific time frames. According to the Chilean Health Ministry, the AUGE covers about 60 percent of all serious healthcare issues in the country. The government recently upped the number of conditions under the AUGE to 80 from 56, an expansion that it may struggle to meet.

“If you increase the number of conditions being covered, you run into making sure you get access to treatment,” says Thomas Bossert, director of international health systems program at Harvard University, who has extensively studied Chile hospitals. More than three-quarters of Chileans receive care through FONASA, the public health system, according to Clinicas de Chile. Bossert says that while the public healthcare system is legally required to contract with private providers to provide care to AUGE patients, there are not enough resources to do so. Private providers and insurers have come under criticism for collecting premiums for the AUGE but not providing services; according to a government report, the private sector spent only 55 percent of the premiums collected to treat AUGE patients in 2015.

Capurro notes that hospital-building isn’t the only approach needed to improve healthcare in Chile. The country should also focus on managing existing ones better, he says, particularly in terms of introducing new healthcare IT systems and tightening their supply chains. “We just have to stop running the hospitals the way we were 30 years ago,” he says.  

 

Ron Shinkman

Ron Shinkman is a freelance writer based in Los Angeles, California.

 

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