PROJECT INFORMATION DOCUMENT (PID)



PROJECT INFORMATION DOCUMENT (PID)

CONCEPT STAGE

Report No.: AB1721

|Project Name |Health Sector Reform |

|Region |EUROPE AND CENTRAL ASIA |

|Sector |Health (100%) |

|Project ID |P094220 |

|Borrower(s) |GOVERNMENT OF AZERBAIJAN |

|Implementing Agency | |

| |Ministry of Finance |

| |4 Kicik Daniz St. 370014 |

| |Azerbaijan |

| |Fax: (994-12)-936-055 |

| |medis@medis.baku.az |

| |Ministry of Health |

| |Azerbaijan |

|Environment Category |[ ] A [ ] B [] C [ ] FI [ X] TBD (to be determined) |

|Date PID Prepared |June 30, 2005 |

|Estimated Date of Appraisal Authorization | |

|Estimated Date of Board Approval |May 23, 2006 |

1. Key development issues and rationale for Bank involvement

Although adequately endowed in terms of facilities and staff, the healthcare system in Azerbaijan has not been successful in delivering essential health services, nor has it been able to respond to the evolving, needs, preferences and aspirations of the Azeri people. Indeed, the country has very large unmet preventive and curative healthcare needs. The failings of the Azerbaijan health system are reflected in poor health outcomes, as evidenced by a dramatic six year decline in Life Expectancy at birth (LE0), between 1990 and 2002, from an average of 70.9 to 65.1 years. This represents the highest downtrend in the world, excluding countries of Sub-Saharan Africa which lost up to three times as many years during the same period due to HIV/AIDS. LE0 in Azerbaijan is one of the lowest in the region and full 13 years lower than the EU-15 average.

Despite limited reliability and validity of data, and limited comparability of pre- and post-independence administrative data, the reasons for this decline are primarily rooted in the high infant mortality (81/1000 live births), under-5 mortality (92/1000 live births) and maternal mortality (94/100,000 live births) (numbers according to survey data). Infant and under-5 mortality figures are 16 times higher than the EU-15 average while maternal mortality ratio is 10 times the EU-15 average. The main causes of mortality and morbidity among infants and children are respiratory diseases and dehydration caused by diarrhea while causes of maternal deaths include acute post-partum hemorrhage and post-abortion complications, exacerbated by a high prevalence of anemia in pregnant women. These finding are all the more disconcerting when one considers that there is one maternal and child health (MCH) clinic in Azerbaijan for every 900 children below age five and for every 2,200 women of childbearing age (15–44).

However, the decline in LE0 is also due to the persisting high adult mortality (85%) from non-communicable diseases, primarily from circulatory diseases. In fact, Azerbaijan is plagued both by health challenges typical of low-income countries, such as predominantly maternal and child health issues and infectious diseases, as well as by issues faced by most of its CIS neighbors, such as high adult mortality due to NCDs, accidents, injuries and poisoning as well as the relatively recent re-emergence of sexually transmitted infections (STIs), tuberculosis (TB) and HIV/AIDS which also pose a considerable threat to the health of the population. As a result, the probability of dying between ages 15 and 60 is 23.1 percent for Azeri males and 12.2 percent for females, twice as high for both sexes than in EU-15 countries.

It is important to point out that patterns of, and trends, in mortality and morbidity in Azerbaijan are in fact entrenched in several determinants of health which are responsible for the deteriorating health outcomes in Azerbaijan. Unhealthy lifestyle choices are perhaps the most powerful of these determinants, and include high prevalence of tobacco use, alcohol abuse, a high-fat diet, lack of physical activity, a relatively low intake of fruits and vegetables, and drug addiction. The consequences of some of these risks include high blood pressure, high cholesterol, and diabetes, all of which contribute to the high prevalence of circulatory diseases. Lifestyle determinants are compounded by socioeconomic factors, including urban/rural and poor/rich disparities, as well as by environmental factors (e.g., inadequate water quality). For example, survey data suggests that IMR and U5MR are three times higher in poor households and are 50% higher in rural areas. The same is true for prevalence of diarrhea among children from poor households, with 60% more children suffering from diarrhea in rural than urban areas. This is significant since dehydration caused by diarrhea is a major cause of death among children in Azerbaijan. This correlates with the fact that only 55% of the population in poor and rural areas has access to safe drinking water.

While these determinants of health account for a major part of why health outcomes are poor, it is self-evident that the unresponsive and ill-equipped healthcare system is a significant contributing factor. There is a general consensus that the healthcare system in Azerbaijan is largely unreformed and continues to function according to the old Soviet centralized norms, both in terms of financing and allocation of available human and physical resources. Despite the fact that the State Program for Poverty Reduction and Economic Development (SPPRED) recommends realigning the healthcare system toward outpatient care, the system continues to emphasize curative care (hospitals and specialized services) which only produces modest impact on the major health risks and conditions of the population. Some limited attempts have been made to enhance the primary health care level in Azerbaijan but this has not gone beyond a few pilot initiatives spearheaded by the donor community. In addition, the quality of care remains generally poor, as evidenced in part by low utilization levels, with only half of the population utilizing health services when experiencing an illness. The main reasons are collapsing infrastructure, outdated or missing equipment, and inadequate mix and distribution of skilled and competent staff, particularly with regard to providing comprehensive and continuous care with an array of services, mainly preventive in nature, thereby limiting the high rate of referrals to district and Republic hospitals.

The health system also remains severely under-funded and its resources are poorly pooled and inequitably allocated. Despite recent attempts to increase the health budget, public resources invested in health represent approximately 20 percent of total health expenditures, with the rest 80 percent financed through out-of-pocket private expenditures. With government health spending being roughly 0.9 percent of the GDP for 2004 and a mandate to provide practically all health care services for free, there is a general agreement that the health care system is in need of additional public funds. In addition, the current allocation formula is not linked to healthcare needs in the country, and does not take into consideration demographic, epidemiological, socioeconomic or other factors. Sixty five percent of public funds goes to inpatient care and is allocated according to the number of existing beds in a given facility. The remainder goes to outpatient care. Generally, public funds finance mainly salaries and utilities (fixed costs), with a small percentage used for drugs and supplies needed in the provision of health care services. The rest comes from out-of-pocket payments which clearly limit access to routine and urgent care for many in Azerbaijan. According to the 2002 Household Budget Survey, one in three households declared that they could not use health services when needed because such services were too expensive. While decreased utilization of healthcare services due to high out-of-pocket payments may not, in the short term, significantly impact levels of morbidity and mortality resulting from non-communicable diseases, the impact may grow exponentially over time, especially for the poor.

The recent World Bank Health Sector Review Note comprehensively examined issues mentioned above and presented a set of options for reforming the system. The proposed reform is an ambitious undertaking and the challenge for the Government of Azerbaijan is to design and implement effective and affordable public health policies and programs in order to improve current health outcomes of its population. The single most important element in this reform is for the MOH to assume greater responsibility for health policy making which would entail both strengthening MOH capacity and reorganizing its functional and administrative structure.

Proposed reforms and Government commitment. The proposed project would help the Government of Azerbaijan to initiate a gradual but a comprehensive reform of the healthcare system in Azerbaijan. The sequencing of reforms has been proposed and discussed with key members of the Government during the presentation of the above-mentioned Health Sector Review Note. Essentially, Phase 1 would entail defining healthcare priorities and improving day-to-day functioning of the system through the establishment of an essential package of services and building necessary mechanisms to deliver this package effectively. This phase would focus almost entirely on primary healthcare and would be followed by Phase 2 which would aim to rationalize the existing inpatient and outpatient healthcare network with a view to improve its allocative and technical efficiency. Phase 3 would be a final phase and could be viewed as the long-term goal of the reform where the existing institutional framework is restructured, with the MOH becoming mainly a policy-making, planning and regulatory agency without direct involvement in the financing or provision of curative services.

The Government is generally committed to reforming its healthcare system and further detailed discussions regarding the scope of the reforms are expected to take place with Government counterparts during the preparation of this proposed project. As a sign of its commitment, the Government has requested the Bank to include the proposed project into the forthcoming Country Assistance Strategy (CAS) in a letter dated January 5, 2005. The project would follow and build on support provided by the Health Reform LIL and is designed to complement the upcoming Bank supported PRSC.

Since its official request for Bank support in this sector, the Government has appointed the Deputy Minister of Health, as the Bank’s main counterpart for project preparation. He has the overall responsibility for oversight, management and coordination of all project preparation activities. In addition, an Inter-Agency Working Group (IAWG) has been established and is responsible for preparing the project. The Bank has received the official list of members of the IAWG and has already conducted extensive discussions with the IAWG on the design of the project as well as on project processing steps. The IAWG has already completed its work on the preliminary project concept and implementation plan. The official receipt of this draft concept is expected shortly. Lastly, the MOH is in the process of setting up project preparation and implementation arrangements in a form of a Project Coordination Unit which will be tasked to carry out overall coordination, management, disbursement and fiduciary functions of project preparation and implementation.

While these initial steps have been taken, it remains to be seen whether the current Minister of Health will follow through with project preparation along the lines that have been agreed upon up to this point.

2. Proposed objective(s)

The development objective of the proposed Health Sector Reform Project would be to improve the health status of the population by ensuring equitable access to, quality and use of essential health services in a fiscally responsible and financially sustainable manner.

3. Preliminary description

The proposed project would be a second-generation project, building on experience and lessons learned under the Bank-supported Health Reform LIL which is closing in September 2005. The Health Reform LIL was a pilot of US$5 million and supported relatively minor investments in primary health in Azerbaijan given its size, including minor civil works, some basic medical and training equipment, pharmaceuticals as well as the development and delivery of 28 basic training modules in primary health. This project is due to close in September 2005 and one of its lessons for the proposed follow-on operation is that investments in primary healthcare need to be more extensive in order to have the necessary impact on health outcomes and that additional capacity building needs to be broader and should focus, among other things, on clinical management of non-communicable diseases, on health promotion and primary disease prevention.

The proposed project would be an investment operation financed by an IDA credit (US$50 million), with an additional 10% contribution by the Government of Azerbaijan, for a total project cost of US$55 million. The project would be implemented over a six-year period and would have the following five components:

Component 1 – Building MOH Capacity for Stewardship (estimated total US$2.5 million). This component would assist the MOH to build its capacity in policy making, planning, and regulation by financing consultancy services, training, some office and computer equipment. To this end, support would be provided to: (i) establish a Health Policy and Planning Unit in the MOH to strengthen MOH capacity with regards to health and healthcare policy design and development; (ii) review and reorganize MOH functional and administrative structures; (iii) assist in the drafting of necessary legal and regulatory documents; (iv) design and carry out a public awareness campaign; (v) strengthen MOH role in designing and implementing health promotion and disease prevention programs by establishing a Health Promotion Unit in the MOH for program design and by strengthening the SANEPID network for disease surveillance and program implementation; (vi) support the development of an accreditation and licensing system for both public and private health facilities and set up a mechanism for quality control and assurance of healthcare services; and (vii) support the MOH Pharmaceuticals and Medical Devices Unit to develop and monitor effective management of national drug policy, including the institutionalization of an essential drug list, standard treatment protocols, as well as the development of the necessary legislative and regulatory framework.

Component 2 –Improving Delivery of Healthcare Services (estimated total US$49 million). This component would aim to improve the appropriateness, quality and efficiency of health care services in select districts at the primary care level and in five district hospitals by supporting development of staff skills, introduction of new planning and management methods, as well as by essential upgrades of facilities through provision of goods, civil works, consultancy services and training. This component would also improve coordination and strengthen system hierarchy between the primary and secondary levels of health care. This would involve an improved referral system within each district and with the national level, with an aim to reduce the number of referrals to Baku. Activities to be supported under this component would begin once a national mapping exercise is carried out that would identify key elements in the provision of care, including patterns of utilization, catchment areas, etc. Following the mapping exercise, a plan to rationalize health facilities would be developed and adopted, based on which the project would finance investments in the particular facilities. This component would also finance baseline, mid-term and final evaluations to assess the impact of investments under this component.

Component 3 – Ensuring Sustainable Health Financing and Resource Allocation (estimated total US$1 million). This component would finance consultancy services to: (i) carry out a feasibility study to ascertain whether a mandatory health insurance scheme is the right mechanism for Azerbaijan, and (ii) to define a set of health services to be provided for free as well as reimbursement rates for each type of service. In addition, a new formula for resource allocation would be developed and per capita allocations would also be adjusted, if possible, for various indicators representing health care resource needs. A pilot of the population-based formula would be implemented in the five districts which received support under the Health Reform (LIL).

Component 4: Human Resources Development – (estimated total US$2 million). This component would aim to address the long term human resource needs of the health sector and would finance consultancy services, training, goods and minor civil works. Specifically, this component would help to develop a labor adjustment strategy for the health sector to identify the human resources needs, in terms of competence mix and equitable distribution, and to propose solutions regarding which areas of specialty would need to be emphasized and/or curtailed. This strategy would also review early retirement and compensation provisions. In addition, this component would support a review of the current medical reform initiatives with regard to the curriculum reform and the regulations pertaining to general practice and specialty training. Lastly, this component would support retraining for health professionals as well as developing a new licensing system for health professionals; in addition, a review and amendment of the regulatory and legal framework for strengthening the Physicians’ Association would be undertaken to better respond to changing needs and preferences of the medical community.

Component 5 – Project management, monitoring and evaluation (estimated total US$1.5 million). This component would ensure effective administration and implementation of the project by supporting the operation of a Project Implementation Unit (PIU) which would be responsible for all implementation activities on behalf of the MOH, the main executing agency for the project. The PIU staff would be responsible for procurement, disbursement, financial management, coordination of training events, ensuring coordination for project activities with relevant stakeholders, and for ensuring effective monitoring and evaluation of the outcomes of the project. An Inter-Agency Working Group (IAWG) would provide oversight for the project and would meet regularly to review and monitoring implementation progress.

4. Safeguard policies that might apply

This project will involve construction and/or renovation of hospitals and health centers on government-owned land.

5. Tentative financing

|Source: |($m.) |

|BORROWER/RECIPIENT |5 |

|INTERNATIONAL DEVELOPMENT ASSOCIATION |50 |

| Total |55 |

6. Contact point

Contact: Enis Baris

Title: Sr Public Health Spec.

Tel: (202) 458-4474

Fax: (202) 614-0947

Email: ebaris@

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