OFFICIAL DOCUMENTS THE WORLD BANK IBRD* IDA WORLD BANKGROUP ARUP BANERJI Regional Director for Operations European Union Countries Europe and Central Asia June 27, 2018 His Excellency Mr. Zdravko Mari6 Minister of Finance Ministry of Finance Katan6i6eva 5 10000 Zagreb Croatia Subject: Republic of Croatia: Loan No. 8365-HR Improving Quality and Efficiency of Health Services Program Amendment Letter Dear Mr. Minister: We refer to the Loan Agreement for the above-referenced Program between the International Bank for Reconstruction and Development (the Bank) and the Republic of Croatia (the Borrower), dated June 10, 2014 ("Loan Agreement"). We also refer to your letter dated March 19, 2018, received by the Bank on March 27, 2018, requesting certain amendments to the Loan Agreement. I am pleased to inform you that, after careful consideration, the Bank has acceded to the said request. In accordance with the provisions of Section 7.01. of the General Conditions applicable to the Loan Agreement, the Bank hereby cancels, as of March 27, 2018, the amount of EUR 10,957,500 allocated to the DLIs set forth in the table in Section IV.A.2 of Schedule 2 to the Loan Agreement as follows: - An amount equal to EUR 7,500,000 from DLI #3; and - An amount equal to EUR 3,457,500 from DLI#8. The table set forth in Section IV.A.2. of Schedule 2 to the Loan Agreement has been revised accordingly and the revised version is provided under item no. 2 of this Amendment Letter. In addition, the Loan Agreement shall be amended as follows: 1. Part 3(a) of Schedule I to the Loan Agreement is hereby amended to read as follows: "(a) Development of centralized procurement of medical consumables, drugs and devices covering the 10 hospitals that are founded by the Borrower." Avenue Marnix 17 * B-1000 Brussels * BELGIUM Tel: +32.2.504.0994 HE Mr. Zdravko Marid -2- June 27, 2018 2. The table under Section IV.A.2 of Schedule 2 to the Loan Agreement is hereby amended to read as follows: "Category DLR Baseline Disbursement Amount of the Loan (including Disbursement Linked (as applicable) Linked Result Allocated Indicator as applicable) (as applicable) (expressed in EUR) (1) DLI# I: Total number of hospital beds in 15,930 DLR#1.1: DLR#1.1: Rationalized Hospitals classified as 15,000 EUR3,750,000 Acute Care Beds DLR#1.2: 12,800 DLR#1.2: EUR3,750,000/ (15,000- 12,800) X actual number of Acute Care Beds reduced from the 15,000 achieved under DLR 1.1, up to a maximum amount not to exceed EUR3.750,000 (2) DLI#2: Number of Hospital Reshaping 0 DLR#2: First and DLR#2: Scheme Projects implemented Second Hospital EUR7,500,000 Reshaping Scheme Projects (3) DLI#3: Percentage of Rationalized Hospitals without Arrears incurred during the preceding calendar year. DISCONTINUED (4) DLI#4: Percentage of all surgeries 0% DLR#4. 1: DLR#4. 1: included in the Elective Surgeries 30% EUR3,750,000 List performed as outpatient surgeries in the preceding six DLR#4.2: DLR#4.2: months 60% EUR 3,750,000 /30 X additional percentage points achieved after the 30% achieved under DLR 4.1 up to a maximum amount not to exceed EUR 3,750,000. (5) DLI#5: Percentage of Best-Performing 0% DLR#5: DLR#5: Rationalized Hospitals which are 40% EUR7,500,000 publicly disclosed (including results) based on the technical audit in the preceding twelve (12) months (6) DLI#6: Foundations are in place for 0% accelerated implementation of hospital accreditation, including sub-DLIs 6.1 and 6.2: HE Mr. Zdravko Mari6 -3- June 27, 2018 "Category DLR Baseline Disbursement Amount of the Loan (including Disbursement Linked (as applicable) Linked Result Allocated Indicator as applicable) (as applicable) (expressed in EUR) Percentage of acute hospitals meeting mandatory quality DLR#6. 1: DLR#6. 1: standards, as defined in the 80% EUR3,750,000 Ordinance of Quality Standards and their Implementation from 2011, confirmed through a proxy- accreditation process Ordinance approving accreditation standards and procedure issued DLR#6.2: DLR#6.2: Ordinance issued EUR3,750,000 (7) DLI#7: Percentage of Identified Doctors 20% DLR#7.1: 75% DLR#7.1: with whom corrective course of EUR3,750,000 action has been discussed on a DLR#7.2: 90% person-to-person basis in the DLR#7.2: preceding six (6) months. EUR3,750,000/ 15 X additional percentage points achieved after the 75% achieved under DLR 7.1, up to a maximum amount not to exceed EUR3,750,000 (8) DLI#8: Percentage of total public spending 0% DLR#8: DLR#8: per fiscal year on medical 32.34% EUR4,042,500 consumables, drugs, and devices for hospital (inpatient and outpatient) services made through centralized procurement/ framework contracts and disclosed on the MoH website. (9) DLR#9: Percentage of primary healthcare 0% DLR#9.1: 30% DLR#9.1: doctors in the Republic of Croatia EUR3,750,000 working in Group Practices DLR#9.2: 50% DLR#9.2: EUR3,750,000/ 20 X additional percentage points achieved after the 30% achieved under DLR 9.1 up to a maximum amount not to exceed EUR 3,750,000. (10) DLR#10: Percentage of hospitals with 0% DLR# 10.1: DLR#10.1: surgery wards that have 30% EUR3,750,000 established quality-and safety- HE Mr. Zdravko Maric -4- June 27, 2018 "Category DLR Baseline Disbursement Amount of the Loan (including Disbursement Linked (as applicable) Linked Result Allocated Indicator as applicable) (as applicable) (expressed in EUR) related sentinel surveillance DLR#10.2: DLR#10.2: schemes that are reporting the rates 60% EUR3,750,000/ 30 X of Specific Events. additional percentage points achieved after the 30% achieved under DLR 10.1 up to a maximum amount not to exceed EUR 3,750,000. Amount cancelled as of March 27, - - 10,957,500 2018 TOTAL AMOUNT 75,000,000 3. The Closing Date in section IV.B.4 of Schedule 2 of the Loan Agreement is modified to read October 31, 2019. 4. The definition of "Arrears" in item no. 6 of the Appendix to the Loan Agreement is hereby deleted and the remaining definitions as renumbered accordingly. Please confirm your agreement to the foregoing amendment by signing and dating the confirmation on the enclosed copy of this Amendment Letter and returning it to us. This amendment will come into force and effect as of the date of your countersignature, upon receipt by the World bank of one countersigned original of this amendment letter. Sincerely, INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT -nerji Regionkal r for Operations Eur ean Union Countries CONFIRMED AND AGREED: RFtAEB C FR T> REPUBLIC OF CROATIA 2 By: 4VV,`K WY-1f(G Title: cej~s'~ fit- -o Date j, 2-1 Svo ~ HE Mr. Zdravko Mari6 -5- June 27, 2018 cc: Mr. Tomislav Dulibic, State Secretary, Ministry of Health Mr. Zeljko Plazonic, State Secretary, Ministry of Health Mr. Zdravko Zrinusic, State Secretary, Ministry of Finance Ms. Silvija Belajec, Head of Sector, Ministry of Finance Mr. Mate Car, Assistant Minister, Ministry of Health Mr. Viii Beros, Assistant Minister, Ministry of Health Mr. Gordan Zanic, Assistant Minister, Ministry of Health Ms. Ruzica Palic Kramaric, Assistant Minister, Ministry of Health Mr. Lucian Vukelic, Director General, Croatian Institute of Health Insurance Ms. Nina Bonde Mijatovic, Acting Director, Agency for Quality and Accreditation in Health Care Ms. Antoaneta Bilic, Senior Advisor, Ministry of Health Ms. Silvija Belajec, Head of Sector, Ministry of Finance Mr. Frank Heemskerk, Executive Director, World Bank