The World Bank Serving People, Improving Health Project (P144893) REPORT NO.: RES60386 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF THE SERVING PEOPLE, IMPROVING HEALTH PROJECT APPROVED ON MARCH 4, 2015 TO UKRAINE HEALTH, NUTRITION & POPULATION EUROPE AND CENTRAL ASIA Regional Vice President: Antonella Bassani Country Director: Arup Banerji Regional Director: Michal J. Rutkowski Practice Manager/Manager: Rekha Menon Task Team Leader(s): Elvira Anadolu The World Bank Serving People, Improving Health Project (P144893) ABBREVIATIONS AND ACRONYMS AF Additional Financing COVID-19 An infectious disease caused by the SARS-CoV-2 virus CVD Cardiovascular Disease DLI Disbursement-linked indicator DLR Disbursement-linked result EEP Eligible Expenditures Program FM Financial management FY Fiscal Year MoH Ministry of Health NHSU National Health Service of Ukraine PDO Project Development Objective PIU Project Implementation Unit PMG Program of Medical Guarantees The World Bank Serving People, Improving Health Project (P144893) BASIC DATA Product Information Project ID Financing Instrument P144893 Investment Project Financing Original EA Category Current EA Category Partial Assessment (B) Partial Assessment (B) Approval Date Current Closing Date 04-Mar-2015 30-Jun-2024 Organizations Borrower Responsible Agency Government of Ukraine Project Development Objective (PDO) Original PDO The proposed "Serving People, Improving Health" Project seeks to improve the quality of health services in selected Oblasts, with special focus on primary and secondary prevention of cardiovascular diseases and cancer, and to enhance efficiency of the healthcare system. Current PDO The objectives of the Project are to: (i) improve efficiency and quality of health services, particularly for non- communicable diseases, in line with the health sector reforms; and (ii) prevent, detect and respond to the threat posed by COVID-19. OPS_TABLE_PDO_CURRENTPDO Summary Status of Financing (US$, Millions) Net Ln/Cr/Tf Approval Signing Effectiveness Closing Commitment Disbursed Undisbursed IBRD-91100 27-Apr-2020 15-May-2020 28-May-2020 30-Jun-2024 135.00 131.84 3.16 IBRD-84750 04-Mar-2015 19-Mar-2015 15-Jun-2015 31-Mar-2024 214.73 211.45 3.28 The World Bank Serving People, Improving Health Project (P144893) Policy Waiver(s) Does this restructuring trigger the need for any policy waiver(s)? No I. PROJECT STATUS AND RATIONALE FOR RESTRUCTURING A. Project Status 1. The Serving People, Improving Health Project was approved in March 2015 for an amount of US$214.7 million. The Project has been restructured five times and has received one additional financing (AF), in the amount of US$135 million, increasing the total financing amount to US$349.7 million. The current Project Development Objective (PDO) is to: (i) improve efficiency and quality of health services, particularly for non-communicable diseases, in line with the health sector reforms; and (ii) prevent, detect and respond to the threat posed by COVID-19. 2. The first restructuring (March 2019) added a results-based financing component and disbursement-linked indicators (DLIs). A US$135 million AF was approved to address the country’s health reform priorities and investment needs, as well as to respond to the COVID-19 pandemic (April 2020) and extended the closing date of the Project (but not the closing date of the original loan) by 24 months.1 The second restructuring (April 2020) was processed concurrently with the AF and extended the closing date of the original loan (IBRD-84750) by 18 months2 to allow additional time to complete the Vinnytsia subproject, reallocated funds to COVID-19-related procurements, and added DLIs to finance expenditures of designated facilities engaged in the COVID-19 response. The third restructuring (September 2021) extended the closing date of the original loan (IBRD-84750) by six months3 to allow sufficient time for the completion of activities that were delayed due to the COVID-19 pandemic, namely: (i) completion of the construction of the 144-bed Vinnytsia Cardiac Hospital; (ii) procurement of equipment for the Vinnytsia Cardiac Hospital; and (iii) initiation and completion of new procurement of COVID-19 antigen tests. The fourth restructuring (June 2022) extended the closing date of the original loan (IBRD-84750) by 18 months.4 The fifth restructuring (July 2023) reallocated funds across DLIs and from uncommitted funds to support activities that improve service delivery at the local level. The sixth restructuring (March 2024) extended the AF loan (IBRD-91100) by three months5 to enable the completion of the proposed new activity and full disbursement of the AF loan. 3. The PDO remains relevant and is on track to be achieved by the closing date. Progress toward achievement of the PDO has been rated Satisfactory since March 2019. Three of the four PDO-level indicators have been achieved: PDO indicator 1 (number of hospitals reprofiled or merged); PDO indicator 3 (improved quality management (prevention, early diagnosis, and treatment) of cardiovascular diseases (CVDs) at primary and secondary care); and PDO indicator 4 (number of hospitals COVID-19 cases treated). PDO indicator 2 (average in-patient length of stay in hospitals) showed early progress, but was subsequently impacted by Russia’s invasion and the increase in complex treatment cases requiring a longer duration of hospitalization and will, therefore, only be partially achieved. Overall Implementation Progress has consistently been rated Moderately Satisfactory or higher since Project approval. Of the ten intermediate 1 From March 31, 2022 to March 31, 2024. 2 From September 30, 2020 to March 31, 2022. 3 From March 31, 2022 to September 30, 2022. 4 From September 30, 2022 to March 31, 2024. 5 From March 31, 2024 to June 30, 2024. The World Bank Serving People, Improving Health Project (P144893) results indicators, nine have been achieved. The remaining intermediate results indicator (share of outpatient-based procedures and day surgeries, which is also DLI 5), will only be partially achieved by the closing date due to the increase in complex cases due to Russia’s invasion. In addition, of the eight DLIs, seven have been fully achieved and one has been partially achieved (DLI 5: increased percentage of outpatient-based procedures and day surgeries that have been undertaken by health care providers contracted by the National Health Service of Ukraine (NHSU)). 4. Component 1: Improving Service Delivery at the Local Level. Seven of the eight subprojects have been successfully completed, including new construction and rehabilitation of primary care facilities, equipment of outpatient health facilities and select hospitals, and improvement of indicators for the management of non-communicable diseases. In addition, the activities under the subproject in the Vinnytsia region, including the construction of the 144-bed Vinnytsia Cardiac Hospital, have been completed, however, Vinnytsya City Administration along with the Ministry of Health (MoH) is awaiting receipt (expected by the end of June 2024) of the completion certificate confirming that all construction works have been completed to the agreed specifications. In this context, all Component 1 activities are on track to be completed by the current closing date. Disbursement will be made upon receipt of the completion certificate, and any unused funds from the original loan (IBRD-84750) will be cancelled upon closure of the loan account after the grace period. 5. Component 2: Supporting Selected Priority Areas of Health Reform. This component finances US$50 million for the Eligible Expenditures Program (EEP) across five reform-oriented DLIs. Four of these DLIs have been achieved (DLIs 1, 2, 3, 4), while the fifth (DLI 5) has been partially achieved. As noted above, progress towards DLI 5 (share of outpatient- based procedures and day surgeries) was initially progressing well,6 but was negatively impacted by Russia’s invasion and the increase in complex cases requiring longer duration of hospitalization. In this context, the MoH completed a detailed analysis of outpatient-based day surgeries to calculate the baseline and achievement, excluding complex cases due to traumas related to Russia’s invasion. This analysis showed that while outpatient-based procedures and day surgeries (excluding complex cases) reached 49.7 percent in 2023, this represented just a 20 percent increase over the revised baseline (excluding complex cases), and, therefore, was not sufficient to reach the 30 percent target required to disburse against disbursement-linked result (DLR) 5.3. As such, the final disbursement-linked result under DLI 5 (US$3 million) will not be achieved by the closing date. In this context, a combined total of US$47 million has been disbursed against the five DLIs. 6. Financial Management (FM). The FM rating remains Moderately Satisfactory, mainly due to the notable delay in submission of audit reports for the fiscal year (FY) 2022 and certain issues raised by the auditors. Project FM risk remains Substantial. Qualified FM staff are available in the project implementation unit (PIU) and operate near normal despite the overall situation in Ukraine, including relevant internal controls and systems access. Statement of Expenditures reporting is done without delays, including timely countersigning of disbursement documents by MoH and Ministry of Finance officials, which is an improvement compared to previous years. Project allocation in the FY2024 state budget is sufficient and adequate for the expected project disbursements. Project quarterly interim financial reports for 2023 were submitted on time and all were acceptable. The Project is currently in full compliance with the reporting and audit requirements, and there are no overdue audits. The final audit period will cover the project expenditures through June 30, 2024. 7. Commitments and disbursements. US$343.29 million has been disbursed, representing (98.16 percent of the total project financing across the original and AF loans. The original US$214.73 million loan (IBRD-84750) is 98.4 percent 6The two first target results for DLR 5.1 and 5.2 (10% and 20% more than the approved baseline) have already been achieved. The baseline for DLI 5 was identified for 2021 at 39.8%. The MoH reported that during 2022 the share of outpatient-based procedures and day surgeries increased by 27%. Achievement of DLRs 5.1 and 5.2 were confirmed on April 28, 2023 and US$6 million was subsequently disbursed. The World Bank Serving People, Improving Health Project (P144893) disbursed, while the US$135 million AF loan (IBRD-91100) is 97.66 percent disbursed. The total balance of undisbursed funds as of May 29, 2024, is US$6.44 million. As noted above, of this, up to US$3 million under the original loan (IBRD- 84750) may be disbursed during the grace period depending on final disbursements associated with completion of the subproject in the Vinnytsia region, and any unused funds from original loan (IBRD-84750) may be cancelled upon closure of the loan account. In addition, approximately US$3 million under the AF loan (IBRD-91100) are proposed for reallocation, as outlined below. Rationale for Restructuring 8. Given changes in service utilization due to Russia’s ongoing invasion, the Ministry of Finance requested a Project restructuring on June 4, 2024, to drop DLR 5.3 and reallocate the associated funds to a new DLI. As noted above, DLR 5.3 will not be achieved given the increase in complex cases due to Russia’s invasion. In order to fully utilize loan proceeds to support achievement of the PDO in the context of the substantial demands in Ukraine’s health sector, a new DLI is proposed, as follows: DLI 9 – A specialized healthcare institution of national level has been contracted by NHSU and started performing services under the Program of Medical Guarantees (PMG) (US$3 million). Transition of national-level facilities from line-item budgeting to output-based payments through contracting with the NHSU for provision of health services under the PMG is a process that will be phased. The Project will support this transition through DLI 9. The verification process will be conducted by the World Bank task team and will consist of several steps, including: (i) verification that the facility is recognized at the national level (included in the Resolution of the Cabinet of Ministers of Ukraine dated May 16, 2011, No. 501, https://zakon.rada.gov.ua/laws/show/501-2011-п#Text); (ii) review of the MoH report on the financing methods for the facility before and after 2024; and (iii) review of NHSU data on contracts concluded within the PMG before and after 2024. 9. The proposed new DLI (DLI 9) supports achievement of the PDO, is aligned with Component 2 activites, is a logical continuation of previous DLIs, and supports Ukraine’s long-term goals to improve quality and access to services and improve financial protection.7 By contracting specialized healthcare institutions at the national level under the PMG, the Project will ensure better quality of and access to services for patients, which directly contributes to achieving the PDO. Furthermore, in the context of Ukraine’s health sector reform agenda, DLI 9 supports the transition to the next phase of Ukraine’s health sector reforms, particularly the hospital network reform process. DLI 9 builds on the progress to date in hospital reform/rationalization by contracting national-level facilities and bringing them under the same rules and conditions of work as other health facilities, thereby ensuring a consistent and standardized approach to healthcare delivery. These national-level facilities, once transformed into state nonprofit enterprises, will be better equipped to provide necessary health services to patients under the PMG, allowing patients to receive high-level medical services at tertiary-level facilities without bearing the costs of the services. Moreover, the facilities will be able to have financial autonomy, enhance the efficiency and effectiveness of provided services, ultimately leading to improved patient outcomes. II. DESCRIPTION 7 The OF PROPOSED Government launched CHANGES a comprehensive health reform in November 2016 aimed at modernizing the obsolete and inefficient health system to achieve better health outcomes. Implementation commenced in December 2017, following the adoption of the Law on Health Financing Guarantees. The NHSU was established in 2018. The first phase of the reform began in July 2018 and focused on transfomriation of primary health care. The second phase of the reform began in April 2020 and focuses on the hospital sector, including optimization of the hospital network, modernization of priority hospitals, definition of the benefits package, establishing systems for quality monitoring, and introducing output-based payment methods. As of April 2024, 2,128 community-based healthcare facilities have concluded contracts with the NHSU for the provision of health services under the PMG. However, several national-level facilities remain in the old system (input-based financing), limiting patient access, excess stay in the hospitals, etc. Therefore, the MoH has initiated the continuation of health reforms by engaging national-level facilities to be part of the NHSU-contracted facilities network. The Project plays an important role in modernizing health systems in eight oblasts by providing direct support to the reform priorities through the DLIs. Support to reorganization of the hospitals is the focus of Component 2 activities. The main implementing agent for Component 2 is the NHSU, which gradually strengthens its capacity as a strategic purchasing agency. The World Bank Serving People, Improving Health Project (P144893) 10. Changes to the Results Framework and Eligible Expenditures Program (EEP) under Component 2. The changes will be made to DLIs, as detailed below.  DROP: DLR 5.3 - Increased percentage of outpatient-based procedures and day surgeries, from a Validated Baseline, that have been undertaken by health care providers contracted by the NHSU. Target: 30% (US$3 million). This DLR will be dropped and the associated US$3 million will be reallocated to (new) DLI 9.  ADD: DLI 9 – A specialized healthcare institution of national level has been contracted by NHSU and started performing services under the Program of Medical Guarantees. Baseline: 0; Target: 1 (US$3 million). 11. Project Operations Manual. The Project Operations Manual will be updated to detail the financial management arrangements, including reporting, annual auditing, and flow of funds for the EEP component, in a manner acceptable to the Bank, no later than one month after the Effective Date of the Amendment to the Loan Agreement. III. SUMMARY OF CHANGES Changed Not Changed Results Framework ✔ Implementing Agency ✔ DDO Status ✔ Project's Development Objectives ✔ PBCs ✔ Components and Cost ✔ Loan Closing Date(s) ✔ Cancellations Proposed ✔ Reallocation between Disbursement Categories ✔ Disbursements Arrangements ✔ Disbursement Estimates ✔ Overall Risk Rating ✔ Safeguard Policies Triggered ✔ EA category ✔ Legal Covenants ✔ Institutional Arrangements ✔ Financial Management ✔ Procurement ✔ The World Bank Serving People, Improving Health Project (P144893) Implementation Schedule ✔ Other Change(s) ✔ Economic and Financial Analysis ✔ Technical Analysis ✔ Social Analysis ✔ Environmental Analysis ✔ IV. DETAILED CHANGE(S) . The World Bank Serving People, Improving Health Project (P144893) . Results framework COUNTRY: Ukraine Serving People, Improving Health Project Project Development Objectives(s) The objectives of the Project are to: (i) improve efficiency and quality of health services, particularly for non-communicable diseases, in line with the health sector reforms; and (ii) prevent, detect and respond to the threat posed by COVID-19. Project Development Objective Indicators by Objectives/ Outcomes RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Improved efficiency of health services PDO Indicator 1: Number of hospitals reprofiled or 0.00 20.00 40.00 60.00 100.00 merged (Number) PDO Indicator 2: Average in- patient length of stay in 11.70 11.60 11.50 11.00 10.50 9.50 8.00 hospitals (Days) Enhanced efficiency of the health care system PDO Indicator 3: Improved quality management (prevention, early diagnosis and treatment) of CVDs at 5.80 5.70 5.40 5.20 5.00 4.80 4.00 primary and secondary care measured as: a) reduction of hypertension-related hospitalization (Number) The World Bank Serving People, Improving Health Project (P144893) RESULT_FRAME_TBL_PDO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 b) number of patients who received stenting for acute myocardial 93.60 117.20 146.20 163.90 184.60 193.70 400.00 infarction with ST segment elevation (Number) c) Percentage of health care providers implementing improved patient care pathways 0.00 50.00 for emergency, stroke care and day surgeries (Number) Prevent, detect and respond to threat posted by COVID-19 PDO 4: Number of hospital COVID-19 cases treated following agreed protocols 0.00 10,000.00 and reimbursed by NHSU (Number) Number of males 0.00 5,000.00 (Number) Number of females 0.00 5,000.00 (Number) PDO Table SPACE The World Bank Serving People, Improving Health Project (P144893) Intermediate Results Indicators by Components RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Improving Service delivery at the local level Health facilities constructed, renovated, 0.00 10.00 139.00 145.00 145.00 119.00 and/or equipped (number) (Number) Improved patient care pathways for emergency stroke care and day No Yes surgeries developed and endorsed (Yes/No) DLI 5: Share of outpatient- based procedures and day 35.80 10.00 20.00 20.00 surgeries (Percentage) Rationale: Given changes in service utilization due to the ongoing war and the increase in complex cases requiring longer duration of hospitalization, the share of Action: This indicator has outpatient-based procedures and day surgeries will not reach 30% (DLR 5.3, US$30 million). Therefore, the end target has been reduced from 30% to 20% to been Revised reflect the previously achieved result (DLR 5.2). Supporting Selected Priority Areas of Health Reform Hospital beds per 880.00 860.00 820.00 780.00 700.00 650.00 600.00 population (Number) DLI 3: NHSU monitors contracted providers and reviews records from No Yes contracted facilities (Yes/No) The World Bank Serving People, Improving Health Project (P144893) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Percentage of patients with acute stroke admitted to hospitals contracted by 0.00 70.00 75.00 80.00 NHSU for provision of stroke care (Percentage) percentage for male 0.00 80.00 patients (Percentage) percentage for female 0.00 80.00 patients (Percentage) Percentage of all patients with acute stroke received thrombolytic 1.10 8.00 therapy/mechanical thrombus removal (Percentage) percentage of male 0.00 8.00 patients (Percentage) percentage of female 0.00 8.00 patients (Percentage) COVID-19 Emergency Response Activities DLI 8: Number of COVID-19 patients with complications attended by emergency medicine service following 0.00 12,500.00 agreed protocols and reimbursed by NHSU (Number) The World Bank Serving People, Improving Health Project (P144893) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 Project Implementation support and monitoring and evaluation Health personnel receiving 0.00 1,929.00 9,820.00 14,749.00 20,480.00 24,937.00 25,000.00 training (number) (Number) Share of health care providers benefiting from Project activities that that 0.00 0.00 10.00 15.00 20.00 used the citizen feedback to enhance the quality of health services (Percentage) Results-based financing DLI 1: Hospitals from the capable network contracted 0.00 210.00 210.00 210.00 210.00 by NHSU using case-based payments (Number) DLI 2: PDO Indicator 1: Number of hospitals 0.00 20.00 60.00 100.00 100.00 reprofiled or merged (Number) DLI 3: NHSU monitors contracted providers and reviews records from No Yes Yes Yes Yes contracted facilities (Yes/No) DLI 4: Percentage of all patients with acute stroke received thrombolytic No Yes Yes Yes Yes therapy/ mechanical thrombus removal (Yes/No) The World Bank Serving People, Improving Health Project (P144893) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 DLI 5: Share of outpatient- based procedures and day 35.80 10.00 20.00 20.00 surgeries (Percentage) DLI 7: PDO4: Number of hospital COVID-19 cases treated following agreed 0.00 10,000.00 0.00 0.00 10,000.00 protocols and reimbursed by NHSU (Number) DLI 8: Number of COVID-19 patients with complications attended by emergency medicine services following 0.00 12,500.00 0.00 0.00 0.00 agreed protocols and reimbursed by NHSU (Number) DLI 9: A specialized healthcare institution of national level has been contracted by NHSU and 0.00 1.00 started performing services under the Program of Medical Guarantees (Number) Rationale: The new DLI (US$ 3 million) will facilitate and support the health sector reform in terms of health care facilities financing. Action: This indicator is New Transition to new contracts with NHSU for provision of health services under PMG will take place in stages. At the first stage (2024), at least 1 (one) health care facility must conclude a contract with NHSU for most services. The World Bank Serving People, Improving Health Project (P144893) RESULT_FRAME_TBL_IO Indicator Name PBC Baseline Intermediate Targets End Target 1 2 3 4 5 IO Table SPACE . The World Bank Serving People, Improving Health Project (P144893) Click here to enter text.