PROJECT INFORMATION DOCUMENT (PID) APPRAISAL STAGE Report No.: AB2821 Project Name Health Sector Reform Program (APL 2) Region EUROPE AND CENTRAL ASIA

Public Disclosure Authorized Sector Health 90%; Tertiary education 10% Project ID P104467 Borrower(s) REPUBLIC OF Implementing Agency MINISTRY OF HEALTH Environment Category [ ] A [X] B [ ] C [ ] FI [ ] TBD (to be determined) Date PID Prepared January 23, 2007 Date of Appraisal January 24, 2007 Authorization Date of Board Approval March 13, 2007

1. Country and Sector Background

Public Disclosure Authorized Country Issues

Economic growth and macroeconomic management are strong. GDP growth has averaged over 10 percent per annum over the past five years, reaching 14 percent in 2005, and an estimated 13 percent in 2006. Prudent macroeconomic policies have maintained sustainable external and internal balances, kept low, and reduced Armenia’s debt burden. The fiscal deficit has also remained low and has been financed by non-inflationary sources. Armenia is fully on track with its IMF Poverty Reduction and Growth Facility (PRGF) Program.

With sustained high and broad-based economic growth, poverty in Armenia has continued to decline. Armenia saw a significant reduction in overall poverty, with the proportion of poor declining from 51 percent in 2001 to 30 percent in 2005. Growth reduced extreme poverty even Public Disclosure Authorized faster from 16 percent in 2001 to below 5 percent in 2005. The recent household survey also reveals equally strong declines in urban and rural poverty, and in income inequality.

Armenia continues to make progress on the reform agenda, though challenges remain. Armenia has made strong progress towards an open economy, as evidenced by the improvement in its IDA Performance-Based Allocation (PBA) score, now the highest of all IDA countries. Nevertheless, challenges remain. Though wages have been increasing, unemployment remains high at one-third of the labor force. Improvements are also needed, inter alia, in eliminating distortions associated with and building the human capital necessary for a competitive knowledge economy.

Armenia has a strong and comprehensive poverty reduction strategy in place. The recent CAS progress report refers to Armenia having had a successful Poverty Reduction and Strategy Paper Public Disclosure Authorized (PRSP) implementation, in which most of the targets have been met or exceeded and which was marked by a high level of participation. The government is currently preparing a full PRSP update, which will set new targets and refine policy actions.

Armenia has achieved or exceeded most targets that it had set for itself. Key achievements included: (i) stronger that anticipated economic growth and poverty reduction; (ii) substantial improvements in fiscal resources and policy, though tax and customs administrations continue to require improvement; (iii) increased spending in the social sectors and good progress in implementing systemic social sector reforms; and (iv) good progress in infrastructure and rural development, although further increasing private sector involvement and reducing rural poverty remain challenges.

Armenia also remains on target to achieve most if not all of its Millennium Development Goals (MDGs) by 2015. In 2005, Armenia published the first progress report on meeting the MDGs. Achievement of all of these goals is assessed as either possible or likely. Rates of poverty, infant mortality and maternal mortality have fallen rapidly over the past few years. There is virtually full enrollment in primary schools, and the country is in the midst of education reforms. At the same time, challenges continue to exist in promoting gender equality, combating communicable diseases, ensuring environmental sustainability and implementing the Government’s anti- corruption agenda.

Sector Issues

Health outcomes

Armenia compares favorably with countries of similar level of socio-economic development in terms of health outcomes, but suffers from a double burden of infectious and non-communicable diseases. A steady downward trend in infant, under-five and maternal mortality has been observed; between 2000 and 2004, the Infant Mortality Rate (IMR) and the Under-five Mortality Rate (U5MR) fell from 15.6 and 19.8 to 12.3 and 13.6 per 1,000 live births, respectively.1 During the same time span, the Maternal Mortality Ratio (MMR) fell from 52.5 to 16 per 100,000 live births. As a result, life expectancy at birth in 2004 was 70.3 years for men (higher than in most of the ECA countries) and 76.4 years for women.

Table 1: Armenia: Health status indicators in the international context (2003) Armenia Europe NMS CIS CSEC

Life expectancy at birth, in years (LE0) 73.1 74.1 74.3 66.9 68.9 Infant deaths per 1,000 live births (IMR) 11.5 9.0 6.6 14.5 19.8 Maternal deaths per 100,000 live births (MMR) 19.7 15.6 6.0 31.8 51.5 SDR, diseases of circulatory system, all ages per 714.9 479.4 452.7 821.4 741.5 100,000 SDR, ischemic heart disease, all ages per 100,000 387.3 222.7 176.1 433.8 362.3 SDR all causes, all ages, per 100,000 1083.3 962.6 931.3 1431.2 1311.2 SDR, diseases of the respiratory system, all ages 63.4 55.5 42.7 70.1 63.1 per 100,000 SDR, selected smoking related causes, all ages per 653.2 243.7 370.7 716.4 577.0 100,000 Tuberculosis incidence per 100,000 47.9 42.4 26.3 87.3 69.0

1 According to the 2005 Demographic and Health Survey, these rates are higher, 26 and 30 per live births, respectively. Clinically diagnosed AIDS incidence per 100,000 0.3 1.1 0.4 0.7 0.6 Diabetes prevalence, in % 1.0 n.a. 4.9 1.4 1.6 Source: World Health Organization (WHO): Health for All (HFA) data base. Note: Europe: 52 countries in the WHO European Region. NMS: New Member States—10 new member states of the from May 1, 2004. CIS: 12 countries of the Commonwealth of Independent States; CSEC: 25 countries in the WHO European Region with higher levels of mortality (Albania, Armenia, , Belarus, Bosnia and Herzegovina, , , , , Kazakhstan, Kyrgyzstan, , , , Republic of Moldova, Romania, Russian Federation, and Montenegro, Slovakia, Tajikistan, FYR Macedonia, , Turkmenistan, and ).

Armenia is also in the midst of an epidemiological transition characterized with a decline in communicable diseases and an increase in the prevalence of chronic diseases. The leading causes of premature adult death under the age of 65 are, in order of magnitude, diseases of the circulatory system - heart disease, stroke and related conditions, cancer, external injuries and poisoning - including suicide and traffic accidents, and diseases of the respiratory and of the digestive system.2 The HIV prevalence rate is lower than in most of the Commonwealth of Independent States (CIS), but a potential threat exists due to large numbers of migrant workers population working in higher HIV prevalence countries such as and Ukraine. Tuberculosis prevalence rate at 98 per 100,000 population remains higher than the European average. In 2004, DOTS case detection and treatment success rates were 63 percent and 77 percent respectively, a slight improvement over the previous years. Overall, disease surveillance, prevention and control system is slowly improving its capacity to better detect and manage the resurgence of communicable diseases as funding levels increase.

Health services utilization

Despite recent improvements, access to and use of health services remain low, favoring polyclinics and hospitals over Primary Health Care (PHC) facilities. After an impressive downward trend in admission rates and outpatient visits during the 1990s, health services utilization is again on the rise, although still low by EU standards and CIS averages.3 In view of the increase in overall mortality and morbidity, especially in the adult population, there is a concern that the sick may postpone seeking care and use of services as result of lack of resources, high out-of-pocket payments and low perceived quality of care, especially in rural areas. In 2003, for instance, the percentage of individuals who did not seek care when ill or injured was on average 70.5 percent, varying between 62 percent for the top quintile and 78 percent for the lowest quintile. As for the out-of-pocket (OOP) informal payments, they are mostly paid in hospitals; in 2001, about 72 percent of those who sought healthcare in a hospital and about 60 percent of those who sought care in a polyclinic reported to have made informal payments averaging 20,000ADM (approx. US$40) and 6,700ADM (approx. US$13), quite high figures with significant impoverishing effects on the household. In rural areas a higher proportion of the sick make informal payments for outpatient services whereas the reverse occurs in urban areas for inpatient services. In both rural and urban areas, the proportion of those who

2 World Health Organization Regional Office for Europe 2005. 3 Between 1991 and 2001, the inpatient admission rate dropped from 12.1 admissions to 4.9 per 100. Similarly, the number of outpatient contacts per person per year dropped from 9 in 1985 down to 1.8 in 2001. The EU and CIS averages are 18.4 and 19.8 for inpatient admission rate and 8.4 and 8.7 for the number of contacts per year, respectively. make OOP informal payments is lower amongst the poorest quintile, mainly because of refraining from seeking care. On the other hand, however, the recent increase in the public health spending has a positive effect on the use of both inpatient and outpatient services, especially for the poor.4

Health system governance and organization

Health system governance in Armenia is increasingly becoming pluralistic and decentralized, albeit with still a limited role for the population. Armenia has a revamped Semashko healthcare system, characterized now with the redefinition of the roles and responsibilities of the Ministry of Health (MOH) and increased involvement of local and municipal authorities. Previously the MOH was responsible for planning, regulation, financing, delivery of healthcare services. More recently it has increasingly been involved in policy making5, defining broad strategies, planning and regulation while leaving service delivery to local authorities and municipalities which now owns a large share of, and operates most hospitals and polyclinics.6 Moreover, payments to health care providers are now managed by the State Health Agency (SHA), a semi autonomous agency within the MOH working in close cooperation with the Ministry of Finance and Economy (MOFE) on matters related to the definition of and budget allocation for the state- funded programs and payment rates for providers. Once the budgets are allocated to state programs and payments are made on the basis of contracts with the SHA, health facilities have the autonomy to manage their own financial and human resources. In addition, they are free to sign contracts with private health insurance agencies or charge patients directly for services not covered by the state-funded Basic Benefit Package (BBP). On the other hand, the SHA is bound to contract all licensing health facilities, neither of them having a real negotiating power.

Health care financing and expenditures

Despite recent budgetary increases in nominal terms, the healthcare system remains under- funded and its resources are poorly pooled and inequitably used. Taxes and mandatory social insurance contributions constitute the main source of tax revenues for the Government through which budgetary obligations to the health sector is financed. This, however, constitutes only a small share of total health expenditures (THE) in Armenia.7 In 2003, THE accounted for 6.1 percent of the GDP, and at present total public expenditures on health represents about 1.64 percent of the GDP, or 9.9 percent of the total public expenditures.8 About 80 percent of the

4 Between 2002 and 2004, there has been a 28% increase in inpatient admissions, but much higher, 44% amongst the poor and vulnerable. Similarly, there has been notable increase in the use of specialty services in polyclinics. 5 See for instance, National Health Policy of the Republic of Armenia, issued by the MOH in 2004, although not yet officially endorsed by the Government, nor ratified by the Parliament. 6 All health facilities in Armenia are now Joint Stock Companies (JSC), with marz authorities and municipalities holding a large share of the stocks of hospitals and polyclinics, respectively, except in where the municipality is the major share holder of public hospitals. Only a few tertiary hospitals and the sanitary epidemiological services remain under the authority of the national government. 7 In 2003, Government expenditures constituted 20.4% of the THE, while out of pocket payments accounted for 62.4% (93% of which are informal payments). External grants accounted for the remaining balance (15.5%for those administered privately and 1.7% through the government). According to WHO, in 2005, public expenditure on health accounted for 26.7% of THE, and private spending for 73.3%, albeit without further details on external or internal grants. THE accounted for 1.4% of GDP and 7.5% of total public expenditure. 8 2007 state budgetary allocations as per the 2006-2008 Medium Term Expenditure Framework (MTEF). public expenditures on health are allocated through the SHA which acts as a single purchaser of healthcare services while the rest is spent by the MOH, mostly on procurement of drugs, vaccines and sanitary and epidemiologic services. Since 2006, the SHA budget is being allocated almost equally between inpatient care and primary health care services. The budget is now being executed fully while all arrears have been reduced significantly. 12. All health facilities are reimbursed on the basis of a reimbursement rate for the services included in the BBP, set jointly by the MOFE, MOH and SHA, although they are free to charge patients for those services that are not covered by the state funded programs. Primary health care physicians are paid capitation-based salaries, calculated on the basis of patients enrolled with the family practitioner. As for specialists in polyclinics, they are paid a certain guaranteed, albeit grossly inadequate (approx US$25 per month) wage. Hospital-based specialists receive a salary on the basis of a contractual agreement with the hospital administration on an individual basis, thus varying from one specialist to another.

Physical resources

Recent efforts in reducing excess capacity have been successful, but they need to be scaled up. Compared with other countries of the Former Soviet Union (FSU), Armenia has been very successful in reducing its hospital capacity and non medical staffing, mainly through closure of small rural hospitals and reduction of beds.9 Under the first phase of the APL, more elaborate optimization and modernization of hospitals in Yerevan has begun, resulting in consolidation of services, elimination of duplicative departments and reduction of surface areas in selected inpatient care facilities and, subsequently, significant productivity and efficiency gains.10 A similar initiative is now underway, approved by the Government, for the remaining ten marzes.

Health workforce

While Armenia is relatively well endowed in terms of health professionals, the gradual decrease in the number of nurses, the relatively higher number of specialists, and geographic distribution of healthcare workers are of concern.11 Not only does the physician/nurse ratio is suboptimal for adequate provision of services, but also because of the oversupply of specialists and the fact that a relatively high percentage of physicians (44 percent) work in hospital settings, PHC services remain inadequately covered, especially in rural areas. The large-scale training of family physicians which began under the first phase of the Health Sector Modernization Project (HSMP) and will continue under the second phase is aimed at addressing this issue by training a total of 1,650 family physicians and 1,650 family nurses to provide PHC services, mainly in rural areas.

9 First efforts resulted in a reduction of 30% in hospital capacity and 15% in non-medical staffing with an estimated cost savings of 12%. In 2004, Armenia had 388 acute care beds per 100,000 population compared with 822 in the Russian Federation, or the CIS average of 742 (HiT profile in brief: Armenia, 2006). 10 The hospital master plan for the city of Yerevan, approved in 2003, consolidated 24 hospitals and 13 polyclinics into 10 hospital networks. As a result, admission rates and bed occupancy ratio increased and average length of stay (ALOS) decreased in the merged hospitals (please see mid-term review report of the HSMP (APL1), issued in December 2006). 11 In 2004, the average number of physicians per 1000 population in Armenia was 3.3 compared with the EU (3.5) and CIS (3.7). However, the has been a gradual decline in the number of nurses, from 6.15 per 1,000 population in 1985 to 4.06 in 2004 which is now lower than the EU (7.2) and the CIS (7.9).

Formal medical education is provided by the Yerevan State Medical University (SMU) which graduates about 400 physicians a year, down from 500 to 800 in early 1990s. There also are four private medical schools in Armenia that are not recognized by the State, catering mostly to foreigners. The Ministry of Education (MOE) and the SMU intend to establish a formal registration, licensing and accreditation system applicable to all training facilities, regardless of their stature and reform the training curricula and state medical exams to bring their training programs up to par with the European Union (EU) standards and have requested Bank’s financial and technical support through the proposed project.

Government Strategy

In the Poverty Reduction Strategy Paper (Report No. 27133-AR), the Government aims at, inter alia, enhancing human development, and improving social safety nets and core public sector functions, including health. Increasing accessibility to essential health services is a major focus of the PRSP, recognizing the need for additional public outlays12, increased efficiency in the use of public resources and improved maternal and child healthcare to achieve the MDGs. In addition to increased public spending and more optimal intra-sectoral allocation of funds according to the healthcare needs of the population by better definition and prioritization of the state programs, the Government is intent on pushing through the following reform agenda, focusing on: (i) further strengthening primary health care on the basis of the principles of family medicine; (ii) separating the purchasing function from service provision by strengthening the institutional capacity of the SHA to become an active purchaser of services with the accompanying reforms in provider payment methods and hospital governance aimed at enhancing efficiency and ensuring access to essential health services particularly for vulnerable groups; and (iii) scaling up and completing optimization of the extensive health facilities network in marzes.

2. Objectives

The objective of the Health Sector Reform Program remains unchanged: to improve the organization of the health care system in order to provide more accessible, quality and sustainable health care services to the population, in particular to the most vulnerable groups, and to better manage public health threats. The second phase (supported by the Health System Modernization Project) aims at: (i) scaling up family medicine based primary health care reform by expanding the renovation of primary health care facilities and upgrading of the medical equipment in the remaining marzes; (ii) optimizing and upgrading hospital networks in the remaining marzes; (iii) strengthening Government’s capacity to develop and monitor effective health sector policies in the area of health financing, resource allocation and provider payments; and (iv) expanding investing in human resources to include formal and continuous education in health (medical, nursing, auxiliary health professionals).

12 The PRSP foresees an increase in the level of the consolidated budget for health care in 2015 to 2.5% of the GDP, up from 1.4% in 2003.

3. Rationale for Bank Involvement

There are two reasons why the Bank should scale up its involvement in the reform of the health sector in Armenia. First, the (GOA) has been successful in implementing the health sector reform agenda described in the letter of development policy (LDP) that was submitted when the first phase of the Health Sector Reform Program (HSRP) was being prepared (HSMP APL1). Second, only after two years of implementation of the first phase of the Program, the GOA has been shown to be very effective in consolidating the large number of hospitals in the city of Yerevan into networks resulting in considerable reduction in the number of health facilities without any compromise in access to and quality of care. Indeed, both have improved in the hospital mergers supported under the first phase. The Government now intends to pursue HSRP in the ten other marzes, and has already prepared an optimization plan for each, recently approved by the Government. This has been a politically sensitive and technically challenging process, requiring therefore a follow-through with major investment in the facilities in order not to lose momentum and proceed with the second and final phase of the HSRP implementation. While several of the triggers for APL2 have not been fully met, they are all on target to be met in the coming year.

The reform of the PHC is progressing equally well with the introduction of the family medicine as both an organizational model and a mode of practice. Its implementation is right on track in terms of training of family physicians, reform of the training curriculum, issuance of the regulatory decrees for independent and group practices, enrollment of patients and upgrading of facilities and medical equipment. The advanced second phase will result in a major gain in terms of time required to complete the transformation of the PHC network.

Finally, the MOH and the SHA are gradually moving their attention to the appropriateness and quality of care, now that access to care in terms of availability of resources has become less of a concern. The programs in the State Order, the basis for the allocation of public resources, is being constantly fine-tuned to ensure that the funds go where the needs are, and the SHA is in the process of updating its information base and introducing a performance-based reimbursement and bonus system to make sure that money follows the patient. On the other hand, substantial technical work has been carried out on voluntary insurance and on the definition/refinement of the basic package of services in view of Government’s concern with the high proportion of out- of-pocket expenditures. The long term vision remains unchanged: a health care system where the State will have the primary responsibility to cover essential services for the population and provide additional support to the poor, indigent and vulnerable populations while it would allow a growing market for for-profit and not-for-profit voluntary health insurance schemes. Bank’s support to strengthen the institutional base for effective system governance is thus deemed crucial to assist the government to make its vision a reality in such a way that the reformed healthcare system would be equitable, efficient and fiscally sustainable.

4. Description

This project is the second phase of a two-phase Adaptable Lending Program (APL) to support Government’s health sector reform program described in the LDP attached to the Project Appraisal Document (PAD) of the Phase I operation. The LDP makes explicit reference to expanding the reach of the PHC and hospital optimization reform on the basis of the lessons learned under Phase I. The PAD indicates that the second phase of the program could start before the end of the first phase subject to Armenia meeting the trigger conditions. Hence, the preparation of the second phase has been advanced in view of the progress made in meeting, either partially or fully, on all of the triggers, but perhaps equally importantly because of Government’s now proven track record of implementing hospital mergers and networks effectively and its commitment to optimize health facilities in the marzes outside Yerevan.

5. Financing Source: BORROWER/RECIPIENT 7.32 INTERNATIONAL DEVELOPMENT ASSOCIATION 22.00 STATE MEDICAL UNIVERSITY 0.30 Financing Gap 0.00 Total: 29.62

6. Implementation

The project will be implemented over a period of 5 years. The implementation arrangements under the APL2 would be the same as for the ongoing APL1 in order to ensure continuity in implementation. Implementation arrangements are also designed to ensure transparency in implementation, to increase the responsibility of key players and to encourage participatory approach to the implementation of politically sensitive hospital modernization process. The Government has designated the MOH as the responsible agency for the project. The HPIU, the unit within the MOH which oversees the implementation of APL1, will continue do so for APL2. During seven years of its operation, including the first Bank-financed PHC Development Project, the HPIU has gained considerable experience and acquired capacity in project management. The Unit is highly effective in overseeing day-to-day project activities and in being fully compliant with IDA fiduciary requirements. The HPIU will be responsible for the fiduciary aspects of the Project and provide project administration and coordination support to the MOH departments and agencies that are responsible for project activities.

An already functioning Steering Committee comprising representatives from key stakeholders within and external to the MOH will provide overall oversight and supervision for the project. The Steering Committee comprises: (i) Minister of Health; (ii) First Deputy Minister of Health; (iii) Deputy Minister of Health responsible for Economic and Financial Issues; (iy) First Deputy Minister of Finance and Economy; (y) First Deputy Minister of Justice; (yi) Deputy Minister of Territorial Affairs and (yii) Director of the HPIU. In addition to discussions regarding health policy matters, the members of the Steering Committee also advise on the specific terms of reference for various assignments, participate in technical evaluations and work directly with consultants during the implementation of their assignments.

HPIU is responsible for the Bank-financed health projects implementation and has already established a successful track record in its implementation of this project (HSMP). However one action has been agreed with HPIU to strengthen its financial management capacity.

Actions for capacity building (not credit condition) Responsible Completion Date Person Update the Financial Manual for the inclusion of new Financial Prior to project activities of HSMP II as well as policies and procedures Manager of the implementation clearly defining conflict of interest and related party HPIU transactions (real and apparent) and providing safeguards to protect the organization from them.

7. Sustainability

The sustainability of the proposed project hinges on GOA’s continued political commitment and ability to stay the course and remain steadfast with the expansion of the implementation of optimization plans in all marzes. The proposed operation would further build on accomplishments already achieved under APL1 which has laid the foundation for a reformed healthcare system. The results of the APL1 Mid-Term Review, the analytical work carried out under the PPER and the draft CAS progress report all indicate that the health reforms initiated are fully supported by the Government and are not likely to be reversed. There are a number of key actions which still need to be completed under APL1 and under the proposed operation, including the upgrading of the facilities as outlined in the optimization plans, the training of the family practice teams, and the implementation of the performance-based payment of providers. Once these elements are put in place, the achievements of the Program would be very likely to remain sustainable in the long run.

The sustainability of the project also depends on sustained levels of additional recurrent costs and the implied budgetary outlays as a result of the investments made to upgrade health facilities and to train more health professionals. Thus far, the GOA has been able to gradually increase its health budget in line with the MTEF projections and proved willing to provide additional funds where there was demonstrated need. The on-going policy dialogue as part of the PRSC process will monitor Government’s budgeting and budget execution practices to ensure sustainable financing of the health sector.

8. Lessons Learned from Past Operations in the Country/Sector

A review of Bank’s experience with support to health sector development in the ECA region during the past 10 years revealed that investment in infrastructure needs to be made conditional to rationalization plans developed in a consensual manner with involvement of all stakeholders and explicit political support of the Government.

The project design also reflects key lessons learned from the review of health care reforms in the transitional CIS countries: (i) the need to enhance allocative efficiency by reorganizing access to primary health care and introducing gate-keeper function to streamline direct access and referral to hospitals; (ii) the need to invest in human resources in a strategic manner with a view to reaching a balance in the mix and distribution of health workforce; (iii) rehabilitation of health facilities is an essential ingredient in raising the quality of healthcare services; and (iv) the need to strengthen providers' managerial capabilities and of the Government by improving public budget management practices and its supervisory and regulatory role.

In addition, the following lessons have been learned in designing and implementing similar reform-oriented projects in the Region:

• Political commitment and ownership is a sine qua non for effective implementation and sustainability;

• A concurrent development policy lending (DPL) operation (e.g., PRSC) significantly improves policy dialogue plays a catalytic role in increased attention to monitoring and evaluation of project results and impact;

• High quality analytical and advisory activities provides the necessary evidential base for more effective policy dialogue and project implementation;

• Involvement of local authorities, MOH and hospital management in both the technical and political processes of the preparation of rationalization plans facilitates consensus building and thus significantly increases ownership and cooperation; and

• A built-in and rigorous M&E scheme relying on indicators of high content and predictive validity helps generate evidence for objective assessment of project accomplishments.

The design of the proposed APL2 incorporates the lessons learned above in the following way:

• Project preparation has been carried out with full cooperation by the MOH, MOF, MOTA and local authorities, and with their substantial political commitment and ownership, as evident in the ratification of the hospital optimization plans by the Parliament.

• Project design hinges on the synergy with the policy conditionality and joint partnership with MOH and MOF in assessing the performance of both DPL and APL operations; • The team has worked in close cooperation with MOH and MOF in the design, implementation and reporting of related Advisory and Analytical Activities (AAA) (e.g., PPER);

• Arrangements for results monitoring have been carefully designed to reflect the intended key project objectives and outcomes.

9. Safeguard Policies (including public consultation)

The immediate impact of the project activities on the environment is limited. The main physical investments for the proposed project are rehabilitation and new construction of family medicine practices in the rural communities as well as rehabilitation and refurbishment of selected space in selected hospital networks in 8 marzes. Therefore, the environmental category rating remains "B", the safeguard screening category rating remains “S3” as it was under the APL1. As such, the existing Environmental Management Plan (EMP) remains valid, albeit subject to amendment to new sites. To date, compliance with the EMP has been satisfactory. Therefore, site-specific environmental screening for all project-supported rehabilitation of PHC centers and hospitals will be carried out as per the EMP. An environmental management framework has been prepared and publicly disclosed in Armenia in December 2006. Consultations mechanism will be the same as it was in the case of APL 1: public hearing are planned to be organized by the National Assembly in the end-February 2007. Key stakeholders at central and marz levels will take part in the public hearings.

10. List of Factual Technical Documents

Bank Staff Assessments: Armenia Health Systems Modernization Project Mid-term Review Report, November 2006 Armenia Country Assistance Strategy, May 2004 Armenia Health Financing and Primary Health Care Development Project Implementation Completion Report, June 2004 Armenia Poverty Reduction Strategy Paper, October 2003

Others:

Review of Health Financing and Provider Payment Systems in Armenia, Health Research For Action (HERA) Final Draft Report, 2004 Do subsidized health programs in Armenia increase utilization among the poor? Diego F. Angel- Urdinola and Shweta Jain, , March 2006 Armenia Programmatic Public Expenditure Review (PPER) Technical Assistance on Primary Health Sector Analysis in Armenia, AVAG Solutions, October 2006 Review of Regional Master Plans of the Armenian Health Care Delivery System, June 2006 Concept Paper on Development of Voluntary Health Insurance in the Republic of Armenia Basic Benefit Package Costing Study, Briefing Note, Business Conust, May 2006 National Health Accounts of the Republic of Armenia-2004, World Health Organization, Ministry of Health of the Republic of Armenia, Armenian Office of the World Bank, USA Agency of International Development, Yerevan 2006 Project Implementation Plan for the Extension of Armenia health System Modernization Project, Health Project Implementation Unit, November 2006 The Effects of a Fee Waiver Program on Health Care Utilization Among the Poor, Policy Research Working Paper, The World Bank Development Research Public Services and Europe and Central Asia Region, Human Development Sector Unit, January 2003 Strengthening of health Legislation and Licensing in Armenia, J. Both, September 2005 Health Financing and Primary Health Care Development Project Evaluation Report, Yerevan 2003 National Health Policy of the Republic of Armenia, Republic of Armenia Ministry of Health, Yerevan 2004 Proposed Framework for Health System Performance Assessment in Armenia, Emmanuel Gakidou, Ph.D, Harvard Initiative for Global health, and Institute for Quantitative Social Sciences, Harvard University, October 2005 Armenia Medium-Term Expenditure Framework for 2006-2008, Ministry of Finance and Health Systems in Transition Vol. 8 No. 6 2006, Armenia Health System Review, European Observatory on Health Systems and Policies

11. Contact point:

Contact: Enis Baris Title: Sr Public Health Specialist Tel: (202) 458-4474 Fax: (202) 614-0947 Email: [email protected]

12. For more information contact: The InfoShop The World Bank 1818 H Street, NW Washington, D.C. 20433 Telephone: (202) 458-4500 Fax: (202) 522-1500 Email: [email protected] Web: http://www.worldbank.org/infoshop