Document of The World Bank

FOR OFFICIAL USE ONLY

Public Disclosure Authorized

Report No: 58498-SV

PROJECT APPRAISAL DOCUMENT

ON A

Public Disclosure Authorized PROPOSED LOAN

IN THE AMOUNT OF

US$80 MILLION

TO THE

REPUBLIC OF EL SALVADOR

FOR THE

Public Disclosure Authorized STRENGTHENING PUBLIC HEALTH CARE SYSTEM PROJECT

June 9, 2011

Human Development Management Unit Central America Country Management Unit Latin America and the Caribbean

Public Disclosure Authorized This document is being made publicly available prior to Board consideration. This does not imply a presumed outcome. This document may be updated following Board consideration and the updated document will be made publicly available in accordance with the Bank‘s Policy on Access to Information.

CURRENCY EQUIVALENTS Exchange Rate: Effective April 29, 2011 Currency Unit = US Dollar US$1 = SDR 0.6

FISCAL YEAR January 1, 2011 – December 31, 2011

ABBREVIATIONS AND ACRONYMS

CLAP Latin American Center for Perinatology CPHC Comprehensive Primary Health Care Strategy CPS Country Partnership Strategy FESAL National Health Survey FOSALUD Solidarity Fund for Health GDP Gross Domestic Product IADB Inter-American Development Bank IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association IFR Interim Unaudited Financial Report IPPF Indigenous Peoples Planning Framework ISSS Salvadorian Social Security Institute MDG Millennium Development Goals MINSAL Ministry of Health NCB National Competitive Bidding NGO Non-Governmental Organization NHS National Health Service OP/BP Operational Policy/Bank Policy ORAF Operational Risk Assessment Framework PAHO Pan American Health Organization PCU Project Coordination Unit PDO Project Development Objectives PTAC Technical Advisory Committee of the Project RHESSA Hospital Reconstruction and Health Service Extension Project RIISS Integral and Integrated Health Care Service Networks SAFI Integrated Financial Management System SBD Standard Bidding Document SEM National Medical Emergencies System SDR Standard Drawing Rights SIBASI Integrated Health Basic System SUIS Single Unified Health Information System UACI Institutional Procurement and Contracting Unit UFI Institutional Financing Unit USAID United States Agency for International Development WHO World Health Organization

Vice President: Pamela Cox Country Director: Carlos Felipe Jaramillo Sector Director: Keith Hansen Sector Manager: Joana Godinho Task Team Leader: Rafael Cortez

ii

Table of Contents

I. STRATEGIC CONTEXT ...... 1 A. Country Context ...... 1 B. Sectoral and Institutional Context ...... 1 C. Higher Level Objectives to which the Project Contributes ...... 7 II. PROJECT DEVELOPMENT OBJECTIVES (PDO) ...... 7 A. PDO ...... 7 III. PROJECT DESCRIPTION ...... 8 A. Project Components ...... 8 B. Project Financing ...... 9 C. Lessons Learned and Reflected in the Project Design ...... 10 IV. IMPLEMENTATION ...... 10 A. Institutional and Implementation Arrangements ...... 10 B. Results Monitoring and Evaluation ...... 11 C. Sustainability ...... 12 V. KEY RISKS ...... 12 VI. APPRAISAL SUMMARY ...... 13 A. Economic and Financial Analysis ...... 13 B. Technical ...... 13 C. Financial Management ...... 14 D. Procurement ...... 14 E. Social ...... 15 F. Environment ...... 15 Annex 1: Results Framework and Monitoring...... 16 Annex 2: Detailed Project Description ...... 21 Annex 3: Implementation Arrangements ...... 33 Annex 4: Operational Risk Assessment Framework (ORAF) ...... 47 Annex 5: Implementation Support Plan ...... 51 Annex 6: Team Composition ...... 54 Annex 7: Economic Analysis...... 55

iii

PAD DATA SHEET

Republic of El Salvador Strengthening Public Health Care System Project

PROJECT APPRAISAL DOCUMENT

Latin American and the Caribbean Region LCSHH

Date: June 9, 2011 Sector(s): Health (100%) Country Director: Carlos Felipe Jaramillo Theme (s): Child health (20%); Health system Sector Director: Keith Hansen performance (60%); and Population and Sector Manager: Joana Godinho reproductive health (20%) Team Leader(s): Rafael Cortez EA Category: C Project ID: P117157 Joint IFC: n/a Lending Instrument: Specific Investment Joint Level: n/a Loan Project Financing Data: Proposed terms: Commitment-linked, fixed-spread loan payable in 30 years, including a grace period of 5 years.

[x] Loan [ ] Credit [ ] Grant [ ] Guarantee [ ] Other: Source Total Amount (US$M) Total Project Cost: US$80 Cofinancing: Borrower: Total Bank Financing: US$80 IBRD IDA New US$80 Recommitted Borrower: Republic of El Salvador Responsible Agency: Ministry of Health (MINSAL) San Salvador, El Salvador Tel: (503-2) 205-7332 Fax: (503-2) 271-0008 Estimated Disbursements (Bank FY/US$ m) FY 2012 2013 2014 2015 Annual 25.0 25.0 25.0 5.0 Cumulative 25.0 50.0 75.0 80.0 Project Implementation Period: January 1, 2012 - December 31, 2015 Expected effectiveness date: November 1, 2011 Expected closing date: June 30, 2016

iv

Does the project depart from the CAS in content or other ○ Yes X No significant respects? If yes, please explain: Does the project require any exceptions from Bank policies? ○ Yes X No Have these been approved /endorsed (as appropriate by Bank ○ Yes ○ No management? Is approval for any policy exception sought from the Board? ○ Yes X No If yes, please explain: N/A Does the project meet the Regional criteria for readiness for X Yes ○ No implementation? If no, please explain: N/A Project Development Objective: The objectives of the Project are to: (i) expand the coverage, quality, and equity in utilization of priority health services provided under the Integral and Integrated Health Care Service Networks (RIISS); and (ii) strengthen the Ministry of Health‘s (MINSAL) stewardship capacity to manage essential public health functions.

Project Description: Component 1: Expansion of Priority Health Services and Programs (US$45 million) 1. Strengthening the quality and delivery capacity of priority health services under the RIISS through: (a) the gradual implementation of the Comprehensive Primary Health Care (CPHC) strategy, which includes the acquisition of medical equipment and the maintenance and minor rehabilitation of facilities; and (b) the improved delivery of selected priority public health programs, including those addressing maternal health, reproductive and sexual health, teenage pregnancy, child health, nutrition, dengue control, and chronic kidney disease. 2. Supporting the implementation of the National Medical Emergencies System (SEM) in about 16 Eligible Hospitals through: (a) improving the coordination between the national hospital system and other entities such as MINSAL, Salvadorian Social Security Institute (ISSS), Ministry of Defense, the National Civil Police, Solidarity Fund for Health (FOSALUD), and the Red Cross; (b) supporting the installation of a national call system for emergencies; (c) improving the resuscitation room equipment and the ambulance fleet; (d) training of medical and paramedic staff in the management of medical emergencies; and (e) strengthening medical emergency response at the community level. Component 2: Institutional Strengthening (US$31.4 million)

1. Strengthening MINSAL‘s institutional and management capacity to perform essential public health functions through: (a) the improvement of the Single Unified Health Information System (SUIS); (b) the implementation of a national pharmaceutical policy aimed to enhance quality,

v efficiency and security in the access of rational use of medicines as well as transparency in procurement; and (c) the support of the activities of the National Health Institute (including training of clinicians and lab technicians, surveillance, knowledge generation and research) and the Central Laboratory. 2. (a) Developing an emergency preparedness plan for Public Health Emergencies; and (b) implementing of this plan through financing of the Eligible Public Health Expenditures. Component 3: Project Management and Monitoring (US$3.4 million) 1. Supporting: (i) the monitoring of the Project activities through semi-annual, external technical reviews; (ii) annual health facility surveys to assess the achievement of health coverage and results targets; and (iii) an impact evaluation. 2. Assisting the PCU in carrying out the management, monitoring and supervision activities of the Project, including training and financial audits. 3. Strengthening Institutional Procurement and Contracting Unit (UACI) and Institutional Financing Unit (UFI), the units performing the Project‘s fiduciary activities.

Safeguard policies triggered?

Environmental Assessment (OP/BP 4.01) X Yes ○ No Natural Habitats (OP/BP 4.04) ○ Yes X No Forests (OP/BP 4.36) ○ Yes X No Pest Management (OP 4.09) ○ Yes X No Physical Cultural Resources (OP/BP 4.11) ○ Yes X No Indigenous Peoples (OP/BP 4.10) X Yes ○ No Involuntary Resettlement (OP/BP 4.12) ○ Yes X No Safety of Dams (OP/BP 4.37) ○ Yes X No Projects on International Waters (OP/BP 7.50) ○ Yes X No Projects in Disputed Areas (OP/BP 7.60) ○ Yes X No

Conditions and Legal Covenants Financing Description of Condition/Covenant Date Due Agreement Reference Section I.A.2 Prior to carrying out any activities under Subcomponent 2.2 Prior to of Schedule 2. of the Project, the Borrower, through MINSAL, shall: implementing any activities (a) carry out all assessments required by the Bank under (under terms of reference satisfactory to the Bank and with Subcomponent scope and detail satisfactory to the Bank) and prepare and 2.2 of the implement all plans required by the Bank (under terms of Project. reference satisfactory to the Bank and with scope and detail satisfactory to the Bank); and

vi

(b) submit to the Bank, for the Bank 's review and approval: (i) a proposed list of the goods, Consultant Services and Non-Consultant Services proposed to be financed under Category (3) of the Project (including a procurement plan); and (ii) an estimated flow of funds needs. The Borrower, through MINSAL, shall carry out Subcomponent 2.2(b) of the Project in accordance with the list and estimated flow of funds needs above-referred.

Section I.C.(a) The Borrower, through MINSAL, shall carry out Prior to (b) and (c) of Subcomponent 2.2 of the Project in accordance with the implementing Schedule 2. provisions of: any activities of the Project. (a) the Environmental Management Plan; (b) the Indigenous Peoples Planning Framework; and (c) a manual, satisfactory to the Bank, that will include, inter alia: (i) the procedures for the carrying out, monitoring and evaluation of the Project; (ii) the indicators to be used for Project monitoring and evaluation; (iii) the organizational structure of the Project, including the structure and terms of reference of personnel of the PCU, the UACI and the UFI; (iv) the Project procurement and financial management requirements and procedures; (v) the Project‘s disbursement and auditing procedures; (vi) the list of Eligible Public Health Expenditures to be financed under Subcomponent 2.2(b) of the Project; and (vii) the list of the Borrower‘s hospitals where Subcomponent 1.2 of the Project will be carried out. In case of any inconsistency between any provision of the Project Operations Manual and the Loan Agreement, the provision of the Loan Agreement will prevail. Any amendment to the Project Operations Manual can occur only if acceptable to the Bank.

vii

I. STRATEGIC CONTEXT

A. Country Context

1. Following more than a decade of civil war ending in 1991, El Salvador made considerable progress in social and economic transformation, undertaking significant social sector reforms that led to improvements in social indicators. These reforms contributed to an increase in the country‘s Human Development Index – which aggregates measures of life expectancy, adult literacy and school enrollment, and income per capita – from 0.660 in 1990 to 0.747 in 2007, and a decrease in the share of households living in poverty by 18 percentage points, from 43.6 percent in 2001 to 35.5 percent in 2007.

2. However, El Salvador was hit hard by the global financial crisis in 2009, and poverty began to increase again, especially in rural areas, partially reversing gains in the social sectors. The global financial crisis in 2009 resulted in a sharp fall in remittances, decreased private capital inflows, and reduced foreign demand, culminating in a contraction in real GDP by 3.5 percent in 2009. As a consequence of the external shocks, poverty rates began to increase, partially reversing the gains in poverty reduction achieved during the last decade. By end 2008, the poverty rate climbed back to 42.3 percent and remained relatively high in 2009 at 37.8 percent, while extreme poverty reached 12.4 percent in 2008 and 12 percent in 2009.

3. El Salvador's economic performance remained modest in 2010, with the economy growing 0.7 percent, below projections of 1 percent and below growth in neighboring countries. Economic activity picked up towards the end of the year, mainly driven by commerce and tourism (10.3 percent) and agriculture (5.7 percent). Social outcomes also started improving in 2010 following an increase in remittance flows and positive job creation for most of the year.

4. In response to the economic slowdown and increase in poverty, the Government prepared an ambitious Anti-Crisis Plan for the period of 2009-2011, placing social policies at the heart of its political agenda. The stimulus package, amounting to US$587.5 million or 2.8 percent of GDP, includes actions to generate temporary jobs and increase the coverage of the social security system. Additionally, the package proposes programs to build low cost housing and basic infrastructure to improve coverage of health services, increase nutrition interventions, and address the violence problem. The Government has also designed and begun implementing a robust social policy agenda focused on the provision of basic health and education services, social protection schemes, and job creation programs for the poor.

B. Sectoral and Institutional Context

5. Since the 1990s, El Salvador has significantly improved its health outcomes, as shown by increased life expectancy, decreased child and infant mortality and improved maternal and reproductive health outcomes. El Salvador‘s average life expectancy at birth has increased from 67.1 years in 1992 to 71.7 years in 20091. Under-five child mortality has been reduced from 92 deaths per 1,000 live births in 1990 to 18 deaths per 1,000 live births in 2008,

1 PAHO Basic Health Indicators, 2009. 1 nearly reaching the Millennium Development Goal (MDG) of 17 deaths per 1,000 live births2. Similarly, infant mortality has been reduced from 48 deaths per 1,000 infants (under the age of one) in 1990 to 16 deaths in 20083. Despite a decline in the maternal mortality ratio, it still remains high at 64.5 deaths per 100,000 live births per year4. Nonetheless, the country has made great strides in reducing maternal health risk factors, introducing prenatal and post-partum controls and institutionalizing births. Prenatal care coverage has increased from 73.6 percent in 2002 to 82.1 percent in 2008 in urban areas and from 59.5 percent to 72.1 percent in rural areas. Moreover, the proportion of health personnel-assisted births increased in urban areas from 87.3 percent in 2002 to 98.2 percent in 2008 and from 54.1 percent to 75.3 percent in rural areas in the same period. El Salvador has also made efforts to improve contraceptive use among its population, mainly to guard against unwanted pregnancies. Today, 72 percent of women between the ages of 15 and 49 years use contraceptives5. Nevertheless, in 2008, teenage pregnancy rates were still high among the poor, with girls between 10 to 19 years old delivering almost a third of all babies born in public health care facilities.

6. Despite good progress towards the MDGs, challenges in equity and access to health care remain for the poor and in remote areas. Results from the national health survey (FESAL) in 20086 highlighted equity challenges in health outcomes and utilization of health services. The fertility rate for households in the lowest income quintile is 3.6 children compared to 1.6 children for the highest income quintile. The perinatal mortality rate in the lowest income quintile is 34 per 1,000 pregnancies in contrast to 13 per 1,000 pregnancies for the highest income quintile. With respect to prenatal check-ups, only 68 percent of women from the lowest income quintile had benefitted from the minimum five prenatal visits compared with 88 percent of women from the highest income quintile. The proportion of women between the ages of 25-44 who are married or with partners and who utilize contraceptive methods is 65 percent for the lowest income quintile, and 79 percent for the highest income quintile. While 58 percent of women from the lowest income quintile had a Papanicolaou test in the last two years, the rate was higher for women in the highest income quintile, at 68 percent. Only 3.1 percent of women from the lowest income quintile had a mammography exam, while 34.1 percent of women from the richest income quintile had the same exam.

7. Sexual and physical violence are key challenges in Salvadorian society and effective responses are required to mitigate mortality and address the mental impact on victims. Data from FESAL 2008 shows that the first sexual experience of 2.9 percent of women 15-24 years old was either rape or sexual assault, while 13.4 percent of women 15-49 were victims of sexual violence, and 30 percent of women experienced physical violence by age 18. Moreover, in 2009, the annual homicide rate was 71 per 100,000 inhabitants (the highest rate in the region and one of the highest in the world)7, with thousands of people, especially among the poor and

2 WHO Global Health Observatory and child and maternal health data from United Nations Development Program ―Without Excuses… Let us Achieve the Objectives of the Millennium in 2015: A Plan for Action‖ 2008. 3 WHO Global Health Observatory: Earliest data available (1990) and latest data available (2008). 4 PAHO Basic Health Indicators, 2009. 5 United Nations Development Program ―Without Excuses… Let us Achieve the Objectives of the Millennium in 2015: A Plan for Action‖ 2008. 6 Encuesta Nacional de Salud Familiar (FESAL), 2008. (Final Report 2009). Health Ministry, Social Inclusion Ministry, Ministry of Education, and Technical Secretariat of the Presidency, http://www.fesal.org.sv/. 7 Geneva Declaration on Armed Violence and Development. 2 marginalized, injured in violence related-events and accidents. The country does not have an adequate emergency system to respond to victims of such violence. Moreover, there is increased need for mental health services following years of civil war. As such, effective responses are required to mitigate mortality related to violence and accidents and address the mental impact on victims.

8. Remarkable progress has been made in reducing barriers to access and increasing supply of services; however, the rise of non-communicable diseases will place additional pressure on the public health system if not addressed early on. Progress has been made on expanding health spending despite fiscal space constraints. To increase access for the underserved, Government has eliminated co-payment for services provided by public health facilities, increasing the health budget by 10 percent in 2010 and by an additional 8 percent in 2011 to fund these services. Government also intends to increase the share of public health expenditures from 1.8 percent of GDP in 2008 to 3.5 percent by 2015. To improve the service capacity of the public health system, the Ministry of Health (MINSAL) has also constructed and rehabilitated six major hospitals. However, a growing portion of the country‘s adult population is suffering from non-communicable diseases, which can create a new challenge resulting in high human and economic costs for the country if left unaddressed. The incidence of arterial hypertension for adults 30-59 years is high, affecting 1,746 persons per 100,000 people. The mortality rate from cirrhosis and other chronic liver diseases has increased from 11 deaths per 100,000 in 2000 to 14 deaths per 100,000 in 2008 while estimated deaths from Ischemic heart disease have also risen from 44 per 100,000 in 2003 to 55.5 per 100,000 in 2008.8 Non- communicable diseases are generally preventable if detected early through large-scale national disease prevention and health promotion programs targeting most at risk populations.

9. While supply-side shortages remain a hindrance to the health and well-being of the Salvadorian population, demand-side determinants of the uptake of health services also play a role. Both supply-side shortages and demand-side determinants of health impact the population‘s access and utilization of health services and ultimately, determine health outcomes. Demand-side barriers are generally defined as determinants of the use of health care that are not dependent on service delivery or price or direct price of those services, such as distance, education, opportunity cost, and other cultural and social determinants, and may lead to decline in the uptake of health services.

10. The country also faces repeated shocks from natural disasters that affect the health status of the population. The 1986 earthquake caused 1,500 deaths and 10,000 injuries, and affected 200,000 people, while the 2001 earthquake resulted in 1,000 deaths and 8,122 injured. Volcanic eruptions, tropical storms and hurricanes (Mitch in 1998, Stan in 2005 and Ida in 2010) resulted in more than 200 deaths and caused 15,000 people to lose their homes. The dengue epidemic is latent and repeatedly hit the country between 2000 and 2010 with over 15,000 confirmed cases and 10,252 suspected cases requiring hospitalization. The A/H1N1 epidemic also hit the country in 2009 with 881 cases and 33 deaths. The country is highly vulnerable to natural disasters that have adverse effects on the physical and mental health of the population and Government requires more resources and better capacity to respond rapidly and effectively to these emergencies.

8 PAHO Basic Health Indicators, 2009. 3

11. The Salvadorian public health sector includes the MINSAL, Social Security, and other public sector entities. MINSAL provides for the coverage and health care of around 77 percent of the Salvadorian population. Meanwhile, Social Security is divided into three social health insurance subsystems: the Salvadorian Social Security Institute—ISSS (less than 20 percent of the population), the Salvadorian Institute of Welfare for Teachers (1.2 percent) and the Military Health Institute (0.6 percent). Each institution serves its own target population, respectively, formerly-employed public and private sector workers and their families, teachers, and military personnel. The private sector includes companies that offer private health insurance to the wealthier populations (0.3 percent). Furthermore, some for-profit private entities sell their services to the ISSS and other public sector entities.

12. Significant inequalities in health care financing exist between the different subsystems, with the National Health Service (NHS) being persistently underfunded. Over the years, the NHS has been persistently underfunded in comparison to the ISSS (Table 1). While it delivers health services to four-fifths of the population, NHS expenditures constituted only 1.5 percent of GDP in 2008. In the same year, the ISSS spent 1.4 percent of GDP to cover only one-fifth of the population.

Table 1: Public Expenditures on Health in El Salvador (In millions of US dollars and percent of GDP) 2005 2006 2007 2008 Public Expenditures on Health (US$ millions) 575.9 634.9 677.4 664.9 National Health Service (NHS) 273.8 304.2 328.0 349.7 -Ministry of Public Health and Social Assistance 74.2 89.0 175.1 184.9 -National Hospitals 199.6 215.2 152.8 164.8 Salvadorian Social Security Institute (ISSS) 291.6 324.0 342.1 306.7 Public Health Expenditures as % of GDP 3.4 3.4 3.3 3.0 National Health Service (NHS) 1.6 1.7 1.6 1.5 -Ministry of Public Health and Social Assistance 0.4 0.5 0.9 0.8 -National Hospitals 1.2 1.2 0.7 0.7 Salvadorian Social Security Institute (ISSS) 1.7 1.7 1.7 1.4 Source: Ministry of Finance and Central Reserve Bank of El Salvador, 2010. El Salvador – Public Expenditure Review. The World Bank. Report No. 53500-SV

13. High out-of-pocket spending on health care has dissuaded Salvadorians from seeking health care. Out-of-pocket expenditures on health represent 37 percent of total health expenditures (or 2.4 percent of GDP in 2007). Such persistently high rates of out-of-pocket health expenditures have established a serious barrier for financial access to health services. According to the 2008 Multi-Purpose Household Survey, only 51 percent of people who became ill or were injured sought medical assistance, while the remaining chose to self-medicate or avoid assistance altogether. Of those who sought assistance, the majority (65.7 percent) utilized services from the NHS, while 16.9 percent used services from a private hospital or clinic, 12.5 percent from the ISSS, and 4.9 percent from the Military Hospital, NGO health facilities or pharmacies.

4

14. Total health expenditure has decreased as a share of GDP, while public health expenditure has increased. Between 2000 and 2008, total spending on health decreased from 8.0 to 6.1 percent of GDP. During the same period, however, public sector spending increased as a proportion of total health expenditures from 3.6 to 4.1 percent of GDP9. Estimated total per capita health expenditures in 2008 were US$215 while per capita MINSAL expenditure was US$98. Thus, a key challenge facing the MINSAL is to increase the share of public capital investment expenditures (estimated at 12 percent of the total MINSAL budget), and allocate more resources to the first level of service delivery (currently only 32 percent of the total MINSAL budget).

15. The MINSAL’s National Health Strategy (2009-2014) seeks to address the issue of fragmentation of the health sector and ensure universal coverage with a major focus on primary health care within an Integral and Integrated Public Health Care Service Network (Red Integral e Integrada de Servicios de Salud or RIISS)10. The National Health Strategy 2009-2014 seeks to increase coverage and equity of access to health services, improve the quality of services, and strengthen management of information systems to enhance the monitoring and oversight capacity of MINSAL. Within this framework, the Strategy supports the strengthening of the RIISS to deliver high quality services to underserved and vulnerable populations. This Network currently provides health services through three levels of health care. The primary health care level includes (i) family and community health teams with medical specialization; (ii) family and community health teams without specialization; and (iii) health promoters and centers. These primary health care institutions are located in municipalities and cantons. The secondary level includes basic and general hospitals, which are located respectively in the departments and regions. The third level includes highly-specialized and specialized hospitals, which are located at the national level.

16. In the past decade, MINSAL had employed two modalities of extension of health service coverage of underserved populations. These modalities include: (i) the extension of health service coverage through public mobile teams; and (ii) contracting with NGOs for the provision of mobile units. These contracts specify the minimum services to be provided, geographic areas of intervention and guidelines and protocols for service delivery. Although the program was successful in increasing coverage of a basic health package, the MINSAL lacked the ability to monitor and supervise the services provided by the NGOs. In addition, one of the most challenging aspects is the difficulty in sustaining the Project once it ends. The new Health Strategy seeks to institutionalize the extension of coverage ensuring that it becomes embedded in the country‘s health system, thus providing a sustainable and long-term solution to the challenge of equity in the access and financing of vulnerable and disadvantaged groups.

17. To expand health coverage, MINSAL is in the process of defining and costing a comprehensive set of essential health interventions to be delivered to all. This set will encompass more than 300 health interventions at all levels of the system. MINSAL will finance

9 World Health Statistics,WHO, 2009. 10 Integrated health networks comprised a group of organizations that provide or made the necessary arrangements to deliver integrated health service to a population within specific boundaries, and it is accountable for its clinical results and fiduciary performance”. (Adapted from Shortell, SM; Anderson DA; Gillies, RR; Mitchell JB; Morgan KL. Building Integrated Systems: The Holographic Organization. Healthcare Forum Journal 1993;36(2):20-6). 5 the recurrent unit costs of this set of health interventions through the State budget. In terms of human resources, the Strategy would require about 1,533 work teams, 831 with specialized doctors, to cover 80 percent of the population.

18. The Project will support Government’s Health Strategy, specifically to expand coverage and quality of health services for target population, improve equity in utilization and increase MINSAL‘s institutional capacity to manage essential public health functions and strengthen system performance. The Project aims to improve the quality of care and increase the efficiency of referral mechanisms so that over 80 percent of health needs are resolved at the first level of care. This reorganization will increase: (i) health care coverage to the poor (near to the community and with a major emphasis on health education and promotion); (ii) quality of care (through the investment needed in the sector); and (iii) efficiency in the provision of services (through a strengthened referral mechanism)11. The Project supports two key areas: (i) expansion of priority health services through capital investments needed to improve the quality of services, in support of the provision of a comprehensive set of essential health interventions, and improvement of priority programs and the National Medical Emergencies System; and (ii) strengthening the essential public health functions, in order to reinforce MINSAL institutional and management capacity at all levels of care. This includes support to the health information system, the national network of laboratories of the National Health Institute and implementation of the national drug management policy as well as responding to public health emergencies. Although the Project will not in itself contribute to the elimination of the fragmentation of the provision of health services, it will enhance harmonization and coordination of the various actors within the sector, including through the use of a Single Unified Health Information System, improvement of the referral system and strengthening of the Ministry‘s regulatory/stewardship capacity.

19. The Project mainly focuses on the supply-side elements needed to expand the coverage and improve the quality of health care services in El Salvador; however, it also has demand-side benefits. The Project seeks to increase coverage and quality of health care through capital investments and the acquisition and replacement of critical equipment, while the Government will finance the recurrent costs needed to operate these investments. Health service demand is influenced by existing health care services and by the knowledge of health care need and information on service providers. Improvements to the quality of services provided, reductions in wait times, better referral mechanisms, and end-of-user fees all serve to increase the utilization of health services. With the end-of-user fees, MINSAL witnessed a 40 percent increase of demand of health care services at the first level of care.

20. During Project preparation, several design alternatives were considered. In order to support the reorganization of service delivery as part of the Strategy, the Bank proposed introducing a results-based payment mechanism through the use of capitation transfers from the central level to the Regional Health Directorates to finance the gap required to expand health care services. Health authorities in El Salvador seek a standard sector specific investment loan, instead of one based on a capitation system for the following reasons: (a) Strategic design: The

11 The Ministry of Finance has selected the Ministry of Health and Agriculture to pilot a ―budget for result‖ mechanism to set up priority tasks and results as opposed to historical budget allocation, which does not take into account the socioeconomic conditions and epidemiological profiles. 6

Project seeks to support health system reform focused on improving the increase of coverage and quality of services through capital investments and the acquisition and replacement of critical equipment rather than the financing of recurrent expenditures (which would be better financed through a capitation system); (b) Cost: Generally, capitation operations are more expensive for the country than standard loans, given the effort and complexity of monitoring and measuring performance under such a system; and (c) Institutional: The MINSAL has a highly centralized administrative system and flow of resources while the capitation approach requires decentralized administrative processes, preferably at the local level.

C. Higher Level Objectives to which the Project Contributes

21. The Project supports a number of goals articulated in the Government’s National Development Plan 2010-201412. The Project will support the MINSAL in its strategy to improve the overall health and well-being of the Salvadorian population by extending a set of priority primary health care services to the poor and in remote areas, strengthening the institutional capacity of the public health care system and assisting the MINSAL in its preparation for a public health emergency.

22. The Project is consistent with the priorities outlined in the World Bank Group’s Country Partnership Strategy (CPS) for El Salvador FY 2010-2012 (Report No. 50642-SV) discussed by the Executive Directors on November 24, 2009. Strengthening the delivery of social services was identified as a main priority of the CPS and includes improving the quality and coverage of primary health care services. The Project supports this priority through the following objectives: (i) increasing access to health services through Integral and Integrated Primary Health Care Service Networks, and (ii) strengthening MINSAL‘s capacity to plan and manage services and monitor results for the health system.

II. PROJECT DEVELOPMENT OBJECTIVES (PDO)

A. PDO

23. The objectives of the Project are to: (i) expand the coverage, quality, and equity in utilization of priority health services provided under the RIISS; and (ii) strengthen MINSAL’s stewardship capacity to manage essential public health functions.

24. The Project will benefit the 2.1 million people who are among the poorest in 92 municipalities. The population in these municipalities has been identified as having the greatest health needs, requiring financial protection, and lacking access to disease prevention and health promotion services at the primary care level.

25. A series of indicators will measure progress on coverage, equity, quality of services, and health results, as well as institutional capacity as follows:  Percentage of poor people using public health care services when needed;  Percentage of MINSAL-registered pregnant women receiving prenatal care according to MINSAL norms;

12 Plan Quinquenal de Desarrollo 2010-2014, April 14, 2010. 7

 Percentage of eligible secondary and tertiary hospitals certified by MINSAL; and  Percentage of pharmaceutical products purchased by MINSAL through a decentralized mechanism that is subject to quality control by a MINSAL laboratory.

III. PROJECT DESCRIPTION

A. Project Components

26. To achieve these objectives, the Project will finance three Components: (i) Expansion of Priority Health Services and Programs; (ii) Institutional Strengthening and (iii) Project Management and Monitoring as follows:

Component 1: Expansion of Priority Health Services and Programs (US$45 million)

27. This Component seeks the Expansion of Priority Health Services and Programs and will finance the following two subcomponents:

Subcomponent 1.1 Strengthening Priority Health Services and Programs (US$27.5 million) Strengthening the quality and delivery capacity of priority health services under the RIISS through:

(a) the gradual implementation of the CPHC strategy, which includes the acquisition of medical equipment and the maintenance and minor rehabilitation of facilities; and

(b) the improved delivery of selected priority public health programs, including those addressing maternal health, reproductive and sexual health, teenage pregnancy, child health, nutrition, dengue control, and chronic kidney disease.

Subcomponent 1.2 National Medical Emergencies System (US$17.5 million)

Supporting the implementation of the SEM in about 16 Eligible Hospitals through: (a) improving the coordination between the national hospital system and other entities such as MINSAL, ISSS, Ministry of Defense, the National Civil Police, FOSALUD, and the Red Cross; (b) supporting the installation of a national call system for emergencies; (c) improving the resuscitation room equipment and the ambulance fleet; (d) training of medical and paramedic staff in the management of medical emergencies; and (e) strengthening medical emergency response at the community level.

Component 2: Institutional Strengthening (US$31.4 million)

28. This Component seeks the institutional strengthening of MINSAL and will finance the following three subcomponents:

8

Subcomponent 2.1 Strengthening Stewardship and Monitoring capacity of MINSAL (US$26.4 million)

The strengthening of MINSAL‘s institutional and management capacity to perform essential public health functions through: (a) improvement of the SUIS; (b) implementation of a national pharmaceutical policy aimed to enhance quality, efficiency and security in the access of rational use of medicines as well as transparency in procurement; and (c) support of the activities of the National Health Institute (including training of clinicians and lab technicians, surveillance, knowledge generation and research) and the Central Laboratory;

Subcomponent 2.2 Responding to Public Health Emergencies (US$5 million) (a) Developing an emergency preparedness plan for Public Health Emergencies; and (b) implementing of this plan through the financing of the Eligible Public Health Expenditures.

Component 3: Project Management and Monitoring (US$3.4 million)

29. The main activities of this component are the following: (1) Supporting: (i) the monitoring of the Project activities through semi-annual, external technical reviews; (ii) annual health facility surveys to assess the achievement of health coverage and results targets; and (iii) an impact evaluation; (2) Assisting the PCU in carrying out the management, monitoring and supervision activities of the Project, including training and financial audits and, (3) Strengthening UACI and UFI, the units performing the Project‘s fiduciary activities.

B. Project Financing

30. The Project will be financed through an IBRD Specific Investment Loan in the amount of US$80 million over a four-year implementation period.

Table 2: Project Costs (US$) Project Components Total (US $ IBRD or % million) IDA Financing Financing Component 1: Expansion of Priority 45,000,000 45,000,000 56.3 Health Care Services and Programs Component 2: Institutional 31,400,000 31,400,000 39.3 Strengthening Component 3: Project Management and 3,400,000 3,400,000 4.2 Monitoring Front-End Fee (0.25% of total loan) 200,000 200,000 0.2 Total Project Cost 80,000,000 80,000,000 100

9

C. Lessons Learned and Reflected in the Project Design

31. Substantial progress in health outcomes can be achieved with clear objectives and targeted investments in the sector. Progress on the fourth and fifth MDGs13 has been the result of concrete sector investments in expanding primary health care services in the poorest municipalities in the last decade through the use of mobile brigades from public health facilities and contracting out of NGOs. The Project builds on this experience and supports the Government‘s health strategy that seeks to strengthen the regulatory capacity of the MINSAL to improve the effectiveness of the health system and increase service delivery capacity of the public health care networks, especially in rural and remote areas, with an emphasis on health promotion, prevention, treatment and rehabilitation.

32. El Salvador may require rapid financial assistance in the event of a public health emergency. The country‘s geography and location make the country very vulnerable to natural disasters, including earthquakes, tsunamis, volcanic eruptions, hurricanes, landslides, droughts, floods, dengue, A/H1N1 and other health outbreaks. The Project will include a contingency fund to support an immediate response to these types of events within the first three years of the Project, if a public health emergency is officially declared by the Government. Lessons learned from the Essential Public Health Functions Project (P110599) in Argentina and the Improving Family and Community Health Project (P106870) in Nicaragua related to a Government‘s ability to respond rapidly to public health emergencies have been taken into account in the design of Component 2 of the Project.

33. Reducing procurement risks contributes to improve Project results. Improving supervision and monitoring of the bidding processes leads to improved competition and transparency as well as cost effectiveness. Continuous strengthening of the MINSAL procurement management is critical to the delivery of health services and smooth implementation of sector reforms.

34. The Project will also build on lessons learned from other project experiences in the country. Lessons learned include the importance of (i) strengthening the fiduciary capacity of the PCU from the start of the Project to help avoid delays in procurement processes; and (ii) involve all stakeholders (e.g. staff, community, public health administrators, local governments, international cooperation agencies) to ensure a successful project implementation.

IV. IMPLEMENTATION

A. Institutional and Implementation Arrangements

35. Project implementation will be overseen by the MINSAL, through a PCU, reporting directly to the Minister of Health and coordinating with the General Operations Management. The PCU was established by Ministerial Resolution and will manage the Project and the Inter-American Development Bank (IADB)-financed project. This PCU will be responsible for the day-to-day management of Project activities, including: (i) preparing annual operational and procurement plans; (ii) overseeing procurement processes in conformity with

13 Goal 4: reduce child mortality; Goal 5: improve maternal health. 10

World Bank procedures; (iii) ensuring the timely implementation of the operational and procurement plans; (iv) providing all necessary technical inputs to Project activities; (v) ensuring efficient use of project funds and resources; (v) preparing semi-annual technical progress reports; and (vi) monitoring and evaluation of Project results. The structure and profiles of personnel of the PCU as well as reporting lines of the PCU within the MINSAL is outlined in the Operations Manual.

36. Procurement and financial management for the Project will be managed by MINSAL’s existing Institutional Procurement and Contracting Unit (UACI) and the Institutional Financing Unit (UFI). The MINSAL‘s UACI will be responsible for overseeing the procurement necessary for project activities, including (i) preparing and updating as necessary an annual procurement plan, based on the annual operational plan; (ii) purchasing goods and medical supplies; and (iii) recruiting consultants needed for technical assistance. UFI will be responsible for the financial management of the Project, including (i) budget formulation and monitoring; (ii) cash flow management, including processing payments and submitting loan withdrawal applications to the Bank; (iii) maintenance of accounting records, including the administration and maintenance of an inventory of project assets; (iv) preparation and submission of in-year and year-end financial reports; (v) oversight of information systems; and (vi) organization of financial and operational audits. UACI and UFI are relatively inexperienced in carrying out the fiduciary responsibilities and functions required for the implementation of a Bank project. Therefore, the Government will ensure that these fiduciary units are adequately staffed with a financial management specialist, procurement specialist, and procurement analyst that have experience with Bank operations.

37. A Project Operations Manual was prepared by the MINSAL and submitted to the Bank at Negotiations. The Project Operations Manual was prepared and outlines staff profiles as well as processes and procedures for monitoring compliance with performance benchmarks, reporting, procurement, financial management, disbursement, and auditing procedures.

B. Results Monitoring and Evaluation

38. MINSAL will be responsible for monitoring and evaluation of the Project. Project outcomes and results will be analyzed using the MINSAL‘s institutional statistics and monitoring system to track progress on the indicators outlined in the results framework in Annex 1. The Project will use different sources of information from Government and from data instruments such as: (i) an external technical review14 and financial auditing; (ii) statistics from the national epidemiological surveillance unit of MINSAL; (iii) annual external procurement reviews; (iv) household surveys15 focusing on demand for health services and financial barriers to access; (v) annual health facility surveys; (vi) quarterly Project Management Reports prepared by the UACI; (vii) baseline and impact evaluation analysis; and (viii) the Mid-Term Evaluation Report jointly

14 A technical review (contracted by the MINSAL) will analyze the Project‘s results and progress on agreed health outcomes and project performance indicators. The terms of reference of the technical review will be prepared by the MINSAL and financed by Component 3. MINSAL may also carry out surveys and rapid assessments to provide population-based and health facility-based information about the impact of the Project and health policies on the well-being of the target population and the status of specific health system performance indicators. 15 Family Health Survey, FESAL, and Multipurpose Household Surveys. 11 reviewed by the Bank and MINSAL. The Project will also support strategic investments through Component 2 to provide supervision and monitoring tools and capacity building within the MINSAL at the local and national levels.

C. Sustainability

39. The Government is committed to the Project, as demonstrated by the high-level support and active engagement of the authorities during preparation. The Government has identified the health sector as a priority within its poverty alleviation strategy and has launched the National Health Sector Reform. In addition, supporting programs that are already under implementation are mostly financed by the Government‘s own raised funds. The estimated annual budget of MINSAL was around US$517 million for 2011, an increase of 30 percent from 2008 demonstrating Government commitment to prioritizing health. The Project will provide substantial support for the expansion of health care services while ensuring that the Government gradually covers the expenditures financed by the Project that require financing beyond the lifespan of this operation.

40. The Government is working in the design and further implementation of a tax reform as part of a fiscal package that will ensure a sustainable public investment in the next four years. This plan is expected to be submitted to Congress in 2012. In the meantime the Government is launching an extensive process of consensus building on a Fiscal Pact with private sector and civil society.

41. Harmonization of financial audits and coordination of investments in the sector are critical to ensuring synergies and maximizing impact. The Government‘s health sector strategy will be supported by two major investments, US$60 million from the IADB and the Project financed by IBRD in the amount of US$80 million. As such, coordination of Project activities and harmonization of procedures will be essential to maximize the impact of both projects. At the same time, close collaboration with other development partners, such as the Pan American Health Organization (PAHO) and the Agencia Española de Cooperación Internacional para el Desarrollo, will ensure synergies in technical cooperation activities and align financial support.

V. KEY RISKS

42. Project risks during implementation are rated as Medium-I (a high impact if the anticipated risk is not mitigated, with a low likelihood of occurrence). Several risks were identified during Project preparation and mitigation measures have been proposed to manage their potential impacts. The Project includes activities and design elements that aim to mitigate the risks and any potential impacts. Potential risks and mitigation actions are summarized in the Operational Risk Assessment Framework (ORAF) in Annex 4. The most critical risks are the following: a) Lack of close coordination and harmonization could result in duplication of efforts or gaps in critical activities. Harmonization of key development partners is essential to ensure synergies and avoid duplication of efforts. The Bank has established strong collaboration

12

with other development partners such as IADB, which has had a long-term presence in the Salvadorian health sector and in on-going projects. The IADB prepared an operation in the amount of US$60 million that was approved in January 2011, with a special focus on primary health care services and the hospital emergency response system. Discussions are underway to advocate for a joint PCU with the IADB-financed project and for joint supervision missions. This will go a long way to ensuring harmonization of activities. b) Strong project performance depends largely on MINSAL’s knowledge of the Bank’s processes and procedures, and on its ability to coordinate the different elements of the Project and carry out fiduciary tasks. MINSAL was found to have weak capacity and limited experience with Bank operations with respect to the Bank‘s procurement and financial management guidelines. UACI and UFI have no previous experience applying Bank guidelines or procedures. A number of mitigating measures have thus been put in place, which include providing training to PCU staff in financial management and procurement, contracting new staff with appropriate skills and experience, recruiting external auditors no later than four months after effectiveness, and designing specific financial management processes and procedures by project launch to ensure that project funds are used economically and efficiently. The Bank will also take advantage of lessons learned from the PCU of the previous project. The MINSAL will also need to coordinate with the Ministry of Finance to ensure that the recurrent budget is available in a timely manner to complement the capital investments undertaken by the Project. In this sense, the role of the technical advisory committee is critical to minimize risk. A process evaluation will be carried out in the first year to identify and address shortcomings.

VI. APPRAISAL SUMMARY

A. Economic and Financial Analysis

43. The economic analysis performed in Annex 7 suggests that the Project will be sustainable based on conservative health budget projections. Assuming that MINSAL‘s budget and spending increase around 8 percent in 2011-2012 and 5 percent in 2012-2013, and at around 3 percent for all remaining periods, the Government will have a large enough budget to sustain the recurrent costs generated from the Project. In addition to sustainability, the Project‘s benefit cost ratio is of 1.61 to 2.15 with net present values of US$129 million to US$172 million. Economic and social benefits will accrue from improved health status, including reduction of maternal and infant deaths, as well as increased system efficiency and productivity gains. Annex 7 provides a detailed analysis.

B. Technical

44. The Project supports the Government’s new Health Strategy and in particular, the objectives of improving health care coverage, quality of services, equity in access and utilization, as well as increasing institutional capacity and strengthening system performance. The overall technical design of the Project is aligned with the country‘s priorities and strategy and consistent with international good practice. This includes making strategic capital investments in the health system to complement recurrent State expenditures and ensure improvement in quality of service

13 delivery. Moreover, the new Health Strategy puts renewed emphasis on not only treatment services but also disease prevention and health promotion, especially for underserved populations. The Project builds on earlier gains in the health sector and is fully complementary with activities of other development partners, especially IADB and USAID.

C. Financial Management

45. A Financial Management Assessment was carried out in July 2010 and rated the Project risk as Moderate. The Assessment was carried out in accordance with OB/BP 10.02 Financial Management and concluded that MINSAL has an established institutional financial unit that was responsible for the financial oversight of US$517 million in 2010, and thus has the ability to manage the fiduciary aspects of the Project; nevertheless, the unit does have some weaknesses in financial management and the Bank has identified specific mitigation measures to ensure the effectiveness of financial management implementation arrangements prior to Project launch.

46. Given the risks identified during Project preparation, Financial Management requirements will include annual financial audits, external technical reviews and semi- annual Interim Financial Reports, as well as financial management training and close supervision. Moreover, as part of the Project‘s financial management arrangements, MINSAL prepared a Project Operations Manual and will identify or contract dedicated financial management staff. These arrangements will be regularly reviewed during supervision and will include a mission at the time of effectiveness to ensure successful implementation of financial management arrangements, an annual review of audit reports to ensure proper use of funds, a review of semi-annual financial reports to monitor Project implementation, and at least two financial management supervision missions at the beginning of Project implementation to review the continuing compliance with financial management arrangements.

D. Procurement

47. Procurement for the Project will be undertaken by UACI within MINSAL and risk is assessed as Moderate. A procurement capacity assessment of the UACI was carried out in July 2010, and a summary of the main findings can be found in Annex 3. The overall procurement risk was assessed as Moderate.

48. A detailed mitigation plan was agreed to address procurement risks. The main actions in the mitigation plan include: i. Inclusion of a procurement section in the Project Operations Manual, including general procurement procedures, detailed procedures for the procurement of goods and the selection and employment of consultants, acceptable standard bidding documents and simplified formats for the different selection and procurement methods, as well as formal guidelines for record-keeping and filing; ii. Establishment of a working group within the UACI to be responsible for the procurement functions for this Project. A procurement specialist and two or three procurement analysts shall be hired by MINSAL under terms of reference acceptable to

14

World Bank and following selection processes under Bank‘s prior review. The UACI staff will be trained on World Bank guidelines and procedures; iii. Development of a Procurement Plan Execution System. In addition, workshops will be organized to train staff on the system and on procurement practices and issues to strengthen the capacity of procurement staff on specialized issues; and iv. Preparation of a detailed Procurement Plan for the first 18 months of Project implementation by MINSAL. The plan outlines the different procurement methods and the need for Bank review process.

E. Social

49. The Project is expected to have a positive social impact on the population of El Salvador, with particular attention on the urban and rural poor including indigenous people and, therefore, triggers the indigenous peoples safeguard policy OP/BP 4.10 (Indigenous peoples). The Project seeks to expand basic health services for the underserved, particularly women and children. An Indigenous Peoples‘ Planning Framework (IPPF) was prepared by the MINSAL to guide Project implementation so that it benefits the targeted populations in a culturally appropriate way. The IPPF was discussed and approved by MINSAL through consultations with the indigenous community and associations. It was disclosed in-country on the MINSAL‘s website on March 10, 2011 and in the Bank‘s website on March 22, 2011. The main recommendations of the IPPF are to: (i) provide training for the MINSAL staff on cultural appropriateness strategies; (ii) improve an informed consultation process; (iii) carry out the implementation of an action plan through which indigenous peoples receive culturally-sensitive and appropriate health services; (iv) monitor and evaluate the effective implementation of the action plan; and (v) conduct mid-term and final evaluations of the social impact of the Project. The Project will not finance any activity which includes land or property acquisition and therefore, OP/BP 4.12 (Involuntary Resettlement) is not triggered.

F. Environment

50. Although it triggers the environmental safeguard policy (OP/BP 4.01), the Project is categorized as Environmental Category C given that it is not expected to generate adverse environmental impacts. An environmental assessment of the potential impacts of the Project was conducted and an Environmental Management Plan, satisfactory to the Bank, was developed by MINSAL. The environmental assessment was disclosed in-country on the MINSAL‘s website on March 10, 2011 and in the Bank‘s website on March 22, 2011 Project activities are not expected to generate adverse environmental impacts. The Project will support small-scale rehabilitation of existing health care facilities to ensure installation of appropriate medical equipment required to expand the delivery of health services. During implementation, supervision will focus on monitoring any potential environmental impacts related to (i) health waste management in health facilities and laboratories; and (ii) minor rehabilitation of health facilities (related to the installation of equipment) that will be financed under Component 1 of the Project. During project supervision, the Bank will also monitor progress on implementation of the environmental management action plan to ensure that it meets Bank standards. The MINSAL‘s Environmental Unit has been rated by the Bank as satisfactorily able to support environmental protection and conservation.

15

Annex 1: Results Framework and Monitoring EL SALVADOR: Strengthening Public Health Care System Project

Project Development Objective (PDO): The objectives of the Project are to: (i) expand the coverage, quality, and equity in utilization of priority health services provided under the RIISS; and (ii) strengthen MINSAL‘s stewardship capacity to manage essential public health functions.

Cumulative Target Values Responsibili Unit of Data Source/ PDO Indicators Baseline YR 4 Frequency ty for Data Measure YR 1 YR 2 YR3 Methodology

Collection

Core Indicator 1: Poor people using public Percentage 50% 55% 60% 65% 70% Annual Multipurpose Department health care services when needed. Household Surveys, of Statistics Baseline Survey and Public Expenditure Tracking Survey Indicator 2: MINSAL-registered Percentage 31.6% 32.5 36% 43% 52% Annual SUIS/MINSAL MINSAL pregnant women receiving prenatal (2010) care according to MINSAL norms. Indicator 3: Eligible secondary and Percentage 0% 0% 30% 50% 75% Annual Directorate of National MINSAL tertiary hospitals certified by Hospitals MINSAL. (**) Indicator 4: Pharmaceutical products Percentage 0% 0% 20% 50% 90% Annual MINSAL information MINSAL purchased by MINSAL through a system decentralized mechanism that is subject to quality control by a MINSAL laboratory.

INTERMEDIATE RESULTS

Intermediate Result (Component 1: Expansion of Priority Health Services and Programs) Intermediate Result Indicator 1: Annual Directorate of First MINSAL Health facilities (ECOS) equipped Number 0 0 80 250 530 Level according to norms established by 0 0 5 12 20 Directorate of National X MINSAL: Hospitals (i) Family community health teams. (ii) Hospitals. Intermediate Result Indicator 2: Number 0 200 400 700 1200 Annual Directorate of Human MINSAL Health personnel receiving training in X Resources priority health programs. Development Intermediate Result Indicator 3: Number 0 4 8 12 16 Annual Directorate of National MINSAL

Hospitals integrated into the National Hospitals

16

Cumulative Target Values Responsibili Unit of Data Source/ PDO Indicators Baseline YR 4 Frequency ty for Data Measure YR 1 YR 2 YR3 Methodology

Collection

Core Medical Emergencies System.

Intermediate Result Indicator 4: Number 0 0 4 9 14 Annual Environmental Health MINSAL Eligible hospitals that comply with Unit the standard bio-hazard waste management systems. (**) Intermediate Result (Component 2: Institutional Strengthening)

Intermediate Result Indicator 1: Number 0 0 5 11 16 Annual Directorate of National MINSAL Eligible hospitals that have an Hospitals electronic medical record system in SUIS.(**) Intermediate Result Indicator 2: Number 0 5 10 15 30 Annual Directorate of National MINSAL Eligible hospitals with functioning Hospitals pharmaceutical surveillance committee in conformity with MINSAL norms. (***) Intermediate Result Indicator 3: Number 0 0 60 200 480 Annual Directorate of First MINSAL ECOS reached by the Project Level supplying medicines according to MINSAL norms. Intermediate Result (Component 3: Project Management and Monitoring)

Intermediate Result Indicator 1: Percentage 0% 80% 85% 90% 95% Annual Technical Review MINSAL Procurement processes implemented according to annual procurement plan.

(*) Certified and functioning according to MINSAL norms. Eligible: 16 hospitals. (**) See Operations Manual for the 14 standard based criteria. Eligible: 16 hospitals. (***) Eligible: 30 hospitals.

17

Definitions of Operational Indicators

INDICATORS OPERATIONAL DEFINITIONS PDO Level Results Indicators

Indicator 1: Poor people Numerator: Number of eligible poor people enrolled in MINSAL using using public health care public health care services. services when needed (percentage). Denominator: Number of eligible poor people.

An ‗eligible‘ poor person fits the same definition as a poor household according to the Government of El Salvador. This information will be included in the Operations Manual. Indicator 2: MINSAL- Numerator: Number of pregnant women enrolled in MINSAL receiving registered pregnant women prenatal care according to MINSAL norms. receiving prenatal care according to MINSAL norms. Denominator: Number of women who are pregnant.

MINSAL norms ensure that women obtain a Latin America Center for Perinatology (CLAP) form, receive at least four prenatal check-ups, and deliver at a MINSAL health facility.

Indicator 3: Eligible Numerator: Total number of eligible secondary and tertiary level secondary and tertiary hospitals certified on an annual basis. hospitals certified by MINSAL (percentage). Denominator: Total number of eligible secondary and tertiary hospitals within the MINSAL (16).

Certified MINSAL hospitals functioning according to the following norms: (a) Operate within the integrated health care service networks. (b) Operate within a system of referral and counter-referral at all levels of care. (c) Hospital is equipped and has adequate human resources. (d) Other technical requirements established in the Project Operations Manual. Indicator 4: Pharmaceutical Numerator: Number of pharmaceutical products purchased by MINSAL products purchased by through a decentralized mechanism that is subject to a quality control MINSAL through a standard. decentralized mechanism that is subject to quality control by Denominator: Total number of pharmaceutical products purchased which a MINSAL laboratory are included in the essential list of medicines. (percentage). The total number of pharmaceutical products subject to a quality control standard is cumulative from project inception as a proportion of the total number of pharmaceuticals in the essential list established by MINSAL.

18

INDICATORS OPERATIONAL DEFINITIONS

Intermediate Result (Component 1: Expansion of Priority Health Services and Programs)

Intermediate Result (i) Number of family and community health teams equipped on Indicator 1: Health facilities an annual basis according to MINSAL norms (out of a (ECOS) equipped according possible total of 530). to norms (number): (i) Family and (ii) Number of hospitals equipped on an annual basis according community health teams. to MINSAL norms (out of a possible total of 20). (ii) Hospitals. Intermediate Result Number of health facility staff receiving training by priority program on Indicator 2: Health personnel an annual basis. trained in the priority health programs (number). The number is cumulative from start of project.

Priority programs refer to the following interventions: primary health care focusing on maternal and child interventions, reproductive and sexual health interventions, nutrition, dengue, kidney chronic disease. Intermediate Result Number of hospitals integrated into the National Medical Emergencies Indicator 3: Hospitals System on an annual basis (out of a possible total of 16). integrated into the National Medical Emergencies System The number is cumulative from start of project. (number). Intermediate Result Number of eligible hospitals that comply with the standard bio-hazard Indicator 4: Eligible waste management systems on an annual basis (out of a possible total of hospitals that comply with the 20). standard bio-hazard waste management systems The number is cumulative from start of project. (number).

Intermediate Result (Component 2: Institutional Strengthening)

Intermediate Result Numerator: Number of eligible hospitals that put in place an electronic Indicator 1: Eligible medical record system on an annual basis (out of 16). hospitals that have an electronic medical record Denominator: Total number of hospitals participating in SUIS. system in SUIS (percentage). Intermediate Result Number of eligible hospitals establishing a functioning pharmaceutical Indicator 2: Eligible surveillance committee on an annual basis in conformity with MINSAL hospitals with a functioning norms (out of 30). pharmaceutical surveillance committee in conformity with The number is cumulative from start of project. MINSAL norms (number).

Intermediate Result Numerator: Number of ECOS reached by the Project supplying medicines Indicator 3: ECOS reached according to MINSAL norms. by the Project supplying medicines according to Denominator: Total number of ECOS reached by the Project on a MINSAL norms. cumulative basis.

19

INDICATORS OPERATIONAL DEFINITIONS

The term ―reached‖ refers to those ECOS intervened on a cumulative basis by the Project. The term ECOS refers to Equipo Comunitario de Salud Familiar (Community Family Health Teams).

Intermediate Result (Component 3: Project Management and Monitoring)

Intermediate Result Numerator: Number of procurement processes implemented annually Indicator 1: Procurement based on the annual procurement plan. processes implemented according to annual Denominator: Total number of procurement processes in the Annual procurement plan Procurement Plan. (percentage).

20

Annex 2: Detailed Project Description EL SALVADOR: Strengthening Public Health Care System Project

1. MINSAL seeks to build a unified sector led by the Ministry. As such, the objectives of the National Health Strategy include improved access to quality health services, improved equity and efficiency, development of information systems to provide data for evidence-based decision-making, reduction of the impact of health emergencies, development of a national research system, and increased social participation and accountability.

2. The Government objective is to guarantee the right to health for all Salvadorians through an Integrated National Health System that steadily strengthens the public sector (including social security) and effectively regulates the private sector, while supporting access to health promotion, disease prevention, care, and rehabilitation, and a healthy safe environment, including but not limited to the creation and maintenance of an efficient health care system with high resolutivity and equitable access to quality services for all.

3. Substantial progress on this long term goal is expected over the next four years. By then, the organization of the Integrated Health Care Service Networks is expected to reach the entire population. Also, significant progress will be made in coordinating health services with other public actors. Strengthened health service provision will be a reality, although there will still be much to accomplish to achieve an ideal system of high quality universal health care.

4. By the end of the five-year period (2009-2014), as per the Strategy the goal is to reduce child under-five mortality and maternal mortality as well as mortality from injuries (especially mortality occurring due to the lack of timely response to illness and accidents) to improve post-traumatic management of injuries, and reduce the incidence of non-communicable and chronic diseases by transforming the health care system as proposed by the National Health Strategy.

5. To ensure the key political and institutional conditions necessary for structuring, strengthening and sustaining the Integrated National Health Care System, the National Health Strategy 2009-2014 defines eight priorities: (i) strengthening of the Integral and Integrated Health Care Service Networks (RIISS) by the MINSAL; (ii) establishment of a National Medical Emergencies System; (iii) improve availability of medicines and vaccines; (iv) progressive harmonization with Social Security and other public service providers and strengthening of the cross-sectoral collaboration; (v) support for the National Health Forum; (vi) creation of the National Institute of Health; (vii) development of a Single Unified Health Information System; and (viii) strengthening of Human Resources Development in Health as a pillar of the Integrated National Health Care System.

6. The Project will support the Government Health Strategy, specifically to improve health care coverage of the poor and quality of services, as well as increase institutional capacity and strengthen system performance. The Project aims to improve the quality of care and increase the efficiency of referral mechanisms so that over 80 percent of health needs are resolved at the first level of care. This reorganization will increase: (i) health care coverage of the poor near the community and with a major emphasis on health promotion); (ii) quality of care

21 through investments needed in the health sector; and (iii) efficiency in the provision of services through a strengthened referral mechanism. The Project supports two key areas: (i) expansion of priority health services through capital investments needed to improve the quality of services, in support of the provision of a comprehensive set of essential health interventions, and improvement of priority programs and the National Medical Emergencies System; and (ii) strengthening the essential public health functions, to reinforce MINSAL institutional and management capacity at all levels of care. This includes support to the health information system, the national network of laboratories of the National Health Institute and implementation of the national drug management policy as well as responding to public health emergencies.

7. Within this context, the Project Development Objectives are to: (i) expand the coverage, quality, and equity in utilization of priority health services provided under the RIISS; and (ii) strengthen MINSAL’s stewardship capacity to manage essential public health functions. The Project will finance three Components: (i) Expansion of Priority Health Services and Programs; (ii) Institutional Strengthening; and (iii) Project Management and Monitoring.

Component 1: Expansion of Priority Health Services and Programs (US$45 million)

8. This Component seeks the Expansion of Priority Health Services and Programs and will finance the following subcomponents:

(1) Strengthening the quality and delivery capacity of priority health services under the RIISS through: (a) the gradual implementation of the CPHC strategy, which includes the acquisition of medical equipment and the maintenance and minor rehabilitation of facilities; and

(b) The improved delivery of selected priority public health programs, including those addressing maternal health, reproductive and sexual health, teenage pregnancy, child health, nutrition, dengue control, and chronic kidney disease.

(2) Supporting the implementation of the SEM in about 16 Eligible Hospitals through: (a) improving the coordination between the national hospital system and other entities such as MINSAL, ISSS, Ministry of Defense, the National Civil Police, FOSALUD, and the Red Cross; (b) supporting the installation of a national call system for emergencies; (c) improving the resuscitation room equipment and the ambulance fleet; (d) training of medical and paramedic staff in the management of medical emergencies; and (e) strengthening medical emergency response at the community level.

Component 2: Institutional Strengthening (US$31.4 million)

9. This Component will finance the following activities:

(1) Strengthening MINSAL‘s institutional and management capacity to perform essential public health functions through: (a) the improvement of the Single Unified Health

22

Information System (SUIS); (b) the implementation of a national pharmaceutical policy aimed to enhance quality, efficiency and security in the access of rational use of medicines as well as transparency in procurement; and (c) the support of the activities of the National Health Institute (including training of clinicians and lab technicians, surveillance, knowledge generation and research) and the Central Laboratory.

(2) (a) Developing an emergency preparedness plan for Public Health Emergencies; and (b) implementing of this plan through financing of the Eligible Public Health Expenditures.

Component 3: Project Management and Monitoring (US$3.4 million)

10. (1) Supporting: (i) the monitoring of the Project activities through semi-annual, external technical reviews; (ii) annual health facility surveys to assess the achievement of health coverage and results targets; and (iii) an impact evaluation; (2) Assisting the PCU in carrying out the management, monitoring and supervision activities of the Project, including training and financial audits and, (3) Strengthening Institutional Procurement and Contracting Unit (UACI) and Institutional Financing Unit (UFI), the units performing the Project‘s fiduciary activities.

Component 1: Expansion of Priority Health Services and Programs (US$45 million)

11. Component 1 seeks to expand coverage of target populations with a comprehensive set of essential health interventions and improve delivery of priority programs focused on health promotion, disease prevention, treatment, and rehabilitation. Coverage will be expanded using the RIISS to strengthen delivery of services within the framework of the MINSAL Comprehensive Primary Health Care strategy (CPHC). This strategy is justified for the following reasons: first, the improvement of service delivery capacity under the MINSAL CPHC strategy has not only increased access to services by vulnerable populations but has also produced better results in responding to the population‘s most critical health needs. Evidence shows that this strengthened capacity to deliver services has resulted in better equity in health service utilization and improved outcomes in child and maternal mortality. Second, strengthening capacity to deliver services is cost-effective and reduces the demand for services that require higher levels of attention. This helps control the costs of the public health care system in the context of emerging chronic diseases that require the development of preventive approaches. Finally, a strengthened hospital network will lead to better efficiency in the provision of more complex services and will better address the high number of trauma cases. To ensure the delivery of high quality services under priority health programs, this Component will finance the optimal amount of equipment, medical supplies and technical cooperation to manage these interventions and program, through two subcomponents.

12. MINSAL has committed to complementing the investment of the Project with the necessary recurrent expenditures (in the eligible municipalities) to ensure increased coverage and quality of health services. MINSAL, through the Family and Community Health Teams, will identify and register their target populations and delivery of health care services using the ―Ficha Familiar‖ as the main instrument. Data collected for the 92 municipalities through additional surveys, including annual health facility surveys, will be sent to the Directorate of Communication and Information at the central Level through the SIBASI and Health Regions. A

23 technical review will assess the Project‘s results in terms of outputs and health indicators included in the MINSAL‘s SUIS.

Subcomponent 1.1: Strengthening Priority Health Services and Programs (US$27.5 million)

13. Providing health care effectively and efficiently involves bringing together a great variety of resource inputs to produce an array of different service outputs. These required resource inputs usually fall into the categories of human resources, facilities, pharmaceuticals and medical equipment. Matching the supply of inputs to health system requirements and ensuring the right mix of inputs, creating the proper balance between capital investments and recurrent costs, as well as putting in place the requisite system capacity to manage purchased inputs throughout their entire life cycle are all vital for the effective delivery of health services and satisfactory performance of the health system. The right equipment and supplies at every level of care is necessary to create an effective referral system or an integrated health care service network (Table 2.2).

14. This Subcomponent will thus finance support to strengthening priority health services under RIISS at all levels. MINSAL is in the process of defining a comprehensive set of essential health interventions, the recurrent costs of which are financed through the State budget. To complement these recurrent expenditures, this subcomponent will finance the capital investments required to implement the CPHC strategy in the eligible municipalities on a gradual basis, including medical equipment and, maintenance and minor rehabilitation of facilities to allow installation of equipment. To avoid duplication and overlap, the Project will concentrate in municipalities other than those included in the IADB Project, excluding the San Salvador Metropolitan area, where IADB will partially intervene.16

Table 2.1: Eligible Municipalities and Target Population No Department Municipality Urban Rural Total Number Number Pop. Pop. Population of Urban of Rural ECOS ECOS 1 Ahuachapan Atiquizaya 20,864 12,723 33,587 3.0 5.0 2 Ahuachapan San Lorenzo 1,127 8,067 9,194 1.0 3.0 3 Cuscatlan El Carmen 2,075 11,270 13,345 1.0 4.0 4 Cuscatlan San Jose 2,871 6,429 9,300 1.0 3.0 Guayabal 5 Cuscatlan San Pedro 14,988 29,742 44,730 2.0 10.0 Perulapan 6 La Libertad Ciudad Arce 41,483 18,831 60,314 5.0 7.0 7 La Libertad Huizucar 4,841 9,624 14,465 1.0 4.0 8 La Libertad Jayaque 6,894 4,164 11,058 1.0 2.0 9 La Libertad Tamanique 3,957 9,587 13,544 1.0 4.0 10 La Libertad Tepecoyo 8,293 6,029 14,322 1.0 2.0 11 La Union Anamoros 1,790 12,761 14,551 1.0 5.0

16 In the IADB project, the departments included are: San Miguel, Chalatenango, Sonsonate and all the metropolitan area of El Salvador. The Bank-financed Project will cover the departments of Ahuachapan, Cuscatlan, La Libertad, La Union, Morazan, Cabanas, San Salvador, Santa Ana, Usulutan, la Paz, Usulutan, Santa Ana and San Vicente. 24

No Department Municipality Urban Rural Total Number Number Pop. Pop. Population of Urban of Rural ECOS ECOS 12 La Union Conchagua 17,025 20,337 37,362 2.0 7.0 13 Morazan Oscicala 1,989 6,920 8,909 1.0 3.0 14 Cabañas San Isidro 1,551 6,245 7,796 1.0 1.0 15 Cabañas Sensuntepeque 15,395 24,937 40,332 2.0 8.0 16 Cabañas Guacotecti 2,419 3,131 5,550 1.0 1.0 17 La Libertad La Libertad 23,103 12,894 35,997 3.0 5.0 18 La Libertad San Pablo 5,619 14,747 20,366 1.0 5.0 Tacachico 19 San Salvador El Paisnal 6,723 7,828 14,551 1.0 3.0 20 San Salvador Rosario de Mora 5,053 6,324 11,377 1.0 2.0 21 Santa Ana Santa Ana 204,340 41,081 245,421 23.0 14.0 22 Santa Ana Texistepeque 3,112 14,811 17,923 1.0 5.0 23 Usulutan El Triunfo 3,072 3,852 6,924 1.0 2.0 24 Usulutan Ereguayquin 1,920 4,199 6,119 1.0 2.0 25 Usulutan Jucuapa 10,468 7,974 18,442 2.0 3.0 26 Usulutan Puerto el Triunfo 9,601 6,983 16,584 2.0 3.0 27 Ahuachapan Concepcion de 5,902 6,884 12,786 1.0 3.0 Ataco 28 Ahuachapan San Francisco 12,396 30,211 42,607 2.0 10.0 Menendez 31 Cuscatlan Cojutepeque 41,072 9,243 50,315 5.0 3.0 32 Cuscatlan San Rafael Cedros 5,356 11,713 17,069 1.0 4.0 33 Cuscatlan Santa Cruz 6,659 5,131 11,790 1.0 2.0 Michapa 34 Cuscatlan Suchitoto 7,654.00 17,132 24,786 1.0 6.0 35 La Libertad San Juan Opico 44,986 29,294 74,280 5.0 10.0 36 La Libertad Talnique 4,889 3,365 8,254 1.0 1.0 37 La Paz El rosario 9,374 7,410 16,784 1.0 3.0 38 La Paz San Francisco 2,659 4,728 7,387 1.0 2.0 Chinameca 39 La Paz San Juan 7,600 9,656.00 17,256 1.0 4.0 Nonualco 40 La Paz San Luis la 8,719 11,686.00 20,405 1.0 4.0 Herradura 41 La Paz San Luis Talpa 13,218 8,457.00 21,675 2.0 3.0 42 La Paz San Pedro 13,116 12,330.00 25,446 2.0 4.0 Masahuat 43 La Paz Santiago 12,013 27,874.00 39,887 2.0 9.0 Nonualco 44 La Paz Zacatecoluca 42,127 23,699.00 65,826 5.0 8.0 45 La Union El Carmen 1,787 10,537.00 12,324 1.0 4.0 46 La Union El Sauce 895 5,651 6,546 1.0 2.0 47 La Union Meanguera del 452 1,946 2,398 1.0 0.0 Golfo 48 La Union San Alejo 2,972 14,626 17,598 1.0 5.0 49 Morazan El Divisadero 822 6,795 7,617 1.0 2.0 50 Morazan Jocoro 3,054 7,006 10,060 1.0 2.0 51 Morazan Meanguera 1,535 6,283 7,818 1.0 1.0

25

No Department Municipality Urban Rural Total Number Number Pop. Pop. Population of Urban of Rural ECOS ECOS 52 Morazan San Francisco 15,307 5,742 21,049 2.0 2.0 Gotera 53 Morazan Sociedad 1,068 10,338 11,406 1.0 3.0 54 San Salvador Santa Tecla 108,840 13,068 121,908 12.0 5.0 55 San Salvador Ayutuxtepeque 34,710 4.0 56 San Salvador Soyapango 241,403 14.0 57 San Salvador Aguilares 19,134 2,133 21,267 3.0 1.0 58 San Salvador Guazapa 14,227 8,679 22,906 2.0 3.0 59 San Salvador Santiago 12,382 7,046 19,428 2.0 4.0 Texacuangos 60 San Salvador Santo Tomas 18,752 6,592 25,344 2.0 3.0 61 San Vicente Guadalupe 3,721 1,765 5,486 1.0 1.0 62 San Vicente San Cayetano 1,610 3,493 5,103 1.0 1.0 Istepeque 63 San Vicente San Sebastian 6,553 7,858 14,411 1.0 3.0 64 San Vicente San Vicente 36,700 16,513 53,213 4.0 6.0 65 Santa Ana Candelaria de la 8,148 14,538 22,686 1.0 5.0 Frontera 66 Santa Ana Coatepeque 13,340 23,428 36,768 2.0 8.0 67 Santa Ana El Congo 14,594 9,625 24,219 2.0 4.0 68 Cuscatlan Candelaria 3,598 6,492 10,090 1.0 2.0 69 Cuscatlan San Bartolome 4,682 3,376 8,058 1.0 2.0 Perulapia 70 Cuscatlan San Ramon 1,261 5,031 6,292 1.0 1.0 71 La Libertad Zaragoza 18,035 4,490 22,525 2.0 2.0 72 La Paz Cuyultitan 3,365 2,225 5,590 1.0 1.0 73 La Paz Jerusalen 448 2,122 2,570 1.0 0.0 74 La Paz Mercedes la Ceiba 485 152 637 1.0 0.0 75 La Paz Olocuilta 15,917 13,612 29,529 2.0 5.0 76 La Paz San Rafael 5,112 4,708 9,820 1.0 2.0 Obrajuelo 77 La Union Bolivar 509 3,706 4,215 1.0 1.0 78 La Union Concepcion de 1,016 7,163 8,179 1.0 2.0 Oriente 79 La Union Intipuca 2,879 4,688 7,567 1.0 1.0 80 La Union La Union 18,046 15,999 34,045 2.0 6.0 81 La Union Pasaquina 3,553 12,822 16,375 1.0 4.0 82 La Union Santa Rosa de 13,640 14,053 27,693 2.0 5.0 Lima 83 La Union Yucuaiquin 1,179 5,620 6,799 1.0 1.0 84 San Salvador Nejapa 16,530 12,928 29,458 2.0 5.0 85 San Vicente Tecoluca 10,476 13,417 23,893 2.0 5.0 86 Santa Ana Metapan 19,356 39,648 59,004 3.0 13.0 87 Santa Ana San Sebastian 17,481 1,085 18,566 2.0 1.0 Salitrillo 88 Usulutan Jiquilisco 20,270 27,514 47,784 3.0 10.0 89 Usulutan San Buena 939 3,787 4,726 1.0 1.0 Ventura

26

No Department Municipality Urban Rural Total Number Number Pop. Pop. Population of Urban of Rural ECOS ECOS 90 Usulutan San Dionisio 1,281 3,664 4,945 1.0 1.0 91 Usulutan Santiago de Maria 14,339 3,862 18,201 2.0 2.0 92 Usulutan Usulutan 51,496 21,568 73,064 6.0 7.0 TOTAL 1466,212 947,697 2137,796 196.0 334.0 *The term ECOS refers to Equipos Comunitarios de Salud Familiar (Community Family Health Teams).

Table 2.2: Hospital networks eligible for capital investments 2011 2012 2013 Gotera Ciudad Barrios Soyapango Jiquilisco Nueva Guadalupe Metapan Suchitoto Santa rosa de lima Saldaña Sensuntepeque Chalatenango Ahuachapán Ilobasco Nueva Concepción Sonsonate Zacamil San Bartolo Santiago de María Santa Ana

15. Component 1 will also strengthen the delivery of selected priority public health programs, including those addressing maternal health, reproductive and sexual health, teenage pregnancy, child health, nutrition, dengue control, and chronic kidney disease. The subcomponent will finance training of personnel, provision of goods, and technical cooperation in eligible municipalities. No activities related to pest management will be financed, such as fumigation of houses or the purchase of pesticides. This Component will support activities related to the priority programs and health interventions described below:

(a) Maternal Health. The Government's strategy to reduce maternal mortality through the Safe Motherhood program includes the following pillars: (i) family planning; (ii) prenatal care, (iii) safe delivery and essential obstetric care.

(b) Child Health. To improve child health results, including by reducing child mortality to 14 per 100,000 live births and under-five mortality to 17 per 1,000 live births, with special focus in poor and remote areas, the Project will finance the following activities: (i) the extended child-mother health benefits plan (e.g. skills certifications, training, monitoring of neonatal rooms, and equipment of neonatal units in eligible hospitals); (ii) interventions linked to (a) reducing pneumonia incidence to 0.5; (b) increasing vaccination coverage to 95 percent; (c) increasing the registration of early child delivery to 85 percent; (d) improving coordination with other relevant public institutions; (e) improving surveillance of mortality and morbidity rates; and (f) achieving 100 percent certification of health personnel in conformity with the new guidelines on child health care attention; (iii) mass communication of the child health care strategy, including education campaigns to improve healthy behavior and improve utilization and access to services; and (iv) prevention of violence and accidents, including data management and awareness of staff, certification of personnel of emergency units in hospitals and of pediatric residents and medical inputs for pediatric emergencies. The Project will finance equipment and analytical consultancies to complement investments in health centers.

27

(c) Nutrition. The Project will finance activities leading to the reduction of chronic malnutrition, anemia and obesity through staff training and consultancies. El Salvador, like many emerging economies, is affected by the double burden of malnutrition: it has both high rates of growth retardation and anemia in children and high levels of obesity and chronic diseases in adults. In El Salvador, almost 20 percent of children under five years of age suffer from growth retardation. Some areas of the country have very high rates of chronic malnutrition such as Sonsonate (27 percent), Chalatenango (26 percent) and Morazán (25 percent). Children from the lowest income quintile are almost seven times more stunted than children in the richest income quintile and almost 40 percent of children born to mothers with no education are stunted. Anemia rates have worsened since 1998, becoming a public health problem affecting more than one quarter of children 6-59 months old (26 percent). Young Salvadorians are the most affected by anemia as two out of five children between 6-24 months are anemic (37.7 percent). The situation is even more serious in very young children as almost half of children aged 6-11 months suffer from anemia (46.1 percent; almost 60 percent in the lowest income quintile). In addition, half of the adult population in El Salvador (54 percent of females and 43.5 percent of males) are overweight and almost one out of five women and one out of ten men are obese. If this situation is not addressed immediately, it will have adverse consequences on both the ability of the health system to absorb the increased costs of treatment of chronic diseases and the productivity of the workforce. Studies have shown that malnourished individuals lose more than 10 percent of their lifetime earning and many countries lose at least 2-3 percent of the GDP to malnutrition. Given a GDP in 2008 of US$22.1 billion in El Salvador, this could translate into a loss to the country of between US$442-US$663 million dollars per year. As El Salvador has been hit hard by the global financial crisis, investing in nutrition makes even more sense than ever to strengthen the economy and human capital.

(d) Dengue. The MINSAL will implement an integrated and integral action plan with citizen participation and a multi-sectoral approach to mitigate the chain of transmission and control the dengue epidemic. The Project will finance activities related to the action plan, including (a) activities at the municipal, regional and national levels which include actions to control dengue in affected localities. This would include diagnosis and follow up of cases in targeted areas; (b) social, community and institutional communication; (c) vector and environmental control interventions; (d) clinical management of dengue cases; and (e) procurement of bombs and fuel to increase the coverage of spraying.

Subcomponent 1.2: National Medical Emergencies System (SEM) (US$17.5 million)

16. The National Medical Emergencies System is a priority health investment for the MINSAL which aims to substantially reduce mortality and disorders caused by systemic cardiac attack, diseases, respiratory and pregnancy complications, as well as those events that generate injuries caused by external factors produced especially by, but not limited to violence and accidents. The beneficiaries of an effective system of care for medical emergencies are all citizens, regardless of their socio-economic status, sex, age, occupation or place of residence.

17. This Subcomponent will support implementation of the action plan of the National Medical Emergencies System in 16 eligible hospitals and strengthen coordination with the rest

28 of the hospital system and other providers, such as MINSAL, ISSS, Ministry of Defense, National Civil Police, FOSALUD, and Red Cross. Services provided by the National Medical Emergencies System begin with the detection of a medical emergency by family members, community and security forces. This is followed by the activation of the system through a management center that ensures the provision of pre-hospital care at the site of the accident, and transfer of the injured person to the health center using optimal means of transport and skilled personnel. MINSAL has established an action plan for the National Medical Emergencies System, including: (i) creation of a National Medical Emergency System Committee; (ii) elaboration of the national legal framework; (iii) establishment of the required inter-sectoral specialized technical committees (hospital commission, pre-hospital commission, rehabilitation commission, curriculum commission, auditing commission, training and education etc.); (iv) creation of an Operational Unit for the National Medical Emergencies System within MINSAL; (v) establishment of a Regulatory Center of Medical Emergencies linked to 911; and (vi) coordination of all ambulance units in the country, training of staff, workshops to community leaders, and purchase of ambulances. The Project will finance ambulances, equipment and training in the eligible hospitals (Table 2.3), consultancies to define the institutional arrangements, protocols, list of medicines, establishment of auditing process, and the purchase of information and technology equipment.

18. During Project implementation, MINSAL will promote a gradual certification of hospitals by regions. This will imply upgrading Santa Ana and San Miguel hospitals with new equipment as tertiary level hospitals (they are currently secondary level hospitals), as well as adding computed tomography, magnetic resonance and emergency resuscitation room equipment.

Table 2.3: Eligible hospitals for the National Emergencies Health System 2012 2013 2014 2015 Ahuachapán Sonsonate Meta pan Rosales Chalatenango San Vicente Zacatecoluca Santa Ana Usulután Gotera Zacamil San Miguel La Unión Llobasco San Bartolo San Rafael

19. This Subcomponent will also strengthen human resources through staff training and by covering the shortfall in human resources. There is a gap of 4,107 personnel necessary for the strengthening of the RIISS. The MINSAL intends to establish a system of referral and counter-referral to decrease the number of patients to hospitals in the same level.Eighty seven percent of tertiary level hospital deliveries are identified as low risk, 50 percent of surgeries that can be addressed in the secondary level hospitals (i.e. cholecystectomy) take place in tertiary level hospitals. Therefore, the Project will support the objective of reorganizing the network according to the complexity of the condition. With the empowerment of human resources at all levels and management of the hospital network, the goal is to improve the quality of care and redeployment of attention, so that 80 percent of needs are resolved in primary health care facilities and 20 percent in the secondary and tertiary level hospitals. This quality improvement will also lead to efficiency improvements in the provision of services. The Project will finance activities for the strengthening of hospital management through human resources management

29 investments (training and recruitment), equipment, physical fitness areas, and technical assistance.

Component 2: Institutional Strengthening (US$31.4 million)

20. This Component seeks to strengthen the capacity of the MINSAL’s essential public health functions in order to reinforce its institutional and management capacity at all levels of care. To this end, this Component will finance two subcomponents.

Subcomponent 2.1: Strengthening Stewardship and Monitoring Capacity of MINSAL (US$26.4 million)

21. Strengthening MINSAL’s institutional and management capacity to perform essential public health functions through: (a) the improvement of the SUIS; (b) the implementation of a national pharmaceutical policy aimed to enhance quality, efficiency and security in the access of rational use of medicines as well as transparency in procurement; and (c) the support of the activities of the National Health Institute (including training of clinicians and lab technicians, surveillance, knowledge generation and research) and the Central Laboratory

22. The MINSAL seeks to strengthen the Single Unified Health Information System to generate timely and adequate quality information for patient management, hospital management, and resource allocation. This System will integrate data management and heath indicators of all programs and institutions. Currently, there are approximately 40 data entry points that have been created to solve specific problems, without an overall picture and without the ability to articulate and connect with each other. In most existing systems, the inputting of information is done manually, which increases the possibility of error and underreporting. Also there is a duplication of information and inability to track individual cases; as a result, the MINSAL seeks to put in place a single unified system, based on existing systems that have been developed at different units and hospitals in the country. The Project will thus support the MINSAL goal to put in place a Single Unified Health Information System based on the existing systems and ensure its development on a free software platform, becoming fully operational in December 2012. To this end, the Project will finance (a) equipment and inputs needed by the System to become operational; and (b) staff cost and training.

23. This subcomponent will support activities to improve quality, efficiency, and safety in the access and rational use of medicines. MINSAL is seeking to: (a) elaborate a unique list of essential medicines; (b) increase budget allocated to medicines; (c) establish the proper arrangement to avoid cost increase; (d) regulate promotion and publicity of medicines under an ethical agreement with the private sector; (e) ensure transparency in the registration, and control of quality; (f) promote rational use of medicines for both users and medical staff; and (g) promote social control and citizen participation. Specific activities to be financed by the Project include training of staff, provision of goods and technical assistance to strengthen the pharmaceutical regulatory mandate of MINSAL (including registering and controlling activities and surveillance of the drug supply chain) and purchase of equipment for the laboratory. The Project will also finance a series of activities to increase awareness of the Government‘s strategy for strengthening the public health care system and improving internal communication.

30

24. Finally, the Project will also support the National Health Institute, including the training of both clinicians and lab technicians in health care waste management, but not construction. The Health Strategy seeks to improve the capacity of the public laboratories, thus the Project will finance the installation of new equipment and staff training.

Subcomponent 2.2: Responding to Public Health Emergencies (US$5 million)

25. (a) Developing an emergency preparedness plan for Public Health Emergencies; and (b) implementing of said plan through the financing of the Eligible Public Health Expenditures.

26. The aim of this subcomponent is to strengthen the capacity of Government to respond to public health emergencies. Earthquakes, volcanic eruptions, and tropical storms and hurricanes have hit El Salvador with tremendous physical damage and negative impact on the health status of the people and their quality of life. The vulnerability of the country to natural disasters justifies the need for additional resources and better capacity to respond rapidly and effectively to these emergencies.

27. This subcomponent will finance the development and implementation of a public health emergency preparedness plan for the most likely public health emergencies in coordination with other relevant sectors. In the event of a public health emergency, and the Government‘s subsequent declaration, this subcomponent will finance the immediate purchase of medical equipment, medical and non-medical supplies, operational costs, and other necessary expenses related to recovery efforts and defined in the preparedness plan as established in the Operations Manual. This subcomponent will not finance any activities related to construction or pest management (e.g. fumigation of houses or the buying of pesticides).

28. The Government may request that any remaining funds for this subcomponent be re-allocated to other Project Components after two-thirds of the loan has been disbursed or three years of Project implementation (whichever comes first).

29. The list of eligible expenses to be financed under this subcomponent is the following: medical supplies and equipment, contracting of temporary staff such as nurses, physicians, environmental health inspectors and community health promoters, land and water transport equipment, fuel, telecommunication equipment, food and water containers and any other items that should be agreed by the Government and the World Bank.

Component 3: Project Management and Monitoring (US$3.4 million)

30. The main activities of this component are the following:

(1) Supporting: (i) the monitoring of the Project activities through semi-annual, external technical reviews; (ii)annual health facility surveys to assess the achievement of health coverage and results targets; and (iii) an impact evaluation.

31

(2) Assisting the PCU in carrying out the management, monitoring and supervision activities of the Project, including training and financial audits.

(3) Strengthening UACI and UFI, the units performing the Project‘s fiduciary activities.

32

Annex 3: Implementation Arrangements EL SALVADOR: Strengthening Public Health Care System Project

Institutional and Implementation Arrangements for the Project

1. Project implementation will be overseen by the MINSAL, through a PCU, reporting directly to the Minister of Health and coordinating with the General Operations Management of MINSAL. The PCU was established by Ministerial Resolution and will manage the Project and the IADB-financed project. This PCU will be responsible for the day-to-day management of Project activities, including: (i) preparing annual operational and procurement plans; (ii) overseeing procurement processes in conformity with World Bank procedures; (iii) ensuring the timely implementation of the operational and procurement plans; (iv) providing all necessary technical inputs to Project activities; (v) ensuring efficient use of project funds and resources; (v) preparing semi-annual technical progress reports; and (vi) monitoring and evaluation of Project results. The structure and profiles of personnel of the PCU as well as reporting lines of the PCU within the MINSAL is outlined in the Operations Manual. The Coordinator of the PCU will report to the Health Minister. MINSAL line divisions will ensure that adequate technical support is provided to the PCU for the implementation of project activities.

2. The Institutional Procurement and Contracting Unit (UACI) and the Institutional Financing Unit (UFI) of the MINSAL will be responsible for Project matters. UACI and UFI are relatively inexperienced in carrying out the fiduciary responsibilities and functions required for the implementation of a Bank project. Therefore, the Government will ensure that these fiduciary units are adequately staffed with a financial management specialist, a procurement specialist, and procurement analysts that have experience with Bank operations to ensure a prompt start of project implementation, and carrying out of Project activities in compliance with Bank procedures.

3. A Project Operations Manual was prepared by the MINSAL.. The Project Operations Manual was prepared and outlines staff profiles as well as processes and procedures for monitoring compliance with performance benchmarks, reporting, procurement, financial management, disbursement, and auditing procedures.

Financial Management and Disbursement

4. The Institutional Financing Unit (UFI) will be responsible for managing the financial management of the Project, including (i) budget formulation and monitoring; (ii) cash flow management, including processing payments and submitting loan withdrawal applications to the Bank; (iii) maintenance of accounting records, including the administration and maintenance of an inventory of project assets; (iv) preparation and submission of in-year and year-end financial reports; (v) oversight of information systems; and (vi) organization of financial and operational audits. UFI is an established unit within MINSAL with 43 staff members responsible for the financial implementation of a US$517 million budget in 2010, and has the ability to manage the fiduciary aspects of the Project. However, due to the current workload and lack of experience with multilaterally financed projects, mitigation measures were identified to ensure the effectiveness of financial management implementation arrangements, including the

33 identification or contracting of three dedicated staff with appropriate skills and experience to manage the budgeting, accounting and disbursement aspects of the Project.

5. MINSAL will use its integrated financial management system (SAFI) to record project transactions. As this system presents some limitations in terms of recording detailed information and producing project financial reports, MINSAL will create, if necessary, a set of subsidiary ledgers to prepare project financial reports. MINSAL is working on integrating the project‘s chart of accounts into SAFI so as to automatically generate most of the required financial information.

6. MINSAL will prepare an unaudited interim financial report (IFR) on a semi-annual basis for monitoring purposes only. The IFRs will contain (i) a statement of sources and uses of funds and cash balances (with expenditures classified by subcomponent or categories of expenditures); (ii) a statement of budget execution per subcomponent (with expenditures classified by the major budgetary accounts); and (iii) a reconciliation of the advance to the Designated Account. MINSAL will be responsible for submitting interim reports to the World Bank no later than 45 days after the end of each semester.

7. MINSAL will prepare project financial statements on an annual basis which will be audited following International Standards on Auditing, by an independent firm and in accordance with terms of reference, both acceptable to the World Bank. These will include cumulative figures for the year and as of the end of that year, of the financial statements cited in the previous paragraph. The financial statements will also include explanatory notes in accordance with the Cash Basis International Public Sector Accounting Standard, and the entity‘s assertion that loan funds were used in accordance with the intended purposes as specified in the Loan Agreement. These financial statements, once audited, will be submitted to the World Bank no later than six months after the end of the Government‘s fiscal year (i.e. the calendar year). Working papers for the preparation of the semi-annual and annual financial statements will be maintained in the entity‘s premises, and made accessible to World Bank‘s supervision missions and external auditors. In the course of its regular internal audit activities, internal auditors from MINSAL may include Project activities in their annual work plans. If such audits occur, the implementing entity will provide the World Bank with copies of internal audit reports covering project activities and financial transactions. The audit opinion covering project financial statements will contain a reference to the eligibility of expenditures for all funds of the Project. Each audit report will also be required to include a section on the state of the internal control. MINSAL will submit its final annual audit report to the Bank no later than six months after the end of the fiscal year. MINSAL will arrange for the contracting of the first external audit within four months after loan effectiveness. The first external audit contract will be expected to cover a two-year period. Financial audits will be undertaken jointly with the IADB-financed project, in coordination with the PCU.

Audit Report Due Date 1) Project specific financial statements (including on the Designated Account statement) June 30 2) Statements of Expenditures June 30

8. There is a risk that MINSAL may fail to comply with the financial loan covenant relating to the timely submission of the annual audit report, even though MINSAL has been 34 audited by the Corte de Cuentas of El Salvador. Thus, external auditors will be hired to review and audit annual financial statements prepared by the Project. Auditors for the Project will be hired four months after effectiveness to ensure timely submission of the audit and compliance with financial covenants.

9. The following table specifies the categories of Eligible Expenditures that may be financed out of the proceeds of the Loan (―Category‖), the allocation of the amounts of the Loan to each Category, and the percentage of expenditures to be financed for Eligible Expenditures in each Category.

Table 3.1: Disbursements per Expenditure Category Category Amount of the Percentage of Loan Expenditures to be Allocated financed (expressed in (inclusive of Taxes) USD) (1) Goods, works, Non-Consultant Services, 45,000,000 100% Consultants‘ Services, Training and Operating Costs under Subcomponent 1.1 and 1.2 (2) Goods, Non-Consultant Services and 26,400,000 100% Consultants‘ Services under Subcomponent 2.1 and 2.2(a). (3) Eligible Public Health Expenditures under 5,000,000 100% Subcomponent 2.2(b) (4) Goods, works, Non-Consultant Services, 3,400,000 100% Consultants‘ Services, Training and Operating Costs under Component 3 (5) Front-end Fee 200,000 Amount payable pursuant to Section 2.03 of the Loan Agreement in accordance with Section 2.07 (b) of the General Conditions TOTAL AMOUNT 80,000,000

For purposes of this paragraph:

(a) the term ―Non-Consultant Services‖ means logistical service expenses for capacity building events, printing of training materials and media campaigns, as well as other services which are not rendered by consultants, obtained at reasonable cost on account of Project implementation and which are not covered in the definition of Training and Operating Costs;

(b) the term ―Operating Costs‖ means the operational costs (which would not have occurred absent the Project, including, inter alia, equipment and computer maintenance, office supplies, utilities, and communication costs) and the supervision and monitoring costs of the Project incurred by the PCU, UACI and UFI (including, inter alia, travel, per diem,

35

accommodation, operation and maintenance of vehicles, repairs, fuel, spare parts and insurance, maintenance of the monitoring and information system, supervisory and quality control activities, but excluding expenditures for salaries and related benefits); and;

(c) the term ―Training‖ means reasonable: (a) travel, room, board and per diem expenditures incurred by trainers and trainees in connection with their training and by non-consultant training facilitators; (b) course fees; (c) training facility rentals; and (d) training material preparation, acquisition, reproduction and distribution expenses.

10. The following disbursement methods may be used by MINSAL to withdraw funds from the loan account: (a) reimbursements, (b) advances, and (c) direct payments. Under the advance method and to facilitate project implementation, MINSAL will open a Designated Account in US dollars in the Central Reserve Bank to be used exclusively for deposits and withdrawals of loan proceeds for eligible expenditure. Funds deposited into the Designated Account as advances will follow Bank‘s disbursement policies and procedures, as described in the Disbursement Letter and Disbursement Guidelines. The ceiling for advances to be made into the Designated Account will be included in the Disbursement Letter. The reporting period to document eligible expenditures paid out of the Designated Account will be on a quarterly basis.

11. Project expenditures under advances and reimbursement methods will be documented by records evidencing eligible expenditures. These include copies of receipts and invoices for payments for consultant services against contracts valued at US$100,000 or more for firms and US$40,000 or more for individuals; for payments for goods against contracts valued at US$150,000 or more; for payments for works against contracts valued at US$150,000 or more; and for payment of non-consultant services and training services against contracts valued at US$40,000. Statement of Expenditures will be used as supporting documentation for all other expenditures below these thresholds. All consolidated Statements of Expenditures, and all other supporting documentation, will be maintained for post-review and audit purposes for up to 24 months after the final withdrawal from the loan account or 18 months after loan closing, whichever is latest.

12. Given UFI’s lack of experience with Bank policies and procedures, additional staff will be required, as well as close supervision by the Bank. To mitigate this lack of experience, MINSAL will identify or contract three dedicated staff for the Project, with appropriate skills and experience, to manage the budgeting, accounting and disbursement aspects of the Project. In addition, specific financial management processes and procedures have been designed in order to guarantee that project funds are used economically and efficiently. These processes and procedures are reflected in the Project Operations Manual. MINSAL has an integrated administrative system (SAFI) in place; however, this system has some limitations, as it does not currently have the ability to produce project financial reports and does not link the financial information to the physical progress. Thus, MINSAL and the World Bank will determine if and how the existing system can be used to prepare project reports. Alternatively, a set of subsidiary ledgers will be established to enable the preparation of project reports.

36

13. The Bank may perform a supervision mission prior to effectiveness to verify the implementation of financial management arrangements. After effectiveness, the Bank will review the audit reports and the financial sections of the IFRs and undertake at least two supervision missions per year.

Procurement

14. Procurement for the Project will be carried out in accordance with the World Bank “Guidelines: Procurement of Goods, Works, and non-Consulting Services under IBRD Loans and IDA Credits and Grants” dated January 2011; and “Guidelines: Selection and Employment of Consultants under IBRD Loans & IDA Credits & Grants by World Bank Borrowers” dated January 2011, and the Financing Agreement. For each contract to be financed by the Loan, the different procurement methods or consultant selection methods, the need for prequalification, estimated costs, prior review requirements, and time frame will be outlined in the Procurement Plan.

15. No major works are foreseen to be financed with loan proceeds in the Project; however, minor works and rehabilitation of existing infrastructure will be financed. If during implementation any works are determined to be needed to implement the Project, procurement shall be done using Bank‘s Standard Bidding Documents (SBD) for all International Competitive Bidding (ICB) processes. Procurement of works under National Competitive Bidding (NCB) and shopping procedures shall be done using SBD agreed upon with, or satisfactory, to the World Bank. Such SBD have been included as annexes in the Project‘s Operations Manual.

16. Goods procured under this Project include medical equipment and supplies, and vehicles. Sub-Component 1.1 will finance goods and equipment to strengthen and expand priority health care services and programs while subcomponent 1.2 will finance goods, equipment and vehicles related to the improvement of the National Medical Emergencies System in eligible hospitals. Under Component 2, goods and equipment related to strengthening stewardship and management capacity of MINSAL as well as for the development of a public health emergency preparedness plan for the most likely public health emergencies will be financed. Procurement of goods will be done using Bank SBD for all ICB processes; procurement of goods under NCB and shopping procedures shall be done using SBD agreed upon with, or satisfactory, to the World Bank. Such SBD have been included as annexes in the Project‘s Operations Manual.

17. Non-consulting services for the Project will include logistics for capacity-building events, printing of training materials, media campaigns, and related services. Procurement of non-consulting services will be done using SBD and simplified formats agreed upon with, or satisfactory, to the World Bank for ICB or NCB, and shopping procedures, respectively. SBD and simplified formats will be part of the Project‘s Operations Manual.

18. Consultant firms and individual consultants will provide technical assistance and training under both Components. Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in

37 accordance with the provisions of paragraph 2.7 of the Consultant Guidelines. Regardless of the method used or the estimated cost of the contracts, the selection and contracting of consultant firms will be done using the Bank‘s Standard Request for Proposals. The selection and contracting of Individual Consultants will be done using a simplified request for curricula vitae and a contract model agreed upon with or acceptable to, the World Bank. Such documents are part of the Project‘s Operations Manual.

19. Operating costs refer to reasonable recurrent expenditures that will not have been incurred by the implementing agency in the absence of the Project. These may include operation and maintenance of equipment purchased under the Project as well as nondurable or consumable office materials, as needed for the implementation of the Project. These will be procured using the implementation agencies‘ administrative procedures, which were reviewed and found acceptable to the World Bank.

20. Procurement activities for the Project will be carried out by the UACI of the MINSAL. The procurement function of the Project will be integrated into the procurement unit of UACI, which will be responsible for overseeing the procurement necessary for project activities, including (i) preparing and updating as necessary an annual procurement plan, based on the annual operational plan; (ii) purchasing goods and medical supplies; and (iii) recruiting consultants needed for technical assistance.

21. The overall procurement risk for the Project was assessed as Moderate. A full assessment of the capacity of the UACI to implement procurement actions of the Project was carried out by the Bank in July 2010. The final report of the assessment, including findings and a proposed mitigation plan, was shared with the Government in August 2010 and presented to the Minister, Vice Ministers and Managers of MINSAL in September 2010. Given that concept note stage for this project was prior to July 19, 2010, Procurement Risk Assessments and Management tool was not used. All the capacity assessment related documents may be found in the Project‘s files.

22. While MINSAL has extensive procurement experience under the Local Procurement Law, it is not yet familiar with the World Bank’s procurement guidelines, procedures or standard documents. The Ministry uses the national administrative system which was intended to integrate the planning, procurement, financial and warehouse functions, although only some modules were working at the time of the assessment. UACI is currently staffed with one manager, four unit coordinators (Bidding, Shopping, Contract Supervision and Legal Assistance), 20 analysts, two technicians and five administrative and clerical staff, none of whom have previous experience applying World Bank guidelines. MINSAL has developed an organizational and functions manual as well as a compendium of procurement procedures under the local procurement law for the use of the UACI, although, these documents do not include any World Bank related procurement provisions. Finally, the Ministry does not have adequate filing space and does not have a proper record-keeping system. To address these issues, a series of actions will be undertaken.

23. A dedicated procurement section is included in the Project Operations Manual, including general procurement procedures and detailed procurement procedures for the

38 procurement of goods and for the selection and employment of consultants. Acceptable SBD and simplified formats for (i) the procurement of goods and non-consulting services using NCB and shopping procedures; (ii) the selection and employment of individual consultants; and (iii) formal guidelines for record-keeping and filing, will be included as Annexes of the aforementioned Manual.

24. The MINSAL will create a working group within the UACI to be in charge of implementing the procurement function for this Project. A procurement specialist and two or three procurement analysts shall be hired by MINSAL under terms of reference acceptable to the World Bank and following selection processes under Bank‘s prior review. The staff needed to fill this task will be financed by loan proceeds.

25. The Bank’s Procurement Plan Execution System will be used for the implementation of the Project. The Bank will organize and carry out workshops on the system and on procurement processes to strengthen the agency‘s procurement staff capacity on specialized issues (procurement of goods and non-consulting services, selection and employment of consulting firms and individual consultants, and the procurement plan execution system).

26. MINSAL has developed a detailed Procurement Plan for the first 18 months of project implementation. The Plan outlines the use of different procurement methods and the Bank‘s review process. The plan was agreed between the Government and the Bank. As soon as the Project is declared effective, the Procurement Plan will be available in portal of the Bank‘s Procurement Plan Execution System as well as in the Project Database and on the Bank‘s external website. The Procurement Plan will be updated in agreement with the Project Team annually or as required to reflect project implementation needs and improvements in institutional capacity. Thresholds for the use of the different procurement methods and recommended thresholds for Bank prior review are outlined in Table 3.2. Such recommended thresholds may be revised at every update of the Procurement Plan.

Table 3.2: Thresholds for Procurement Methods and for Recommended Bank Review Estimated Value Contract Threshold Procurement Method Bank Prior Review Works: >=US$5,000,000 ICB All =US$250,000 NCB First Two =US$250,000 = US$25,000 ICB All =US$200,000 QCBS, QBS All

39

Estimated Value Contract Threshold Procurement Method Bank Prior Review

Individual Consultants: SS All >=US$100,000 IC All

27. Table 3.3 outlines the list of contract packages identified to date to be procured following ICB procedures under the Project.

Table 3.3: Contract Packages following ICB RRef. Estimated Proc. P-Q Review Expected No. (Contract Cost Method by Bank Bid- (Description) (US$)Estimated (Prior / Opening Post) Date 01/2011 Clinical Equipment 289,050 ICB No Prior April 2012 02/2011 Office equipment 588,625 ICB No Prior April 2012 04/2011 Medical Equipment for 862,220 ICB No Prior March Health Centers 2012 06/2012 Computer Equipment 353,700 ICB No Prior May 2012 for Health Centers 10/2011 Laundry equipment for 255,000 ICB No Prior May 2012 Hospitals 11/2011 Ambulances 955,000 ICB No Prior April 2012 14/2011 Medical Equipment for 6,718,593 ICB No Prior March Hospitals 2012 01/2012 Medical Equipment for 916,350 ICB No Prior February Health Centers 2013 02/2012 Clinical Equipment 1,473,031 ICB No Prior March 2013 04/2012 Medical Equipment 2,574,740 ICB No Prior January 2013 05/2012 Medical instruments 508,537 ICB No Prior February 2013 06/2012 Hardware and software 5,227,600 ICB No Prior March for health information 2013 systems 10/2012 Laundry equipment 275,100 ICB No Prior March 2013

40

RRef. Estimated Proc. P-Q Review Expected No. (Contract Cost Method by Bank Bid- (Description) (US$)Estimated (Prior / Opening Post) Date 11/2012 Emergency vehicles 1,040,000 ICB No Prior February 2013 14/2012 Hospital equipment 8,394,593 ICB No Prior January 2013 29/2012 Laboratory Equipment 2,127,456 ICB No Prior January 2012 2013

28. Table 3.4 shows the list of consultant services identified to date that will be selected with short-lists composed of international firms.

Table 3.4: Consultant Services with short-lists of international firms Ref. No. Description of Assignment Estimated Selectio Review Expected Cost n by Bank Proposals (US$) Method (Prior / Submission Post) Date 1. Adaptation and development of 500,000 QCBS Prior January 2013 CF call center software, for the 01/2011 medical emergencies system and training for five years 2. Household and Health Centers 350,000 QCBS Prior February 2013 CF Survey (initial) 04/2011

29. Short lists of consultants for services estimated to cost less than US$200,000 equivalent per contract may be composed entirely of national consultants in accordance with the provisions of paragraph 2.7 of the Consultant Guidelines.

30. In addition to the prior review supervision to be carried out from Bank offices, annual supervision missions will be undertaken to carry out a post-review of procurement actions. One out of every ten contracts will be post-reviewed where applicable.

3.4 Environmental Assessments and Arrangements

31. The Project is classified as a Category C given that no major adverse environmental impacts will result from the Project and minor works to be financed are minimal hospital refurbishments. OP 4.01 (Environmental Assessment) is triggered, however, with respect to the need to mitigate potential environmental impacts related to the management of medical waste. Thus, the World Bank will support the Government to continue strengthening the implementation of the current strategic approach to health care waste management. This aims to have a positive impact on public health, worker safety, and link the notion of improved environmental management as integral to quality health service delivery.

41

32. In the long term, it is possible that greater access to health services could lead to an increase in biomedical waste which, if managed improperly, could raise health risks for health personnel and the general public as well as lead to environmental contamination. To address these risks, the MINSAL integrated the required Bank environmental guidelines into the Project‘s Operations Manual. Bolstered by the environmental law and recent legislation the country has implemented an exemplary Health Care Waste Management System. The Project can support the continued implementation of waste management practices in all project health facilities and thereby contribute to improving the quality of health care.

33. The country has adopted an official and mandatory Technical Standard (Norma Salvadoreña NSO 13.25.01:07) on May 6, 2008 that establishes clear procedures and an institutional framework for biomedical waste management. The country has also developed guidance notes targeting health care facility staff on the proper management of health care waste taking into consideration issues such as size, quantity generated, and location (i.e. remoteness). Furthermore, as a result of these norms, each health facility maintains a log on health care waste generated so that MINSAL has a clear idea of the total amount the country is producing annually (approximately 1350 tons).

34. These norms describe the appropriate final disposal of health care waste. Currently all health care waste is transported in refrigerated vehicles to the sanitary landfill in Nejapa. There the waste is treated in an industrial autoclave in a facility built for this purpose. It also has the capacity to properly dispose of expired drugs. An onsite laboratory monitors quality of the process assuring that the health care waste has been disinfected. Once treated the waste is taken to the landfill. Another sanitary landfill is currently being built in the Department of San Miguel and will have the capacity to treat heath care waste, thus easing the load at Nejapa.

35. The MINSAL has adequate in-house capacity to implement health care waste management procedures, enforce standards, and coordinate with other Government actors involved in these issues (i.e. environmental, solid waste, and regional health authorities). Under the training planned in Component 2, continuous capacity building for both clinicians and lab technicians in health care waste management is envisioned. This will be done in the context of the existing Infection Control Committees present in most health care facilities.

36. The MINSAL, in compliance with Article 107 of the Environmental Law, has undertaken an Environmental Assessment of 30 national hospitals. The Environmental Assessment evaluated the material and energy use processes, common and hazardous solid waste management, soil, water and air effluent discharges, environmental and human health risks, and the administrative environment. The Assessment also includes a more in-depth analysis of the main impacts on the use of water, energy, fossil fuels, emergency plans and environmental contingencies. It also requires the creation of an environmental policy for the hospital and a committee responsible for its implementation.

3.5 Social Assessments and Arrangements

37. The Project will directly benefit the Salvadorian population, with particular attention on the urban and rural poor including indigenous people in El Salvador in the eligible ―mu

42 nicipalities‖. The Project seeks to improve the coverage of health services, especially for the poor and those in remote rural areas through priority programs, such as adolescent reproductive health, maternal and child mortality, malnutrition, reproductive and sexual health, chronic kidney disease, dengue, and mental health disease. The capacity building interventions will also benefit indigenous peoples in that the personnel working in primary health care services will receive training to better understand indigenous and traditional medicine and care in the areas of intervention of the Project.

38. The indigenous and other rural populations in El Salvador are important stakeholders of the Project, including administrative and social organizations. Other major stakeholders are the institutions which are implementing the Project, such as the Regions, the SIBASIs, the hospitals, Municipal Health Units, Health Centers, Maternal Health Care Centers, and Rural Nutrition Centers. NGOs and volunteers are other stakeholders. One very important stakeholder category is that of indigenous traditional healers and health practitioners, such as ―parteras‖ and ―sobadores‖, because they will play a significant role in bridging the gap between western and traditional medicine and health care. The indigenous people‘s associations, such as the Salvadorian Indigenous National Coordinator Council and National Committee for Development, have and continue to play a very important role as intermediaries and vehicles through which indigenous people‘s health care models and action plans have been elaborated, in particular with the support of PAHO.

39. The major potential beneficiaries of the Project are the rural and urban poor and the indigenous people in the eligible municipalities, with particular emphasis on women and children, who will have improved access to a comprehensive set of essential health interventions. Among the rural poor, it is sometimes difficult to distinguish indigenous peoples, mainly due to the stigma of being indigenous in El Salvador. Nevertheless, the major groups include (i) the Nahua/Pipiles, who are the most numerous, live mainly in the Department of Sonsonate, and who speak the major indigenous language in El Salvador, the Nahuatl; (ii) the Lencas live in the east of the country and speak Poton Lenca, which appears to be a language almost lost; (iii) the Cacaopera live in the Morazan Department and their language, Ulwa, is being taught by leaders in the context of a program supported by the Ministry of Education; and (iv) the Chorti people are very few and live in the Ahuachapan Department close to Guatemala. It is difficult to estimate the percentage of the indigenous population in El Salvador because different sources present different numbers. An additional factor making it difficult to identify and estimate the population is that indigenous people are reluctant to reveal their ethnicity. Nevertheless, it is generally estimated at between 10 and 13 percent of the total population.

40. The health status of indigenous peoples in El Salvador is affected by several factors: (i) socio-cultural roots, illiteracy and poverty in indigenous populations; (ii) isolation or geographically marginalized settlements of indigenous communities in rural areas; (iii) lack of appropriate roads and communication channels; (iv) the poor capacity of MINSAL to coordinate policies and resources for indigenous peoples; (v) relatively low health budget for the poorest and those in remote areas; (vi) low access and coverage of primary health care services in indigenous communities; (vii) poor quality of services; (viii) shortages of inputs and medicines; (ix) lack of appreciation of ethno-health practices; and (x) insufficiently trained staff with knowledge of indigenous culture.

43

41. MINSAL is well aware of the fact that indigenous people have not yet benefitted appropriately and adequately from health care services for cultural reasons. The Project has prepared an Indigenous Peoples Planning Framework (IPPF) which includes recommendations for better planning of basic health services which will be better adapted to the cultural realities of these populations. The IPPF is based on already existing documentation on indigenous people‘s health, which has been prepared by indigenous associations in collaboration with PAHO. This IPPF will be implemented in project intervention areas. The Government is addressing indigenous population social challenges under the Integrated Health Program.

Box 3:1: Summary of the IPPF

The IPPF includes the following sections: (i) framework of reference; (ii) description of the project; (iii) possible effects of the activities of the project; (iv) indigenous population estimates; (v) methodological framework of processes related to information, consultation and participation; (vi) guidelines for the social assessment preparation; (vii) indigenous peoples planning framework; (viii) institutional requirement planning framework for strengthening institutional management of the MINSAL; (ix) monitoring and evaluation system of IPPF; (x) mechanisms for the dissemination of the Indigenous People's Plan developed under the IPPF; and (xi) mechanisms for attention and resolution of claims of indigenous population.

The IPPF focuses on two main areas: (i) the cultural traditions and practices related to health in indigenous peoples; and (ii) characteristics of traditional and western health services in indigenous areas. Having acquired this fundamental knowledge, and after having discussed it thoroughly in consultation with indigenous health representatives, practitioners and the community, the IPPF makes recommendations on how basic health services can be better prepared and/or modified in order to better serve a multi-cultural population. Such recommendations may be found in the final version of the IPPF, which was discussed and approved by MINSAL in consultations with the indigenous community and associations, and disclosed in country and in the Bank‘s InfoShop. The IPPF recommends the following actions:

(i) Organization of training programs for MINSAL staff to improve institutional capacities to address health challenges of diverse socio-cultural realities of indigenous peoples of El Salvador. (ii) Carrying out public seminars and workshops involving indigenous peoples, public and private institutions, international cooperation agencies and civil society, to generate a discussion on social and health characteristics of indigenous peoples and social responsibility to address their health challenges.

Consultations with stakeholders are, and will continue to be, an ongoing, interactive process for MINSAL, in particular with the indigenous community. People at different levels of the institutional health framework are always involved in consultations with the community in one way or another. The mid-term and final impact evaluations will include an indigenous people section that addresses an orientation towards indigenous socio-cultural differences, consultations in indigenous communities, response to their health needs and practices, and the Project‘s contribution in solving social exclusion in the delivery of health care services in its areas of intervention.

42. The expected social impacts of the Project are almost exclusively beneficial. The major objective of the project is to improve the health of the population in El Salvador which

44 will also lead to improved living conditions. The greatest benefit is that it will lead to a healthier and better prepared younger generation of Salvadorians. The possible lack of knowledge among health personnel and their lack of willingness to learn about traditional medicine and new and innovative ways to practice a synchronized blend of western and traditional medicine, may conflict among personnel and their communications with indigenous peoples. However, several steps have been taken to improve communication between health personnel and indigenous population, as well as increase the knowledge of health personnel on traditional medicine and health practices.

43. Traditional community networks are the pillars that support the health system in regions inhabited by indigenous people, providing for communication and social control and solidarity. Community participation in the Project intervention areas is therefore very important because the traditional health care system is a combination of western medicine and indigenous traditional medicine, the latter which is being practiced by respected, prominent and specialized community members who are often also the community‘s political leaders. In particular, in remote areas for example, the entire community is mobilized and involved when a person is ill or has had an accident. The survival of the community depends on the ability to manage any emergency in a communal way. The role of women in traditional medicine as midwives is widely acknowledged throughout Latin America. The Project will therefore support their training to better identify issues in pre-and post-natal care, provide basic preventive health care and function as the intermediary between traditional and western health practices.

44. Organizational movements of indigenous communities in El Salvador are characterized by the following aspects: (i) based on a complex network of local, regional, and community-based organizations (ii) indigenous movements are independent of the different Governments and traditional political parties (iii) there are several indigenous community types ranging from a community fully identified as indigenous (i.e. Guatajiagua), and other communities that based their identity in specific elements such as their economic activity, customs or by their struggle to maintain specific property rights such as in the case of water rights (i.e. Panchimalco).

45. The MINSAL will train and incorporate a safeguards team to follow up the implementation of the IPPF and coordinate with MINSAL, indigenous communities, and indigenous people‘s organizations to ensure culturally appropriateness of health sector policies in the project intervention areas.

Monitoring & Evaluation

46. Effective monitoring is critical for project implementation and progress toward its objectives. The Project will support the MINSAL in (i) strengthening the collection of health sector statistics; (ii) supporting the design and implementation of public health supply and demand monitoring; (iii) carrying out national epidemiological surveillance and annual health facility surveys; and (iv) undertaking independent technical reviews to measure results at regional and departmental levels. In addition, the Government will improve the information system for priority programs such as child health, reproductive and sexual health, dengue, nutrition interventions, chronic diseases and kidney diseases, and employing a new monitoring

45 approach for project monitoring and evaluation. The national epidemiologic surveillance system, combined with the technical review, will allow the PCU and other line units within MINSAL to take adequate investments and policy responses to address health challenges and verify that implementation of project activities are in compliance with project procedures, selection criteria, and other Operations Manual provisions.

47. The PCU will ensure satisfactory functioning of the project monitoring system in coordination with the relevant line units of MINSAL (Health Regions and National Health Programs) to generate timely and effective data collection and data information to the public. Effective institution building and training will be carried out to improve capacity of health providers and line units to generate data relevant to project monitoring and follow up of project indicators and results. The Office of the Minister of Health will ensure that all relevant line units provide the PCU with necessary reports and information. Progress reports of the Project will be consolidated and submitted to the Bank twice a year and will include information as established in the Operations Manual. Technical reviews will monitor project outputs and health targets.

48. The Project will finance an impact evaluation of the proposed activities in child and maternal health and other selected interventions. The MINSAL monitoring information system, the Multi-Purpose Household Survey and National Health Surveys, and a health facility survey will provide baseline data for the Project. The Bank will provide technical assistance to MINSAL to develop the adequate methodology and design for the impact evaluation analysis.

Role of Partners

49. The Project foresees no formal co-financing agreements with other donors or organizations. However, the Bank has established a strong collaboration with other agencies of international cooperation (IADB and PAHO) in financing investments to strengthen health networks and technical assistance respectively. The Bank and IADB have taken steps to ensure stronger coordination and harmonization of their health sector program support in the country, including joint supervision missions and establishing a joint PCU to implement the two projects, which will also help facilitate monitoring and evaluation of health outcomes.

46

Annex 4: Operational Risk Assessment Framework (ORAF) EL SALVADOR: Strengthening Public Health Care System Project

Negotiations and Board Package Version

Risk L =- Low; Risk Category M-L = Medium, driven by Risk Description Proposed Mitigation Measures likelihood M-I = Medium, driven by impact H = High Project Stakeholder Medium - L Lack of close coordination and Organize joint supervision missions. Risks harmonization could result in duplication of efforts or gaps in critical activities. Harmonization with key development partners, including IADB, is essential to ensure synergies and avoid duplication of efforts.

Implementing Agency High Weak capacity and limited experience Provide training to new staff, Risks with Bank operations by MINSAL particularly in financial management may adversely impact performance and procurement, following initial with respect to the Bank‘s procurement hiring. and financial management guidelines. Recruit external auditors no later than The main risks in financial four months after effectiveness. management are as follows: 1) Untimely presentation of audit Contract three staff with appropriate reports from the Corte de Cuentas; skills and experience to manage the 2) Lack of experience with the budgeting, accounting and disbursement Bank‘s policies and procedures; aspects of the Project before and Negotiations. 3) Limitations of the integrated administrative system. Design specific financial management The main risks in project management processes and procedures to ensure that are as follows: project funds are used efficiently before 1) Lack of coordination between Negotiations. the Project and IADB-financed

47

Risk L =- Low; Risk Category M-L = Medium, driven by Risk Description Proposed Mitigation Measures likelihood M-I = Medium, driven by impact H = High project could delay Project Determine how and if SAFI can be used implementation ; to prepare project reports or create a set 2) Delays in the procurement of subsidiary ledgers to enable the process may hinder the overall preparation of Project reports before effectiveness of the Project; Negotiations. 3) Untimely training of staff, following initial hiring; Successful Project implementation will require close coordination and policy dialogue with the IADB to gain from common objectives.

Strengthening the fiduciary capacity of the PCU from the start of the Project to help avoid delays in procurement processes. This includes timely training of staff and financial audits. Project Risks Design Low Monitoring and evaluation Monitor data collection closely during mechanisms may need to be implementation strengthened. Social and Environmental Medium - Low The Project triggers the Environmental Prepare an environmental management Safeguard policy OP/BP 4.01 by plan (for waste disposal and other having potential environmental factors) before appraisal. impacts related to (i) health waste management of the SIBASIs and the Conduct field visits and carry out a national institute of health laboratories; review of the environmental and (ii) hospital refurbishments management plan during (related with the installation of implementation. equipment) that will be financed under Component 2 of the Project. Monitor implementation of the IPPF.

There is a risk that training activities will not be enough to change medical practices.

48

Risk L =- Low; Risk Category M-L = Medium, driven by Risk Description Proposed Mitigation Measures likelihood M-I = Medium, driven by impact H = High Low Donors may not adequately coordinate PCU has been established. Program and Donor health program efforts during project Organize joint supervision missions. implementation. The Government has announced its interest to join the International Health Partnership (IHP+) to implement the principles of Aid Effectiveness in the health sector. The World Bank and WHO co-facilitate this effort. Medium - Low Weaknesses in the procurement Provide training to Project staff, capacity may impact the ability to particularly in financial management manage large and complex contracts as and procurement. demonstrated during the Offer technical assistance in the design implementation of the RHESSA of surveys and impact evaluation Project. Effective contract analysis. management will ensure that contract Monitor data collection closely during creation, execution, and analysis implementation. Delivery Quality maximize operational and financial Provide continuous technical assistance performance and minimize risks. to the implementation of the SUIS. The Project will also finance various Data management is limited and the monitoring and impact evaluation development of surveys remains activities for better planning control complex. The implementation of the and sustainability. SUIS will also require substantial investments in skilled staff and the contracting of vendors to create a comprehensive information system with multidisciplinary clinical applications.

49

Overall Risk Overall Risk Rating at Preparation Rating During Comments Implmentation

The Project builds on experience from the previous health sector operation in the Country which has revealed some Medium-I Medium-I potential implementation risks. The impact of these risks is likely to have a high impact on achievement of the PDO.

50

Annex 5: Implementation Support Plan EL SALVADOR: Strengthening Public Health Care System Project

1. The Strategy for Implementation Support was developed based on the nature of the Project and its risk profile. The Strategy seeks reduced risks and bottlenecks that may prevent progress during project implementation and thus relies on increased supervision and technical support focused on the following aspects:

2. Implementation support will include the review of technical specifications and bid documents to ensure fair competition. The Bank will also review the planning and design of minor works to ensure that technical contractual obligations are met. Finally, the Bank will review all technical documents for which public health specialist support will be needed. An engineer and a public health specialist will conduct site visits on a semi-annual basis throughout project implementation and will provide support on a timely basis.

3. Given the risks identified and the design of the project, financial management requirements will include annual financial audits, semi-annual IFRs, financial management training and supervision. In addition, as part of the financial management arrangements of the Project, the MINSAL prepared an Operations Manual and identified or contracted dedicated financial management staff for the Project. Financial management supervision will consist of a possible mission at the time of effectiveness (to ensure successful implementation of financial management arrangements), review of audit reports (to provide assurance regarding the proper use of funds), review of semi-annual financial reports (to monitor the implementation of the project) and at least two financial management supervision missions per year (to review the continuing acceptability of financial management arrangements).

4. Given the moderate risk for procurement by UACI, an action plan has been developed to strengthen the capacity of UACI. Actions include support to designing technical specifications in coordination with PCU, defining adequate price estimates, grouping effectively goods and medical supplies in bidding packages, maximizing bidder participation thereby increasing the level of competition; and eliminating the risk of collusion in shopping processes, accelerate contract award and signing; and hiring a number of individual consultants adequately remunerated. The Bank will conduct independent procurement reviews of contracts with a sample not less than a quarter of the total number of contracts awarded by MINSAL.

5. During preparation, the Bank identified capacity building needs to strengthen its financial management capacity and to improve procurement management and efficiency. The Bank will provide timely support. Formal supervision of financial management reports will be carried out semi-annually, while procurement supervision will be carried out on a timely basis as required. Training will be provided by the Bank‘s financial management specialist and the procurement specialist before the commencement of project implementation, and during project implementation.

6. Semi-annual inputs from the environmental and social specialist will be required throughout the Project lifetime. The MINSAL will have to ensure that service providers

51 receive adequate training on environmental safety measures and thus the Bank will ensure that training is provided to relevant counterpart staff. Likewise, service providers will need to ensure that the Project‘s benefits reach the intended populations and that the intervention is culturally appropriate. Supervision will focus on the implementation of the agreed IPPF. Semi-annual formal supervision missions and field visits will ensure that safeguard measures are followed.

7. The Bank will continue to work closely with international cooperation agencies supporting the National Strategic Plan. The IADB project will be also carried out by the same PCU and therefore will provide high flexibility for both projects in supporting the same health strategic plan. During implementation, members from the Bank will work closely with other international agencies and the MINSAL to review the execution of an annual assessment of the health sector implementation plan.

8. Formal supervision and field visits will be conducted at least three times a year. Specific missions to regions will occur to address needs presented in the audit reports and studies. Staff skill mix required and inputs from the Bank are listed below:

Time Focus Resource Estimate (Staff Weeks) First 12 Task leadership TTL 10 SWs months Technical review of project documents and Public health specialist 15 SWs M&E Operations support and supervision Operations officer 15 SWs Procurement training and supervision Procurement specialist 10 SWs Financial management and disbursement Financial management 10 SWs training and supervision specialist Environmental training, supervision and 2 SWs Environmental specialist reporting Social safeguard supervision and reporting Social specialist 2 SWs Support to operational and analytical work ETC economist 100 SWs 12-48 Task leadership TTL 10 SWs months Technical review of project documents and 15 SWs Public health specialist M&E Operations support and supervision Operations officer 10 SWs Review of bidding documents and 15 SWs Procurement specialist procurement supervision and reporting Financial management and disbursement Financial management 10 SWs supervision and reporting specialist Environmental training, supervision and 2 SWs Environmental specialist reporting Social safeguard supervision and reporting Social specialist 4 SWs ETC economist and health 80 SWs Support to operations and analytical work management specialist (2)

Partners

52

Name Institution/Country Role Luis Tejerina, Task Team IADB, USA Coordination and harmonization of Leader, Health Project, financial and technical support to the IADB, El Salvador national health strategy Dr. José Ruales PAHO, El Salvador Coordination of Technical assistance PAHO Representative, El among donors Salvador

53

Annex 6: Team Composition EL SALVADOR: Strengthening Public Health Care System Project

World Bank staff and consultants who worked on the Project:

Name Title Unit Rafael Cortez Task Team Leader, Senior Economist LCSHH Alvaro Larrea Senior Procurement Specialist LCSPT Cristian D'Amelj Counsel LEGLA Maryanne Sharp Senior Operations Officer LCSHH Patricia De la Fuente Hoyes Senior Finance Officer CTRFC Gunars Platais Senior Environmental Economist LCSEN Kristine Ivarsdotter Senior Social Development Specialist LCSSO Mary Lisbeth Senior Social Development Specialist LCSSO Marie Chantal Messier Senior Nutritional Specialist LCSHH Fabienne Mroczka Financial Management Specialist LCSFM Rocío Schmunis Extended Term Consultant, Health Specialist LCSHH Eleonora Cavagnero Economist LCSHH Barbara Cunha Economist LCSPE Iván González Health Management Specialist LCSHH Jimena Luna Consultant, Economist LCSHH Rory Narvaez Consultant, Economist LCSHH Chirine Alameddine Program Analyst WBIRP Sonia M. Levere Language Program Assistant LCSHH

Peer Reviewers:

Name Title Unit Christoph Kurowski HD Sector Leader, LCC1 LCSHD Gayle Martin Senior Health Economist AFTHE Sadia Chowdhury Senior Health Specialist HDNHE

54

Annex 7: Economic Analysis EL SALVADOR: Strengthening Public Health Care System Project

1. Despite years of pro-poor growth, El Salvador has been hard hit by the global financial crisis and remains highly vulnerable to external shocks. The current crisis has impacted Salvadorian households through job losses, particularly in the export, construction, and services sectors, through reductions in incomes, and a decline in remittances from the U.S. While the country underwent a poverty reduction phase until 2006, with the Gini coefficient decreasing 6 points to 0.46 from 2001 to 2008, reverse trends indicate a continued need for public policies to combat growing inequalities, including broadening of social programs and inclusive economic growth for all.

2. El Salvador has made good progress in the health sector as some of its health indicators demonstrate. The under-five mortality rate decreased from 92 to 18 per 1,000 live births between 1990 and 2008 and infant mortality was reduced from 48 deaths to 16 deaths. Maternal mortality, despite a decline, remains high at 64.5 deaths per 100,000 live births per year. Infant malnutrition and access to health services continues to improve. The Project will contribute to sustaining and improving social gains in life expectancy, decreased child and infant mortality and improved maternal and reproductive health outcomes, while working towards improvements in equity through utilization of health services for those in the poorest municipalities.

3. The underlying rationale for the Project is the need for expansion of priority health services and programs targeting populations with a comprehensive set of essential health interventions and improving delivery of priority programs, while strengthening the stewardship capacity of MINSAL‘s essential public health functions for service delivery.

Figure 7.1: Real GDP Growth and General Government Expenditure as Percentage of GDP

6% 5% 4% 3% 2% 1% 0% -1% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 -2% -3% -4% Real GDP GGHE/GDP -5% Source: Ministry of Finance, 2011.

55

4. The Project will contribute to the efforts of the Government to continue allocating resources to the social sectors. El Salvador's economic performance remained modest in 2010, with the economy growing 0.7 percent below projections of 1 percent and below neighboring countries. Economic activity picked up towards the end of the year, mainly driven by commerce and tourism, and agriculture. Social outcomes also started recovering in 2010 following an increase in remittance flows and positive job creation for most of the year. To increase access for the underserved, Government has eliminated co-payment for services provided by public health facilities, increasing the health budget by 10 percent in 2010 and by an additional 8 percent in 2011 to fund these services. Government also intends to increase the share of public health expenditures from 1.8 percent of GDP in 2008 to 3.5 percent by 2015.

Figure 7.2: Ministry of Health Budget 2005-2011

600 558.7 517.3 500 470.2 449.0

391 400 366 347 296 300

200

100

0 2005 2006 2007 2008 2009 2010 2011 2012*

Source: MINSAL, 2005-2011. Note: *projected.

Fiscal Impact and Sustainability

5. For fiscal year 2012, the budget is estimated to be US$558.68 million, excluding external funding. Based on Government projections, MINSAL‘s annual health budget is expected to increase 25 percent from 2012 to 2016—conservative projections estimate a 15 percent increase. Assuming that MINSAL‘s budget and spending remain approximately the same over the next five years, and taking into account for projections, the Government will have a large enough budget to sustain the recurrent costs generated from the Project.

56

Table 7.1: Fiscal Impact (in millions of US$) FY 2012 2013 2014 2015 2016 Total Cost of Project 14.77 31.83 23.76 9.04 0.60 80 MoH ANNUAL Budget* 558.68 603.38 633.55 665.23 698.49 MoH ANNUAL Budget** 558.68 586.62 604.22 622.34 641.01 % of MoH annual Budget* 2.64% 5.28% 3.75% 1.36% 0.09% % of MoH annual Budget** 2.64% 5.43% 3.93% 1.45% 0.09% El Salvador GDP*** 22,903 24,496 26,237 28,274 30,469 % of GDP 0.064% 0.130% 0.091% 0.032% 0.002% Source: Authors‘ calculations based on Government and IMF projections. Note: * Based on Government projections;**Based on conservative projections; *** Based on IMF projections.

6. This sustainability analysis shows both recurrent and capital expenditure budgeted and projected against the recurrent costs needed to implement the Government‘s Comprehensive Primary Health Care strategy (CPHC). All calculations are at the national level for the population covered by MINSAL, which in 2010 represents more than 5 million people, with 2,756,932 (54.5 percent) living in urban areas, and 2,297,951 (45.5 percent) in rural areas. The total covered population is 5,054,883.

7. This sustainability approach was selected for two reasons: first, it was interesting to observe the Project‘s overall impact at the national level—especially because the Project does not finance the entire CPHC strategy in a particular region, rather it allows for capital investments to be made in several regions. Secondly, the Project will finance 92 municipalities, with the remaining municipalities to be financed by the IDB project. All costs calculated will be at the national level since the reach of the Project spans the total network. This sustainability approach provides an overall picture rather than just the impact from our selected municipalities.

8. On the revenue side, the 2010 budget shows recurrent costs at US$416 million, representing more than 80 percent of the total budget. The first level of care represents 35 percent of the total budget, while secondary and tertiary level care represent 55 percent. The remaining budget is allocated for non-service costs. These percentages are expected to change in the next few years, since one of the pillars of the new strategy is to reinforce prevention, promotion and curative care at the first level of care.

9. As of now, the per capita recurrent cost needed for the implementation of the CPHC strategy at all levels of care, has yet to be finalized. Preliminary results suggest the per capita cost for the extension of comprehensive services at the first level may be at US$44 per year. This includes medical supplies (medicines, vaccines, etc.) and surgical equipment, in addition to cleaning supplies and other recurrent costs such as salaries and basic services. Currently the MINSAL allocates an average of US$28.83 for the services at the first level, which is expected to increase in the next years. Previously, US$15.28 was the average per capita cost of a basic package of health services provided by NGOs in El Salvador. MINSAL paid US$17 per capita. The NGOs package of health services only included maternal health and vaccinations with MINSAL administering all additional care.

57

11. To have a projection of the total population covered by MINSAL, total population growth was estimated to be 0.5 percent in the period 2011-2025.17 Table 7.2 shows two scenarios given different projected total expenditure by MINSAL. Scenario 1 shows an initial 10 percent increase of total expenditure in 2010-2011, and assumes a projected increase of 8 percent for 2011-2012 and 2012-2013. The budget is projected to increase by 5 percent onwards. Scenario 2 gives a more conservative outlook, with an expected increase of 8 percent in 2011- 2012 and 5 percent in 2012-2013, before finally settling at 3 percent for all remaining periods. These scenarios are considered relatively conservative given that between 2005 and 2009 the MINSAL budget increased an average of around 10 percent per year.

12. Since the strategy aims to strengthen the first level of care and reach the poor, capital expenditure is expected to grow at 2 percent in both scenarios, with the rest of the augmented budget going to reinforce the first level. Under this assumption, current expenditure per capita at the first level of care is sustainable in both scenarios by 2013—Scenario 1 shows a current per capita expenditure of US$49.64 and Scenario 2 a slightly smaller amount of US$46.37. Table 7.2: Scenario 1 and 2 Scenario 1 2010 2011 2012 2013 2014 2015 2016 Population with access to MINSAL 5.05 5.08 5.11 5.13 5.16 5.18 5.21 Current expenditure 416.31 462.35 502.63 546.21 575.23 605.74 637.82 Capital expenditure 23.67 24.14 24.62 25.12 25.62 26.13 26.65 Transfers 30.21 30.81 31.43 32.05 32.69 33.35 34.02 Total expenditure MINSAL 470.18 517.30 558.68 603.38 633.55 665.23 698.49 Per capita Current expenditure per capita (pc) 82.36 91.01 98.45 106.45 111.55 116.88 122.46 Current expenditure (pc) 1st level 28.83 36.41 42.75 49.64 53.60 57.78 62.17 Current expenditure (pc) 2nd level 53.53 54.60 55.70 56.81 57.95 59.10 60.29 Health budget growth 0.10 0.08 0.08 0.05 0.05 0.05

Scenario 2 2010 2011 2012 2013 2014 2015 2016 Population with access to MINSAL 5.05 5.08 5.11 5.13 5.16 5.18 5.21 Current expenditure 416.31 462.35 502.63 529.45 545.90 562.86 580.34 Capital expenditure 23.67 24.14 24.62 25.12 25.62 26.13 26.65 Transfers 30.21 30.81 31.43 32.05 32.69 33.35 34.02 Total expenditure MINSAL 470.18 517.30 558.68 586.62 604.22 622.34 641.01 Per capita Current expenditure per capita (pc) 82.36 91.01 98.45 103.18 105.86 108.61 111.42 Current expenditure (pc) 1st level 28.83 36.41 42.75 46.37 47.92 49.50 51.14 Current expenditure (pc) 2nd level 53.53 54.60 55.70 56.81 57.95 59.10 60.29 Health budget growth 0.10 0.08 0.05 0.03 0.03 0.03 Source: Authors‘ calculations based on Ministry of Health projected budget.

17 Projections based on the Economist Intelligence Unit‘s database. 58

13. This economic analysis also takes into account a series of assumptions about the strategy, interventions, and goals established in the Project.

a. Population covered: The Project will benefit 2.1 million people who are among the poorest living in 92 eligible municipalities in both rural and urban areas of El Salvador (see Table 2.1: Eligible Municipalities and Target Populations). Project Component 1 seeks to expand coverage of target populations with a comprehensive set of essential health interventions and improve delivery of priority programs focused on health promotion, disease prevention, treatment, and rehabilitation.

b. Discount rate: A discount rate of 7 percent is applied to the benefits generated by the Project.18

c. Direct and indirect benefits: There are a number of direct and indirect benefits associated with the Project intervention, namely: (i) a reduction of maternal and infant mortality, (ii) greater efficiency of health services through capital investments and training of health providers, and (iii) an increase in coverage expanded through the RIISS to strengthen delivery of services.

i. Reduction of maternal and infant deaths: The Project‘s implementation of prevention and promotion activities during the prenatal stages of pregnancy aims to reduce the number of maternal and infant deaths. Indicator 2 measures the number of pregnant women enrolled in MINSAL receiving four prenatal check-ups and giving birth at a MINSAL hospital. A cost-benefit analysis suggests that saved lives produce economic benefits through an individual‘s future labor force participation.19

ii. Greater efficiency of health services through capital investments and training of providers: Through the financing of new capital investments such as medical equipment and training of health personnel working in priority health programs, Components 1 and 2 lessen the demand for curative services with better provision of preventive care. Savings from the capture of disease at an earlier stage allows for the reallocation of funds towards increased health care coverage of the population. Efficiency gains are witnessed through improved health provider performance, the use of adequate and reliable medical equipment, lower cost interventions, and lower cost medicines.20

18 Since the Salvadorian economy is dollarized, the country has much lower interest rates than other countries in the region—as such, a 7 percent discount rate was used. 19 We assume that income per capita remains constant for an individual living in rural areas. 20 An effective referral mechanism or a high-performing integrated health care service network needs the right equipment, medical supplies, and trained personnel. 59

iii. Increase in coverage expanded through the RIISS to strengthen delivery of services: Strengthened health service delivery encompasses greater coverage and better targeting of underserved and vulnerable populations, and seeks to improve quality and equity in utilization of health services. Equity in health service delivery may indirectly increase demand for health services, especially for the underserved, and could directly impact health outcomes positively.

At the macro-level, this may increase productivity and raise overall GDP levels. MINSAL‘s provision of a comprehensive set of essential health interventions under expanded coverage, coupled with the strengthening of the Single Unified Health Information System (SUIS) and the implementation of a national pharmaceutical policy, shows Government commitment towards increased coverage and better stewardship and monitoring capacity, and more efficient and effective use of personnel and annual budgets.

d. Project investment and recurrent costs: The total financing of this Project is US$80 million, which will be disbursed over a period of five years (2011-2015). Recurrent costs are US$416 million in 2010 and expected to increase at least by US$562.86 (scenario 2) once Project investments are completed at the end of 2015.

e. Use of real (rather than nominal) figures: All figures are in real currency units (US$ of 2011). The results presented here assume no inflation over the next couple of years.

f. Counterfactual: Analysis of health scenario without Project intervention: The Project will provide additional resources to fill demand-side and supply-side gaps for the delivery of health care services under MINSAL. Without this intervention, underserved populations will continue to experience difficulty in utilizing health services, especially at the first level of care, and health providers will have to work with inadequate and inefficient medical equipment, and lack of trainings. This will prove to be more costly for MINSAL as outpatient and curative services are more expensive.

Cost-Benefit Analysis: Maternal and Child Mortality Rates

14. Some of the costs and benefits associated with the Project, specifically those related to the maternal and child mortality rates are described below. For the purpose of the analysis, a model estimating avoided deaths and years of life lost was used. Using these estimates, the net present value of deaths averted was calculated. The discount rate used was 3 percent and the expected remaining years of life were based on the average life expectancy at birth in El Salvador, which is 72 years of life. Furthermore, the net present value of the Project was estimated as:

t t NPV =∑(Bt /(1+d) )- ∑(Ct/(1+d) )

60 where ∑ refers to the sum of all periods, t is the year of reference (ranges from 0 to T), Bt is the estimate of the monetized benefits in a given period, d is the discount rate, Ct is the monetized cost in period t, which in present value is the cost of the project. T refers to the implementation period of the Project.

15. This approach is likely to underestimate the benefits of the Project for two main reasons. First, the model captures only benefits that result from reductions in maternal and child mortality but exclude all other deaths avoided in part due to new medical equipment and the setup of the National Medical Emergency System. Second, it does not take into account benefits from reductions in morbidity and out-of-pocket expenditures.

16. The Project is expected to yield substantial benefits. It would avoid between 2,953 and 3,938 deaths, which translate into monetary benefits between US$129 million and US$172 million. For all scenarios, the Project's benefit-cost ratio is greater than one and its net present value is positive. More specifically, through these analyses, the benefit-cost ratios are expected to be between 1.61 and 2.15 and net present values between US$49 million and US$92 million.

Table 7.3: Results of the Economic and Financial Analysis Scenario 1: Scenario 2: Scenario 3: High Basic Low Cost of intervention (US$ million) 80 80 80 Deaths averted 3,938 3,150 2,953 Avoided years of life lost 201,943 161,554 151,457 PMV of deaths averted (US$ million) 172 137 129 Net benefit (US$ million) 92 57 49 Benefit-cost ratio 2.15 1.72 1.61 Abbreviations: Present Monetary Value (PMV).

61