Peru - Primary Health Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4016-PE STAFF APPRAISAL REPORT PERU PRIMARY HEALTH PROJECT October 29, 1982 Population, Health and Nutrition Department This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Soles S/.560 = US$1.00 (as of March, 1982) FISCAL YEAR January 1 to December 31 PRINCIPAL ACRONYMS USED APSP = Primary Health Care in Peru CNAP = National Commission of Primary Health Care CNP = National Population Council COOPOP = Popular Cooperation Agency ENCA = Encuesta Nacional de Consumo de Alimentos GOP Government of Peru IPSS = Peruvian Social Security Institute MCH = Maternal and Child Health MOF = Ministry of Finance MOH = Ministry of Health PAHO = Pan American Health Organization PAMI = Mother/Child Food Assistance Program PHC = Primary Health Care PHCM = Primary Health Care Modules PHCP = Primary Health Care Policy PNACS = National Plan of Coordinated Health Actions SECIGRA = Graduate Civil Service UNICEF = United Nations Children's Fund USAID = United States Agency for International Development  PERU FOR OFFICIAL USE ONLY Primary Health Project Table of Contents Page No. Definitions ... . . . . . . . . . . . . . . . . . . . i I. BACKGROUND .1.. . . . . . . . . . . . . . . . . . . . I A. Geographic Environment . . . . . . . . . . . . . . . 1 R. Population Profile . . . . . . . . . . . . . . . . . 1 C. Economic Situation ... . . . . . . . . . . . . . . 2 II. THE HEALTH SECTOR ... . . . . . . . . . . . . . . . . 2 A. Status ... . . . . . . . . . . . . . . . . . .. 2 B. Policy ...................... . 4 C. Structure of Health Services . . . . . . . . . . . . 6 D. Health Resources ... . . . . . . . . . . . . . . . 9 E. Summary Assessment ................ . 14 III. THE PROJECT ... . . . . . . . . . . . . . . . . . . . 15 A. Project Concept and Objectives . . . . . . . . . . . 15 B. Project Components ... . . . . . . . . . . . . . . 17 C. Project Description . . . . . . . . . . . . . . . . 19 IV. PROJECT COST AND FINANCING ... . ..... . . . . . 24 A. Cost .... . . . . . . . . . . . . . . . . . . . . 24 B. Financing ... . . . . . . . . . . . . . . . . . . 25 C. Fiscal Feasibility ... . . . . . . . . . . . . . . 27 V. PROJECT IMPLEMENTATION ... . . ..... . . . . . . 28 A. Management ... . . . . . . . . . . . . . . . . . . 28 B. Procurement ... . . . . . . . . . . . . . . . . . 29 C. Bank Review Requirements . . . . . . . . . . . . . . 30 D. Working Fund and Disbursements . . . . . . . . . . . 30 E. Accounting and Auditing . . . . . . . . . . . . . . 31 VI. JUSTIFICATION . . . . . . . . . . . . . . . . . . . . . 32 A. Benefits and Costs ........ ... .. ... . 32 B. Risks ....................... 34 VII. AGREEMENTS REACHED AND RECOMMENDATIONS . . . . . . . . 34 This Report is based on the findings of an appraisal mission which visited Peru March/April 1982. The mission comprised Messrs. R. Cuca (Mission Leader), D. De Ferranti and Dr. 0. Echeverri and Mesdames M. de Valdivia and P. Kleysteuber of the Bank, and Mr. A. Zuniga (Consultant). This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  -2- Page No. ANNEXES 1. Organization and Delivery of Health Services . . . . . . . 36 2. Targets for Project Areas after 5 Years of Service Delivery ... . . . . . . . . . . . . . . . . . . 42 3. Staffing, Personnel Estimates and Functions of Key Personnel ... . . . . . . . . . . . . . . . . . . 43 4. Training Component ... . . . . . . . . . . . . . . . . . 47 5. Proposed Location List for New Health Infrastructure . . 48 6. Architectural Program - Construction of Health Posts and Health Centers .54 7. Project Implementation Schedule . . . . . . . . . . . . . 55 8. Summary and Detailed Cost Estimates . . . . . . . . . . . . 56 9. Estimates of Project Recurrent Costs . . . . . . . . . . . 74 10. Disbursement Schedule . . . . . . . . . . . . . . . . . . 75 11. Assessing the Project's Benefits . . . . . . . . . . . . . 76 12. Selected Documents and Data Available in the Project File. 82 SUPPORTING TABLES 1. Comparative Health Indicators in Peru and Neighboring Countries . . . . . . . . . . . . . . . . . . 83 2. Projections of Age Structure of Population by Sex, 1980-2000 in Percentages . . . . . . . . . . . . . 84 3. Selected Health Indicators for the Project Area . . . . . 85 4. Fertility and some Family Planning Indicators . . . . . . 86 5. Ten Leading Transmissible Diseases Notified Cases 1969-1978 . . . . . . . . . . . . . . . . . . . . . . . . 87 6. Professional Health Personnel by Type and Rates 1975 and 1980 .88 CHART 1. Organizational Chart of the Ministry of Health 2. Organizational Chart - Civil Works Component 3. Organizational Chart - Training Component MAP IBRD 16602 - Project Areas  i - DEFINITIONS Adult Literacy Rate The percentage of persons aged 15 and over who can read and write. Child Mortality Rate Annual deaths of children 1-4 years per 1000 children in the same age group. Crude Birth Rate Number of live births per year per 1000 people. Crude Death Rate Number of deaths per year per 1000 people. Dependency Ratio Ratio of population 14 years or under and 65 or over, to population aged 15 to 64 years, multiplied by 100. Indicates proportion of population that needs to be economically supported. Incidence Rate The number of persons contracting disease as a proportion of the population at risk, per unit of time usually expressed per 1000 persons per year. Infant Mortality Rate Annual deaths of infants under 1 year per 1000 live births during the same year. Life Expectancy at Birth Indicates the number of years a newborn child would live if subject to the mortality risks prevailing for the cross-section of population at time of birth. Maternal Mortality Rate Number of maternal deaths per 1000 births in a given year attributable to pregnancy, childbirth or puerperal complications. Morbidity : The frequency of disease and illness in a population. Mortality : Deaths as a component of population change.  - ii - DEFINITIONS (cont.) Prevalence Rate The number of persons having a particular disease at a given point in time per population at risk. Usually expressed per 1000 persons per year. Rate of Natural Increase Difference between crude birth and crude death rate; usually expressed as a percentage. Total Fertility Rate The average number of children a woman will have if she experiences a given set of age-specific fertility rates throughout her lifetime. Serves as an estimate of average number of children per family.  I. BACKGROUND A. Geographic Environment 1.01 Peru is the fourth largest country in Latin America with an area of about 1.28 million km2, of which only about 5% is agricultural land. The Andes mountains divide the country into three clearly defined topographic and climatic regions: (i) the coastal region, alongside the Pacific Ocean, occupies 11% of the country's area, but includes 46% of total population; for about six months of the year, it is hot, cloudy and humid but rainless; (ii) the mountain region, covers 26% of the country area, holds 44% of the population and con- sists of steep mountain slopes and high valleys between the mountain ranges, and has a climate varying from mild to very cold temperatures; and (iii) the jungle region, east of the Andes covers 63% of the area, holds only 10% of the population and is hot, rainy, and humid. Modern economic activity is confined to the coastal region because of diffic- ulties in transportation, communication and cultural differences with other regions. B. Population Profile 1.02 There are about 18.2 million Peruvians (1982); almost half are Indians, about a third are Mestizos and about one tenth are of European origin. European descendants continue to control business and politics. German and Italian descendants are powerful in commerce and finance. Asian minorities have intermingled with the coastal population and are active in commerce. Most of the Indians (Quechuas and Aymaras) live in the mountain region, deeply attached to their ancient cultural patterns and not fully integrated into the economic, social and political life of the country. This social dichotomy demands different strategies for planning and implementing social and economic programs. 1.03 Peru's population almost tripled in the last 40 years and about two-thirds now live in urban clusters of 2,000 people or more. The Lima-Callao metropolitan area alone has 5 million people. Urban growth in the last decade (average annual growth rate of 4.3%) has magnified problems and requirements in sanitation, transportation, health, education and other public services in urban areas. 1.04 The present population growth rate in Peru is 2.7% per annum 1/. As in most developing countries, the rate of growth l/ Preliminary results of the 1981 Census suggest that the present rate of growth of population may be as low as 2.1 per cent per year and that the total fertility rate may be 5.1 children per woman. A full analysis of the Census, including evaluation of undercounting, is, however, needed before these figures are accepted. This job is being done in collaboration with the Latin American Demographic Center (CELADE).  accelerated in the last 40 years due to slightly incre.s Ig birth rates and dramatically decreasing death rates. Only recantly has fertility begun to decrease and presently the total fer.i'lty rate is 5.3 children per woman compared to about 6.5 in the early 1970s. At present growth rates, Peru will have a population of 28 rillion by the year 2000. National efforts to provide employment, foodi, health, housing and education, and to support a very large dependent-child population, would be undermined if population growth is not slowed down. Whilst the Government is aware of these consequences, it does not yet have a fully developed and articulated policy framework adequate to respond to the population problem; a family planning program is, however, now at the initial stage of implementation. C. Economic Situation 1.05 The Government elected in 1980, has made efforts to achieve economic efficiency, decontrol and promotion of the private sector, and also introduced policies aimed at more equitable sharing of development benefits. At the macro-economic level, it nas given high priority to creating employment, liberalizing trade, promoting exports and fighting inflation. At the sectoral level, high priority is being given to the revival of the agricultural and industrial sectors, the expansion of mining and energy production, the rehabilitation and expansion of the country's road network, and the improvement of the health and housing situation. 1.06 Poverty, however, continues being a dominant problem in Peru. About 49% of urban people subsist below the absolute poverty income level (US$235 per capita), compared with 35% (in 1979) in Latin America as a whole2!. Inflation has further eroded the already limited purchasing power of the poor, and fiscal constraints have adversely affected the social sectors, especially the health sector whose share of total Government budget declined from 7% in 1950, to 4.5% in 1981-82. This decline hindered the expansion cf health services to underserved poor populations, especially in rural and marginal-urban areas. To correct this situation, the Government has given priority to developing a new approach, involving more efficient health service delivery through a primary health care strategy and additional resources. II. THE HEALTH SECTOR A. Status Health 2.01 Peru's health statistics are incomplete and the information system is unreliable, but they give sufficient basis for assessing the main problems and trends of the country's health status. Peruvians' life expectancy at birth increased from 48 years to 58 years in the last 20 years as a result of better socio-economic conditions and 2/ "Social Indicators Data Sheets"; World Bank, May 1981  - 3 - public health measures such as water supply and communicable diseases control. However, their health status continues to be poor in comparison to other Latin American countries. High mortality and morbidity together with poor nutrition and high fertility characterize Peru's health status. 2.02 The reported infant mortality rate is 86 per 1,000 live births, but other available evidence suggests that it is actually over 100 per 1,000 live births, due to low immunization levels, deficient nutritional status, poor personal and environmental hygiene, and high fertility. The most common causes of death among preschool age children are: pneumonia (24%); enteritic and other diarrhoeal diseases (20%); bronchitis (9%); and influenza (5%). Maternal mortality is over 30 per 10,000 live births due mainly to anemia, hemorrhage, infection, and toxemia during pregnancy, delivery and postpartum periods. Main causes of adult mortality include: influenza, pneumonia and bronchitis (19%); tuberculosis (8%); accidents (7%); and diarrhoeal disease (4%). Other causes account for the remaining adult deaths. As a corollary, the country's crude death rate, about 11 per 1,000, is the third highest in Latin America (see Table 1). 2.03 Morbidity is also high in Peru. The leading transmissible diseases are diarrhoea, hidatidosis, hookworm and other helminthiasis accounting for about 44% of transmissible diseases; and influenza, ma- laria and tuberculosis, which account for another 30% of transmissible diseases (see Table 5). The epidemiological importance of parasitic, pulmonary and gastro-intestinal infections is clear. Other health problems are: hypoxia (deficient oxygenation of blood) at high alti- tudes which affects pregnant women and children; zoonosis which results in a large number of cases of rabies and trypanosomiasis; alcohol consumption and coca chewing, especially among the Indians in rural areas, which are social as well as health problems; and perio- dontal disease which is widespread. There are no official estimates of the time lost due to illness, but the human suffering and economic cost are undoubtedly high. A substantial decrease in the risks of mortality and morbidity could be achieved by strengthening immuniza- tion programs, extending breastfeeding, increasing family food purchasing power, improving personal hygiene habits, better access to quality health care, and improving household sanitation and water supply. Nutrition 2.04 Contributing to this poor health status is the nutritional problem. Most nutrition data come from the Encuesta Nacional de Consumo de Alimentos (ENCA) completed in 1972, which concluded that 44% of pre-school children were undernourished. Little improvement in nutritional status -- and perhaps some deterioration -- has taken place since then. The National Nutrition Institute now estimates that over 48% of preschool children are undernourished. Shortened breast- feeding, poor diets, recurrent childhood parasitic and infectious diseases and low incomes explain this high prevalence. Other impor- tant nutritional problems are iodine deficiency in 20-25% of the total population, and nutritional anemia in 69% of pregnant/lactating mothers and in 34% of women 15-49 years old. Daily per capita con-  -ur.;z:ion & cal--&ies is about 97X of the FAO standard of 2,350, but approxI~ ealy X0% of the pooulation has diets below 90% of that standard. Moreover, it is likely that in recent years food consump- tion declined for low and middle income persons. S s -_ies on imported foods during this period may have provided some relief for low income families in urban areas but this may ha also produced a reduction of income in rural areas, with negative -onal effects for the rural population. The most basic cause of mal rition in Peru is low incomes due in turn to shortage of employmearL opportuni- ties. Other associated factors are inefficient use of available local foods, high prevalence of debilitating infectious and paras-tic diseases, diarrhoea and lack of family -;areness of the s ous consequences of malnutrition. Population 2.05 The poor health status is aggravated by high fertility (TFR = 5.3 children per woman). Frequent pregnancies, pregnancy at an early or very late age and a high number of pregnancies adversely affect the health of mothers and their offspring. Most Peruvian women have their first child before age 20. More than half the women aged 25-29 interviewed in 1978 for the World Fertility Survey in Peru said they wanted no more children. The proportion wanting no more children rose to three-quarters for those aged 35-39. Despite this expressed desire to have no more children, only about one-third of the 25-29 age group and an even smaller percentage of those 35-39 were using some method of birth control (see Table 4). These figures indicate a large unfulfilled demand for family planning services which the GOP has only recently begun to address. The services offered by the GOP are not yet fully satisfactory because they do not make people aware of the possibilities of controlling their fertility, they do not reach all those who could use them, and they are limited in methods. A greater effort is therefore needed in population education and to extend service availability. B. Policy Health 2.06 In the past, Peru's health policy evolved on the basis of the medical practices of industrialized countries that do not neces- sarily address the main health problems and demands of its population. In the mid 1970s, international concern for primary health care, endorsed at the Alma Ata Conference, stimulated the MOP to use its own experiences in primary health care to update health policies and programs. The Government elected in 1980 decided to formulate a National Plan of Coordinated Health Actions (PNACS) for 1982-85 with strong emphasis on primary health care aimed at: (a) reducing mortal- ity and morbidity especially among rural and urban poor; (b) promot- ing Maternal and Child Care (MCH) services including implementation of population policies; and (c) improving efficiency and extending coverage of health services. 2.07 To facilitate the attainment of these goals, the Government of Peru (GOP) decided to: (a) reorganize the Ministry of Health (MOB), especially its central administration; (b) appoint a special  MOH Commission to prepare the National Primary Health Care Policy (PHCP) and an implementation plan; (c) improve the coordination of external technical and financial aid; (d) improve the MOH physical infrastructure and equipment; (e) improve logistics, especially for the supply of medicines; (f) improve information, supervision, evalu- ation and control systems of the MOH; and (g) set up intersectoral coordination for strengthening community participation. So far, MOH's central administration has been reorganized, but more managerial strengthening is needed. Implementation of the other initiatives is under way, in some cases with support from bilateral and multilateral agencies (see paras. 2.33 to 2.36). The National Commission of Primary Health Care (CNAP) prepared a document on Primary Health Care in Peru (APSP), which was officially approved by a Ministerial Resolu- tion (Jan. 1982). The main objective of APSP is to make available essential care based on safe, effective and standardized actions to underserved populations in rural and urban areas. The basis to imple- ment the APSP is the Primary Health Care Module concept consisting of a defined package of human, technological, physical and financial resources to provide basic health services to population groups according to size, risks, and resources (see Annex 1). The CNAP also prepared a proposal on "Primary Health Care and Basic Health Services" as the keystone for implementing the APSP. It is planned that by the year 2000, the entire population should have access to primary health care and that their health status would permit them to live a socially and economically productive life. Population 2.08 Other policies in respect to population, nutrition and sani- tation have also changed recently. In the last five years, the GOP has carefully moved toward a defined population policy. In 1976, for the first time, the Government formally announced a population policy with three broad objectives: (a) to achieve a population growth rate consonant with the free decision of the population about family size which would contribute to the human development desired by the society; (b) to achieve meaningful reductions in mortality and morbi- dity; and (c) to achieve a better population distribution in accord- ance with the objective of regional development and national security. At present, there are no demographic targets and abortion and sterilization for fertility control are strictly prohibited. The GOP, however, expects that implementation of the above policy along with structural changes in the economy will result by the year 2000 in a population of 25 million, rather than 28 million in the absence of such a policy. In this connection, the new Government has recently created a National Population Council (CNP) under the chairmanship of the President of the Council of Ministers. The CNP is the institution in charge of developing, promoting and coordinating all population ac- tivities in the country. A family planning program, part of health projects supported by TJSAID and UNFPA, has been providing services through the health delivery network since late 1981. Despite these encouraging developments, it will take some time for meaningful reductions in fertility to occur, due in part to the lack of intensive communication efforts which cannot take place because of religious sensitivities in the country. If the preliminary results of the 1981 population Census are confirmed, they would indicate that in urban areas people have been practicing family planning for some time utilizing the services of the private sector.  -6- Nutrition 2.09 The Government's response to the nutritional problem in Peru has been modest, fragmented and weak in operational terms. Several commissions and multisectorial groups have been charged with the pre- paration of policies and development of a national plan for food and nutrition, but implementation has been incomplete, with less than adequate intersectorial participation and coordination. The Mother/ Child Food Assistance Program (PAMI), initiated in 1978, is the most important effort of the MOR to correct the nutritional problem of this target group, but its scope and impact are modest compared to the mag- nitude of the problem. At present, the MOR interprets its role as one of monitoring nutritional status and caring for complications arising from nutritional problems. Nutrition research is meager because the MOM Nutrition Research Institute lacks financial support and human resources. Water and Sanitation 2.10 The Government established by law, in 1962, the Rural Water Supply Plan aiming at providing potable water to 4,393 localities each with less than 2,000 people. The plan is phased to match available resources. Its fourth phase, 1980-1982, would reach 220 additional localities increasing the coverage up to about 16% of the total target population. The Ministry of Health has also established a 10-year plan to develop adequate systems for collection, transport, processing and final disposal of solid wastes in 70% of cities with 20,000 people or more. It is estimated that by mid-1981 water supply was available to 68% of urban and 19% of rural populations and that sanitation was available to 58% of urban and 1% of rural populations. These policies are being implemented at a slow pace because of insufficient human, technical and financial resources. 2.11 The Government is committed to economic and social policies, including a more equitable distribution of development benefits, which will improve the health of the population. GOP is also prepared to provide more resources for health consistent with the sector's ability to absorb and utilize such resources effectively but low administra- tive capacity to prepare and execute programs has so far made this commitment theoretical. MOR's efforts to establish health programs more attuned to the country's health needs are a response to that challenge. C. Structure of Health Services 2.12 The Organic Law of 1969 (Law 17523) established MOH as the organization responsible for regulating and coordinating the delivery of "public" and "non-public" health services through the National Health Council. The main health agencies in the "public" sector include the MOH, the Social Security (IPSS), the health units of the Armed Forces and the Ministry of Interior, the medical departments of other public organizations or institutions and the "Beneficencias" or Welfare Boards (public non-profit organizations). Health services in the "non-public" sector are provided by private hospitals, clinics and sanatoria, and by agro-industrial cooperatives and other community-  - 7 - based organizations. Overall, the health sector includes about 17 different public institutions and 8 non-public agencies. The National Health Services System 2.13 In 1978, the Government created the National Health Services System (Law No. 22365) to coordinate the above health agencies so as to avoid overlapping of functions and responsibilities, and thus foster a more efficient use of resources. The system is managed by the National Health Council3/ at the national level and by regional health councils and local health committees at regional and local levels, respectively. However, the National Health Services System is still too weak to deal with the imbalance of power and strong vested interests among the institutions involved. In practice, almost every health agency continues to have its own legal and economic basis and enjoys complete administrative and executive autonomy in the delivery of health services. The PNACS is the starting point for services coordination, although greater efforts to coordinate the different components of the system will ultimately be needed to ensure consolidation of the National Health System. 2.14 Fifty per cent of the Peruvian population do not have regular access to formal health services, and 25% have never had access to them and depend on traditional healers and birth attend- ants. IPSS covers about 10% of the population, other public institu- tions cover about 19%; and, the professional private sector covers about 4%. The other two-thirds of the population are nominally served by the MOH. Ministry of Health Structure and Services 2.15 The MOH, created in 1942, was by 1950 the most important health care provider. As now reorganized (see para. 2.07), the MOH is headed by a Minister and a Vice Minister advised by a Consultative Commission and helped by an Auditing Directorate. The MOH has: (a) four Advisory Directorates (Planning, Legal, Organization and Methods, and International Relations); (b) seven support directorates (Administration, Statistics, Infrastructure, Public Relations, Person- nel, School of Public Health and the National Institute of Health); (c) two Normative Directorates (Persons and Environment); (d) a Directorate of General Health Services; and (e) sixteen Regional Directorates (see Organization Chart 1). Delegation of authority and responsibility is still limited, however, with consequent excessive paperwork and inefficiency. Managerial and technical skills are not uniformly adequate. Low salaries, lack of incentives and low prestige hinder efforts to hire and retain good managers. Short term prospects 3/ This Council is chaired by the Minister of Health and has representatives of the four components of the health system (MOH, IPSS, Armed Forces Health Services, and private services) and of the IJniversity and professional groups.  - 8 - 'or organizational improvement hinge more on training than on .oersonnel or structural changes. Prospects for improvement at the regional level are better because personnel changes are easier, managers are younger, and possibilities of advancement still exist. Since program implementation is the responsibility of the regional level, it is at this level that management improvements will be most productive. 2.16 At present, the country is divided into 16 health regions, each one involving one or more departments. Each region has a Regional Health Directorate whose director is appointed by the Mini- ster of Health, and a Regional Health Council. The region is then subdivided into "Hospital Areas", each with at least one general hospital and a network of health centers and health posts in urban and clustered rural populations. In principle, each health region should be able to provide all types of health care except those requiring the most sophisticated technology (e.g. cobalt therapy, neurosurgery etc.); tertiary care should be available in the main city of the region (usually a departmental capital); secondary hospital and ambulatory care should be locally available within each Hospital Area and primary care should be available for all urban and rural popula- tions. 2.17 This regionalized pattern has the following drawbacks needing correction: (a) lack of appropriate information systems for planning, programming and budgeting health services; (b) complicated methodologies of health planning; (c) inadequate logistical and financial support; (d) weak technical and administrative skills of health personnel; (e) strong hospital-oriented organization with consequent bias in the allocation of health resources; and (f) inabi- lity to decentralize ministerial administration and delegate autho- rity. Some of these weaknesses are being addressed within the context of PNACS. Specifically, USAID is supporting MOH efforts to improve lo- gistics, the German Government and PAHO are supporting the design of a new information system, and the Bank is supporting the improvement of overall national planning and budgeting. These efforts will contrib- ute to better administration of the health system in the medium-term. 2.18 The services of the MOH cover the whole spectrum of medical services from basic health services, provided by a wide variety of health workers, to tertiary health services, provided by highly specialized personnel and utilizing sophisticated technology and costly facilities. A number of vertical programs have been operating in the country for the past 20 years (tuberculosis, malaria, MCH care, immunizations) with varying degrees of efficiency and effectiveness. Under MOH budgetary restrictions of the past decade, these programs have significantly deteriorated to the point that, for example, malaria incidence tripled from 12,033 new cases in 1973 to 32,413 in 1977. The principal benefit of the new Primary Health Care approach is expected to be a substantial improvement in the use of resources and in service coverage, achieving both better efficiency and effective- ness of health services.  - 9-- Peruvian Institute of Social Security (IPSS) 2.19 The IPSS is the result of the merger of the old Social Secu- rity System for blue and white collar workers. All salaried workers, their spouses (for pregnancy, delivery and postpartum) and children in the first year of life are supposed to be beneficiaries. Contribu- tions are 15% of payroll based on minimum wages. Fifty per cent of the budget is devoted to pensions and the other 50% goes for health services including medical care, sick leave, maternal benefits and milk allowance. IPSS has its own infrastructure for health services but it also buys services from MOH and the private sector. In the case of services bought from MOH, fees are reviewed infrequently and, according to the MOH, they do not cover the cost of these services, implying that MOH subsidizes the IPSS. IPSS has management problems. Financial control is weak and recording of contributions and benefi- ciaries inadequate. This situation undermines the objective of expanding the services of IPSS to the families of its insured workers as required by the 1979 Constitution. D. Health Resources Manpower 2.20 In 1980, there were 12,400 doctors, 10,000 nurses, 3,900 health technicians and 7,400 nursing auxiliaries in the country. This is a distorted manpower structure because of the extremely low number of health technicians and auxiliaries in relation to that of medical doctors. This manpower imbalance may be reversed in the future. The seven medical schools are graduating about 600 new physicians per year, and the eleven university nursing programs and the twelve nurs- ing schools are graduating 800 nurses per year. The increasing demand in the public and private sector for nursing auxiliaries has led to the development of the training programs (ESEP and CENECAPE 4/) which have increased the number of auxiliaries by about one-third. 2.21 The health manpower distribution is biased towards large cities. Two-thirds of all doctors live in Lima which has about 29% of the population, whereas in most rural areas there is only about one doctor per 10,000 or more inhabitants. To correct this bias, the Government established, in 1976, a law of Graduate Civil Service (SECIGRA) which has enabled the MOH to assign more professionals to rural areas. According to this law, a doctor has to devote one year, and a nurse six months to work in a rural health situation before being legally qualified for professional practice, but due to lack of appropriate training, facilities, equipment and proper intellectual, social and economic incentives to stay, they migrate to large cities as soon as they finish this compulsory service. 4/ ESEP = Escuela Superior de Educacion Profesional CENECAPE = Centro Nacional de Educacion y Capacitacion Especial  - 10 - 2.22 Staffing patterns of MOH facilities vary widely according to level of care, geographic location and services offered. Health centers should be staffed by 2 physicians, a general nurse, an obste- trical nurse, a sanitary technician, a pharmacist, an administration clerk, a laboratory auxiliary and three ancillary services personnel. In practice, this level of staffing is seldom possible due to insuffi- cient funds being allocated by MOH to the health regions. In addi- tion, health professionals and paramedical personnel are reluctant to work in health centers which are usually located in small towns and villages. 2.23 Health posts are staffed by one of three different types of workers: the bachiller de salud (ESEP graduate), who has four years of secondary school followed by two years of health training with emphasis on MCH, including prenatal control of normal pregnant women and care of their deliveries; the sanitarian, who has one or two years of secondary education and three to six months of health training with emphasis on first aid and MCH but without the skills to care for nor- mal deliveries; and the health promoter, who has some primary school- ing and one to four weeks of training. Both the bachiller de salud and the sanitarian are paid by the MOH. The health promoter is suppo- sed to work about two hours per day and to be paid in kind or cash by voluntary community contributions. Another health worker is the community volunteer, "Vigia" (health watcher), who with a few days of training provides health information and advice in communities to stimulate demand for services. The above staffing is an outcome of initiatives to cope with the poor availability of personnel in rural areas, but has produced wide variations in the quantity and quality of health services provided at the health post. Present role conflicts among sanitary auxiliaries, bachilleres de salud and nurses will be solved through the new primary health care policy delivery system, which defines clearly the activities to be carried out at each level of service and the training needed to perform those activities. Financial Resources 2.24 Financial resources for health in Peru are limited; they are distributed unequally among the different regions of the country and among expenditure categories. The MOH's budget was US$190 million in 1981 or about 4.4% of total Government spending. In some regions, MOH services were funded through regional entities (ORDES). If these expenditures are included, the share of health rises to 4.9% of Government spending. This figure has fallen gradually since the early 1950s when it was slightly over 7%. 2.25 The health portion of the IPSS budget was US$245 million in 1981, nearly 30% higher than the MOH's. The police (Ministry of Interior) and armed forces also operate health care facilities for their employees, but do not publish financial data. It is estimated that their spending on health must be at least US$100 million. The aggregate for all these major service providers is US$535 million for 1981. This figure, however, does not include private expenditures on health, except for employee contributions to IPSS and for cost recovery by the MOR equivalent to about 10% of its budget. Household  - 11 - survey data suggest that private spending on health, for all manner of services ranging from traditional medicine to store-bought medicines to private physicians, may be about 3% of per capita income. If so, private health expenditures would be in excess of US$500 million, and total (public plus private) expenditures would be over US$1 billion, or more than US$50 per capita. 2.26 Large differences among the major public providers in per capita spending levels underscore the unequal distribution of services and resources. Assuming that the MOH covers all its intended beneficiaries or about 67% of the population, its per capita expenditure was US$16 in 1981. However, if 25% of the population, as is generally recognized, has no access to non-traditional medical care, and thus the MOR is only reaching 42%, its rate of spending was in fact US$25 per capita. The per capita figures for the 10% of the population who are beneficiaries of IPSS and for the beneficiaries of the armed forces in that year were over US$130 and US$200, respectively. The parts of the population with no access to any modern facilities are among the poorest. Those covered by IPSS and by the Armed Forces are workers in the modern sector of the economy or members of the police and armed forces services, and generally have higher incomes than those relying on the MOH. 2.27 There is also inequality among regions. Excluding recurrent expenditures devoted to central administration and special programs, the budget of the MOH (plus the health expenditures of the ORDES) is equally distributed between Lima and the rest of the country. Expenditures by the IPSS have a similar imbalance for Lima, since most of the beneficiaries are concentrated in the urban areas of the country. 2.28 There is also inequality in most Hospital Areas between the resources allocated to the hospital and those allocated to the peripheral area. As resources are allocated to Hospital Areas in total and as the Director of the hospital is also the Director of the Hospital Area, resources tend to be spent at the hospital with little going to the peripheral areas depriving health centers and posts of needed resources. Separate budgets for the hospital and peripheral facilities would likely correct this problem. 2.29 A further breakdown of the MOH budget by input categories reflects other problems. About 10% of the total budget was devoted to capital investment in 1981. Of the recurrent budget, about 70% is devoted to payments to or on behalf of personnel. Medical supplies and drugs only receive about 5% of the recurrent budget because patients are expected to buy their medicines. By contrast, in IPSS about 15% of the recurrent budget goes for medical supplies and medi- cines. As a result, the poorer people served by the MOR often have to buy their own medicines while IPSS beneficiaries receive medicines free. 2.30 As of the beginning of 1980, the MOH had obtained US$73.9 million in foreign aid for the period 1980-1985. Among the major donors in 1980 were Japan and the Federal Republic of Germany (each  - 12 - accounting for 21% of the total foreign assistance received), the World Bank (15.2%), USAID (12.3%) and PAHO (6.2%). Some of the aid is for service extensions that will generate significant additional recurrent costs for the MOH, but a relatively large proportion is for maintenance, equipment and support activities, which have a smaller impact on operating expenses. Overall, the increase in recurrent costs is expected to be between US$1 and US$2 per capita. This aid is also unevenly distributed geographically, compounding the Lima bias characteristic of domestic fund allocations. Over a third of the US$73.9 million for 1980-1985 is assigned directly to Lima and just under another third will benefit Lima along with other regions. 2.31 The MOH has been at a disadvantage in obtaining more finan- cial resources for two reasons. First, it has not been able to demonstrate the case for higher budgetary allocations in spite of the repeatedly emphasized commitment of the GOP to devote more resources to health for programs which will improve the general health status; the PNACS and the new Primary Health Care Policy will give the MOH better leverage in national resource allocations. Second, the MOH has not been able to recover more than 10% of its budget through user charges because of an insistence on provision of free medical servi- ces. A cost recovery of between 20% and 30% of the budget through user charges does not seem a difficult task while ensuring free servi- ces for the truly needy. A careful study of the possibilities of cost recovery should be undertaken by the MOH soon. Physical Resources 2.32 In 1980, there were 329 hospitals with 28,708 hospital beds or about one hospital bed per 650 people; the country also had 630 health centers and 1,538 health posts. The MOH owned about 15,460 hospital beds and most of the health centers (421) and health posts (1,443), (see Table 3). The distribution of hospital beds is biased in favor of Metropolitan Lima which has more than half of all hospital beds in the country. Furthermore, some hospitals are underutilized because they are located in areas where there is not sufficient demand, in some cases because there are other facilities in the same place which duplicate services. Many MOH facilities are in disrepair and lack basic equipment. Some sophisticated equipment is not used because there are no people trained, the cost of use is high and the need small. Political pressures, lack of coordination among service providers, lack of resources for maintenance and poor management all contribute to this waste. Peru requires more infrastructure, but careful planning is necessary before expanding the existing facilities to prevent further resource misallocation. The Primary Health Care proposal will be an important basis for the rationalization of addi- tional facilities. Some coordination with IPSS is under way but fully unified health infrastructure planning can only be a long-term goal of the National Health System, given existing political constraints. Support Systems 2.33 Maintenance. The MOH maintenance system has not functioned well in the past due to lack of planning, budget and personnel. Con- cepts of depreciation, planned replacement and preventive maintenance  - 13 - are completely absent from the planning process. Good professional staff have been difficult to recruit and retain. The MOR, with the assistance of the German Government, has designed a new maintenance system, including training schools and maintenance centers. This is an important step to correcting the present problems. 2.34 Logistics. Several problems affect procurement, storage and distribution of medical supplies by the MOH. The MOR budget for medicines is so inadequate that many health facilities cannot provide appropriate therapeutic care for want of basic medicines. There is no systematic restocking of supplies. Supplies and medicines are kept at the hospital for its own use and not distributed to the peripheral areas depending on the hospital. A USAID consultant has for the past year been helping the MOH to address some of these problems and will propose solutions for consideration and adoption by the MOH. 2.35 Supervision. In practice, the supervision system is punitive and inspectorial, emanating from Lima and spreading all the way down to the health post, resulting in expensive short visits and voluminous reports but little practical effect on services. At monthly meetings health staff are paid, hand in their reports and receive information on special campaigns and activities. These acti- vities operate quite independently of the drug and equipment supply processes. Other obstacles to supervision are: lack of overnight accommodation; low travel and subsistence reimbursement rates; reluct- ance of supervisors to abandon their private practice; lack of vehi- cles; and separation of the information system from the supervision and supply systems. The MOH is now redesigning the supervision system with a fresh approach based on supervision from level to level rather than from Lima, emphasis on training and problem-solving, and coordination of supervisory activities with those of supply and information. This effort should improve supervision and service provision in the near future. 2.36 Information System. The health information system does not serve managers, researchers, planners or the general public. The large amount of forms designed to satisfy a large number of potential consumers of information makes the process inefficient and very time consuming. As managers do not give it importance for decision making, the data is not carefully collected nor promptly analyzed. This implies that it is not even available for planning purposes or for research. For management purposes, the information system requires prompt collection and analysis of just enough data to produce meaningful indicators of health status, service provision and resource utilization. Indicators should be made available to managers at all levels before being sent to headquarters for other uses. Only very general aggregates should reach MOH headquarters. The MOH, with the assistance of PAHO and the German Government, is beginning to review the system with the objective of developing a practical system which would be implemented with the help of the German Government. The Bank participated in designing and testing simplified health statistics forms for PHC.  - 14 - Community Participation 2.37 Community effort in pursuit of communal goals has long been a feature of the Peruvian culture. Once a basic need is identified, such as a health facility, the community organizes to provide the land and whatever non-skilled labor is necessary. To tap this resource, the GOP has organized Cooperacion Popular (COOPOP), a nationwide Governmental agency primarily dedicated to physical improvements at community level with national coverage and a 1981 budget of US$25 million. In recent years, community based groups have begun lobbying politicians and Government agencies demanding services and, in par- ticular, staffing for health posts and schoolrooms. Various payment and volunteer mechanisms have led some communities to consider super- vision and support of these staff as a community function and respon- sibility. As elsewhere in Latin America, Government agencies have attempted to use the communities to stimulate activity in agriculture, health and education. In response to MOH programs, some communities have established formal committees, though they have no clear activities, no structured relationship with health staff and function parallel to traditional mechanisms. The habit of community discussion, the tradition of communal work, the existence of community leaders and groups, and the community perception of shared responsibility for improvements in the quality of life will facilitate health promotion, health education, and small scale construction and environment improvement activities undertaken by the community itself. E. Summary Assessment 2.38 The health status of Peruvians is among the lowest in Latin America. Major causes of mortality and morbidity are enteritic and other diarrhoeal diseases as well as pneumonias, influenza, tubercu- losis, and bronchitis related to poverty factors such as poor personal and environmental hygiene; poor nutrition and education; poor housing and low income; and inadequate or non-existent health services. 2.39 MOH health resources are scarce, especially for providing essential services which can prevent, control or cure most prevalent diseases through home care, ambulatory care and basic hospital care. There is underutilization of available services because of lack of geographic, economic and cultural accessibility. This is compounded by poor quality of services due to unavailability and inefficient use of equipment and medicines, weak supportive referral and supervision mechanisms, and less than adequate management. The above situation tends to be aggravated by rapid population growth which stretches the already inadequate resources. 2.40 Against this background, the MOH has designed a National Plan of Coordinated Health Actions (PNACS) for 1982-85 in response to the GOP commitment to improving health. Within the context of PNACS, the MOH established a National Policy for Primary Health Care (PHCP) aimed at: (a) reducing mortality and morbidity, specially among rural and urban poor; (b) promoting basic health services for mothers and children including family planning services; and (c) improving and  - 15 - expanding health services. The main strategy to meet these goals is the development of Primary Health Care Modules (PHCM), consisting of a cadre of field nursing auxiliaries to do home care, nurses at health posts to supervise the field nursing auxiliaries, provide family nursing care, and community health education, and a medical team at health centers to provide ambulatory, hospital and community health care. Each module will serve up to 15,000 scattered population or up to 40,000 clustered population (see Annex 1). The different com- ponents of this approach have been tested and proven in small pilot projects and what is now needed is the wider application of the approach to cover a meaningful number of people as a first step towards nationwide coverage. 2.41 The implementation of the PHCP poses a challenge to the MOR. Political, institutional, technical and financial constraints will have to be carefully addressed for a realistic and successful undertaking and MOH's managerial capabilities will need strengthe- ning. The new institutionalized approach will tackle the major causes of mortality and morbidity such as child malnutrition, diarrhoea and debilitating infections, and consists of actions that can be carried out in a safe, effective and standardized way by field nursing auxiliaries under supervision, with the support of nurses and physicians. The changing roles of professional and other staff will need careful introduction. III. THE PROJECT A. Project Concept and Objectives Project Concept 3.01 This project is designed to assist the Government in improv- ing the country's health status by providing primary health care and basic health services, including family planning, to marginal-urban and rural communities, following the National Primary Health Care Policy. The main strategy to meet this goal is the development of "Primary Health Care Modules" (P-CM), defined as a set of human, technological, physical and financial resources to provide primary health care, medical care and community health care to about 2,400 scattered rural families or about 6,400 clustered urban families (see Annex 1). The principles ruling the delivery of health services by the PHCM are: (a) community participation in decision making and resource allocation for planning, providing and evaluating services; (b) delegation of safe, effective and standardized health care functions to non-professionals leaving those requiring clinical judgement and decision exclusively to health professionals; (c) systematic home visiting by field nursing auxiliaries to each family in order to deliver safe, effective and standardized health interventions; (d) use of signs or symptoms (risk factors) for individual screening to decide where and by whom the individual should be cared for; and (e) coordination of health care with the development activities of other Ministries to facilitate development and, therefore, better health. The different elements of this  - 16 - approach have already been tested through small pilot projects in Peru. The project constitutes a first phase adoption of the system on a nationwide basis. The Project Beneficiaries 3.02 The direct project beneficiaries would be the inhabitants of four geographical areas chosen on the basis of health indicators, poor access to health care, isolation, low educational levels and demographic factors (see Table 3). The project would include urban coastal, rural, mountain and jungle areas of Peru providing the experience for future expansion of the new PHC system to the rest of the country. The areas chosen are: (a) La Libertad, which includes the peri-urban zone of Trujillo with 90% of the total population of 0.4 million, and the coastal area of the Department of La Libertad extending from Pacasmayo in the North to Viru in the south; (b) Lima (two Hospital Areas) with 1.3 million people concentrated in 180 km2 (Rimac), and 0.5 million in 22 km2 (Cercado de Lima) respectively, living in shanty towns and squatter settlements; (c) Centro Medio with a population of 1.1 million people dispersed over 48 thousand km2 in small towns and inaccessible villages; and (d) Ucayali in the Huanuco Health Region with a population of 0.2 million of whom 48% live in urban areas and the rest along rivers in 130 thousand km2 of jungle. In all the project areas, services of MOH are currently inadequate and of low quality and, except for the few working in industry, sugar cooperatives and the mines, the population does not benefit from IPSS services. The majority of people in the four areas subsist at income levels below the absolute poverty. Relatively high literacy rates, in urban areas, may facilitate adoption of good health practices. In rural areas work is sought in agriculture and mining. Because in these rural areas the majority speaks Quechua, uses traditional medicine and lives in isolated communities, the acceptance of modern medicine may be slower, though radio and community organizations may support dissemination of innovation. Project Objectives 3.03 The general objective of this project is to increase avail- ability of and access to primary health services for about 3.5 million people living in four selected areas of the country (see para 3.02). The GOP selected these areas because of the population's poorer health status, and their present lack of health services. 3.04 The project's specific objectives, established by the MOH are to: (a) reduce mortality caused by: (i) diarrhoeal diseases by 20-40%; (ii) respiratory diseases by 10-25%; (iii) diseases prevent- able by immunization by 50-70%; and (iv) pregnancy complications by 20-50%; (b) reduce frequency and severity of illnesses due to: (i) diarrhoeal disease by 20-50%; (ii) respiratory infections by 30-50%; diseases preventable by vaccinations by 30-70%; and sepsis and toxemia by 20-40%; (c) reduce the severity of malnutrition by 20-40%; and (d) increase the number of family planning users by 3-20%. These specific targets were set according to age groups, region of the coun-  - 17 - try and present health status (see Annex 2 for more details). Services will be provided to address each particular objective. A monitoring and evaluation system will assess the efficiency and effec- tiveness of services in achieving objectives. 3.05 The project will support the GOP's population policy and has as specific objective to increase the number of family planning users. Family planning services are an integral part of primary health services and health workers will have training in family planning as part of their primary health training. B. Project Components 3.06 The project will include 7 components: (a) Organization and Delivery of Primary Health Care Services. (i) developing about 131 PHC modules in four regions to deliver primary, family nursing, ambulatory, hospital and community health care; (ii) constructing, furnishing and equipping about 60 new health centers, 118 health posts, and 27 staff housing additions; and, furnishing and equipping about 66 existing health centers and 60 existing health posts, out of which 41 health centers and 22 health posts would be upgraded by MOH; (iii) providing about 132 vehicles for service delivery and supervision; and (iv) providing equipment and supplies for malaria control. (b) Health Manpower Training (i) developing curricula and training courses according to job descriptions through about 45 staff-months of technical assistance and 12 staff-months of local consultants; (ii) developing training methodologies and organizing training; (iii) retraining about: 180 health module directors, 180 community health nurses, 2,089 doctors, clinical nurses, technicians and other professionals, and 640 health post head nurses; and training about: 4,500 field nursing auxiliaries and 20,000 community volun- teers; and (iv) providing continous education seminars for all PHC personnel. (c) Community Health Education and Participation (i) producing and distributing about 400 radio spots; and printing posters, flip charts and other demonstration materials for health education activities;  - 18 - (ii) producing a manual on non-formal education and commun- ity participation techniques for field staff use; and (iii) promoting innovative activities by community groups related to defined health goals, through about 3 staff-months of technical assistance and 3 staff-months of local consultants. (d) Monitoring, Supervision and Evaluation (i) implementing a new PHC information system; (ii) monitoring of PHC service efficiency; (iii) implementing a new PHC supervision system based primarily on problem solving and continuing education; (iv) evaluating PHC service processes and impact through about 31 staff-months of technical assistance and 142 staff-months of local consultants; and (v) implementing a health financing and cost recovery study through about 3 staff-months of technical assistance and 27 staff-months of local consultants. (e) Maintenance of Buildings, Furniture, Equipment and Vehicles (i) constructing, furnishing and equipping two maintenance centers to provide services to MOH health facilities in the regions of Centro Medio and Ucayali; and (ii) providing about 4 staff-months of technical assistance for design of maintenance centers. (f) Institutional Development (i) providing about 36 staff-months of technical assist- ance for improving programming and budgeting in the MOH; (ii) providing about 60 staff-months of scholarships abroad to improve technical and managerial skills of MOH per- sonnel; (iii) organizing a management workshop for MOH director generals and one for regional and area civil works personnel; and about 20 operational seminars for national, regional and local health officers; and (iv) supporting preparation of a second project for possible Bank financing by providing about 6 staff- months of technical assistance; (g) Project Administration Support (i) providing required additional personnel, vehicles and equipment for project administration; (ii) providing about 60 staff-months of technical assist- ance to strenghten project management; and (iii) providing auditing of project accounts.  - 19 - C. Project Description Organization and Delivery of Services 3.07 Four criteria have been applied to organize and deliver primary health care services: (a) identification of people's basic health needs according to their perceived morbidity and fertility; (b) selection of a package of safe, effective and standardized actions to prevent and treat common health and nutrition problems at home; (c) assignment of functions to health personnel on the basis of their vocational, technical or professional training and education; and (d) organization of health resources into primary health care modules (PHCM) (see Annex 1). These criteria define what services, for whom, when, by whom and where they would be provided. Primary health care, including family planning, family nursing care, ambulatory medical care, hospital care and community health care would be provided to the entire population of the project areas following a systematic schedule, by field nursing auxiliaries at home, nurses at the health post and a health team at the health center under physicians' responsibility. 3.08 Primary Health Care includes all safe, effective and standardized health and family planning actions performed by field nursing auxiliaries in the home. The field nursing auxiliaries will visit each family every two months to deliver a "package" of these services (see Annex 1 para. 16), thus ensuring improvements in families' health status. Home visiting on a regular basis requires full time employees and should, therefore, be remunerated accordingly. However, since this activity has not existed in the past, it has been agreed that the field nursing auxiliaries will be remunerated at the same level as the present Sanitary Auxiliaries who work in the Health Posts. Accordingly, the GOP confirmed this agreement during negotiations. Community volunteers would stimulate the use of health module services after completing short information/training sessions. The work of volunteers is by definition an informal, part-time activity and, therefore, is not remunerated. 3.09 Family Nursing Care includes all primary health care and other health activities performed by the nurse at the health post. The nurse would use this facility as a teaching instrument for users to learn how to improve household hygiene, safety and comfort. The nurse would provide three basic services: (a) sick care for patients requiring administration of special drugs and monitoring of symptoms and signs to decide whether to continue the nursing care at home or to refer patients for higher level medical care; (b) family health edu- cation, including: (i) identification of health problems and family planning needs, and methods of self-care with health/therapy groups; (ii) information and training sessions for volunteer workers to stimulate families' use of health services; and (iii) continuing education to the 6-8 field nursing auxiliaries working in the health  - 20 - post catchment area; and (c) monitoring of the health status and fertility of about 600 families under her responsibility, including collection, processing and analysis of health indicators jointly with her field nursing auxiliaries. This analysis will be the basis for planning and reviewing health activities and for informing the community and the MOH administration on health progress (see Annex 1). 3.10 Ambulatory Medical Care will be delivered at the health center and includes medical and family planning consultation, clinical lab, x-ray exams and treatment for patients requiring ambulatory professional care. Most pediatric, obstetric, surgical and internal medicine problems requiring ambulatory medical care will be managed at the health center. A small proportion (about 11%) will be referred to tertiary care facilities usually located at regional hospitals. 3.11 Hospital Care will be delivered at health centers and includes short stay hospitalized care for pediatric obstetric- gynecologic and surgical problems (see Annex 1 para. 19). Patients requiring longer stay would be referred to other hospitals within or outside the project areas. In some localities where IPSS has hospital facilities, the MOH would use these facilities under contract instead of building new facilities. During negotiations, assurances were obtained that GOP will enter into a contract with IPSS defining these arrangements, which would be agreeable to the Bank, before June 30, 1983. 3.12 Community Health Care includes: (a) the assessment of fer- tility, nutrition and health status of the community served by the entire health module; (b) the planning, allocation and monitoring of health resources and services for the health module; and (c) evaluat- ing efficiency and effectiveness of health and family planning ser- vices delivered through the PHCM. These activities would be carried out by the team of health workers under the leadership of the health module director. 3.13 The PHCM design is flexible enough to be adapted to rural and urban areas with scattered or clustered populations. The PHCM in rural areas would have: one volunteer worker for about 20 families; one field nursing auxiliary for about 100 families; a health post for about 600 families and a health center for about 2400 families. In urban areas, the PHCM would have: one voluntary community worker for about 40 families; one field nursing auxiliary for about 200 families; one health post for about 1600 families; and one health center for about 6,400 families (see Annex 3, page 1 for detailed staffing pattern for the PHCM). Average family size is assumed to be about six persons. The above multipliers are estimates based on the time required by different health providers to take care of the population under their responsibility and carry out all other activities such as supervision, training, health education and monitoring. Although 131 modules have been defined, not all of them will have the complete set of human and physical resources due to the excessive dispersion of the population. As there is a conflict in the division of funds between the hospital and the peripheral area (para. 2.28) which may prevent proper allocation of resources to the PHCM, assurances were obtained  - 21 - during negotiations that the budgets for the hospital and the peripheral area will be clearly separated and that a monitoring system will be established to monitor this separation. This is expected to allow peripheral areas the capacity to keep staff in better working conditions. Staff housing and better training opportunities are also expected to be incentives to attract personnel to the periphery and maintain interest in PHC. Assurances were obtained during negotia- tions that additional incentives would be considered, and that these new incentives would be adopted before December 31, 1983. 3.14 Physical Facilities. The above activities require a physical infrastructure of health posts and health centers. Some of this infrastructure already exists. The project would, therefore, construct, furnish and equip about 60 health centers, about 118 health posts and about 27 staff housing additions to existing health facili- ties. It would also complete the equipment and furnishing of about 66 existing health centers and 60 existing health posts, of which about 41 health centers and 22 health posts would have to be upgraded. Assurances were obtained during negotiations that the MOH will upgrade said facilities. Out of the total, about 65 (26 new) health centers and about 69 (47 new) health posts are located in urban areas. The rest, about 61 (34 new) health centers and about 109 (71 new) health posts are located in rural areas. Both types of facilities will follow a new, economical and functional modular design which allows for future expansion. About 59 (25 new) of the health centers have beds, which will perform 12 basic operations requiring a short hospital stay (see Annex 1, paragraph 19). About 57 health centers (32 new) and 90 health posts (69 new) will have living quarters for the staff. 3.15 The health post will have a gross area of up to 110 m2. Where needed, it will also have living quarters for the staff, in which cases the gross area would be about 133 m2. The health center will have about 317 m2; if it is in a rural area and requires living quarters it will have about 417 m2. The health center with beds will have an additional 218 m2. In addition, the project will add an average of about 45 m2 of living quarters to about 27 facilities already in existence (see Annex 6). Proposed locations for the above facilities have been agreed upon (see Annex 5) on the basis of the PHC concept application. Fifty per cent site acquisition and all prototype typical designs were completed before negotiations. 3.16 To facilitate patient referral and for supervision purposes, the project would provide about 43 4-wheel drive vehicles, 9 ambul- ances, 47 motorcycles and 25 motorboats. The vehicles will be allo- cated to defined localities where there is currently no transport. During negotiations, GOP provided assurances that these vehicles as well as other facilities financed under the project would be properly maintained and used only for the purposes of the project. Health Manpower Training 3.17 The proposed delivery and referral services require the development of new skills, acquisition of new knowledge and substan- tial changes in attitude and behavior of health personnel. Assuming  - 22 - completion of 131 PHCMs and assuming changes in personnel during the life of the project, about 180 directors of modules, 180 community nurses, 363 doctors, 363 nurses, 683 nursing auxiliaries and approxi- mately 680 technicians would be retrained for the health centers; 640 health post nurses, 4,500 field nursing auxiliaries and 20,000 community volunteers would also be trained. More than 27,000 persons will receive some form of training and orientation as part of the project. About half of the doctors and nurses and about 90% of the field nursing auxiliaries will be newly recruited personnel. Except for the retraining of doctors and nurses, which would be at the regional level, all training would be done at the module level. The training component would operate in three phases: (a) definition of job descriptions and development of curricula according to job descriptions; design, testing and printing of operational manuals and initial training curricula; and development of trainer's guides and materials; (b) initial training of trainers and key module staff; and (c) continuing education and training at the module level (see Annex 4 and Chart 3). Phase (a) is already in process and is expected to be completed before loan effectiveness. Phases (b) and (c) would be scheduled according to progress in PHCM organization. The staff of the PHCMs would receive operational manuals as reference and information and as an element of their training courses. Manuals and training curricula are being derived from the job descriptions and curricula designed by the National Commission on Primary Health Care (CNAP) with technical assistance financed under a PPF. The trainers will be the members of training units to be established in each Hospital Area and consisting of about three professionals (a doctor, a nurse and a health educator). They will be trained in Lima by the School of Public Health with help of technical assistance and with collaboration of schools of nursing. The training units would have training and supervision responsibilities so that immediate in-service or continuing education needs can be met within the module. Continuing education and in-service training needs for each Hospital Area would be assessed by the training unit which would have an overview of the functioning of all modules in the Hospital Area, the needs of field staff, and the strengths and weaknesses of each functioning module. The training unit would also provide initial training for new and replacement staff. A process evaluation of training to be done by the School of Public Health would establish learnina, attitude, skills and continuing education needs of trained personnel. Community Health Education and Participation 3.18 The MOH Department of Health Education, with technical assistance, would produce: (a) a manual on the application of non-formal education and community participation techniques for health promotion to be used by module field staff; (b) about 400 2-minute radio spots on previously-identified, locally-appropriate themes, made, recorded and broadcast in local languages by local radio sta- tions; (c) a series of leaflets for house-to-house distribution on the same locally-appropriate themes; and (d) sets of posters, flip charts and demonstration materials for use in health posts and health  - 23 - centers. Hospital Area health educators will train field staff in health education techniques and local production of audiovisual mate- rial. 3.19 In the past 6 years, the MOH has gained some experience in innovative approaches to integrating health and community develop- ment. These include, among others, initiating productive activities such as vegetable gardens and sewing clubs, digging of wells and cons- truction of latrines. The project would provide means for the MOH to pursue some of these innovative ideas with community groups. Tech- nical assistance to help plan and implement such initiatives and funds to meet requests to finance them would be provided. The criteria to select innovative approaches, would be that: they be proposed by res- ponsible community groups; they have clear definitions of scope, cost and time phasing; and, they have clear health goals. Assurances were obtained during negotiations that the MOH will present to the Bank, before June 30 of every year of the project life, specific proposals based on agreed procedures and criteria for financing innovative activities before making any expenditures on them. Monitoring, Supervision and Evaluation 3.20 Service monitoring and personnel supervision would rely heavily on a simple information system based on a set of cards already designed and tested, and on continuous education activities within the PHCM. The set of cards has been designed as a management tool by which the field nursing auxiliary, the health post nurse, the community nurse and the PHCM director would monitor health status of families, and services programmed and provided. Continuing education and program improvement would be based on the analysis of achievements and problems made jointly by the members of the PHCM team. 3.21 Since the project's main objective is to modify the PHC delivery system, the training of personnel, the monitoring of services and the supervision of personnel, its efficiency and effectiveness should be evaluated before GOP can implement it nationwide. The proj- ect, therefore, provides for assessing changes in the population cove- red by primary health services, specifically, changes in health status and the costs incurred to achieve those changes. Health status chang- es will be measured only in those areas with at least three years of continuous service delivery. This impact evaluation would be carried out by a local research institution selected on the basis of proposals made for the study. Proposals would be requested and submitted to the Bank for review and comment. Specific arrangements, including the selection of the institution concerned, would be carried out within one year of project effectiveness. 3.22 The present inadequate financing of the health system results from both a declining share of the GOP budget for health and low fees charged for services (para. 2.31). As it is generally accep- ted that a greater degree of cost recovery is feasible, the project provides for a study of health financing and possibilities for increased cost recovery in the health system. This study would be done by local or foreign consultants. The terms of reference for this  - 24 - study would be submitted for Bank review by June 30, 1983 and its results would be discussed, before June 30, 1984, between the National Health Council and the Bank with a view to adopting its recommenda- tions by the end of the project implementation period. Maintenance of Buildings, Equipment and Vehicles 3.23 The German government is supporting the MOH in developing a maintenance system and it will finance two maintenance training schools, and two maintenance centers. This project will contribute to that effort by developing two maintenance centers in Huanuco and Centro Medio Regions, following the technical and organizational recommendations set out by the proposed national maintenance system. The Libertad and Lima regions will be covered by maintenance centers being built with the help of the German Government. Institutional Development 3.24 The MOH technical and managerial capabilities are weak, particularly in manpower training, staff development, and planning, organization and administration. To help strengthen this capability, the project provides: (a) 36 staff-months of technical assistance for programming and budgeting; (b) 60 staff-months of scholarships abroad to improve technical and managerial skills of MOH personnel; (c) a management workshop for MOH director generals and another for regional and Hospital Area civil works personnel; (d) 20 seminars on Primary Health Policy concepts and strategies; and project objectives, con- tents and operations; and (e) about 6 staff-months of technical assistance to prepare a second project for possible Bank financing. Project Administration Support 3.25 The project would be implemented by the existing line-units of the MOH and, therefore, no Project Implementation Unit would be required. It is, however, necessary to strengthen the Directorate of Health Services, directly in charge of Project Management; the Office of Physical Infrastructure, in charge of civil works; and the School of Public Health in charge of training activities, with additional personnel, equipment and transport. Other assistance required and financed by the project include: (a) 60 staff-months of technical assistance to ensure efficient project management; and (b) external auditing of project accounts. IV. PROJECT COST AND FINANCING A. Cost 4.01 Total project cost, including contingencies, taxes, and duties, but excluding a front-end fee of US$0.5 million, is estimated at US$55.5 million. The foreign exchange component including contingencies is estimated at US$17.5 million, or about 32% of total project cost. To the base cost of US$40.6 million are added a  - 25 - physical contingency5/ allowance of US$3.1 million (7.6% of base cost) and a price contingency allowance6/ of US$11.7million (28.8% of base costs). Detailed project costs are presented in Annex 8 and summarized by functional and disbursement categories in Table 4.1 below. 4.02 The largest share of the base cost (71%) is allocated to the improvement and expansion of Primary Health Care Services. About 8.4% of base cost is allocated for training; 6.8% for health education and community participation; 2.2% for maintenance; 1.5% for research and evaluation, and 5.8% for project administration. 4.03 The cost estimates are based on March, 1982, prices. The foreign exchange component of the project is estimated at 12% for con- struction; 70% for furniture and equipment; 100% for technical assist- ance and fellowships; and 90% for vehicles. 4.04 Implementation of this project will give rise to incremental recurrent costs associated with the operation of the PHC modules, but not included in the cost of the project. These costs will increase with the rhythm of implementation. By 1988, the first year of full implementation, the costs will be about US$25 million at 1982 prices, equivalent to 11.8% of the current budget of the MOR. The GOP has assured the Bank that funds for the incremental recurrent expenditures of the operation of the project facilities will be available and incl- uded in the budget annually. During negotiations, assurances were obtained that the funds needed for the project during 1983, both for investment and operation, are included already in the proposed 1983 budget. B. Financing 4.05 The project would be financed by an IBRD loan of US$33.5 million equivalent, which includes the front-end fee, or about 60% of estimated total cost; the balance of US$22.5 million equivalent would be financed by the GOP. The proposed loan will finance the entire 5/ Physical Contingencies were calculated as 10% of the base costs of construction, furniture, equipment, vehicles and materials. 6/ The price contingency was calculated on the basis of the following inflation assumptions: 8% in 1982 and in 1983; 7.5% in 1984; 7% in 1985; and 6% thereafter. Variations in exchange rate were assumed to compensate for the differences between local and international inflation rates. The following implementation schedule is also assumed: 3% in 1982, 16% in 1983; 22% in 1984; 24% in 1985; 18% in 1986; 11% in 1987; and 6% in 1988. The inflation assumptions were made considering the "Guidelines on Expected Price Increases and Real Interest Rates" (Memo from W. Baum, March 17, 1982).  - 26 - PERU PRIMARY WEALTh PROJECT Table 4.1: Summary Project Cost 1/ Local Foreign Total Local Foreign Total Foreign as X C o m p o n e n t ------Rillion Soles ------ ------USS Milion