Romania - Health Rehabilitation Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 9641-RO STAFF APPRAISAL REPORT ROMANIA HEALTH REHABILITATION PROJECT SEPTEMBER 4, 1991 Human Resources Division Country Department V Europe, Middle East and North Africa Region 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 EOUIVALENTS Currency Unit Leu (plural Lai) USS1.00 Lei 60.00 Lou I * US$0.0167 Lei Rer US Dollar Official Rate" Interbank Rate, 1990 November 25.000 n.a. 1991 August 60.000 200 approx. FISCAL YBAR January 1 - December 31 AAMREVIATIONS AND ACRONYMS ASMR Age Standardized Mortality Rate CBR Crude Birth Rate CDR Crude Death Rate CEE Central and Eastern Europe DRA District Nealth Authorities DHD District Health Director DMCH General Directorate for Maternal and Child Health EC European Community PP Family Planning FPSEU Family Planning and Sex Education Unit GNP Good Manufacturing Practice CPS General Practitioners HSNI Health Services Management Institute IDQC Institute for Drug Quality Control -HPH Institute of Hygiene and Public Health INCA Institute for Mother, Child and Adolescent IMR Infant Mortality Rate NCR Maternal and Child Health MOF Ministry of Finance MOB Ministry of Health MOI Ministry of Industry NcHPe National Center for Health Promotion and Education NCHS National Center for Health Statistics " The official exchange rate applies to the purchase of foreign exchange that is not retained by exporters (one-half oI. their foreign exchange receipts are subject to retention), the sale of foreign exchange for the importation of a limited number of goods, and certain government transactions. v The interbank rate applies to other foreign exchange transactions. The interbank market for foreign exchange was established in April 1991. NCO Non-governmental Organization OECD Orcanization for Economic Cooperation and Development ON Operational Manual OTC Oter-the-Counter PBNS Tost Basic Nursing School PCU ?roject Coordination Unit PHC Primary Health Care RIC Rural Health Center SESM School of Health Systems and Management STD Sexually Transmitted Diseases TA Technical Assistance TFR Total Fertility Rate UNFPA United Nations Fund for Population Activities UNICEF United Nations Children's Fund WHO World Health Organization  FOR OMCIL USE ONLY BQHMML HElU2I REHABILITATION PROJECT Table f Contents Page X. T5H MEALTE sECTOR IN ROmANA . . . . . . . . . . . . . . . . . 1 Background . . . . . . . . . .1 Health and Population tatus . . . . . . . . . . . 1 Health Services organization, Staffing and Physical Infrastructure . . . . . . . . . . . . . 2 organization . . . . . . . . . . . . . . . . . 2 Staffing . . . . . . . 4 Physical infrastructure.4 Sector Issues . . . . . . .. . 5 Management . . . . . . . . . . . . . . . . . . . . . . 5 Structure and Dellvery of Health Care . . . . . . . . . 6 Health Financing . . . . *. . . . . ...... . . 7 Pharmaceuticals and Medical Supplies . . . . . . . . . 8 Pharmaceutical Pricing Pollcy . . . . . . . . . . . . . 9 Ensuring Provision of PrLmary Health Care . . . . . . . 9 Health Promotion . . . . . . . .. . . . . . . . . 10 Government Health Pollcy and Strategy . . . . . . .. . 11 The Bank's Role . . . . . . . . . . . . . . 12 II. TM EALTZ CARD REA5IWLITATION PROJECT . . . . . . . . . . . . 14 Project Objectives . . . . . . . . . . . . . . 14 A. REHABILITATING AND UPGRADING PRIMARY TEALTH CARE. . . . 15 Upgrado Rural Dispensaries . . . . . . . . . . . . . 1S Xmprove Reproductive Health Care Servicea . . . . . . . iS Institute for the Mother, Chlld and Adolescent . 16 The Family Planning and Sex Education Unit . . . 16 Reproductive Health Centers . . . . . . . . . . . 17 Maternity/Neonatal Referral Units . . . . . . . . 17 Contraceptive Supplies . . . . . . . . . . . . . 17 Strengthvtn Pro/In-Service TraLning for Nurses and Physiclans . . . . . ... 18 Strengthen Nursing Training. 18 Improve Continuing Education for PhysicLans . . . 19 Ensure Supply of Essential Drugs, Consumables, Vaccines and Blood Products . . . . . . . . . . . 19 Drugs and Consumables . . . . . . . . . . . . . . 19 Preparation of a Strategic Plan for the Pharmaceutical Industry . . . . . . . . . . 20 Vaccines . . . . . . . . . . . . . . . . . . . . 20 Blood Products . ... . .20 Improve Management of Emergencies . . . . . . . . . . . 21 Improve Health Promotion and Population's ParticipatLon in Health care . . . . . . . 21 National Level .21 Local Level . . . . . . . . . . . . . . . . . . . 21 Envlronmental Health . . . . . . . . . . . . . . 22 This document has a restricted distribution and may be used by reciplients only in the performance of their official duties. Its contents may not otherwise be disclosed wSithout World Bank authorization.  Table of Contents -Continued) PA-e B. RESTRUCTURING HEALTH SE,CTO FINANCE AND MANAGEMENT . . . 22 Preparation of a New National Health Strategy . . . . 22 Decentralization and Improved Resource Allocation . . . 23 Development of a Health Xnformation System . . . . . . 24 School of Health Systems and Management . . . . . . . 24 C. ENVIRONMENTAL IMPACT ... .. ..C... .. . . . . . . . . 25 XII. PROJECT COSTS, FINANCING, KANAGEOENT AND TZnPMNENTTION. . . 26 Cost of the Project. . . . . . . . . . . 26 Project Cost Summaries. . . . . . . . . . . . . . . . 26 Basis of Cost Estimates. . . . . . . . . . . . . . . . 27 Customs Duties, Taxes and Distribution Costs. . . . . . 28 Contingency Allowances. . . . . . . . . . . . . . . . . 28 Foreign Exchange Component . . . . . . . . . . . . . . 28 Project Financing ..... ........ . .. .. . .. . 28 Recurrent Costs . . . . . . . . . . . . . . . . . . . 29 Management and Implementation .... . . . . . . . . . . . . 29 Responsibilities ..... . . ...... . . . . . . 29 Project Coordination and Supervision . . . . . . . . . 30 Architectural Design Services . . . . . . . . . . . . . 31 Site Acquisition ..... . . ...... . . . . . . . .31 Maintenance ......... . .. .. . . . . . . .. . 31 Procurement . . . . . ................. . . 31 Background. . . . . . . . . . . . . . . . . . . . . . . 31 Procurement of Durable and Consumable Goods . . . . . . 31 Procurement of Technical Assistance . . . . . . . . . . 33 Status of Preparation . . . . . . . . . . . . . . . . . 35 Disbursements ...... .. ... . . .35 Audits, Reports and Progress Reviews . . . . . . . . . 36 IV. BEFITS AND RISKS .......... . 38 Project Benefits ...... .......... . . . . . . . . . 38 Project Risks ....... .. . ............ . . 38 V.CONDITIONALITIESANDRECOIOEDTION . 39 Agreements Reached at Negotiatione . . . . . . . . . . . . . 39 Condition of Effectiveness. 40 Recommendation . . . . ..40 This report is based on the findings of an appraisal mission which visited Romania in April 1991. The mission comprised J. Schweitzer (Mission Leader), R. Castadot (Senior Population and Public Health Specialist), S. Sigurdsson (Senior Implementation Specialist)* D. Broun (Public Health Specialist), L. Fox (Economist), I. Szemzo (Operations officer), M. Aljbaili (Administrative Assistant), D. Chernichovsky, D. Caplin and D. de Leeuw (Consultants). substantive assistance was also provided by D. Pierotti (WHO/UNFPA), F. Donnay and M. Potts (Family Planning Consultants). The Peer Reviewers were Messrs. M. Over (PHRHN) and C. Pannenborg (ASlPH). Mr. Ralph Harbison is the Division Chief and Mr. R. Cheetham the Country Director.  A-uS A EXls: . .. . . .......... ............. 41 TABLE lAt Natality and Mortality Trends . .. . . . . . . . . . . . 41 TABLE lBs Life Expectancy by Sex, 1970-1988 . . . . . . . . . . . . 41 TABLE 2: Romania - Mortality . . . . . . . . . . . . 42 TABLE 3s Maternal Mortality, 1989-90 . . . . . . . . . . . . . 43 TABLE 4: European Comparison of Health Indicators . . . . . . . . 44 TABLE S Middle-Income Countries Comparison of Health & Social Indicators . . . . . . . . . . . . . . 45 TABLE 6: Health Facilities . . . . . . . . . . . . . 46 TABLE 7: Romania Health Activity, 1965-88 . . . . . . . . . . . . 47 TABLE 8s Medical and Auxiliary Health Personnel . . . . . . . . . 48 TABLE 9: Romania - Hospital and Ob/GYN Dept. Utilization by District, 1989 . . . . . . . . . . . . . 49 TABLE 10: Physicians Activity in Dispenoaries and Polyclinics per District . . . . . . . . . . . . . . . 50 TABLE 11: Death Rates by Cause, 1960-1989 . . . . . . . . . . . . . 51 TABLE 12: Romania Population Data . . . . . . . . . . . . . . . . . 52 TABLE 13: Birth Rates in Europe, 1880-1990 . . . . . . . . . . . . 53 TABLE 14: Romania - Birth Rate, Mortality Rate and Natural Increase by District, 1970-1989 . . . . . . . . . . . . 54 TABLE 15: 1987 Population Groups Estimates (In '000s) . . . . . . . 55 TABLE 16: 1990 Contraceptive t'se . . . . . . . . . . . . . . . . 56 TABLE 17: Deliveries by Location, by District, 1980, 1985, 1989 ... . . . . . . ...... . . . . 57 TABLE 18: Romania - Distribution of Aids Cases by Age Group and Sex, October 1, 1990 . . . . . . . . . . 58 TABLE 19: Romaaia-Estimated Prevalence of Chronic Diseases by Distr ict, 1989 .t.r.ic * 1989. ... . . .... 59 TABLE 20: Romania - Expenditures on State Owned Health Care Facilities by Type of Facllity 1980-1991 . . . . . 60 TABLE 21: Romania - Financing of Health Care Expenditures . . . . . 61 TABLE 22: Romania - Government Financed Health Expenditures by Category . . . . . . . . . . ... . . . . 62 Attachment 1 63 Figure 1: Maternal Mortality Rate in Selected Comntries, ca 1970 and ca 1986 ... . . . . . . . ..... . . 63 Figure 2t Crude Birth Rate in Romania, 1947-1987 .. ...... . 64 Figure 3: Age-specific Fertility, Romania, 1987 . . ... . . . . 65 ANNEX 2: THE DRUG SUPPLY SYSTEMl . . . . . . . .. . . . . . 66-75 Attachment 1: The Romanian Pharmaceutical Industry Proposed Restructuring Program and Strategic Plan - Terms of Reference . . . . . . . . . 76-81 ANNEX 3: PREPARATION OF A NEW NATIONAL HEALTH STRATEGY . . . . . . . 82-90  ANNES18 (continued raim ANNEX 4: THE HEALTH MANAGEMENT INFORMATION SYSTEM . . . . . . . . . 91-93 ANNEX 5s ESTIMATED QUANTITIES . . . . . . . . . . . . . . . . . . . . 94-98 ANNEX 6: TECHNICAL ASSISTANCE SUMMARY BY COMPONENT . . . . . . . . . . 99 ANNEX 7: IMPLEMENTATION MATRIX AND INDICATORS . . . . . . . . . . . 100-102 ANNEX 8s SCHEDULE OF DISBURSEMENTS . . . . . . . . 103 ANNEX 9: MATERIALS AVAILABLE IN PROJECT FILE . . . . . . . . . . . . . 104 ANNEX 10: ESTABLISHING A HEALTH PROMOTION FUND . . . . . . . . . . . 105-119 CHART l SCHEMATIC ORGANIZATION CHART . . . . . . . . . . . . . . . . 120 FIGURES: FIGURE 1: STRUCTURE OF THE HEALTH SYSTEM . . . . . . . . . . . . . 121 FIGURE 2: NETWORK OF DISTRICT HEALTH UNITS . . . . . . . . . . . . 122 MAP: IBRD-23250  EALT= REMADZLITAUION PROJECT HEAL-TH AND POPULATION- DTA 1HEET-U A. General Country Vata Year 1. Population Estimate (millions) 23.3 1990 2. Population Projections (millions) 24.5 2000 25.6 2010 27 2025 3. GDP per Capita (US$) 1,450 1989 4. Urban Population (% of total) 49 1990 5. Male Literacy Rate (% of Male 12 + years of age) >95 1985 6. Female Literacy Rate (% of Fema'e 12 + y4bare of age) >95 1985 7. Total Prilary School Enrollment 97 1987 8. Female Primary School Enrollment 98 1987 9. Total Secondary School Enrollment 79 1987 10. Total Tertiary School Enrollment 10 1987 11. Area (Km2) (in 000) 238 12. Population Density (per Km2) 98 1990 13. Babies with low birth weight (%) 6 1985 14. Daily calorie supply per capita 3,373 1986 15. Average index of food productinn per capita 117 1986 B. !IJjAk.iOn 1. Crude Birth Rate (per 1,000 population) 16 1990 2. Crude Death Rate (per 1,000 population) 11 1990 3. Annual Rate of Natural Increase (%) 0.5 1990 4. Net Migration (oooes) -30 1990 5. Total Fertility Rate 2.1 1990 6. Infant Mortality Rate (per 1,000) 26.9 1990 7. Under-5 Mortality Rate 30 1990 8. Life Expectancy at Birth (years) 70 1990 9. Population Age Structure (%) 0-4 years 7 1990 5-14 years 16 1990 15-64 years 66 1990 65+ years 10 1990 10. Dependency ratio 50.7 1990 11. Women in Childbearing age (15-49 years of age in 000's) 5,610 1990 12. E of Women Using Modern ContraceptionX 1.1 1990 13. Maternal Mortality (per 100,000 live birth) 84 1990 1 Unless otherwise indicated, are World Bank estimates. Z Romanias Ministry of Health, DMCH.  (ii) C. Health Sector kegources? 1. Population per physician 552 1989 2. Population per nurse 171 1989 3. Population per Hospital Bed 112 1989 4. Dispensaries 5,186 1989 Territorial 3,629 1989 Enterprise 1,557 1989 5. Polyclinics 541 1989 6. Hospitals 425 1989 Territorial Hospitals 400 1989 Enterprise Hospitals 25 1989 7. Sanatoria 32 1989 8. Orphanages 65 1989 9. Maternities 590 1989 10. Pharmacies 1,935 1989 11. Percentage of Government Expenditures on Healths' 5.5 1989 7.3 1990 12. Total Expenditure on Health as S of GDP' 2.4 1989 3.0 1990 13. MOH Budget as % of Total Governmental Budgety 7.6 1990 D. Hosoital UtLiLzation 1. Admissions per 1,000 Population 230 1988 2. Total Patient days per 1,000 Population 2,497 1988 3. Average Occupancy Rate (%) 74 1988 4. Average Length of Stay (days) 10.9 1988 ' Romanias Statistical Department, MOH, Bucharest. # IBRD: Romania - Accelerating the Transitions Human Resource Strategies for the 1990s. Report Nos 9577-RO  (iLL) DEFINITIONS OF MEAMLT. POPULAIXON AND NUTRITION TERMN 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 1,000 children in the same age group. Contraceptive The percentage of married women of reproductive Prevalence Rate age who are using a modern method of contraceptive at any time. Crude Birth Rate Number of live births per year per 1,000 people. Crude Death Rate Number of deathe per year per 1,000 people. Dependency Ratio Population 14 years or under and 65 years or over as percentage of population aged 15 to 64 years. Incidence Rate The number of persons contracting a disease as a proportion of the population at risk, per unit of time; usually expressed per 1,000 persons per year. Infant Mortality Rate Annual deaths of i.fants under 1 year per 1,000 live births during the same year. Life Expectancy The number of years a newborn child would at Birth live if subject to the age-specific mortality rates prevailing at time of birth. Low Birth Weight (LBW) Infant welght at birth less than 2,500 gr. LBW may be associated with either pre-term (less than 37 weeks gestation) or full-term but small-for-dates (38 weeks or more) of gestation. Maternal Mortality Number of maternal deaths per 100,000 live births in a Rate given year attributable to pregnancy, childbirth or post-partum. Morbidity The frequency of disease and illness in a population. Mortality The frequency of death in a population. Prevalence Rate The number of persons having a particular dieease at a given point in time per population at risk; usually expressed per 1,000 persons per year. Rate of Natural Difference between crude birth and crude death rates; Increase usually expressed as a percentage.  (Lv) Total FertliLty Rate The average number of children a women will have if she experiences a gLven set of age-specifLc fertllity rates throughout he} lifetLme.  (V) HEALTH RGEABILITATION PROJECT STAFF APPRAISAL REPORT Loan and Prnct1 8S arI 3frQcmWrSg Romania Amounts USS 150.0 million $ rass3 Fifteen years, including a five year grace period, at the IBRD standard variable rate Protect Obiectivecs The project would have two principal objectives: (a) to rehabilitate and upgrade the primary health care delivery system which is collapsing through want of equipment, spare parts, drugs and medical supplies; and (b) to support the first steps of a major restructuring of health sector financing and management to ensure a sustainable, cost-effective health care system in the medium term. ]ProJect gscriPtion: Rehabilitatina and uoaradin2 Krimarv health care would be achieved bys (a) upjrading rural dispensaries according to criteria of demographic coverage, local needs, community support and availability of medical staff; (b) improving reproductive health care services, focussing on maternal and child health and increasing access and choice in family planning servicas; (c) strengthening training for nurses and physicians in key aspects of primary health care; (d) introducing a health promotion program to provide a greater focus on preventive medicine; (e) ensuring the supply of essential drugs, consumables, vaccines and blood products (including preparing a restructuring plan for the Romanian pharmaceutical industry); and (f) upgrading the communication/transport system for emergencies. Restructuring 29 health sector financina and manaoement would be facilitated by: (a) preparing and implementing the first phase of a major reform of: health finance; the roles of the public and private sector; the legal framework; organization and management of health care; and institutional development. In addition, a pilot project to decentralize health care management and improve resource allocation would be supported; (b) developing a Health Information System to assist Ministry, district and local  (vi) managers uet objectives, allocate resources, anticipate needc and monitor performance; and (c) developing the Health Services Management Institute as an institution able to provide the health system with well trained health care managers and policy analysts. The project's major policy actions would include: support for the restructuring of health care finance and manage- ment; supporting the restructuring of the Romanian pharmaceutical industry; shifting some of the patient load from the tertiary hospitals to the primary care etructure, thereby lowering unit costs of health care; shifting the emphasis of contraception from abortion to modern methods of family planning; renewing emphasis on continuing education for medical staff; and increasing attention to preventive, rather than curative medicine to address the country's high morbidity and mortality rates. Benefits and Risks: Benefits. ImDroved orimarv health care delivery would lead to: a reduction in morbidity and mortality in infants and under-fives; improved ac-iss and choice for women in the field of reproductive health services. The consequent decline in the number of unwanted pregnancies would diminish abortions and the flow of children into institu- tions; a reduction in mortality and morbidity from such causes as cardio-vascular disease and accidents; and lower unit costs of health care through improved utilization of lower cost health services. Better blood oroducts and ensured suPolies of vaccines would help reduce the incidence of AIDS and Hepatitis 8, and morbidity from infectious diseases. Strengthening of health education and gromotion would encourage a switch in focus from curative to preventive medicine, with major benefits to the cost- effectiveness of health care delivery. Restructurina studies of the health care system and PharmalejqUtI&ca industry and subsequent implementation of reforms would provide the basis for systemic reform and a sustainable, cost-effective health care delivery system in the medium- term. Rinks. The major risk concerns the institutional weaknesses in the sector which could conru-rain implementation and meaningful reform. The project's structure (investments to improve primary health care and providing the institutional basis to carry out a medium- term reform program) is designed to minimi le this risk by providing immediate assistance for critically affected parts of the health sector, while at the same time building the i.stitutional base for meaningful reform. The second risk concerns Government capacity to provide the oecebsaepources during a time of economic crisis. To reduce this risk, the project has been designed to minimize incremental recurrent costs ae a result of new Investments. In addition, the restructuring studies will  - vii - point to diversified sources of financlng and propose efflciency galns whLch will alleviate the pressure on the central budget. I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I  viii Es-ti-mated4 RoRist GROWt Jo!1 Iorania Total - US$ Million - Upgrade Rural Dispensaries 10.9 14.5 25.4 Reproductive Health Care Service 8.1 27.5 35.6 Training for Nurses & Physicians 0.5 0.9 1.4 Drugs, Consumables, Vacc. & Blood Prod. 21.3 71.9 93.2 Management of Emergencies 5.8 3.1 8.9 Health Promotion/Participation 0.9 3.9 4.8 Sub-Total Rehabilitations 47.5 121.7 169.3 RESTRUCTURE MEITH SECTOR National Health Strategy 0.7 2.5 3.1 Health Information System 0.7 2.4 3.2 School of Health Systems & Mgmt 0.4 2.7 3.1 Sub-Tot Health Serv. Delivery: 1.8 7.5 9.4 Total Bass Costs 49.4 129.3 178.6 Physical Contingencies 4.9 12.9 17.9 Price Contingencies 3.2 7.8 11.0 Total Project Costs 57.5 150.0 207.5 a/ Detailed numbers may not add to totals because of rounding. Financina Plan: Local Eoreign Total USS Million- Government 57.5 0.0 57.5 IBRD O.0 150.9 150.0 Total Financing Requirements ,57.5 150.0 207.5 ast i-' Disbursements:t IBRD FY FY92 F3 FY94 FY95 Annual 32.0 68.0 28.0 11.0 11.0 Cumulative 32.0 100.0 128.0 139.0 150.0  OMXANIA KEALTH REHABILITATION PROJECT STAFF APPRAISAL REPORT I. THE HTALTH SECTOR IN RONAN1A backaround 1. The new Government which assumed power in December, 1989 has placed a high priority on improving the harsh social conditions imposed by the Ceaucescu regime. Amongst these, inadequate health services and unhealthy living conditions have left a serious legacy of health problems. The ban on contraception and consequent reliance on illegal abortion resulted in high maternal mortality and morbidity. Life expectancy has declined over the last decade, infant mortality has risen and infectious diseases are still relatively widespread. Drugs and medical consumables are in extremely short supply and much equipment is obsolete or stands idle for lack of spares. Further, during the last decade, medical staff and policy makers have been isolated from external developments and there are now serious technical and institutional weaknesses. 2. Attempts to improve the population's health status are taking place against a background of economic crisis. GDP is estimated to have fallen by 10% in 1990 following a 6% decline in 1989. Industrial production fell 20% in 1990 and inflation rose to 8, from 1 in 1989. The combLned effect of the decline in domestic output, the diversion of exports to the domestic market to ease severe consumer shortages, and the Gulf crisis has led to a 41% decline in convertible currency exports and a resulting convertible currency deficit of about 5% of GDP. Economic performance in the first quarter of 1991 appears to have deteriorated further, with industrial output declining 17% compared with the same period in 1990, and convertible currency exports more sluggish than anticipated. Since pharmaceutical and medical supplies are heavily import dependant, the health sector has been badly affected. At the same time, the economic crisis has given added emphasis to the need for reforms which can improve targeting and resource utilization in the sector. These issues are discussed in more detail below. gealth and Pooulation Status 3. Improvements during the last three decades in the health status of the Romanian population have recently slowed or started to reverse (Annex 1, Tables 1A and 13)1. Life expectancy at birth rose to 69.9 in 1984, but had declined to 69.2 by 1988, with a particularly steep decline for males. I The veracity of data copitled during the Ceaucescu regime (I.e. prior to 1990) is often questionable, and time-series conparisons oust be treated cautiously.  Although adult life expectancy compares favorably with the average for all lower middle income countries, it is amongst the lowest of the Central and Uastern European (CEE) countries, and is five years below the Western European average. The age standardized mortality rate, at over 1200 per 100,000 population, is the highest in Europe. Infant mortality has increased from a 1986 low of 23 per thousand live births to over 27 in 1990. This is 50 percent higher than the CEE average, higher than a number of countries with lower incomes (Chile, Costa Rica, Jamaica), and the deteriorating trend is cause for concern. The mortality rate of children in the 1-4 age group has also risen in the last decade, and at 2.2 per thousand, is now amongst the highest in Europe. Respiratory diseases, perinatal problems, diseases of the digestive system, and infectious diseases are the principal causes of death amongst infants, and acute diarrhoeic diseases and respiratory infections are frequent among children in the 0-4 age group. Although '-he exceptionally high maternal mortality has been reduced by 60% since abortion was legalized in late 1989, at 84 per 100,000, it is still nearly eight times that in Poland. 4. In common with other European countries which have undergone the *pidemiological transition, cardiovascular diseases, oiseases of the respiratory system, cancers and accidents account for an increasing (now almost 80 percent) share of adult mortality. The highest rates ^f increase have been for cardiovascular diseases and lung cancer, pointing to gains which could be realized from curtailing cigarette smoking and excess consumption of animal fats. The incidence of Tuberculosis has also increased in recent years and the shortage of blood testing facilities and disposable syringes means that the spread of AIDS and Hepatitis B has yet to be controlled. S. One of the Government's first steps following the revolution in December, 1989 was to rescind the 1966 decree which banned contraception and strictly limited abortion. The decree had been promulgated to reverse the preceding lecade's rapid decline in fertility, but had unintended effects. following a spectacular fertility rise in 1967, women turned to any means possible, including a large number of self-induced abortions, to control their fertility. Since 1967, the birth rate has been in almost persistent decline until the present day. The crude birth rate (CBR) and total fertility rate (TFR) are now 15.5 and 2.1 - about replacement level for Romania's population of 23.2 million. 6. The impact of the 1966 decree on maternal and infant mortality was disastrous. Largely as a result of complications following self-induced abortions, the maternal mortality rate reached 159 in 1989 - about ten times th. CEE average. The incoming Government has also faced a major crisis of 150,000 children in orphanages and other institutions, many unwanted or abandoned by their parents because of poor social conditions. Poor living conditions in the institutions have also contributed to high mortality amongst the 0-5 age group. ealth Servieas Organuxation. Staffina and Physical Infrastructure 7. 2zanAaatAM.t Health care is almost exclusively managed and financed by central government, under the supervision of the Ministry of Health (MOH) and  - 3 - 41 district health authorities (DHAs). All citizens are guaranteed access to health services which are largely free. The MOH ie responsible for health policy, setting standards for health care and public hygiene, epidemiological surveillance, certifying health professionals and training of some para- medical staff2, procuring and distributing drugs, and health education and promotion. The MOH and DHAs directly manage most health facilities and staff and set standards for health facilities under the supervision of other ministries. The DHA is managed by the District Health Director (DHD), assisted by an administrative council. The district is divided into 3-5 territorial units for integrated primary and secondary health service delivery (in patient and ambulatory care, dispensing of drugs, etc.), with at least one hospital, several polyclinics and a network of dispensaries (Figure 1). Each district also has a public health unit to monitor water and air standards and for epidemiological surveillance, as well as a health education laboratory. 8. Patients usually receive initial care through one of the 5,500 primary health care (PHC) facilities (termed dispensaries) which are situated in towns, rural communes and enterprises (Annex 1, Table 6). The dispensary is meant to deliver prenatal care, growth monitoring and care of newborns and infants, basic curative care, some disease prevention, and home care after hospitalization or childbirth. Dispensaries normally include a number of doctors (a general practitioner, a dentist and a pediatrician), at least four paramedical staff and a treatment room. Most medium or large enterprises also have a dispensary, with the MOH usually providing the medical staff, supplies and equipment. Smaller enterprisees may contract with a nearby enterprise for this service, or group together to share one off-plant facility. Enterprise dispensaries are also meant to monitor occupational health and safety and issue sick leave certificates. Some enterprises have a variety of facilities; some 3.5% of all hospital bede, 10% of polyclinics and 30% of dispensaries are located in enterprises. Employees usually use their work-place dispensary, with community dispensaries serving those who are not employed (e.g children, and the elderly). Under new legislation, some 4,000 licenses have been issued to doctors for private practice, but only about 400 private offices have yet been opened. 9. Patients with more complex problems are referred to the 541 polyclinics and 424 hospitals, the latter being nominally responsible for technical super- vision of the dispensaries. The most complicated cases are referred to district, specialized, or university hospitals. Following discharge, super- vision is meant to be resumed at the dispensary. The polyclinics handle mostly ambulatory cases. Some polyclinics charge fees. Doctors (primarily specialists) and nurses work at these fee-for-service clinics during their off-duty hours. Budgeting and management is autonomous from the DHD, whose main responsibility is quality assurance by, for example, ensuring that specialists are certified in the area in which they are offering services. 2 The Ministry of Education is responsible for certifying physicians and some para-medical staff.  10. The MOH manages the procurement and distribution of drugs. Foreign imports have in the past been handled by a specialized trading company. An autonomous central warehouse in Bucharest distributes imports to 17 regional distributors. Domestically produced drugs are delivered either to the central warehouse, or directly to the regional distributors, which distribute the drugs to the 1,500 retail outlets throughout the country owned by the MOH, or tO the 450 hospital pharmacies. The government plans to privatize the retail outlets and regional distribution systems. 11. Sfla1iima. With about one physician per 560 inhabitants (a 28% increase over the last decade - see Annex 1), Romania compares favorably with coun- tries at its income level. However, in 1978 the Ceaucescu regime eliminated all specialist medical training, as well as nurse training except at the most basic level, and there are now growing shortages of specialist doctors and nurses. Specialist training was resumed in 1990 and nursing schools have been opened in each district to ensure local coverage. The Government is also in the process of reestablishing a training school for nurse trainers and specialiets. Owing to Romania's past lsolation, and because in-service medical training is not required, physicians have often not kept abreast of medical advances. In additlon, there has been a focus on curative, rather than preventive medicine (para. 33). There ia also a dearth of health sector policy analysts, hospital managers and health administrators. Other health professionale in short supply include epLdemiologists, psychologiets, psychiatrists, and soclal workers, as tralning ln these disciplines was halted in the 1970a. 12. Average salaries ln the health sector are a low 94% of the economy-wide average. However, salarLes are often supplemented by perquLsites and gratuities. Untll 1990, health care personnel, especially doctors, were assLgned posLtLons by the MOH, wlth new doctors required to undertake a three year tour of duty ln a rural area. These rules have now been relaxed and there has been some exodus of doctors from the rural areas, wlth many applying for speclallt traLning. The problem has untll now been less severe for nurses, who were locally trained and often llve in the area in which they work. 13. Physical Infrautructure. In terms of quantity, RomanLa's facillties are adequate compared with OECD countries or developing countrles at lts lncome level. The number of beds per capita has increased steadily since 1965, as have the number of outpatient visits per capita. The average length of stay has declined slLghtly during thli perlod. Average hospital occupancy is about 70 percent, pointlng to some overcapacLty. However, hospital utillizatlon data have to be treated cautlously because: (a) many beds are ln poorly equipped and maintalned facilLtLes, so utilizatlon is low; (b) there are wide regional variatlons (average length of stay varles between 7 and 54 days, average bed occupancy between 128 and 308 days per year); and (c) some beds are ln enterprise cllnice, where they are only available during working hours, or to selected members of the population. Consequently, some hospitals are overcrowded, with beds in the hallways, while other facillities go unused. DesLgn and malntenance of buildings is a problem throughout the system (some have been irreparably damaged by earthquakes) at times compromising the  quality of health care because of difficulties in disinfecting operating theatres and other sterile areas. District hospitals also tend to be very large (700-1200 beds), with high running costu. However, the scope for cost savings through closing facilities and increasing bed occupancy rates may be limited in the short run, as it would require substantial new investment. SOetor Issues 14. Although the Romanian health care system is mature in terms of its coverage of the population, it has increasingly failed to deliver a reasonable level of health care, as evidenced by poor and in some cases deteriorating health indicators, chronic shortages and the reported widespread dissatis- faction of consumers. Addressing this legacy will require a carefully sequenced and thoroughgoing reform involving management, structure, finance, delivery and training. At the same time, immediate efforts will be needed to rehabilitate key components of the system to ensure a basic provision of health services to the population. These two issues - beginning the process of reform while ensuring the maintenance and improvement of basic services, will be addressed in the proposed project (Chapter Is). 15. bnaasMent. Central planning and rigid management have driven the development of the Romanian health care system. Inflexible norms determined the volume, location, size, type and equipping of health care facilities, without regard to consumer needs, or cost-effectiveness. Rigidly applied budget and staffing rules which allocated resources according to production- style input ratios left little flexibility for local administrators. For example, all hospital departments were required to have a minimum of 50 beds, with the result that there is now excess capacity in some specializations, while others cannot be catered for. 16. The results of this management system were predictable. Local managers had little incentive to uee resources wisely, and in fact had virtually no authority to do so because all important decisions were made centrally. District and hospital managers had little say in determining priorities, with resultant mismatches of resource allocation and needs. Staffing decisions, even at a relatively junior level, were made centrally. Information collection and monitoring were highly centralized. Although the districts provided the MOH with a substantial amount of data, the data were often collected without regard to operational objectives, and there was (and still is) little feedback to the diotricte, and health facilities. Consequently, managers have little objective basis on which to allocate resources or compare performance. The lack of a management oriented information system is a significant impediment to improved health sector management and better use of resources. 17. The centrally managed system did not take into account the nebde of either the consumers or the providers of health care. Patients had little choice as to their health care provider. Draconian policies such as the compulsory examination of women for pregnancy and the ban on family planning (para. 5) reduced trust in the system. Patients were treated with little respect for personal needs or dignity. Wcmen were particularly badly affected, and the continuing lack of alternatives to abortion remains an issue (para 31). Information and education campaigns are needed so that consumers  become better informed about health care and risk factors. Health care providers were also mistreated. Doctors were assigned to posts without regard to preference, aptitude, or skills and could be punlihed for failing to meet unrealistic targets. The nursing profession was downgraded, and all medical personnel were relatively unrewarded for their skills. In order to improve quality and efficiency in this labor intensive sector, it will be essential to introduce incentive systems - financial, career, training etc.- which encourage staff in the health sector to perform well. 18. Finally, because there are few adequately staffed institutions or trained professionals (para. 11), policy analysis and advice to Government on critical health issues exists only in rudimentary form. This is a major constraint on Government efforts to introduce systemic reform. In response, the MOH has created the Health Services Management Institute (HSMI), whose functions include training of health managers and policy makers, and providing advice on health policy to the Government. The HSMI has been instrumental in assisting the MOH prepare initial plans for reform. 19. As a first step in the reform of public sector management the new public finance law allows for significant decentralization and flexibility in resource allocation. However, in the absence of detailed regulations to apply the new law, the previous inflexible system often prevails. 20. 8tructure and Delivery of Health Care. The health care delivery system described above is intended (a) to control costs by treating patients at the least expensive facility possible, and (b) to improve access by offering primary health care services close to patients. In practice, the operation of the system is wasteful and inefficient, for a number of reasons: (a) as discussed below, the extreme shortages that have plagued the Romanian health system over the last few years have resulted in a breakdown of PHC. Tertiary health care facilities have been accorded priority for supplies, equipment and drugs at the expense of the dispensaries and local drug stores. PHC staff often have no choice but to refer their patients to the hospitals, where supplies are usually better. This is wasteful of resources because: (a) hospital unit costs are higher and there are underutilized staff and physical capital in the dispensaries; (b) the integration between levels of care and types of facilities is poor; (c) the system focusses excessively on institutional care (e.g. in hospitals, homes for the disabled) instead of on more cost-effective community-based care, for which there is a dearth of services; and (d) tie rigid allocation of the population to specific dispensaries prevents efficient use of resources and eliminates choice and competition. 21. Data on utilization by district, facility and location are difficult to interpret. Generally, the average daily number of visits per dispensary physician is somewhat higher in urban than in rural areas, and larger hospitals have higher occupancy rates than smaller ones. An improved information system will be needed for more refined analysis (see Chapter II). 22. Many primary health facilities are located in industrial enterprises, which were given responsibility by the previous regime for a wide range of  services to the local population, including housing, district heating and electricity. These enterprise health facilities are often not optimally sited for use by the general public. Their continued existence contributes to poor utilization of facilities, inhibit. the development of family-based care and could impede the industrial restructuring process if closure of an enterprise resulted in a reduction in health care to the local population. In addition, saddling the emerging private sector with the responsibility for running health care clinics could discourage venture capital. Thus, high priority will need to be placed on the difficult task of relocating, closing, or phasing out enterprise health facilities, and limitLng the responsibility of enterprises to occupational health according to rules which safeguard workers and the environment. 23. Realth rinancina. Both current and investment expenditures are financed out of central government revenues. Between 1985-89, public current expenditures on health averaged about 2.2% of GDP. Since health care was regarded as an "unproductive" sector, it was starved of financial and physical resources, so that, unlike virtually all other countries in its income group, public expenditures on health care grew more slowly than GDP throughout the 1980s.3 Public expenditures rose in 1990 to 2.9% of GDP, with the increases mainly used for salaries, maintenance and food (Annex 1)4. However, this percentage is still well below other CEE countries (e.g. Poland, 3.7%, Hungary 5.4%)s. During the last decade, there have been virtually no new investments in equipment or facilities, and maintenance expenditures were at very low levels. Because of chronic shortages (para. 25) expenditures on drugs and supplies as a share of total health expenditures declined from 18% in 1980, to 13% in 1989. Taking into account household health expenditures, it is estimated that health care and related services comprised about 3.3% of total GDP in 1989, of which about one-fourth were private expenditures. The proportion of private health expenditures is relatively high for a country with supposedly free health care, highlighting the important role that private purchase of drugs, fee-for-service polyclinics and gratuities comprise in total health expenditures. 24. Total expenditures on health, including user fees, are shown in Annex 1. Current expenditures are primarily for personal health care (89% of total expenditures), and 69% of these expenditures fund hospitals and polyclinics. Expenditures are reasonably well distributed across districts. The urban bias (the 45% of the population which live in rural areas receive directly only 13% of health expenditures) is partly explained by the fact that the high cost 3 The large JUng In expenditures as a share of GDP in 1989 was primarily caused by the fall in GOP. 4 Until 1989, 1nvestents were financed out of district budgets and no data are avaflable on expenditures during this perfod. However, these investments were amll, particularly during the last decade. s International comparisons of Romanian health care expenditures must be treated cautiously becoume current, distorted, prices bfas health expenditures downwards, particulerly in conparison with market econormies.  - 8- facilities which serve both rural and urban areas (e.g. ditrict hospitals) are located ln the towns. 25. The lack of now investments, systemic shortages of domestically supplied products, and the unavailability of foreign exchange for w.he health sector during the last decade have combined to create a crisis. Drugs ard consumables are in extremely short supply, much equipment is obsolete or stands idle for lack of spare parts and buildings and equipment are in a dangerous state of dierepair. For example, leakages and excess dosages from some X-ray machines are threatening the health of patLents and medical etaff. Basic equipment such as autoclaves is lacking in many dLipenearies. Laboratory equipment is old and difficult to maintain and sterilizatLon equipment is often too old to repair. Transportation of emergencies is made difficult by shortages and breakdowns of ambulances. 26. Pharmaceuticals an Medi ual uoOlie-s. The shortage of essential medicines and supplies is particularly critical6. The Romanian pharmaceutical and medical supplies industry has suffered over the last 15 years from lack of access to modern technologles, shortages of foreign currency for imports of raw materials and inadequate capltal investment. In addition, the previous regime pursued a mliguided policy of self-sufficiency in pharmaceuticals. The resulting unrealietLcally wide product range (over 1200 finished products and 200 active compounds) is spread over a relatively small tonnage and has engendered high unit costs of production for many products. Domestic output declined by over 25% between 1988-1990 and the industry is now unable to satiefy the domestic market with even the most basic pharmaceuticals. For example, three quarters of the country's requirements of lnfusion packs have to be imported. Production quality is poor and rarely meets World Health Organization (WHO) Good Manufacturing Practice (GMP) standards. The technologies used and the products available in the antibiotics fleld are in particular in need of improvement. Drug packaging facilities are also primLtive and need urgent upgrading. 27. To safeguard the welfare of the local population, the industry needs restructuring so that it can produce at least a minimum of basic pharma- ceuticals competitively and at international quality standards; meanwhile baesc drugs of appropriate quality must be imported until the industry has carried out much needed reforms. However, imported drugs are scarce because of the acute shortage of foreign exchange. The position in 1991 has been alleviated somewhat by grants from the European Community (EC) of about 18 million ECU to import essential drugs. In 1992/93, there will be a need for an incremental US$50 million in foreign exchange to meet basic needs for imported drugs (mainly for PHC), with additional foreign exchange requirements of about US$12 million for essential consumable items. Increased supplies of disposable syringes are particularly important to combat the spread of AIDS and Hepatitis B. e A more detailed description of the issues concerning drugs manufacturing, pricing and distribution is provided In Ainex 2.  -9- 28. Ptoxgu> ak Ptricin@ Policy. Market oriented reforms of industrial and pricing policies which encourage economically juatified import substitu- tion should improve the supply of pharmaceuticals and consumables in the next few years. In April, 1991, the Government decided to charge consumers the full cost of imported drugs; at the same time, in an effort to improve quality and restore financial stability to the domestic industry, producer prices were raised by an average of 250%. However, domestic producer prices will still need to rise by a further factor of five to reach parity with import prices, and for some drugs, producer prices would have to rise even higher to make domestic production worthwhile. In such cases, local demand would be better met from imports -.ther than from domestic production. 29. The local pharmaceutical industry should not be expected to subsidize the consumer by accepting producer prices below the cost of production. However, if the necessary increases in producer prices outlined in para. 28 were passed to the consumer with no increase in subsidy or insurance coverage, the average household would have to spend about 8% of household income on drug purchases - a very high amount by international standards. The Government has therefore begun to review the issue of consumer subsidies. Until recently, certain groups (e.g. hospital in-patients, children and the elderly) received free medication, while the rest of the population received no direct subsidy. Following the price reforms described above, social insurance contributions (compulsory for all state employees and voluntary for others) were raised by 2% to finance rebates for the covered population amounting to 50% of the new drugs prices. An EC financed study expected to start in late 1991 will assist the Government address further the issues of drug prices and consumer subsidies, including the financing of drugs used in hospitals. The findings of the Study will be reviewed with the Bank. 30. Ensurina Provision of Primary Health Care. The crisis in management, structure and financing of health care described above has particularly affected PHC, which is now collapsing. Many dispensaries lack even the most rudimentary supplies of drugs, syringes, and equipment. It is reported that, because disposable syringes are in short supply, they are often reused. In the absence of functioning sterilization equipment, reusable equipment is often not properly disinfected. Dental equipment is unusable for want of spare parts and supplies. Treatment of childhood infections is delayed through shortages of antibiotics. Some rural dispensaries lack any means of communi- cation with district hospitals, or transport for emergency cases. In part because of the lack of opportunities to practice their profession and in part because of poor living conditions, rural doctors are seeking to leave their posts. 31. Within primary health care, actions to improve maternal and child health (MCH) are a particularly high priority. Although the high infant mortality rate (para. 3) is caused in part by poor social conditions, improve- ments in PHC, in particular better availability of drugs, vaccines and emer- gency transport, as well as training for management of Acute Respiratory Infection (ARI), high risk pregnancies and diarrhea would certainly bring about a reduction. Immediate actions to legalize abortion dramatically reduced the maternal mortality rate in 1990, but the overall rate remains high (para. 3), caused, in order of importance, by abortions and post-partum hemorrhage. In 1990, there were about one million legal abortions in Romania  - 10 - (i.e. three abortLons for each delivery)7. In contrast, there were only about 58,000 acceptors of modern family planning methods (1.1% of women of reproductive age (WRA)) for the same period. Even allowing for some unrecordod family planning (FP) acceptors, this is a very low rate. The reasons include the poor quality and unreliable supply of contraceptives, a lack of FP services (at present there are only about 100 poorly equipped centers In the count-y), inappropriate and poorly trained FP providers (VP is mainly provided by c*necologists, rather than general practitLoners and trained lay covAsellors), and cultural attitudes which militate agsinst contraceptive use. 32. I.tensive efforts have begun to improve MCH. There includes (a) preparation of an MCH strategy in collaboration with the World Health Organization (WHO); (b) strengthening the Institute for the Mother, Child and Adolescent (INCA); (c) establishing a Family Planning and Sex Education Unit (FPSEU) within the MOH; (d) improving diagnostic and curative capacity; (e) upgrading and establishing reproductive health facilities; and (f) preparing a training plan. In addition, in an effort to encourage a switch from abortion to modern family planning methods, the Government has increased the price of an abortion relative to other forms of contraception. 33. Realth Promotion. Health promotion as a means of reducing mortality and morbidity was neglected by the previous regime. While the new Government recognizes the importance of efforts to promote healthy lifestyles and provide information on risk factors to the population, these efforts are hampered by institutional weaknesses in the present administration of health promotion activities, ignorance among health providers of the importance of health promotion (a consequence of past distortion of health promotion efforts) and the small numbers of NGOs working in the field. To promote health education activities, a committee on health promotion has been established in the MOH, and in addition, the Government has created an inter-ministerial committee responsible for coordinating health promotion amongst several ministries (Health, Education, Labor and Social Protection, Youth and Sports, Culture, etc). The Government also plans to establish a National Center for Health Promotion and Education (NCHPE) which would provide public information on disease prevention and health promotion, support the development of good practice in district health education laboratories and develop training programs for health wor'ars and other professionals engaged in health promotion. 7 This corresponds to about one abortion per five WIRA in each year.  . 11 - OcyarnagBt Health PolLav and ftrategl 34. The Romanian authorities are acutely aware of the crisis of management, structure and resources which faces the health sector, and have begun the process of reform. Actions which have already been taken includes a) placing emphasis on primary health care and family health within the highly constrained budget situation; b) rescinding the ban on FP, and initiating reforme in the provision of FP which include encouraging NGO involvement; c) licensing doctors for private practice; d) taking the first oteps to decentralize the budget process; and e) eastabliehing or strengthening insti- tutions such as the HSMI and IMCA which can play a key role in management training and policy formulation. 35. In preparing a systemic reform of the health care system, the Government is emphasizing certain broad policy goals includings (a) equity; (b) efficiency - reallocation of resources to health promotion, disease prevention, and reduction in morbidity; (c) improved quality of care focussed on individual and family needs; and (d) individual choice and participation. 36. Achievement of these goals has implications for the initial direction of the reform. Since private insurance is almost non-existent, development of a private insurance sector offering universal health coverage would take a long time, and for the next decade at least, the Government will need to ensure equity through a public financing system with universal coverage. Issues for reform include how the financing is to be collected (general revenues, earmarked taxes, co-payments, etc.), managed (centrally or locally) and allocated (per capita, fee for service, etc). Improved efflicency will requtre elements of competition, and hence decentralization, with private ownership of some health facilities, or public ownership with autonomous local management for larger facilities (e.g. hospitals). Private management of public facilities is also an option. It will a:so require incentive systems which reward good performers and sanction bad ones. This in turn implies a much improved health information system. Improved quality will require better training, diffusion of new technology, improved facilities and supplies, a greater emphasis on family practice and a revised role for the government and private associations (e.g. medical societies, NGOs) in ietting standards and assuring quality. Indlvidual cholce and particlpation will require multiple providers, who will need careful regulation to reduce inefficiencies associated with excess capacity. An active program of health education and information will be needed 20 that Romanians become informed health care providers and consumers. 37. The constrained economic environment and critical balance of payments position (para. 2), severely limits the options for quality improvement and reform in the short-term. The Government has therefore decided to focus the first phase of its reform program on two high priority objectives, whose successful achievement would provide a firm basis for a more systemic medium- term reform. These are: (a) rehabilitating and improving PHC, with a special emphasis on MCH and reproductive health; and (b) restructuring the organization and finance of health care to provide a system which is sustainable, efficient and responsive to patient needs.  12 - Dh * anks Rol- 38. The Government is placing hign prlority on two key areas of hk an resource development during the early phase of the tranoition to a market economy: improved health care is vital on reverse the deterioration in the population's health over the lst decade; an:d an adequate social safety net8 in essential to protect from povorty those most adversely affected by inflation and unemployment. The Bank is assisting the development of the social safety net through Economic and Sector Work9 and the FY91 Technical Assistance-Critical Imports loan (Report No. P-5584-RO). 39. In the health sector, the Bank has aosisted the Government articulate its priorities over the next 3-5 years. These includes (a) rehabilitating primary health care to provide a cost-effective means of reducing mortality and morbidity; (b) restructuring the financing and management of health care to improve access and delivery; and (c) rehabilitating the tertiary health care system. The proposed Bank loan would focus on items (a) and (b), which are the top priorities and the most attainable in the current economic sltuation. A major justification and result of the loan would be the development of a health strategy and program to ensure a sustainable, cost- effective health care system in the medium-term. The project would also support a number of important changes in strategy and policy: assistance for the restructuring of the Romanian pharmaceutical industry; shifting some of the patient load from the tertiary hospitals to the primary care structure, thereby lowering unit costs of health care; shifting the emphasis of contraception from abortion to modern methods of family planning, thus improving the health of women; renewing emphasis on continuing education for medical staff; and increasing attention to preventive, rather than curative medicine as a more cost-effective method to address the country's high morbidity and mortality rates. 40. The severe ece.omic contraction and loss of foreign exchange earnings provide little oppoztunity for any significant new investments at least in the next year or two. To improve the supply response, the country's primary needs are for foreign exchange to import raw materials and spare parts. Within the health sector, foreign exchange shortages have resulted in acute scarcities of esential drugs and medical consumablea (para. 30) to the extent that primary health care is now collapsing. The proposed loan would therefore finance imports of these items as well as equipment for primary health care, technical assistance and training. S/ The term social safety not Is used here to deffne the package of policies and programs whose primary purpose Is to protect from poverty those who are adversely affected by inflation and urmiployment. OECD experience demonstrates that the social safety net is a permanent feature of a welt tunc:ionfng market economy. 9/ A recent Bank report (9577 RO) provideos recommendations for the social safety net, health, education and training. A study of the fncidence of poverty and targeting of benefits is planned for FY92.  - 13 - 41. Given the neglect over the last decade, the health sector will need considerable assistance and the proposed project is intended as a first phase of Bank support. A second health sector loan would support the structural changes begun in the proposed project. Other Bank operations in the human resources sector would provide further support to the social safety net, as well as assistance for education and training. In preparing the project, the Bank has collaborated closely with other donors and No3s which are assisting the health sector in Romania.  - 14 - II. *- HEflLT CARU RGHRAlLIATION PROJECW Prolect Obiectives 42. The proposed project has two pringipal objectLvess (a) to rehabilitate and upgrade the primary health care (PHC) delLvery system which is collapsing through want of equipment, spare parts, drugs and medical supplies. By focussing on maternal and child health (MCH), increasing access and choice in family planning (PP), and HIV/HepatitiL B preventlon, the project would (i) decrease maternal and under-S mortality and morbidity, as well as adult mortality and morbidity, and (ii) reduce the flow of unwanted chlldren into institutlons. Shifting the patlent load froui the tertiary hospitals to the primary care structure would lower unit costs of health care by improvLng utilization of lower cost services; and (b) to support the first steps of a major restructurlng of health sector financing and management to ensure a sustainable, cost- effective health care system in the medium term. 43. The PHC obiective would be achieved by: (a) upgrading rural dispersaries and attracting physicians to work there; (b) improving reproductive health care services (MCH and FP); (c) strengthening pre/in-service training for nurses and physicians; (d) introducing a health promotion program focuseing on key health priorities; (e) ensuring the supply of essentlal drugs, consumables, vaccines and blood products; (f) upgrading the communicatlon/transport system for emergencLes. 44. The restructurina objective would be achieved byt (a) preparing a national health strategy, based in part on pllot experiments in decentralization and improved resource allocation; (b) developing a Health Informatlon System; and (c) developing the Health Services Management Institute (HSMI). 45. A summary of project costs by component and sub-component and a description of implementation arrangements ia provided in Chapter 3 and Annex S. A breakdown of technical assistance (TA) and fellowships by component and  - 15 - sub-component can be found in Annex 6. Working papers available in the project files provide deacriptions of each project component, as well as details of equipment to be procured, collaboration with other agencies etc. A. EARAILITATING AND UPGRADING PRIMARY HEALTH CAR$. Uoorad- Rural DieMnsarigs (estimated project cost US$25.4m.10) 46. The project would assist the Government's first phase of PHC system rehabilitation by upgrading some 420 rural dispensaries (about 8E of total) in the country's 41 districts. This first phase is targeted toward rural areas because: (a) owing to their isolation, the lack of PHC takes a higher health toll on rural residents; and (b) these dispensaries are the least well equipped and supplied. Rural dispensaries have been selected using the following criteria: demographic coverage (each center would serve about 4500 inhabitants); local needs (e.g. those communes with the highest infant mortality rate); community support (e.g. willingness to provide cash or in- kind support); availability of paramedloal staff; and location in the four pilot decentralization districts (para. 79). Using these criteria, 102 dispensaries have be/in selected for upgrading in 1992, and a further 160 dispensaries per year would be included in 1993 and in 1994. A health map of each district has beon prepared, showing the physical relationship between the dispensary and the referral center. The project would supply clinical and dental equipment, and educational materials. In a parallel project, the EC would finance laboratory equipment and renovation for the selected dispensaries. To encourage their active participation, the dispensary physiciane would select equipment that meets their needs from a model equipment list which has been prepared. The project would also provide fellowships for district staff to learn about PHC developments abroad and TA to assist with implementation of this component. 47. The Government recognizes that additional incentives over and above better professional opportunities will need to be provided by the commune, district or central government to attract and retain physicians in rural areas. Based on a working group report, the MOH is preparing an incentive plan to attract health personnel to work in rural areas which includes measures to be financed by the MOH, district, commune and patients. IXmrove Reoroductive Realth Care Services (estimated project cost US535.6m.) 48. High infant and maternal mortality, the prevalence of infant diseases such as ARI and the high number of abortions and related complications clearly demonstrate the need to strengthen reproductive health services and pediatrics. The objective of this sub-component is to improve delivery of a range of these services, and by providing greater access and choice, increase 10 Estfmated project costs in this chapter are provided without physirst or price contigencries.  - 16 - the number of FP acceptors. WHO (which has aosisted the MOH prepare a medium- term MCH plan), UNICEF and UNFPA have cooperated closely in project preparation, and intend to provide TA, fellowships, local training, and limited amounts of equipment in support of the project. In addition, a number of NGOs and bilateral agencies were also consulted. The project would support: (a) the Institute of Mother, Child and Adolescent (INCA); (b) The Family Planning and Sex Education Unit (FPSEU) in the MOH; (c) reproductive health centers; (d) maternity/neonatal referral units; and (e) contraceptive supplies. 49. Institute- for the Mother. Child and Adoloscent. The INCA is one of the country's major teaching and research institutes in MCH. It assists the MOH in setting MCH standards and also participates in health education programs. The institute has five sections: a) pediatrics; b) maternity, high risk pregnancy and neonatal intensive care; c) a polyclinic for handicapped children; d) an orphanage; and e) a laboratory for early detection of gynecological cancers. Both equipment and highly trained physicians and paramedical staff are in short supply. A key objective of the IMCA is to improve standards in high risk maternity and neonatal care by training obstetricians and neonatologists, supervising midwifery and neonatal nurse training, organizing epidemiological surveys, and setting staffing and equipment standards in perinatology. The IMCA is also in charge of national efforts to reduce genital and breast cancer mortality. It also advises the KO0 on the FP program and trains reproductive health personnel. The IMCA would also assist in the coordination of the MCH program to be supported by the project. 50. The project would provide equipment in support of: (a) the High Risk Pregnancy and Neonatal Intensive Care Dapartment, so that lt can (i) become a referral facllity for hlgh rlsk pregnancLes, and a training unit for obstetrLcLans and midwives, and (li) train nurses, pedLatricians and new-born intenslve care specialists, wlth a view to reducing the early Lnfant death rate; (b) the cancer detection center, which will be-ome a country-wlde referral center for pap-smears, and organize and monitor early detection and treatment of cervical and breast cancersl and (c) MCH training programs for general practitioners (9?s), specialists, mid-wives and nurses. Fellowships wlll be provided for IMCA staff for instructor trainLng, tralnlng in public communications, new s5pcializations and for management training. WHO will provlde TA for the launching and organization of new activities and to develop institutional management. 51. The Family Plannina and Sex Education Unit. The FPSEU has been established in the DMCH of the MOH to: (a) coordinate, evaluate and provide quallty control of the MOH's reproductive health activities; (b) organize training; (c) manage an information center in collaboration with one of the national reproductive health reference centers (see below); (d) plan operational research; (e) coordinate with NGOs; and (f) assess national contraceptive requirements and prepare marketing and distribution plans. The FPSEU staff would be strengthened with two additional professional staff to carry out these tasks. In addition, the reproductive health reference center in Bucharest (see below) would be provided with at least three additional specialist staff to support the FPSEU. A 24 hour telephone service, would be installed at the Reference Center to provide counselling. 52. The project would support audiovisual equipment for the information center, fellowships to assist FPSEU staff learn about FP activities in other  - 17 - countries and TA to assist the FPSEU carry out its functions as described above. During negotiations, the Goverfent confirme" that it would provide a total of five additional qualified staff for the FPSmE and the Bucharest Reproductive Health Centor by December 31, 1991. 53. Roroductive Health Centers. The project would provide equipment, educational materials and suppliee to upgrade 10 reproductive health reference centers at the six University Hospitals and in four major cities (Arad, Satu Mare, Sibiu and Constanza). The centers would train health providers, provide information and counselling, FP and abortion services, and cancer screening. Patients would be referred within the same institution for more comprehensive services. TA would be provided for staff training in specialized topics such as laparoscopy, with additional training for the gynecologists, reference center managers and counsellors provided by WHO/UNFPA1". With support from WHO, UNFPA and the continuing education section of the MOH, the reference centers would train annually about 400 gynecologists, provide FP certification training to about 125 GPs, and a one week PP initiation course for 4,000 GPa and nurses. Outline training plans have been prepared. 54. The project would provide TA to develop training materials and sDecialized training for physicians. The project would also provide equipment and minor renovations to open 130, and upgrade a further 100 reproductive health centers in district hospitals, urban hospitals and polyclinics. The MOH has prepared a staff training plan to be implemented by the FPSEU and staff from the 10 reference centers. 55. MateritvlfN.otagl Referrail Units. The project would improve the diagnostic and curative capacity of 50 maternity/neonatal referral units located in each district and in the university hospitals by upgrading equipment in the labor and delivery rooms and neonatal units. TA would be provided to prepare training modules for the staff of the referral units. The training would be provided by the INCA. WHO and UNICEF will support a survey of maternity care professionals, staff training, books and materials, and studies including: a) the institutionalization of children; b) staff training needs in children's institutions; c) nutritional and immunization status of children; and d) genetic disorders among institutionalized children. 56. Contracentive_ 8unolies. The project would support efforts to increase the number of FP acceptors from the current 1.1% of WRA (para 31) to about 18% by the end of 1994. The MOH has estimated the annual import requirements for condoms, oral contraceptive cycles and IUDs to meet these targets, and the potential volume of supplies from foreign donors and NGOe. The project would supply the shortfall in oral contraceptives and IUDs. (The MOH estimates that there will be a sufficient supply of condoms from other sources). The contraceptives would be distributed to the 10 reproductive health reference centers and the 230 reproductive health centers, and in order to encourage acceptance, would be supplied at low cost to women using the centers. During 1992, the FPSEI would prepare, with local NGOo and TA supplied by the project, a marketing and distribution plan for contraceptives with a view to establishing appropriate marketing, pricing and distribution policies to encourage as wide as possible acceptance of modern FP methods. During It To be fnaltized. If UNFPA/WHO fuwds are uLavaiteble, this training will be provided by the Project.  - 18 - negotiations, the Governsent agreed: (a) to prepare a contraceptive marketing and distribution plan by June 30, 1992 and to review the plan with the Bank by September 30, 1992; and (b) to continue to adjust annually priceo of reproductive health interventions to encourage the use of contraceptives. Strongthen Pro/Xn-Service Training for Nuroes and Physicians (estimated project cost US$1.4m.) 57. The Government has recognized that reestablishing nurse training, improving nursing career opportunities and providing continuing education for physicians are essential elements of health system reform and improved resource utilization. This sub-component would strengthen nurse training and physician continuing education in primary health care topics. Since it will be necessary to reestablish nursing as a worthwhile career, the Governmnt agreed during nagotiations: (a) to prepare for Bank review by July 1, 1992 a career plan for nurses, including training, certification, quality control and incentives to reward improved qualifications and standards, and begin to implement the agreed plan by January 1, 1993; and (b) to add two positions in the XOB Directorate of Human Resources to coordinate pre- and in-service training by December 31, 1991. 58. Strennthen Nursina Training. The project would assist (a) efforts to develop the Post Basic Nursing School (PBNS) in Bucharost, and (b) in cooperation with UNICEF, improve the 41 new nursing schools recently established in each district to provide local-level training. 59. The PBNS provides annually one to four week courses to 3,000-4,000 nurses, laboratory, pharmacy, physiotherapy and radiology technicians and maintenance staff. The school has limited and obsolete facilities and over half of the faculty lack relevant qualifications or experience. The Government intends the PBNS to assume national responsibility for developing training programs for nurse tutors, nursing specialists (community health, MCH, psychiatry) and nurse managers, for which virtually no training has been provided during the last 15 years, and to assist improving nursing standards throughout the country. The School is currently receiving limited assistance from a number of bilateral donors. In collaboration with UNICEF and WHO, which would assist in identifying suitable international experts, the project would finance TA and fellowships, office equipment and software to design and develop training programs. However, development of the PBNS has been constrained (a) by regulations which made it ineligible to award professional diplomas, and (b) by inappropriate staffing. The Government has suitably modified the legal and administrative status of the PBNS and plans to staff the institution with nurse trainees who will shortly return from overseas training. 60. In collaboration with UNICEF, which will provide TA and teaching materials to develop appropriate nurse training curricula, the project would supply audio-visual aids, additional teaching materials and office equipment to the 41 nursing schools which would be used for both pre- and in-service training. In-service training would include: (a) the "bridge" program (organized in all districts to permit nurse technicians who graduated from high schools to upgrade their skills); and (b) a program of continuing education. The KOH has prepared a training plan including: identification of priority subjects (FP, high risk pregnancy, child health maintenance,  - 19 - community health, health education, simple laboratory techniqueo); an implementation program (18 regional workshops followed by secondary workshops in each district); and requirements for training materials (250 kits). The project would support the production of the 250 kits and running costs of the training programs. Development of the 41 nursing schools has been constrained by jurisdictional issues between the Ministry of Education end the MOH concerning management of the schools. However, the two ministries have recently drafted a decree wtich transfers jurisdictions to the MOH, with joint issuance of diploma. during a suitable transitional period. 61. improve Contiugina Nducation for Physicians. In addition to the training in reproductive health described in paras. 50 and 53, the project would support PHC training in ARI, cardio-vascular diseases, cancer prevention and detection, child health maintenance, community diagnosis and health education, management of consultation and emergency transfer, and sterili- zation of medico-surgical equipment for 650 OPe and nurses working in the upgraded dispensaries. Training would be provided by the Continuing Education Unit in the MOH via four one-week courses over a two year period. The project would provide training equipment, books and materials, fellowships and TA for development of training modules and support local costs. Enoure Suoulv of Essential Drucs. Consunables. Vaccines and Blood Products. (estimated project cost US$93.2m.) 62. This sub-component woulds (a) provide essential drugs and medical consumablesl (b) prepare a strategic plan for the Pharmaceuticals industry; (c) provide equipment to ensure the continued production of vaccines; and (d) provide equipment to ensure the production of safe blood products. 63. DRuAsg and ConsumabLe& The acute shortages of essential drugs and medical supplies described in Chapter I have contributed to the collapse of PHC and the consequent overburdening of the hospital system, as patients have been forced to use hospital out-patient facilities to obtain essential medication. To support the rehabilitation of the PHC system and to ensure critical supplies for hospitals and polyclinics, the project would finance certain essential drugs and medical supplies during the first two years of the project (1992-93). This would be the period when the shortage of foreign exchange is expected to be most acute as the transition to a market economy takes effect, and when the Romanian pharmaceutical industry would begin restructuring to improve domestic production (para. 65). A list of drugs and consumables to be procured under the project is available in the project files (a national drugs formulary for the public sector is being drafted). The list, which covers the gap between Romania's minimum needs and supplies from local productlon, domestically financed imports, and projected donor assistance includes: (a) for nriMarv health care, essential drugs to address (i) the main causes of mortality and morbidity in infants and children; (ii) communicable diseases such as tuberculosis; and (iii) maternal mortality and morbidity; and (b) for hosoitals and olvclinics, certain essential drugs for clinical and surgical purposes. In support of its current policy concerning the wholesale price of imported drugs (para. 28), the government confirmed during negotiations that drugs procured through the project will bo sold to health  - 20 - institutions and pharmacies at least at the CIF price converted into Lei at the market exchange rate, plus a suitable distribution margin. The Goverment also confirmed that it would finalise the national drugs formulary by March 1, 1992. 64. TA and computer equipment would be provided to assist the regional distributLon systems in stock management, warehousing, distributlon and accounting. The project would also provide equipment for the Instltute for Drug Quality Control-IOQC (in charge of drugs registration) and TA and fellowships to the MOH Directorate of PharmaceutLcal ServLces for the design and lmplementation of a new purchasing policy for drugs and consumables. The IDQC is now able to use hard currency earnLngs from charges to drug manufacturers for reglitering new drugs to purchase materLals needed for drugs testlng. 65. PrgnaratLon of a strutegig Plan for the Pnhaaceutical Industry. To assist the restructuring and rehabllitation of the domestic drugs lndustry, the project would finance TA to develop a strateglc plan for the industry. The study would: (a) analyze the problems faced by the six major pharmaceu- tical companies with respect to quantity, quality, flnancial viability of product llnes, management of operatlons, research and development, product distribution and marketlng, and lnvestments to rehabllitate the Lndustry; (b) prepare a strategLc plan to restructure the subsector as a whole and the individual production enterprises, with a view to their ultimate privatization if appropriate; and (c) prepare preliminary feaeibillty studies to estimate the total capital Lnvestment required to implement the restructurlng plan. Terms of reference for the study are attached in Annex 2, Attachment 1. During negotiations, the Government agreed to prepare a Strategic Plan as described above, review it with the Dank by December 31, 1992 and begin implementation shortly thereafter. 66. Vaccines. The project would provide replacement equipment and spares to ensure continued productlon of vacclnes at the Cantacuzino Institute in Bucharest (the sole domestic producer of vaccines). Essential replacement equipment to be provided includes equipment for aseptic conditioning of biolo- gical products, deep-freezers, a freeze-dryer, a large steam sterilization unit, and a large volume filtration unit. The Institute has established links with the Pasteur Institute in Paris, which will assist with upgrading production and research. 67. BloodlProducts. The EC, the Red Cross, and French Cooperation will provide equipment for eight blood transfusion centers, fractionation and production of blood derivatives and TA as part of an urgent effort to provide safe blood products and prevent blood-transmitted AIDS and Hepatitis B. The project would supply laboratory equipment and reagents for the National Reference Laboratory in charge of monitoring the quality of blood control by the 41 blood transfusLon centers. The National Reference Laboratory would provide the centers with technlcal expertise and access to sophisticated technology for AIDS testing and detection of Hepatltis. Depending on the level of assistance which may be proposed by a forthcoming WHO mission, the project would also provide advanced fellowship training for laboratory techniclans, biochemists and center managers.  - 21 - Ig2rove Managgment Of Emerasucieo (estimated project cost US$8.9m.) 68. The mortality rate from the first cause of death in Romania (cardio- vascular diseases), as well as from accidents would be diminished with improved emergency transport and communications. Inadequate emergency communi- cations and transportation often prevent PIC staff seeking consultation from specialists, obtaining rapid transportation, or notifying referral centers of incoming emergencies. The project would provide communications equipment for the 60 dispensaries included in the project presently without services, and ambulances and spare parts for the district emergency transport systems. In addition, TA would be provided to review the emergency transport system at the district level. Imorovo Health Promotion and Population's PartLcipation in Health care (eotimated project cost US$4.8m.) 69. This sub-component would improve health promotion activities at the national and local level, and would finance a small environmental health research project. 70. National Level. The project would strengthen national planning, coordination and management of health promotion and education by developing a National Center for Health Promotion and Education (NCHPE) in the Institute of Hygiene and Public Health. The Center would provide public information on disease prevention and health promotion, support the development of good practice in district health education laboratories and develop training programs for health workers and other professionals engaged in health promotion/education. Detailed objectives and staffing needs for the Center are under preparation with assistance from WHO. Early priorities for activities would be selected from the following topics: hygiene and sanitation; coronary heart disease; HIV/AIDS; FP; cancer prevention and early detection; accidents; healthy lifestyle; and environment. During negotiations, the Government agreed that by December 31, 1991, it would: (a) set up and appropriately staff the Center; and (b) prepare for Bank review a development plan for health promotion and public participation to include training of district health education workers and involvement of NDOs for the years 1992-94. 71. In cooperation with WHO and UNICEF which would provide complementary TA and fellowship training, the project would support the Center with: (a) fellowships for advanced training in public health /health education including placements with a foreign health promotion agency; (b) TA for management development, evaluation and monitoring; and (c) equipment to produce health promotion and training materials. In addition, to promote public trust and participation in the health system, the project would provide TA, fellowships and office equipment to develop an ethics unit in the KOH to monitor patient- physician relationships. 72. Loca Levol. The NCHPE would develop training programs for staff working in district health education laboratories attached to the DHD. The district health laboratories would in turn train health staff at the periphery and encourage efforts by local health Fersonnel to establish a health dialogue with the local community. The project would provide equipment for district health promotion laboratories to produce local health education and promotion materials. The project would also finance a health promotion fund which would be used to support NGO and local government initiatives such as FP services  - 22 - for special groups (e.g. adolescents)* health promotion activitieo in schools, and fostering dialogue between health providers and local groups of consumers. The organization of the Health Promotion Fund and criteria for its use are included in Annex 10. An Organizational Manual (O) for the fund, as well as guidelines for the fund's monitoring and administration are being developed in association with the Bank-wide Learning Exercise on Popular Participation. 73. 2gLlronaental Health. There is concern in Romania about the impact of the Chernobyl disaster on children born in parts of the country which were affected bjy radio-active fallout. The project would finance a study of the endocrine system of children born in 1986 in Botosani and Suceava districts (the areas worst affected) as well as in Bucharest. For comparison purposes, children born in the same year in Timis district (the area least affected) would be surveyed. A sample of women of reproductive age would also be studied. The study would examine the impact of increased radioactive iodine absorption on the thyroid function and on reproductive endocrinology. The project would finance TA, fellowships, equipment and consumables. B. RESTRUCTUR NO MEALTH SECTOR FINANCE AND MANQAEMENT 74. The Government recognizes that improving health outcomes requires fundamental reform of health care finance and delivery to: (a) provide more autonomy to public providers; (b) develop private provision of medical services; (c) diversify sources of health care financing; and (d) offer more consumer choice and participation. Careful design of the reform will be needed to ensure achievement of the policy goals described in para. 35. The project would support three key building blocks in the reform effort: (a) preparation of a new national health strategy based in part on pilot experiments in decentralization and improved resource utilization; (b) an improved health information system; and (d) development of a School of Health Systems and Management within the HSMI. Preparation of a New National Health Strateov (eetimated project cost US$3.1m.) 75. The health system needs fundamental reform in order to perform its functions efficiently and effectively in a market economy. To assist the Government design and implement a reform program, the project would (a) support the preparation of a set of policy studies and reform options; and (b) assist implementing the first phase of the reform. A special committee comprising representatives from the Ministries of Health and Finance and specialized institutes has been appointed to manage the studies and first phase of implementation, using the HSMI as the executing agency. The expected outcomes are as follows. (a) A Series of Pagars and a Summary Reoort. with Detailed Reform Propogals, These would include proposals for: (i) financing, including the role of private finance and private-public mix in finance;  - 23 - (il) the delivery system: the roles of the public and private sectors; private-public mix in delivery; and the legal framework and institutions governing public and private delivery; (iii) criteria for allocation of public funds and compensation of health providers (e.g., budgeting, fee for service, diagnostic related groups, capitation); (iv) organization: roles for the MOH, DHD, local governments etc. in policy making, monitoring and evaluation, manpower planning, investment and technology adoption, and quality control; (v) new institutions, and change in governance of existing institution.; (c) Precaration gf the First Phase of Reforms. After the summary report has been distributed and widely discussed in Romania, the initiation and implementation of the first phase of reforms would be directed by the Special Committee (para. 75). The Committee would be assisted by consultants appointed for the expedient implementation of the reform. The committee woulds (i) prepare a time-phased plan, including required legal and institutional changes, with deadlines; and (ii) specify resources, equipment, training, TA etc., necessary for implementation. 76. Details of the policy studies and the implementation plan are attached in Annex 3. During negotiations, the Government agreed to carry out the studies, review with the Bank the proposed reform program by December 31, 1992, and begin implementation by July 1, 1993. 77. Decentralization and Improved Resource Allocation. As part of the reform process, the project would support Government efforts to decentralize management and control of the health system in order to improve resource utilization, increase the responsiveness of the system to local needs, encourage local decision making and establish accountability. Two types of actions would be undertaken: (a) the Government would modify outmoded regulations which unnecessarily restrict local initiative; and (b) there woule be pilot decentralization experiments in four districts. The experience gained would feed into the preparation of the national health strategy. 78. The MOH, with the active collaboration of the four pilot districts (see below) is preparing a list of regulations which need to be modified. For example, the current rigid norms for staffing, expenditures etc. would be replaced by a set of hospital standards and incentives to encourage greater efficiency. At the same time, new rules would be issued to provide more consumer choice. Examples include allowing all doctors to certify sick leave, and permitting patients to choose their PHC facility within the district.  - 24 - During negotiations, the draft proposals from the four districts were discu&sed and the Government agreed to introduce suitable operational procedures by January 1, 1992. 79. Based on draft decentralization proposale submitted by a number of districts, four districts have been selected to participate in a two-year pilot decentralization program. The districts are now finalizing plans which will includes (a) qualitative and quantitative targets (e.g. decreasing infant mortality); (b) priority actions (e.g. privatizing or switching to an autonomous financial regime existing fee-for-service units; restructuring of health facilities); (c) financial decentralization and autonomy (e.g. transferring financial reeponsibility for as many enterprise clinics as possible to enterprises; allowing hospitals and health facilities to retain revenues for activities such as renting unused space to NGOs for FP activities); (d) experimenting with new financing schemes (e.g. fee-for- service with global expenditure controls, or capitation fees for primary health care); and (e) contracting out some services (e.g. laundry, maintenance) following a competitive bidding process. 80. The project would provides (a) TA to assist the four districts finalize and implement their action plans and evaluate progress; (b) fellowships in health facilities management for the district health director or a designated unit manager in the district; and (c) equipment and materials to be selected by each participating district to improve management procedures, or for equipping district health facilities. The district plans were reviewed at negotiations, and the Government agreed to begin implementation of the plans by January 1, 1992, to send progress reports to the Bank at six-monthly intervals thereafter, and a final report by December 31, 1993, which would include plans for introducing successful decentralization actions on a country-wide basis. Development of a Health Information 8ystem (estimated project cost USS3.2m.) 81. To assist the MOH, district and local managers to set objectives efficiently and effectively, allocate resources, anticipate needs and monitor performance, the project would support a first phase development of a national health information system. The system would take advantage mainly of existing data. The project would finance: (a) TA to design the system and train staff in its use; and (b) equipment the National Health Statistics Center and the districts. A more detailed description is provided in Annex 4. A working paper outlining objectives and a description of the system, as well as TA requirements and job descriptions is available in the project files. School of Health Systems and Manaaement (estimated project cost US$3.1m.) 82. To provide future trained health care managers and policy analysts, the project would support the establishment of a School of Health Systems and Management (SHSM) in the Health Services Management Institute. The School would improve policy making, management, and evaluation in health care institutions by: (a) improving understanding of principle and methods of  - 25 - public health, finance, economics, law, decision-making and managements (b) training existlng and new health care managers; (c) identifying and researching pollcy and operatlonal lssuea, and disseminating the results; (d) fostering international cooperation ln health economLcs, management and adminLetratLon; and (e) trainlng of trainers. 83. The project would provide TA, fellowships and equipments (a) for curriculum development; (b) to enable the School to provide advanced pre- service education to at leart 60 professionals during the period 1992-1994; (c) to enroll at least 200 professionals - distrLct health directors, directors of hospitals and lower level staff - in the continuing educatlon program during the same period; and (d) for academic staff training overseas. A working paper is available in the project files which provides: a detailed course description and implementation schedule for the proposed advanced program in health systems and management; an outline for a continuing education program; a framework for operational research; job descriptions for international experts to assist the development of the school; a fellowship program; and an equipment llit. During negotiations, the Governsent agreed that by March 1, 1992 it would ensure the necessary academic certification of the School's programs, and pass a resolution that the graduates of the academic program are recognised as holders of a professional specialty. The Government also agreed that by March 1, 1992, lt would prepare for Bank roview a set of incentives (both monetary and non-monetary) which will make specialLsation in the management of health services an attractive career in Romaia. C- * NIRONMENTAL XMPACT 84. The project has several positive environmental features: (a) as part of the evolving health strategy, appropriate attention will be paid to better protection against infection and proper medical waste disposal in project supported institutions; (b) the strategic plan for the pharmaceuticals industry (Annex 2, Attachment 1) would contain explicit measures to control pollution associated with these industries; (c) new equipment to be supplied for the production of vaccines (para. 66) would minimize risks of virus infection and contamination; and (d) the environmental health study (para. 73) would determlne the impact of, and measures needed to deal wlth, radiation pollution.  - 26 - iI. POJET COS, P MCG. NME AM WMPRAI. C:OSt f ghe Prolect. 85. Project Cost ummari,s. Project costs by project item (US$207.5 million) are shown in Table 3.1 below. Details of thege costs (including expenditure type and timing) are shown in Annex 5. TABLE 3 . 1 PROJECT SUURY BY PROJECT ITW a/ K of K of Lei Miltion ---- .. USS Million -- Base Foreign Locat Foreign Totat Local Foreign Total Costs Exchange REHABILITATE & UPGRADE PHC Upgrade Rural Dispensaries 656.7 867.9 1,524.6 10.9 14.5 25.4 14X 57X Reproductive Health Care Servc. 486.9 1,650.5 2,137.4 8.1 27.5 35.6 20X 7rx Training for Nurses & Ph nicians 29.9 51.2 81.1 0.5 0.9 1.4 1X 63X Drugs, Consum, VacC. & Stood P. 1,277.9 4,312.7 5,590.6 21.3 71.9 93.2 52 77X Management of Emergencies 348.4 186.9 535.3 5.8 3.1 8.9 5X 35X Health Promotion/Participation 52.4 234.5 286.8 0.9 3.9 4.8 3K 82K Sub-Total Rehabilitation: 2,852.1 7,303.7 1O,155.9 47.5 121.7 169.3 95K 72X ..... ..... . ..... ..... . . ..... ---- ... -----............ ........ .. RESTRUCTURE THE HEALTH SECTOR National Heatth Strategy 41.0 147.2 188.2 0.7 2.5 3.1 2K 78X Health Information System 44.1 146.0 190.4 0.7 2.4 3.2 2K 77K School of Health Systems & Mgmt 24.6 159.4 184.0 0.4 2.7 3.1 2 87X Sub-Tot Restr Health Sector: 110.0 452.6 562.6 1.8 7.5 9.4 5K 80K Total Base Costs: 2,962 2 7,756.3 10,718.5 49.4 129.3 178.6 100l 7n Physicat Contingencies: 296.2 775.6 1,071.8 4.9 12.9 17.9 10 72K Price Contingencies: 190.8 466.9 657.7 3.2 7.8 11.0 6K 71X ... ....... .; ; ..... ........ ... ..... . ...... . ..... ...... . . .... . ....... ........... ..... TOTAL PROJECT COSTS 3,449.2 8,998.8 12,448.1 57.5 150.0 207.5 116K 72X n232 uu UUU i~m num aua iu a/ Includes taxes In the amo4mt of: $18.9 Mitlion 86. Project costs by category of expenditure are shown in Table 3.2 below. These costs include TA, equipment, vehicles, software, books, medical supplies, spare parts, building facilities (including government financed rehabilitation and furniture), and incremental recurrent costs for the project.  - 27 - TABLE 3.2: PROJECT COST SUMARY BY CATEGORY OF EXPENDITURE Xof X - Lef Million ---- ---- USS Million -- Base Foreign Local Foreign Total Local Foreign Total Costs Exchange ........ ......... --- . .... ..... .... ...... ......... .... ...... .... A. TECHNICAL ASSISTANCE COSTS Fellowships (Foreign) 179.0 179.0 3.0 3.0 21 100X Consultants (Foreign) 79.6 329.2 408.7 1.3 5.5 6.8 41 81t Training (Local) 4.5 4.5 0.1 0.' 0O Consultants (Local) 5.2 5.2 0.1 0.1 0O -- - ... ... ..... ..... .. ..... -----.. ..... .................. Sub-Total Technical Assistance: 89.3 508.2 597.5 1.5 8.5 10.0 6% 852 -----~~~~ ~~ ---- .......---... B. EQUIPMENT, SOFTWARE, SPARES AND VEHICLES Equipment 716.5 2,388.2 3,104.7 11.9 39.8 51.7 291 77X Software 23.4 118.3 141.7 0.4 2.0 2.4 1X 84X Spare Parts 122.5 34.2 156.7 2.0 0.6 2.6 12 221 Vehicles 48.6 162.0 210.6 0.8 2.7 3.5 21 771 ..... ....... ....... -----. .... ..... . ----- . .... .. ... ---....-......... .......... Sub-Total Eqt, Spares & Vehicles: 910.9 2,702.8 3,613.7 15.2 45.0 60.2 34X 75X .... ....... ....... -----. .... . .... ...... ----- ... . ... ...----.. ..... . C: MEDICAL SUPPLIES #SSVSI#:":D~~~~as I SS##S=# ----- ----- - ...----....... ..... ..... ...... ----.- Drugs 873.5 2,911.6 3,785.1 14.6 48.5 63.1 35X 77X Contraceptives 141.8 472.8 614.6 2.4 7.9 10.2 61 77X Disposable Materials 348.3 1,161.0 1,509.3 5.8 19.4 25.2 14X 772 Medical Supplies: Sub-total 1,363.6 4,545.4 5,909.0 22.7 75.8 98.5 551 77X ,-- . ...... ............ -----. -----.... ..... ... ... . .... . . 0: BUILDING FACILITIES s#s#=n#wasuas===zlasns..... ... .....-- - -- -- -- ------ .. .... - -- - -- - Building Rehabilitation 344.8 344.8 5.7 5.7 31 Furniture 58.1 58.1 1.0 1.0 1X , i....... ........ ..... ----... .... .............. Building Facilities: Stb-tot 403.0 403.0 6.7 6.7 41 ,................. ....... .. ..... .... ...... .... -- --- E: INCRENENTAL RECURRENT COSTS 195.4 195.4 3.3 3.3 2X . ... ..... . ----- ..... .. ----- ..... . . ---. ...... ......... ... Incr. Rec Costs: Sub-total 195.4 195.4 3.3 3.3 2X Total Base Costs: 2,962.2 7,756.3 10,718.5 49.4 129.3 178.6 1001 721 Physical Coantingencies: 296.2 775.6 1,071.8 4.9 12.9 17.9 102 722 Price Contingenies: 190.8 466.9 657.7 3.2 7.8 11.0 62 71% TOTAL PROJECT COSTS 3, 449.2 8, 998.8 12,448.1 57.5 150.0 207.5 1161 721 l:3S:S# == ##=== ##IuSX=tm a=== u=u= ==-== u=== ===== 87. Basis of Cost Estimates. All project costs have been estimated in US$ terms, and converted into Lei at the official exchange rate of 60 Lei per US$'2/. Technical assistance costs (about 7 percent of project total) are based on recent costs for comparable TA in the Third Industrial Restructuring Project in Hungary (Loan 3020-HU), adapted to costs in Romania. The monthly costs are averaged"3/ as follows: (a) foreign consultant costs of US$11,000 (foreign cost) and US$3,000 (local cost); (b) Romanian consultants US$500 12 All project costs have been estimated in US$ because of uncertainties about the market value of the Loi between the official rate (currently about Lei 60 per USS) and the inter-bank rate of about Lei 200 per U5S. 13 There are considerable variations within this average, and these have been taken into account in the details of project costs where appropriate (e.g. management consultant costs are estimated at about twice the average unit cost).  - 28 - (local cost); (c) foreign fellowships US$6,500 (foreign cost) and (d) local training US$500 (local cost). Costs of consumable and durable goods are based on detailed lists of unit costs and requirements which have been prepared for the project components described in Chapter II. Building refurbishment costs, furniture costs and local costs of spare parts are based on the estimates of local officials of the coste for these items. 88. Customs Duties. Taxes and Distribution Costs. The costs of imported items include a 10% allowance for import tax (US$18.9 million). An allowance of 20% (local costs) over CIF costs has been added to account for inland transportation, handling, warehousing and distribution. 89. Co