41243-023: Fourth Health Sector Development Project - Additional Financing | Asian Development Bank

Mongolia: Fourth Health Sector Development Project - Additional Financing

Sovereign (Public) Project | 41243-023 Status: Approved

ADB is helping Mongolia improve health sector efficiency, governance, and drug safety. The project will upgrade hospital services in Ulaanbaatar, improve human resource development, and strengthen the country's drug safety regime. The Songinohairkhan district hospital in the capital will be turned into a model multifunctional general hospital, which other district hospitals are expected to follow.

Project Details

Project Officer
Altantuya Jigjidsuren East Asia Department Request for information
  • Mongolia
  • Loan
  • Health
Project Name Fourth Health Sector Development Project - Additional Financing
Project Number 41243-023
Project Status Approved
Project Type / Modality of Assistance Loan
Source of Funding / Amount
Loan 2932-: Fourth Health Sector Development Project - Additional Financing
Asian Development Fund US$ 25.00 million
Strategic Agendas Inclusive economic growth
Drivers of Change Governance and capacity development
Sector / Subsector

Health - Health sector development and reform

Gender Equity and Mainstreaming Effective gender mainstreaming
Description The Asian Development Bank (ADB) approved the original project in 2010 which was designed to improve health sector efficiency, governance, and drug safety focusing on three key areas: hospital services in Ulaanbaatar, human resources development, and drug safety regime. The additional financing will significantly expand the original project's output establishing a demonstration multifunctional general hospital in Songinohairkhan District of Ulaanbaatar
Project Rationale and Linkage to Country/Regional Strategy

The original project planned to establish a demonstration multifunctional general hospital in Songinohairkhan, the poorest district of Ulaanbaatar, by renovating and expanding the infrastructure, equipping the hospital, and introducing innovative management systems (original hospital output). Civil works under this output are planned to start in the spring of 2013. In May 2011, the Mongolian Parliament amended the health law requiring general hospitals to provide at least seven specialized medical services. This substantial heightening of mandated standards for delivery of health services by general hospitals means that the funding allocated to the hospital output under the original project is no longer adequate to achieve the stated output. To accommodate all of the upgrading required, and considering the poor state of the existing infrastructure, the government has concluded that it is more efficient to construct a new hospital in the same location than to continue with the original plan of renovating and rehabilitating the old hospital complex, and has therefore requested the additional financing to support the proposed project expansion. The new demonstration general hospital will be used as a model to be replicated in the nine districts of Ulaanbaatar. This 300-bed hospital will include modern features such as surgical and maternity services, adequate diagnostic and laboratory capacity, integrated management of out- and inpatient departments, model nursing care, proper medical waste management, adequate infection prevention and control measures, and advanced information technology tools for patient, procurement, and financial management.

Hospital infrastructure in Mongolia is generally poor and the rapid population growth of Ulaanbaatar requires continuous investments. The expanded hospital output targeted at construction of the demonstration multifunctional general hospital is an integral part of the broader effort to reform the hospital sector which is being undertaken under the original project. As part of the original project, a hospital policy and a strategic hospital development plan to restructure the public and private hospital sector will be approved by the Cabinet within 2012. The broader financial implications and funding requirements of a modern public hospital network are analyzed and are part of the impending strategic plan. A detailed development plan is being developed for the demonstration hospital, including financial, human resources and managerial aspects with the assistance of the World Health Organization. Projected operational costs of the demonstration hospital will increase from the current level to provide higher quality of care. Actual costs will depend on factors such as staff:bed ratio, higher wages to motivate staff, and proper budgeting for maintenance services and capital depreciation. Recent and future trends in public financing suggest that additional operation and maintenance costs for the demonstration hospital can be financed by rising public revenues.

Total out-of-pocket health expenditures are estimated between 17-30% of total health expenditures in Mongolia, which is in line with the World Health Organization's guideline not to exceed 30%. About 80% of the population is covered by health insurance and about 50% of hospital revenues are paid for by direct State funding. This contributes to accessibility and affordability. Nevertheless, equity in accessing health care for the poorer segments of the population remains a challenge, as some of these individuals do not have health insurance. In addition, out-of-pocket payments are the rule for those who are insured. ADB is addressing equity issues through three ongoing projects and the reform of the citizens' health insurance law promoted by the Social Sectors Support Program.

The additional financing is considered to meet the four eligibility criteria for additional financing. First, ADB reviewed the original project in April 2012 and confirmed the satisfactory performance of the original project and that no significant changes in approaches and methodologies are envisioned. Accordingly the original project remains technically feasible, economically viable, and financially sound. Second, the government accords high priority to the original project as proposed to be expanded through the additional financing. The demonstration hospital represents a concrete step in implementing the 2011 amended health law, as acknowledged by the government's request for additional financing. Third, the project outcome remains the same, while the output related to the demonstration hospital, supported by the additional financing, will be enhanced and remains consistent with the project's development objectives. Fourth, the expanded project and its outcome are consistent with the current country partnership strategy, 2012-2016, which emphasizes social development through efficient delivery of health services.

The additional financing modality is highly relevant as the modification in respect to the demonstration hospital output will make it possible to meet the objectives of the original project in light of the amended health law requiring higher standards for general hospitals. The ADF loan modality is relevant to finance major infrastructure rather than using ADF grant funding as in the original project. The current effective project implementation arrangements (i.e., project steering committee, implementing agency and project implementation unit ensure a high degree of readiness and effectiveness in implementing the additional financing. The development of the hospital policy and strategic hospital development plan under the original project and continuing under the overall project provides a framework for the later replication of the demonstration general hospital to be established under the additional financing. The enhanced model character of the new hospital will reinforce its demonstration effect and will be a strong incentive for reforming the hospital sector in Mongolia as promoted under the original project.

Impact Improved health status of the Mongolian population, including the poor
Project Outcome
Description of Outcome Improved health sector efficiency, governance, and drug safety
Progress Toward Outcome MOH approved the "Hospital care development policy" by ministerial order in February 2014. Implementation strategy of the "Hospital care development policy" was finalized in December 2014.
Implementation Progress
Description of Project Outputs

Component 1: Strengthened Hospital Services in Ulaanbaatar

1. Hospital development policy and strategic plan for Ulaanbaatar

2. A hospital capital planning system is established and operational

3. A demonstration multifunction general hospital established in Songinohairkhan district

4. Increased hospital governance

Component 2: Strengthened Human Resource Development

5. Strengthened postgraduate specialist structure and residency programs

6. Hospital management module integrated in a local training institution

Component 3: Strengthened Drug Safety Regime

7. Drug regulatory authority established

8. Strengthened drug regulatory functions

9. Upgraded drug control laboratory, including accreditation system

10. Implementation of good manufacturing practice (GMP)

11. Strengthened postmarketing surveillance and adverse drug reaction monitoring

12. Strengthened drug safety governance function at MOH

Additional Output: Project Management

Status of Implementation Progress (Outputs, Activities, and Issues)

Output 1.1.

A major output of the Project is the development and approval of a hospital policy for Ulaanbaatar city which will direct changes in the way Ulaanbaatar city hospitals are financed, managed, organised and deliver services. The policy was intended to cover private sector participation, governance and autonomy issues and future public sector investment. MOH working group with the support from Project consultants developed a draft policy, which was discussed and commented in 2012 by a high level strategic planning committee.

In June 2012, the MOH decided to extend the document to cover hospitals nationwide and the policy document underwent extensive discussion and review at the ministry level throughout 2013. A shorter version of a "Hospital Care Development Policy" document was approved through a ministerial order in February 2014. A draft Implementation Strategy Plan to facilitate and guide the proposed reforms is scheduled to be discussed and finalized in December 2014. The hospital policy and the strategic plan are supported by specific covenants of the grant agreement. While there have been delays, it now appears that the hospital policy is in place and the implementation strategy is likely to be approved.

Output 1.2.

In March 2012 a review of the current capital planning system was carried out by an international consultant. An assessment of public infrastructure and equipment in Ulaanbaatar was carried out covering 37 hospitals of various types. The assessment intended to provide a basis for estimation of infrastructure investment needs and contribute to a strategic development plan to reform the hospital sector in Ulaanbaatar. Capital planning procedures developed by international consultant and the assessment of the infrastructure investments needs of the Government are available. As a next step, by the end of 2015, the MOH will define the future capital planning system which would address institutional, human resources, information technology, financial requirements and investments to restructure and develop the hospital sector, as well as the types of processes needed.

Output 1.3.

The development of a model multifunctional general hospital in Songinokhairkhan district is intended to assist in the ongoing health and hospital sector reform by instituting best management practices, organisational processes, and restructured clinical services. The original plan was to renovate the existing hospital and have a restructured facility operational by June 2015. The new hospital would include modern systems of human resources, governance, waste management, IT and clinical services delivery. In 2012 the government requested additional funding of $25 million as a concessional loan for a new hospital, instead of renovating and appending new wings to the existing structure. The FHSDP-AF, the Loan, became effective on 14 June 2013.

The Project has engaged SIMED (Netherland), an international hospital planning and design consulting firm, to develop the concept design and functional requirements. To date, SIMED has produced a Concept Design and Functional Plan for the new hospital and terms and reference for architects to design the facility. The construction work will be postponed to 2016-2018.

The WHO has agreed to support hospital experts (4 months input to be split between developing the Songinokhairkhan hospital development plan and developing and introducing internal operating plan and new policies and procedures). The MOH will finalize the Songinokhairkhan hospital development plan by the end of 2015.

The Project has engaged Junglim Architect (South Korea) to develop detail design for demonstration hospital and support the ministry to prepare bidding documents for construction of the hospital.

Geographical Location
Safeguard Categories
Environment B
Involuntary Resettlement C
Indigenous Peoples C
Summary of Environmental and Social Aspects
Environmental Aspects The initial environmental examination of the original project was updated to address the environmental implications of the new Songinohairkhan demonstration hospital, approved by ADB and disclosed on the ADB website on 24 August 2012. The updated initial environmental examination report includes a comprehensive environmental management plan which defines environmental mitigation measures, monitoring requirements, institutional responsibilities, and training and capacity building requirements. The government is committed to manage identified environmental risks and has agreed on a comprehensive set of environment-related loan covenants. The executing agency conducted meaningful consultation and disclosed relevant environment information to the affected people. Consultation and public participation will continue throughout overall project implementation and any environmental complaints or disputes will be handled in accordance with the grievance redress mechanism established for the overall project.
Involuntary Resettlement The demonstration hospital will be constructed on existing government land occupied by the present hospital. There is sufficient land that construction will not cause any resettlement impact. Therefore, the overall project and additional financing remain category C; a resettlement plan is not required.
Indigenous Peoples The original project and additional financing will not have any negative impact on indigenous peoples and, therefore, the overall project and additional financing remain category C. No further actions are required.
Stakeholder Communication, Participation, and Consultation
During Project Design Consultations with key stakeholders (family group practice, hospital staff, patients) were held in Ulaanbaatar during the original project's preparation and were updated for the additional financing in coordination with the environmental public consultation. The second round of consultation was held to investigate views and recommendations on establishing a multifunctional hospital and a drug regulatory body. Consultations held in preparation of the environmental management plan also addressed construction disturbances and safety. Mitigation actions are in the environmental management plan. Some staff of the Songinohairkhan district hospital and community members were not supportive of deconstructing the current district hospital once the new hospital will be established. The project will require an effective communication strategy and involvement of community and staff members to identify options, if any, and address the concerns and discuss the relevance and technical requirements of deconstructing the current hospital to meet upgraded hospital standards.
During Project Implementation

The consultation and participation plan includes (i) patient satisfaction surveys, (ii) community monitoring and awareness raising linked to the pilot multifunctional hospital in the Songinohairkhan District, and (iii) drug safety information and outreach activities in Ulaanbaatar. The results will be part of the project's monitoring and evaluation system. The patient satisfaction survey will collect information on (i) the availability, reliability, and quality of hospital services received; (ii) the responsiveness of hospital service providers; (iii) hidden costs, such as a demand for informal payments; and (iv) affordability. The community score card will address similar issues and suggestions for addressing complaints.

Improved drug safety. A communication and media framework will be established so that the general public and stakeholders will have access to the annual reports and public reporting on the website. A local nongovernment organization experienced in drug safety and consumer affairs will raise awareness through outreach programs and local public meetings about drug regulatory control. The project will hire a local nongovernment organization to implement the activities and the project implementation unit will support a gender specialist for gender mainstreaming project activities (including the gender action plan). The consultation and participation plan will be implemented over the 5 years of the project at a cost of $50,000.

Business Opportunities
Consulting Services All consultants will be recruited according to ADB's Guidelines on the Use of Consultants (2010, as amended from time to time). A Design and Construction Supervision Consultancy firm will be recruited under the additional financing to provide a total of 51 person months of consulting services (9 international and 42 national) to support the construction of the new hospital in Songinohairkhan District. A Hospital Management Consultancy firm will also be recruited under the additional financing to provide technical assistance during the first year of the hospital operations for a total of 51 person months (9 international and 42 national). Both firms will be engaged using quality-and cost-based selection with the standard ratio of 80:20 and required to submit simplified technical proposals.
Procurement All procurement of goods and works will be undertaken in accordance with ADB's Procurement Guidelines (2010, as amended from time to time). International competitive bidding will be applied to goods contracts estimated to cost $500,000 or more and works contracts estimated to cost $1,000,000 or more. Goods contracts with values less than $500,000 and works contracts with values less than $1,000,000 will follow national competitive bidding. Works and goods contracts with values less than $50,000 will be procured using ADB's shopping procedure.
Responsible ADB Officer Altantuya Jigjidsuren
Responsible ADB Department East Asia Department
Responsible ADB Division Mongolia Resident Mission
Executing Agencies
Ministry of Health_and Sports
[email protected]
1st Floor, Government Building VIII
Olympic Street 2, Ulaanbaatar
Concept Clearance 18 Jul 2012
Fact Finding -
MRM 06 Sep 2012
Approval 05 Nov 2012
Last Review Mission -
Last PDS Update 24 Mar 2015

Loan 2932-

Approval Signing Date Effectivity Date Closing
Original Revised Actual
05 Nov 2012 07 Feb 2013 14 Jun 2013 31 Dec 2016 31 Dec 2018 -
Financing Plan Loan Utilization
Total (Amount in US$ million) Date ADB Others Net Percentage
Project Cost 27.00 Cumulative Contract Awards
ADB 25.00 05 Nov 2012 0.97 0.00 4%
Counterpart 2.00 Cumulative Disbursements
Cofinancing 0.00 05 Nov 2012 0.88 0.00 4%
Status of Covenants
Category Sector Safeguards Social Financial Economic Others
Rating Satisfactory - - Satisfactory - -

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No tenders for this project were found.

Contracts Awarded

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Procurement Plan

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