Report No. PID10084
Project Name                     Estonia-Health Sector Development
Region                           Europe and Central Asia Region
Sector                           Hospitals; Secondary & Tertiary
Project ID                       EEPE70993
Borrower(s)                      GOVERNMENT OF REPUBLIC OF ESTONIA
Implementing Agency
Address MINISTRY OF SOCIAL AFFAIRS
Gonsiori 29
15027 Tallinn, Estonia
Contact Person: Mr. Ahti Kallikorm, M.D.
Tel: 372-626-9800
Environment Category             F
Date PID Prepared                February 23, 2001
Projected Appraisal Date         September 10, 2001
Projected Board Date             February 7, 2002
1. Country and Sector Background
Current Sector Issues:In the decade following independence, the first
phase of health reform in Estonia introduced laws and institutional reform
in line with provisions in many EU countries and began modernization of
health services. The first phase of reform successfully put in place the
main structural reforms required and created a basis for more efficient
planning and management of health care and health care financial
resources. However, the first phase of reform did not fully address the
need for organizational reform of the hospital and specialist sector. As
well, skills for efficient management, analysis and planning need to be
strengthened. More development is needed to strengthen public health
administration and long term care.n Inefficient network of hospital and
specialist facilitiesAlthough one third of hospital beds were closed
between 1991 and 1995 and bed numbers have continued to decline, hospital
capacity is still excessive at six beds per 1000 population compared to
the EU average of 4.4 acute beds per 1000 and UK average of 2 acute beds
per 1000 (1997 data), and is poorly configured. Average lengths of stay
remain above norms in more efficient EU countries at 8.8 days, and
occupancy rates are low (75%-) compared to ALOS of 4.7-6.5 days n the
Nordic countries and UK and occupancy rates averaging 80%- in the EU.
There are 78 hospitals in Estonia for a population of 1.4 million,
including a number of single-specialty hospitals and many small local
hospitals. A number of small hospitals have closed or converted to
nursing homes or primary care facilities. But larger hospitals have not
yet consolidated, and many operate with multiple sites and poor use of
physical space. A review of existing hospitals capacity - the Estonia
Hospitals Masterplan - estimated the capacity and configuration of
hospitals needed in Estonia based on Estonian population characteristics
and EU benchmarks for hospital efficiency. The Masterplan found that
major efficiency gains will only be achieved by consolidation into a
smaller number of hospital sites and buildings. Modernization of
facilities and equipment is needed to achieve greater efficiency and raise



quality.      Under-developed long term care services Acute hospitals
currently provide inappropriate and inefficient long term nursing care and
social care for patients who could be cared for with home support or with
lower cost, more appropriate nursing home care. EHIF financing
arrangement currently do not encourage home care (except for cancer
patients). The interface with locally financed and provided social care
is an issue in Estonia, as in many countries. There are relatively low
numbers of nursing home beds in many parts of Estonia compared to EU
averages, and there are waiting lists for public nursing home places. If
Estonia is to pursue an aggressive plan for downsizing acute hospitals and
reducing ALOS without adverse social impact on chronically ill patients
and social cases who currently rely on hospitals care, a vital concomitant
of the plan must be development of nursing care services, with a strong
emphasis on home-based care as well as development of nursing homes.
Policy, governance and financial framework for investment for public
sector health facilitiesThe 1994 law governing health care organizations
does not specify clearly the responsibilities for ownership and governance
of public hospitals or the planning of healthcare facilities, and the
system of regulation and licensing is poorly specified.     Capital
investment in public healthcare facilities is problematic. Public
investment funds are very limited at both state and municipal levels in
Estonia, which has balanced budget legislation. There is no capital
charge on public sector assets or on public investment funds. Revenue
from the EHIF covers part but not all of the costs of capital. Providers
have been borrowing from banks to finance investment, leading to loss of
central control over investment and to mounting and poorly monitored
financial risks at provider level. A new Healthcare Organization Law has
been introduced into Parliament which seeks to create a stronger framework
for hospital ownership, governance, accountability, and capital
investment. The new law recentralizes planning functions to some extent,
through mechanisms to promote implementation of the hospitals Masterplan
and through assigning counties responsibility for primary care planning
and monitoring; it also changes the legal status of hospitals to
autonomous entities operating under private sector law, allowing for
public-private partnerships (PPPs) and potential future privatization of
healthcare facilities. It is expected that most future investment in the
hospital network will be carried out with private resources. The law
establishes a new licensing system for health professionals and provider
institutions.n Human resource development needsIn the first phase of
reform, Estonia has taken steps to address surplus doctor and specialist
numbers and nursing shortages, to modernize the medical curriculum, and to
develop health management training and public health specialist training.
However, the planned optimization of the hospitals network and development
of long term care services, creates a need for greater depth of management
skills, and for retraining and redistribution of medical personnel.
Development of analytical and administrative skills among health policy
personnel and the public health administration is also a priority.      n
Efficient and equitable public health priorities and health
policiesEstonia has already taken steps to shift the allocation of health
resources to high priority areas (public health, primary care, essential
drugs) and to allocate funds in an equitable way between regions (based on
population). National health accounts have been produced and are
regularly updated to monitor aggregate use of resources. However, with
more sophisticated analysis of provider efficiency and the
cost-effectiveness of interventions, much greater progress could be made
-2 -



to obtain better value from health sector resources. There is a need to
enhance Estonia's capacity to apply economic and social analysis to the
setting of public health priorities, health expenditure priorities, and
choice of sources of revenue. It is desirable for this analysis to focus
on equity as well as efficiency, in view of the fact that ill health is
more prevalent among the poor and disadvantaged and that disadvantaged
groups tend not to participate equally in general trends towards improved
healthy life expectancy.n Priority public health problems Life expectancy
began to improve in Estonia in 1994, following some seven years of
deterioration, but at 70.1 years remains below the EU average. Infant
mortality has fallen steadily to 9.3 per 1000 in 1998. As in the EU
countries, non-communicable diseases are the principle causes of premature
morbidity and mortality. Diseases of the circulatory system and cancers
are the first and second highest causes of death. Tobacco consumption is
higher than EU average. Cancer survival in Estonia lags behind the EU.
The incidence of alcohol-related illnesses (liver cirrhosis and alcoholic
psychosis) appears to have risen in the past decade. As in the other
Baltic states and Russia, Estonia has high prevalence of TB and
significant rates of multi-drug-resistant TB. DOTS has been implemented.
Current work by WHO on development of a "DOTS-plus" program for countries
with multi-drug resistant TB is highly relevant to Estonia. In the past
year, there has been a very sharp increase in reported cases of HIV/AIDS,
concentrated in north east Estonia, and associated with IV drug use,
though the national incidence remains lower than in neighboring countries.
n EU Accession Preparation for EU accession is a high priority for the
Government of Estonia (GOE). Direct implications of the Acquis
Communitaire for health policy and the health sector are concentrated upon
regulatory issues. Indirect effects on the health sector are also
important, adding to the impetus for modernization and improvement of
quality while also limiting the GOE's capacity to allocate additional
resources to the social sectors.Government Strategy:Estonia began planning
health reform at the end of the 1980's in anticipation of moves to greater
autonomy, and in response to the major problems in its health system,
typical of the former USSR. The major issues at that time were:n
Excessive hospital capacity and numbers of specialists;n Weak and
underdeveloped primary health care;f Declining health status (in
particular, increases in injuries, violence and cardiovascular disease in
men aged 20-50) and re-emergence of some infectious diseases, notably
tuberculosis;n Lack of consideration of the costs of care. Reform
encompassed the following major measures: n establishing a social
insurance system for financing health care (in 1992) This system has
proved to be stable and sustainable. It provides relatively comprehensive
coverage for most of the population. An estimated 9 percent of people who
are uninsured are covered by safety net provision of emergency care.
Unlike most transition countries, Estonia achieves effective risk pooling
for over 80 percent of health expenditure through social health insurance
and budget-financed health programs, with out-of-pocket payments by
patients accounting for 11-12w of expenditure.    Patient fees are regulated
to ensure affordable access for higher users of care. Total health
expenditure has been stable at around 6t of GDP since 1994.    n developing
primary health care / family medicine Family medicine was recognized as a
specialty in 1993 and retraining of primary care doctors as family
practitioners has been going on for the past 10 years. Financing for
primary care shifted to a modified capitation system in 1998, conducive to
patient choice, private practice, and clearer family doctor responsibility
-3 -



for patients. In most of the country, the new system has been fully
implemented, but Tallinn has been more conservative about this change, due
to the presence of large polyclinics and high specialist numbers.fn
strengthening public health servicesPublic health services have been
modernized and enhanced through establishment of a National Center for
Health Promotion and Education, an earmarked budget for health promotion
initiatives within the Central Sickness Fund (EHIF), establishment of a
public health department and public health specialization within the Tartu
University medical school, pre-EU-accession development of health
protection and occupational health, and a expanded range of
budget-financed national programs for health promotion and disease
prevention, including TB prevention and HIV/AIDS and STD prevention. n
pharmaceuticals reformsRegulation for safety, efficacy and quality has
been introduced in line with EU provisions, and an Agency for Medicines
established to administer the regulations. Manufacturing, wholesale and
retail distribution have been privatized. The Estonia Health Insurance
Fund (EHIF) operates a reimbursement scheme for prescription drugs which
is relatively liberal, and has led to unsustainably high trend real growth
in this area of expenditure. Patient copayments are modest, and are
reduced for disabled and retired people, and drugs for serious illnesses.
In hospital drugs are free to patients. The rapid growth in
pharmaceutical expenditure is being tackled by introduction of a reference
pricing system by the EHIF.    n decentralization, followed by some
recentralizationDecentralization occurred in the health sector, as part of
a wider trend of reaction to the centralization of decision-making in the
former USSR. Ownership of hospitals and health facilities was largely
decentralized to municipalities, and 17 sickness funds were established at
county or city level. After some years of experience with this
arrangement, awareness grew of the problems of higher transaction costs,
lack of economies of scale, and limited pooling of health insurance risks
with this degree of decentralization in the health system. Legislation
was enacted in 2000 to recentralize financing responsibility under the
Central Sickness Fund. A new Healthcare Organization Law currently
proceeding through Parliament recentralizes health care planning.fn reform
of social careSocial care reform is shifting provision from a low-quality,
stigmatized, institutional system to an open care system, with greater use
of home care, support to families, and greater emphasis on social
adaptation and community integration of disabled people, with
encouragement of self-reliance. Social care is a local government
responsibility. Long term nursing care remains a health sector
responsibility. There has been some increase in private provision of
nursing homes and home care, but this sub-sector has not undergone
systematic reform.The first World Bank Estonia Health Project supported
reform of health insurance, primary health care, public health and human
resource development in the implementation phase from 1995 - 2000, with an
IBRD loan of US$18 million.The Government of Estonia has approved a
15-year program - Estonia Health Project 2015 - for sustainable
development of the health sector. This as a continuation of the program
of reform implemented with the support of the first Estonia Health
Project. In planning the program for the next 15 years, the economic
memorandum composed by the Government of Estonia and the Bank of Estonia
to the IMF for 2000-2001 was taken into consideration. The memorandum
noted the need for reform in the health care sector and for the
restructuring and investment program for hospital network with the aim of
increasing effectiveness and decreasing costs. There are four parts of
-4 -



the Estonia Health Project 2015, summarized below. The Government has
prepared indicative cost estimates for the Project, and requested the
support of the World Bank for implementation of the project through a
second IBRD loan for the health sector.(a) Restructuring of the Health
Care SystemThe first Estonia Health Project focused on development and
reorganization of primary health care, which accounts for approximately
20t of health insurance expenditure.   The 2015 Project has a major focus
on the logical next phase of reform - the restructuring of hospital and
specialized care, which accounts for around 70t of health insurance
expenditure. The first Health Project supported preparation of the
Estonia Hospitals Masterplan, now approved by the Estonian Government. The
Masterplan envisages consolidation of specialised health care resulting in
increased quality of services as well as increased efficiency. According
to the Masterplan it would be optimal to have 13 acute care hospitals
organized in four health care regions. In each region there will be one
central or regional hospital (more in Tallinn). Alongside consolidation of
the acute hospital network, the Masterplan envisages an expansion of
long-term nursing care. Acute hospitals currently function as
inappropriate and inefficient providers of long term care and social
care. Consolidation will create a need to develop alternative more
appropriate long term care and nursing care services. The Masterplan
envisages that the profile of many existing hospitals will be altered from
acute, curative services to nursing and long-term care beds. However, the
Bank sees a need to ensure that home-based alternatives to institutional
long-term care are also developed. The GOE does not expect the Masterplan
to cause drastic reduction of jobs. Instead, there would be a need for
specialized clinical training and retraining among doctors and middle
level health care personnel, and redistribution of staff. The indicative
estimate of the costs of the 15-year investment plan for consolidation of
the hospital network is US$250 million. The Estonian Government aims make
the project credible and attractive for private investors, and seeks the
participation of the World Bank as a critical ingredient in achieving the
necessary credibility. Alongside plans for investment, the Government
wishes to develop the kind of regulatory and financial policies for the
hospital sector which would foster public-private partnerships (PPPs). In
the first years of the program the Government plans to address the
following policy issues in co-operation with the World Bank: the inclusion
of capital costs to the price-list of health care services; finding
solutions to the problems that might arise from changes in the ownership
of the hospitals; financial analysis of investments; the sustainability of
private initiative and competition in the market after the implementation
of the hospital masterplan. (b) Human Resource DevelopmentThe first phase
of reform commenced the training of family medicine specialists, public
health specialists (as part of the Biomedicum established under the first
Estonia health project), and graduate training programs for nurses and
social workers. The 2015 Project will continue this training to meet the
need for larger numbers of trained personnel in these fields. In
addition, a masters program in health management is planned to be
established, to increase the depth of management skills to meet the
increased demands of restructuring and raising quality standards. The
2015 Project also envisages establishment of a Health Care Quality Center
to coordinate a quality strategy, develop standards, and coordinate
training in quality management. (d) Project Management The management and
control of the Estonian Health Project is carried out under the steering
committee of the project. The head of it is the Minister of Social
- 5-



Affairs. Representatives of Tartu University and the EHIF are also on the
committee. Working groups have been established for the components and
sub-components of the project, with participation of hospital managers as
well as MSA, Ministry of Finance, EHIF and private sector experts. Public
health programsAlthough specific public health programs do not fall under
the ambit of the 2015 Project, the Government of Estonia has planned
further reforms in public health administration and programs. In the 2001
Budget, it recognized the need for very prompt intensive intervention to
prevent the spread of HIV/AIDS following the rapid increase in reported
cases in north east Estonia, and increased funding of the prevention
program by 25%-. Estonia is also participating in the Baltic Sea Action
Plan on HIV/AIDS.   2. Objectives(a) i. to achieve a step increase in
hospital efficiency through implementing a comprehensive hospital capacity
optimization plan;(a) ii. to develop policy and a regulatory framework
which support sustainable and efficient financing of investment in health
care facilities, fostering public- private partnerships where these can
add value; (b) to increase and assure quality in the health care delivery
system through alignment of training, standards, and quality and
performance management arrangements with international best practice; (c)
to improve the efficiency and equity of public health strategy and health
resource allocation.
2. Objectives
(a) i. to achieve a step increase in hospital efficiency through
implementing a comprehensive hospital capacity optimization plan;(a) ii.
to develop policy and a regulatory framework which support sustainable and
efficient financing of investment in health care facilities, fostering
public- private partnerships where these can add value; (b) to increase
and assure quality in the health care delivery system through alignment of
training, standards, and quality and performance management arrangements
with international best practice; (c) to improve the efficiency and equity
of public health strategy and health resource allocation.
3. Rationale for Bank's Involvement
n The Bank's experience in similar projects in other Bank client countries
(e.g., Georgia, Moldova) and the Bank Team's experience in hospital
organizational reform and PPPs in OECD countries would benefit the project
by bringing to it the lessons learned elsewhere and facilitating the
transfer of knowledge, including the possibility of engaging experts from
other countries and/or organizing study tours., n The Bank can assist in
strengthening economic and financial analyses in hospital management, and
in creating increased pressure to make "tough decisions" where necessary
based on economic and social analysis. n The Bank can help to bring
financial partnerships with other development banks and private sector to
the hospital rationalization program. The advice given to the Bank team
by IFC, EBRD and NDB is that these agencies are reluctant to invest in the
hospital sector in this region because of difficulty encountered with
initial attempts at PPPs. These agencies articulate a need for
partnership with the Bank to ensure that appropriate development of health
policy, regulatory and financing arrangements are in place before this
type of investment is undertaken, since they do not have this type of
capacity in-house. These agencies view the general institutional and
financial environment in Estonia as favorable for this type of initiative
and are therefore interested to re-engage with the hospital sector in
partnership with the Bank in this proposed Project, in part because of the
- 6 -



potential for this Project to serve as a pilot or demonstration site for
other countries in the region.fn The Bank's expertise in project impact
evaluation can strengthen Estonia's efforts to learn as much as possible
from the innovative aspects of the hospital reform in order to fine-tune
the project design during implementation and thereby achieve the most
health benefit for the population over the long run.
4. Description
A. Optimization of hospital and specialist health care services
This component will support some of the investment needed in hospital
consolidation and upgrading during the first four to five year phase of
implementation of the hospitals Masterplan. The intention is to develop a
model for preparation of the business case and plans for a major hospital
investment project and to pilot a public-private partnership for finance
and development of one major investment in hospital consolidation and
upgrading. This component is expected to account for the largest share of
project costs. In parallel, other investments in hospital consolidation
under the Masterplan will begin, financed from other sources.
Al. Optimization of the North Estonia Regional Hospital Network
A group of state-owned hospitals in Tallinn is forming a single legal
entity, which will provide tertiary level health services to the northern
half of Estonia and some national services. Plans are being developed to
consolidate the hospital from a number of existing hospital sites,
predominantly onto one site, and to reorganize services in a more
efficient way. The network includes a specialist hospital for
tuberculosis and lung diseases, and specific attention will be paid to the
appropriate future for TB hospitals in view of the relatively high
prevalence of multi-drug resistant TB in Estonia. Planning and evaluation
of the consolidation will take place during the project preparation
period. The proposed loan would support the consolidation project. The
Project will seek to engage private partners and other investment banks in
this component of the project during the preparation period.
A2. Preparation for optimization of health services in Ida Virumaa
Development and agreement of plans for optimizing hospital and specialist
services in this north-eastern part of Estonia are at an earlier stage.
In this area, the County faces the challenge of coordinating planning and
decision making among a number of municipalities which own the hospitals,
within a context where there are significant socio-economic problems and
associated health needs among the local population.
A3. Implementation and communication of the framework for hospital and
specialist health care
During the project preparation period, the legal and regulatory framework
for hospital and specialist care is being developed, with the support of a
grant from the Japanese government. It is intended that this framework
will apply to all of the public hospital network and all of the hospital
investment projects under the Masterplan, whatever the financing source.
This framework will be implemented during the project period and the
project may support some technical assistance for implementation in areas
such as development of quality standards, development of performance
monitoring, development of capacity for investment planning, appraisal and
financing in the health system. Another critical aspect of implementation
of the plans for hospital optimization in public information and
communication. Communication and consultation will be undertaken with
health professionals and health sector employees, with communities
- 7-



surrounding hospitals involved in the Project and with the general public.
B. Development of long term nursing care services
Alongside reduction in the capacity of acute hospitals, it will be
important to increase capacity for long-term care and nursing care, to
support patients who are discharged earlier from hospital and to provide a
more appropriate form of care for long term patients currently treated in
hospitals. The Project will seek to support a pilot in one area of
development of a more appropriate form of long term care and nursing
care. This is likely to involve re-profiling an existing hospital for
long term care and development of home care services.
C. Public health strategy and capacity building
EU accession gives greater urgency to the need for Estonia to strengthen
and modernize its public health administration and tackle some high
priority public health problems which are of particular concern to the
international community. During the project preparation period, a study
will be carried out with the support of the Japanese government of equity
in health status and in access to health care in Estonia, in coordination
with an EU iniative to tackle health inequalities, in which Estonia is
participating. The Project itself may support development of capacity to
contribute to EU-oriented public health analysis and strategies. It may
also support specific initiatives in areas of high priority public health
need identified by the study and the MSA's strategy. This may include
support for measures to address the epidemic of HIV/AIDS which has emerged
in some parts of Estonia in the past year. The GOE is seeking the support
of bilateral and multilateral donors to enhance its public health strategy
and address urgent public health problems.
D. Project Management
5. Financing
Total ( US$m)
Total Project Cost 40
6. Implementation
6.1 Implementation responsibilities and institutional arrangementsOverall
responsibility and authority for the project will reside within the
Ministry of Social Affairs (MSA).    A Steering Committee, headed by the
Minister of Social Affairs, has been established to oversee management of
the Project. Other members of the Committee will include professional
staff in the Ministry, as well as representatives from the Central
Sickness Fund and Tartu University. Working Groups have been established
to oversee individual components and sub-components of the Project.     The
new management team of the Tallinn Regional Hospital Network will play a
vital role in leading the decision making process, and guiding the
technical assistance.A fully functioning and fully staffed Project
Coordination Unit (PCU), funded by the Government, remains in place from
the first Estonia Health Project. This unit is working closely with the
Working Groups and the Steering Committee to help to manage preparation
activities. They are managing the PHRD Grant, preparing bidding
documents, terms of references and working closely with the Ministry of
Social Affairs to coordinate preparation activitiesIn addition, the PCU
will be responsible for: (a) the management and coordination of all the
project activities and preparation of regular implementation reports; (b)
maintaining all financial and procurement records, including a database of
costs of civil works, goods and services; (c) prior review and project
oversight responsibilities such as monitoring the content and
- 8 -



implementation of sub-project activities by the provinces; and (d) project
evaluation with inputs from the provinces.    Implementation will be guided
by a Project Implementation Plan. 6.2 Project supervision, monitoring and
evaluationThe PCU will work closely with the Working Groups to monitor
overall project implementation including progress and effectiveness of
technical assistance, components and sub-components, based on the agreed
key performance indicators. Monthly meetings will be held with the
Steering Committee for periodic monitoring and evaluation of progress.
The Bank will carry out regular supervision visits (usually twice a year),
a review of progress reports, and day-to-day monitoring of implementation
of progress and performance. A mid-term review will be conducted jointly
by the government and the Bank by March 2004.    A detailed plan for
evaluation will be finalized during appraisal.6.3 ProcurementProcurement
activities will be carried out by the PCU in consultation with Ministry.
The Project Implementation Plan for the project will include, in addition
to the procurement procedures, the Standard Bidding Documents to be used
in each case, as well as a request for quotations and contracts or
purchase orders to be awarded on the basis of price quotations. Where no
relevant standard contract exists, other standard forms acceptable to the
Bank will be used. Annex 6 summarizes procurement procedures and
arrangements.6.4 Financial management and disbursementTraditional
disbursement procedures, operating on a reimbursement basis in accordance
with the Bank's Disbursement Handbook, will be followed in support of Bank
claims. IBRD funds will flow from Washington to the Ministry of Finance on
a basis/frequency to be determined against incurred and pre-financed
expenditures, with direct payments and special commitments being available
as needed. Independent auditors will be appointed on terms of reference
acceptable to the Bank.
7. Sustainability
The following factors are critical for sustainability of project
benefits:(i)   Stable or growing public health revenue;(ii)   Stability in
health sector strategy and sector management;(iii) Government's
willingness and capacity to infuse health system with increased incentives
for efficiency, quality and affordable access;(iv) Private sector's
willingness and capacity to invest in and manage health servicesWhile it
is not possible to avoid political change during the life of the Project,
the participatory approach to preparation, widespread public communication
and public debate about the Hospitals Masterplan, and the participation of
management of affected agencies in project preparation and implementation,
helps to increase the prospect of stable commitment to the policies
supported by the Project. Involvement of the CSF and of the Ministry of
Finance in project preparation is also helpful to ensure financial realism
and sustainability of the strategies adopted.
8. Lessons learned from past operations in the country/sector
The first Estonia Health Project to support the Government health reforms
became effective in 1995 and closed on June 30, 2000. The project
financing included US$18 million IBRD loan, US$14 million Government
contribution and it mobilized US $4.5 million of other bi- and
multilateral donor financing. The project supported the launch of primary
health care reform, capacity building of the Ministry of Social Affairs,
public health programs, and training and organizational development of
central sickness fund. The implementation of the project has been
satisfactory and it achieved its developmental objectives.     Work done
-9-



under the first health project has set the ground for the next stage of
the health sector development agenda that is the basis of the proposed
second Estonia Health Sector Development Project. Although the first
health project was assessed to be complex and ambitious, project
components proved to be a binding common goal for academia, policy makers,
and the community at large, resulting in successful implementation.
Stakeholder participation and consultation has been recognized by the Bank
and has rightly become a mandatory part of the project preparation
process.The Bank added significant value in providing impartial technical
know-how to implementclient-driven activities in the first project. The
Bank proved to be a valuable partner to the client by providing knowledge
of international practice and standards as well as ensuring that sound
technical checks and cost controls were put in place. While the client
clearly is capable of implementing a project, Estonian counterparts
perceived from their experience with the first Project that working in
partnership with international experts, who bring knowledge and an
impartial assessment of a project, provides a system for checks and
balances that prevent political, local, or personal biases from occurring,
and thus achieves the optimum technical and economical solution for the
benefit of the community at large.Monitoring indicators were critical to
maintaining focus on development objectives. Attention given early during
supervision missions to systematically assess progress in achievement of
defined project performance indicators enhanced project performance and
helped to steadily steer the project towards its goals, or amend them as
needed. The relevance and appropriateness of monitoring indicators is
crucial for maintaining credibility of the supervision process.Project
start-up needs intensive and immediate attention through Bank Supervision.
Projectsoften do not receive start-up supports supervision support
immediately after loan approval, though this is the most critical point
for the client and stakeholders as they transition from planning design
and theory to results on the ground. The first Health Project, however,
did suffer some neglect during startup which resulted in initial delays
and lack of coordination with stakeholders. Fortunately, significant
project management technical assistance provided some support to impart
the needed management and administration knowledge and skills for project
implementation. During these times of budget constraints, it is critical
that appropriate financial commitments be forthcoming.
9. Program of Targeted Intervention (PTI)     N
10. Environment Aspects (including any public consultation)
Issues        The only potential issues involve the
rehabilitation of some hospitals, which potentially could be undertaken as
part of the rationalization program. Plans for the rehabilitation of such
hospitals would include aspects that would ensure that the environment
would not be negatively affected by the civil works supported under the
Project. No adverse environmental effects are anticipated because
rehabilitation is expected to occur on existing hospital sites, within
existing structures. Additional concerns might arise from the possible
decommissioning of certain hospitals, requiring environmental analysis and
audits; the incorporation of environmental management issues in
institutional planning and management; an upgrading of existing
institutional capacity to handle collection, disposal and management of
hospital waste. The Project will follow accepted Bank procedures in these
matters. All hospital and health center activities will incorporate
- 10 -



appropriate and safe disposal of wastes. An environmental action plan
will be developed and agreed upon with the Environment Unit.
11. Contact Point:
Task Manager
Loraine Hawkins
The World Bank
1818 H Street, NW
Washington D.C. 20433
Telephone: 202-458-7905
Fax: 202-477-0711
12. For information on other project related documents contact:
The InfoShop
The World Bank
1818 H Street, NW
Washington, D.C. 20433
Telephone: (202) 458-5454
Fax:        (202) 522-1500
Web: http:// www.worldbank.org/infoshop
Note: This is information on an evolving project. Certain components may
not be necessarily included in the final project.
This PID was processed by the InfoShop during the week ending March 23, 2001.
- 11 -