Docom ofThe World Bank

FOR FMCIAL USE ONLY \

Cv / ) /3<2 -0¾Report No. 5876-CHA

STAFF APPRAISAL REPORT

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

May 27, 1986

Population, Health and Nutrition Department

This document has a restrictd distribution and may be used by recipients only in the performanceof their otcisl duties. I contents may not otherwise be disclosed without World Dank authoriztion.

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CURRENCY KOUIVALENTS

Currency Unit - Renuinbi (MMB)

I Yuan (Y) - 100Fen - US$0.31Y3.20 US$1.00

(as of April, 1986)

FISCAL YEAR

January 1 - December 31

ABREVIATIONS AND ACRORYKS

CNTIC - China National Technical Import CorporationDPT - Diphtheria-Pertussis-Tetanus Associated VaccineEPS - Epidemic Prevention StationsIBRD - International Bank for Reconstruction and DevelopmentICB - International Competitive BiddingIDA - International Development AssociationNCH - Maternal and Child HealthNOPE - Ministry of Public WealthNCPM - National Center for Preventive MedicineOPV - Oral Poliomyelitis Vaccine (Live)RIME - Rural Health and Medical Education (Project)UNICEF - United Nations Children's FundIBLO - World Bank Loan Office1R0 - World Health Organization

FOR OFFICIAL USE ONLY

CHINA,

RRAL hMALTS AND PREVENTIVE MNDICINE PROJECT

Loan/Credit and Project Summiry

Borrovexr :People's Republic of Ckains

Aunt : Bank Loan : US$15.0 million equivalentIDA Credit: SDR57.2 million ($65 million equivalent)

Terus : Bank Loan : 20 years including 5 years of grace atstandard variable interest rate

ImA Credit: Standard

Proiect : The objectives of the proposed project are to strengthenand expand the Ministry of Public HealthVs (MOPE)continued efforts to improve rural health care, toimprove the efficiency, coverage and quality of thenational immunization program for children, to initiateimproved drug quality control and to develop newcoumuoicable and chronic disease preventive strategiesand health care financing systems in rural areas. Theproject consists of four main components: (a) PuralUaiLk - expansion and qualitative improvement (throughconstruction, equipment, technical assistance. personnelrecruitment and training) of preventive and curativehealth services in the poorer rural counties of fiveprovinces (Gansu, Hubei, Jilin, Sichuan and Ningzia Rui)and strengthening of the disease monitoring and controlactivities and immnization delivery and management ofthe epidemic prevention stations in these and threeadditional provinces (Heilongjiang, Jiangxi andShandong); (b) Vaccine Production - iwprovement in thecoverage and cost effectiveness of the nationaliinwnization program against the main childhood diseasesthrough construction and rehabilitation of threenational centers for the production of essentialvaccines meeting international quality standards; (c)Dma Oualitv Control - improvement of the qualitycontrol of drugs used in China through construction,equipment, training, fellowships sud technicalassistance; (d) Ouerational Research - undertakingresearch (i) to strengthen the capacity of the NationalCenter for Preventive Medicine (NCPM) for diseasesurveillance and disease prevention strategies and (ii)to test new approaches to rural health insurance.

Thk document h a restict ditibution and may be used by repients only in the perfonnmaceof their ofic dutieL Its contents may noL otherwise be discksed whout World Bank authoriin.

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Bzperience with the Rural Health and Nedical Educationproject, and with preparation of the proposed project,indicates that NMPI has the management capacity andcoumituent needed for successful implemeta tion of therural health component and, with the assistance ofezperienced international vaccine firos, the vaccineproduction component. Consequently no *ajorimplementation risks are anticipated. Implementation ofthe operational research component, bowever, does carryinherent risk in that it may take time for NCPN, a newlycreated amalgmation of previously independent researchinstitutes, to shift from laboratory to policy-focusedresearch. To miniize this risk NCP's program will bemonitored closely by NOPE and the Bank Group. In thedrug quality control component, there is a risk that theexpected impact may be compromised by difficulties incoordinating tbe activities of MOPE and the StatePharmaceutical Administration. To min-imie the riskthat investments in quality control would not beeffectively utilized because industrial capabilitiescould not keep pace with rapidly improving qualitymeasurement standards, the project will finance only thefirst phase of the MOPE program to raise drug qualitytesting capacity.

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Estimated Costs Loa Fri2gn ~ Total-- is C88(US$ million) -

A. Strengthening of Rural Health 53.3 22.3 75.6

B. Vrccine Production 11.2 29.4 40.6

C. Drug Quality Control 7.6 4.2 11.8

D. Operational Researcha) Preventive Medicine 6.1 1.9 8.0b) Rural Realth Insurance .2 .5 .7

Subtotal for Operational 6.3 2.4 8.7Research

Total l Jse Co-ts 78.4 58.3 136.7

Physical Contingencies 8.5 10.0 18.5Price Contingencies 11.8 10.4 22.2

Total Proiect Costs 11 98.7 78.7 177.4

Finaucing-Plan:Local Foreign Total

IBRD 0.0 15.0 15.0IDA 1.3 63.7 65.0Government 97.4 0.0 97.4

Total 98.7 78.7 177.4

EstimatedDisbursements: Bank Groun FY 1987 1988 1989 1990 1991 1992

- Annual 8.9 15.2 21.5 18.4 12.0 4.0- Cumulative 8.9 24.1 45.6 64.0 76.0 80.0-

Rate of Return: n.a.

l/ Project-financed goods are exempt from import duties and taxes.

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OMRAL UE&LTH D PRA VENTIVE MEDICINE

Table ogf ContenMt

Page 11d,

Loan/Credit and Project Su ary .................... ....... .... iTable of Contents .................... . . .. ..... ivBasic Data .................................................... viiDefinitions ......... *so ...............s.............. ... 00. 0 iii

I. THE HEAITR SECTOR . .......................s........e..... 1

A. Introductiono.................... ...................... 1B. Health and Population Status .......... o....o..o...... 1C. Health Sector Services .......................... , 2D. Health Sector Policies ........ ..... ... .... ... 3E. Health Sector Financeo ........................ . 5F. Sectoral Issues ...... ....................** 5G. Bank Role and Assistance Strategy...................... 6

II. THE PROJECT ......................... oo .................. 7

A. Project Objectives and Scope ........................... 7B. Project Components ............................. o..... 8. 8

1II. PROJECT COSTS AND FIXANCING .. ...... ...... .... .... . .. ... . . 12

A. Cost Estimates ....... o................ o........................ ...... 12B. Financing Plan ...................... ...... ...... .. 14C. Procuremet ..... ....... ....... ............... ......... 14D. Disbursements ................... ...... .... 15E. Accounts and Audits .......... o.......................... 16

This report is based on the findings of an appraisal mission that visitedChina in July 1985: Dr. A. Prost (mission leader), Messrs. D. Pearce,N. Prescott and Ms. C. Lee (PHU); Mr. J. van der Gaag (DRD), Dr. J. Krister,Dr. K. Young, and Mr. M. el Fekih (consultants). Mr. F. Orivel (consultant)also assisted in project economic analysis. Post appraisal work on theproject was also done by Mr. R. BUmgarner and Ns. C. Fogle (PEU).

Table of ConteMts(Continued)

Pate No.

IV. PROJECT ORGMAIZATION, MANRGEMENT AND INPLUAEHTATION ..... 17

A. Project Organization ................................ 17B. Project Management ...... e..660-..*-**...*.......... 18

V. PROJECT BENEFITS AND RISKS ..... ......................... 19

A. Project Benefits ....... ............................. 19B. Project Risks ...................................... 20

VI. AGREEK RTSR'ECED AND RECOMEND&TIOIS .................. 21

ANNEXES:

1. Documents Available in The Project File .................. 23

2. Principal Causes of Death, Urban and Rural Areas, 1980 ... 25

3. Immunization Coverage ..... ....... .. a ...... ............. 26

- Table 1: Percentage of Counties in China withSpecified Morbidity Levels, Measles,Faliomyelitis and Pertussis, 1983 ............. 26

- Table 2: Results of EPI Cluster Surveys onImmunization Status of Children, 1984 ......... 27

- Table 3: Percentage of Under-Reportizg of Measles,Pertuseis, and Poliomyelitis, fromSurveillance Points ...... .................... 28

4. Table A.: Rural Health Component - Statistics ofSummary Participating Provinces (1984) .... .............. 29

Table B.: Construction in The Rural Health Component .... 30

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Table of Contents(Continued)

Pate No

5. Table 1 : Sichuan Province General Summary, 1984 ..... 31Table 2 : Gansu Province General Susmmry, 1984 ... ...... 32Table 3 : Eubei Province General Su_mary, 1984 .......... 33Table 4 : Jilin Province General Sumary, 1984 .......... 34

6. Description Prepared by MOPE for Rural Eealth InsuranceEzperi-ent ................... ............... e........... 35

7. Table 1 : Summary Accounts by Year ....... ......... e 41Table 2 : Project Components by Year ............. e... 42Table 3 : Sumnary Account by Project Component .. .... 43

8. Project Implementation Schedule ................ 44

CHART e.e.e. .......................... eeee 45MAP - IBD 19288R

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CEINA

RURAL XEALTR AND PREVENTIVE MEDICINE PROJECT

Basic Data

Total area (million km2) .........-....... ...... 9.6Total population (mid-1983 in millions) ..................... 1,019Estimated annual rate of natural increase (Z) ...... 1.2Projected population for year 2000 (in millions) 1,242Population density per km2 (mid-1983) ........................ 106Population density per km2 of agricultural land (mid-1983) 261Per capita GNP (1983) (in US$) .............. 300Crude birth rate (1983) .*..O ....... 19Crude death rate (1983) .............. o............... ....... 7Life expectancy at birth (1983) ............................. 67Infant mortality rate (1983) .. .............. ... ... .0 38Child death rate (1983) ....2.................... ........ 2Urban population as percentageof total population (1983) ..... .. ........ 21

Population per doctor of western medicine (1980) ........... 1,740Population per nursing person (1980) .............. }..... 1,710Nutrition (1982)Calorie intake as percentage of requirements .......-.... 120Daily calorie supply per capita (total - 1982) ............ 2,565

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CHINA

RURAL EEALTH AND PREVENTIVE MEDICINE PROJECT

Definitions

Child Death Rate The number of deaths among children 1-4 yearsof age per 1,000 children iu the same agegroup in a given year.

Crude Birth Rate The number of live births per year per 1,000people in a given year.

Crude Death Rate The number of deaths per year per 1,000 peoplein a given year.

Incidence Rate . The number of persons contracting a disease ina population during a specified period oftime. Usually expressed as the number ofcases per 1,000 persons.

Infant Mortality Rate The number of deaths of infants under 1 yearof age in a given year per 1,000 live birthsduring the same year.

Life Expectancy . The number of years a newborn child would liveif subject to the mortality risks prevailingfor the cross-section of population at time ofbirth.

Maternal Mortality Rate The number of maternal deaths per 100,000 livebirths in a given year attributable topregnancy and childbearing complications.

Morbidity . The frequency of disease and illness in apopulation.

Rate of Natural Increase The difference between crude birth and crudedeath rates; usually expressed as a percentageof the total population in a given year.

Total Fertility Rate The average number of children that would bebo-n alive to a woman during her lifetime ifsbe were to pass through her childbearingyears conforming to the age-specific fertilityrates of a given year; serves as an estimateof average number of children per family.

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

I. THE HEALTH SECTOR

A. Introduction

1.01 Since the early 1950s, China has made remarkable progress inimproving health and nutrition. Many factors have contributed to thisachievement, including greater and more equitable food distribution,improved water supply and sanitation, a higher literacy rate and advances ineducation. The health system's strong emphasis on prevention, communitymobilization and financing, and paramedical field workers (barefoot doctors)have also contributed greatly to progress. However, China's health caresystem is entering a period of transition. The changing epidemiologicalprofile and emerging health problems of the 1980s and beyond willincreasingly mean that curative as well as preventive health care needs mustbe adequately and economically addressed. A detailed assessment of China'sachievement and prospects in the health sector was undertaken by a Bankmission in October 1982. The mission's report is entitled The Health Sectorin China, A World Bank Country Study, 1984.

B. Realth and Population Status

1.02 Health conditions in China have improved dramatically since the1950s and are now far better than in other lov-income countries. Infantmortality has fallen from close to 200 per 1,000 live births in the early1950s to below 40 per thousand today. At the same time, life expectancy atbirth rose by 70Z from about 40 years in the early 1950s to 67 years in1983. The extent and rapidity of these mortality declines are remarkableand probably unprecedented for a country of China's relatively low incomelevel. Current mortality rates in China compare very favorably to theaverage infant mortality rate of more than 100 per thousand and average lifeexpectancy of about 50 years in other low-income countries. However, thesenational averages conceal vide variations within the country. Lifeexpectancy appears to be higher in the more heavily populated and advancednortheastern provinces and coastal areas than in inland and border regionsand is also higher in urban than in rural areas.

1.03 Significant declines have been achieved in fertility. The totalfertility rate remained high at about 6.5 from the mid-1950s through thelate 1960s, despite a temporary reduction associated with the 1959-62famine. Following the introduction of strong fertility limitation policiesin th early 1970s. the total fertility rate fell sharply to only 2.3 in1979. Fertility has since turned upwards slightly, probably as a short-lived result of the relaxation in policy regarding age at first marriage andthe consequently increased rate of family formation (marriage followed byfirst births). Overall, according to Bank estimates, the average annualpopulation grovth rate has decreased from 2.7% i.- the period 1965-73 to 1.5Zbetween 1973 and 1983 and is projected to fall further to 1.2% between 1980and 2000.

1.04 Many once important communicable diseases such as smallpox,cholera, plague and Kalaazar have been virtually eradizated. Diphtheria andpoliomyelitis have been almost eliiminated and the incidence of otherinfectious and parasitic diseases nas been reduced. However, continuingdeficiencies in hygiene and human waste treatment cause the persistence ofdiseases such as hepatitis and dysentery. Malaria and schistosomiasisremain problems and their control is a public health priority.Tuberculosis, the main cause of death in 1949, still affects nearly onepercent of the pcpulation and remains a major health haza-4. Chronicbronchitis, associated with smoking and severe air pollution, is reported in3.5% of the population. In China, as in the industrialized countries,cancer, cardiovascular diseases and accidents now account for most deaths(see Annex 2). Due to inevitable aging of the population, morbidity andmortality associated with chronic diseases are likely to become even moreprevalent. For example, the number of cases of hypertension can be expectedto more than double between 1980 and 2010.

C. Health Sector Services

1.05 At the apex of China's rural health system are approximately 2,100counties, each of which has a county hospital, an epidemic preventionstation (EPS), a Maternal and Child Health (MCH) clinic, and a healthpersonnel training center. County facilities are funded by the Governmentthrough the province and county health bureaus which are responsible foroverall direction, technical support and supervision c. all county servicedelivery. Belov the county facilities are health centers at the townshiplevel. In 1981, some 55,000 or 90 percent of all townships had suchcenters, averaging about 14 beds, which are responsible for routine curativeand preventive services. The operation of these centers is financed bycounty subsidies (either full or partial subsidy of salaries) plus usercharges (for drugs and services). At the village level, more than 90% ofthe villages have a health station with one or more barefoot doctors. Manyvillage-level services have, in the past, been financed by cooperativehealth insurance, vhich was funded jointly by annual prepavments ofindividual members and appropriations from village welfare funds. Howeverhealth insurance coverage bas declined dramatically, from 85% of villages in1975 to 58% in 1981 and to only a negligible proportion today. This has

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resulted from the introduction of the rural production responsibility systemwhich removed the institutional and fiscal basis of cooperative insurance atvillage level.

1.06 Although the urban population comprises only 21Z of the total,urban health services are quantitatively very important. They account forabout half of total hospital beds and salaried health anpower available inthe entire health sector, and recent trends show a more rapid increase inresources for urban than for rural health care in China. The size of theurban sector reflects the high effective demand for services resulting fromthe extensive insurance coverage provided to urban' residents under theGovernment and labor health insurance schemes. State enterprises play a keyrole both in financing and in directly providing urban health services.Approximately half of urban health resources are owned by enterprises.

1.07 At the national level, the Ministry of Public Health (MOPE)supervises activities of the provincial health bureaus. MOPH has broadresponsibility for health policy, for preparation of an annual plan, forsupervision of medical and paramedical education and for coordination withrelated ministries and agencies. MOPH is directly responsible for thirteencore medical universities, for medical research, for the vaccine productioninstitutes and for the National Center for Preventive Medicine.

1.08 The licensing of new drugs and the supervision and control ofproduction, '-rketing and utilization are part of the mandate assigned toNOPH by the new Pharmaceutical Administration Law which became effectiveJuly 1, 1985. The drug manufacturers (about 1,800 in China), under thegeneral plan of production marketing of the State PharmaceuticalAdminirtration, are responsible for the quality and quantity of the drugsapproved by NOPH. Tests of pharmaceuticals are carried out by the 29provincial and municipal institutes. Biological products and vaccines areproduced in seven institutes under the control of MOPH. Each instituteproduces vaccines, blood derivatives and biological reagents, except for theKunming Institute which specializes in poliomyelitis. None of thesevaccines meet the international standards for safety and potency establishedby the World Health Organization (WHO).

1.09 The National Center for Preventive Medicine (NCPM) was created in1983 to coordinate seven research institutes. NCPN has begun to pursue itsprincipal objectives of conducting research on preventive medicine andcoordinating similar research programs throughout the country, assistingprovincial health institutions and training public health professionals forservice in the provinces, monitoring epidemic prevention and quarantineprograms, and developing the scientific basis for establishing regulations,standards and appropriate public health priorities and policies.

D. Healt1 Sector Policies

1.10 China's progress in improving the health of its people is due inpart to effective health delivery and to the policies on whi.h such delivery

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is based. During the last two decades China has emphasized preventive overcurative services more strongly than most low-income countries. China'spolicies have always reached beyond the health system itself, stressing theimportance of nutrition, water supply and sanitation, education and reducedfertility. China has also pioneered the concept of community-financedauxiliary health workers, known as barefoot doctors. Consistent withChina's priorities for poverty reduction through rural development andprovision of basic social services, a substantial volume of financialresources (over 3Z of GDP at present) has been mobilized for health fromcentral and local governments, insurance systems and community and privateexpenditures. As a result the resources available for health care,particularly in poor areas, are significantly higher than in comparableareas of most low-income countries.

1.11 The Government's current medium-term health policy objectivesinclude the following:

(a) to promote prevention by strengthening anti-epidemic activities, improving the managementof immunization campaigns, and identifyingpreventive measures against chronic diseases;

(b) to strengthen and consolidate rural healthservices by upgrading county-level healthinstitutions and major township health centersand promoting barefoot doctors to ruraldoctors after they have received sufficienttraining; and

(c) to intensify medical research and training ofhealth professionals and improve the technicaland administrative management of healthdelivery, and to improve the quality,production and distribution of pharmaceuticalsand to ensure that they are properly used.

1.12 Rural Health Poliy. The national program, designed to strengthenrural health services, is called the One-Third County Upgrading Program.The program is to be implemented in three phases, each covering about one-third of the counties and lasting five years. The program's major focus isto strengthen the four county-level health institutions - the generalhospital, the epidemic prevention center, the maternal and child healthcenter and the training center - together with the major township healthcenters. An important policy innovation is the development of selectedcenters as major township health centers designed to serve an intermediatereferral function between ordinary centers and county hospitals. Investmentin the program during 1980-1982 totaled Y 443 million, and was allocatedmainly to construction and purchase of equipment. Provincial budgetsfinanced the largest share (48X), followed by county budgets (29Z), andself-financing by beneficiary institutions (18%). In general,implementation performance has been uneven. Investment per county ranged

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from as little as Y 0.5 million in Shanxi Province up to Y 4.4 million inShanghai. There has been no detailed evaluation of the impact of theprogram to date but a preliminary HOPH assessment judged implementation tobe satisfactory in about two-thirds of the participating counties. Poorperformance was attributed principally to insufficient financing andineffective management.

E. Bealth Sector Finance

1.13 Estimates for 1981 indicate that China spent 3.3Z of GDP on healthservices, a relatively high proportion compared with other low-income coun-tries. Total expenditures were US$7.50 per capita, of which 95Z wasrecurrent expenditure. The major sources of finance for recurrentexpenditure were individual payment for drugs and services, labor insuranceschemes and go-rernment subsidies. Expenditures were mainly for drugs (58Z,of which the bulk were Western medicines), salaries (20x) and hospital care(132). Urban expenditure in 1981 was estimated at about US$16.50 per capita,more than double the national average and almost four times greater than therural average of US$4.50 per capita. The major cause of this disparity isthe uneven distribution of state subsidies, especially for insurance schemescovering urban residents.

1.14 Important features of healtb financing in China are the emphasis oncost recovery, the consequent importance of health insurance and, untilrecently, the extensive degree of insurance coverage. Estimates for 1981indicated that 43% of total expenditure was mediated through healtb insuranceschemes. About 70% of the population benefited from some type of insurancecoverage. Hovever, since the early 1980s the virtual collapse of the ruralcooperative insurance schemes associated with the dissolution of the commtnesand production brigades has essentially limited insurance coverage to theurban minority and enterprises employees. This important new development inthe health sector presents policy issue for MOPE, particularly becauseGovernment also wants to encourage hospitals to become financially self-supporting by increasing cost recovery and reducing reliance on statesubsidies. Development of affordable and efficient rural insurance coverageis high on HOPE's medium-term policy agenda so that rurallurban inequities inaccess to health care do not threaten many of the past gains.

F. Sectoral Issues

1.15 Consolidation of Past Gains. Although China's progress in reducingmorbidity and mortality has been considerable, this achievement remainsincomplete 2_ several important respects. First, improvements in healthconditions have not been uniform. Hajor differences in health status and inthe availability of health resources continue to exist between rural andurban areas, and these are reflected in wide disparities between provinces.While effective systems of health delivery have been established in urbanareas, similar improvements have not been extended to many poor rural areas.

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These improvements will inevitably require mobilization of increased centraland provincial finance for provision of rural health services in order tooffset the limitations of local fiscal self-reliance introduced by fiscaldecentralization.

1.16 Communicable Diseases. Hepatitis, dysentery and tuberculosis arenot yet under control and there are still problems with the vaccine-preventable diseases which typically account for the bulk of infant and childmortality in developing courtries. Although the national immunizationprogram has made considerable progress, its success is still constrained bythe poor quality of domestically produced vaccines, lack of refrigeration topreserve vaccine potency during transport to the field, and the infrequentscheduling of immunization sessions, which leaves unprotected children whoare either too young or too old to receive immunization when it is offered.Evidence of under-reporting of disease incidence and over-reporting ofimmunization coverage rates also points to a need to strengthen programmanagement. (See Annex 3, Table 3).

1.17 New ChallennKes. China's transition to a predominantly chronicdisease profile has been induced in part by Cbina's past success in diseasecontrol and is being reinforced by the shift to an older age-structure as aresult of the one-child family planning policy. Prevention is a much hardertask for now-communicable diseases but the development of effective yet lowcost strategies for chronic disease prevention and treatment is the majorpriority in the health sector. This will require reconsideration of the roleof the epidemic prevention stations which have been narrowly focused oninfectious disease control. It will be increasingly important for urbanhospitals to provide specialized curative services as part of a hospitalreferral system serving both rural and urban populations. With the grovingcost pressures that accompany a rise in demand for specialized hospitalservices, there will also be a need to contain costs by eliminatinginefficiencies in service provision throughout the health sector. This willrequire improved hospital management, revision of incentives that encourageexcessive service provision and avoidance of wasteful duplication of servicessuch as the development of curative facilities in maternal and child healthstations. Additional important issues in the sector include cost recoveryand financing policies for both capital and recurrent costs; development ofaffordable and efficient insurance coverage particularly in the rural areas;and organizational and regulatory reforms to improve pharmaceutical quality.

G. Bank Role and Assistance Stratefv

1.18 Bank Group lending operations in China's health sector so farcomprise one IDA credit (Cr. 1472-CH&) of US$85 million equivalent for theRural Health and Medical Education (R ME) Project approved by the ExecutiveDirectors on May 3, 1984. The project-s two major objectives are to developnew approacbes to upgrading health service in rural areas and to improve thequality of medical eduication. The REME project is now in its second fullyear of implementation, and performance to date has been fully satisfactory.In the rural health component, participating provinces have endorsed the

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methodology developed by Bank Group staff and consultants for preparingcounty plans. and other counties and provinces have begun to use themethodology. Programs aimed at improving the reporting system for diseasemonitoring and establishing standard procedures in hospital care managementhave been extended to non-participating counties. Construction under theproject has been implemented ahead of schedule and the output of trainingprograms has exceeded the target set during project appraisal. In themedical education component, the experience of project preparation andimplementation in the 13 medical universities serves as a basis to design thereform of curricula and medical education policies currently underpreparation. This reform will later be introduced in provincial and othernon-project medical colleges.

1.19 The Bank Group's strategy for the proposed project and futurelending in the health sector is to focus on policy and institutional changesneeded to address inequities in health conditions in poor rural areas,lingering problems of communicable disease and the emerging problems ofchronic disease. It will also assist China to gain access to new medicaltecbnologieis that will lead to more efficient use of resources as well assupport the Government's agenda for reform in systems for supplying andfinancing bealth services. Bank Group sector and project work in health isaimed to build the basis for a sound dialogue on key policies, meet highpriority needs and have a clear demonstration effect consistent with thesestrategies. The proposed project contributes to this objective, particularlythrough rural health investments, the upgrading of vaccines, and monitoringcf pharmaceutical production, and support for operational research into newpreventive strategies and alternative rural insurance systems.

II. THE PROJECT

2.01 The project was first presented to the Bank Group in July 1984 andsubsequently prepared by MOPH with the assistance of WHO consultants. A BankGroup mission appraised the project in July 1985. Negotiations were held inWashington in April 1986 with a delegation led by Mr. Luo Qing of theMinistry of Finance and included representatives of the State PlanningCommission and Ministry of Public Health. A map (IBRD No. 19288) of thecountry showing the project locations is attached.

A. Project Objectives and Scope

2.02 The objectives of the proposed project are to strengthen and expandMOPH's continued efforts to improve rural health care, to improve theefficiency, coverage and quality of the national immmnization program forchildren, to initiate improved drug quality control and to develop newcommunicable and chronic disease preventive strategies and health carefinancing systems in rural areas.

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2.03 The project consists of four main components: (a) Rural Health -expansion and qualitative improvement (througb construction, equipment,technical assistance, personnel recruitment and training) of preventive andcurative health services in the poorer rural counties of five provinces(Gansu, Hubei, Jilin, Sichuan and Ningxia Hui) and strengthening of thedisease monitoring and control activities and immunization delivery andmanagement of the epidemic prevention stations in these and three additionalprovinces (Heilongjiang, Jiangxi and Shandong); (b) Vaccine Production -improvement in the coverage and cost effectiveness of the nationalimmunization program against the main childhood diseases through constructionand rehabilitation of three national centers for the production of essentialvaccines meeting international quality standards; (c) Drug Quality Control -improvement of the quality control of drugs used in China throughconstruction, equipment, training, fellowships and technical assistance; (d)Operational Research - undertaking research (i) to strengthen the capacityof the National Center for Preventive Medicine for disease surveillance anddisease prevention strategies and (ii) to test new approaches to rural healthinsurance.

B. Proiect Components

Rural Health

2.04 The purpose of this component is to upgrade the coverage andquality of preventive and curative health services in about 50 poor ruralcounties in five provinces (Gansu, Sichuan, Hubei, Jilin and Ningxia Hui) andit will strengthen and reorient disease monitoring and prevention efforts inthese and three additional provinces (Heilongjiang, Jiangxi and Shandone.)(see Annex 4, Table A for summary statistics by province). Each of the eightparticipating provinces prepared an investment program based on overallproject objectives and consistent with the national One-Third County Program.The provincial investment programs and implementation plan were the basis ofproject design and project cost estimates.

2.05 To improve health care at the county level in the five provincesthe project will upgrade or construct hospitals, maternal and child healthcenters, epidemic prevention stations and training centers. Below countylevel the project will support the establishment of a network of majortownship health centers and in some cases will rehabilitate existing healthcenters. Major health centers are designed to provide basic inpatient carethat serves an intermediate referral function between ordinary healtb centersand the county hospital. Total construction is estimated at about 471,100m2, of which about 113,103 m2 is for facilities below county level (sep Annex4, Table B for details).

2.06 Equipment and vehicles, including teaching aids in the trainingcenters, will be provided to strengthen laboratories, clinical diagnosis,cold chain, X-ray facilities, operating rooms, outpatient clinics, andtraining facilities.

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2.07 Selected ccunties are generally much poorer than those supported inthe REME project. In Gansu, one of the poorest provinces in China, theparticipating counties come from the lover two-thirds of the per capita ruralincome distribution. Participating counties in the other provinces have beenselected from the lowest one-third of the income distribution. Alsoconsidered in the selection of counties were implementation and managementcapability, geographic distribution, relative severity of health problems,and strength of local government commitment. (See Annex 5).

2.08 In all eight provinces the component will strengthen diseasemonitoring and control activities and immunization delivery and managementfunctions of the provincial epidemic prevention stations through expansion ofthe provincial stations, equipment and vehicles, staff training, fellowshipsand technical assistance. Cold storage facilities will be constructed atprefecture level wherever needed to ensure an effective cold chain forexpanded, effective vaccine distribution. In Heilongjiang, Jiangxi andShandong provinces the component focuses on improving the management ofpreventive health programs, with special emphasis on priority diseases.These include programs to strengthen child immunization in Heilongjiang,screening for hemorrhagic fever in Jiangxi, and screening for leprosy andtuberculosis in Shandong. Project activities in these provinces will alsoinclude improved disease surveillance of a wide range of both communicableand non-communicable diseases.

2.09 For the component as a whole, improved outreach, patient care andmanagement will be supported by training in the following areas: (a)pre-service training of primary health workers at the county level, and ofmiddle level workers at the province level; (b) upgrading of professionalskills in specific disciplines and subjects, such as improved clinicalpractice for doctors and equipment maintenance for general service staff; and(c) specialized training for doctors and supervisors in technical fieldssuch as epidemiology, statistics and management. An extensive program hasbeen organized by MOPH and the health bureaus in participating provinces.County training schools will be eetablished or upgraded in all participatingcounties. Provincial training centers will be upgraded to in-service schoolsfor medical cadres. Local trainers and consultants from universities,medical schools, NCPM, provincial hospitals and other high level institutionsinm China will organize a series of training workshops, assist in design ofcurricula for in-service training and provide on-the-job training in medicalprocedures and nise of equipment. An estimated 72,000 health staff willbenefit from some kind of retraining during project implementation (see Annex4, Table C for summaries of provincial training requirements). Additionalpersonnel (doctors, nurses, laboratory technicians, administrators andtrainers) will be recruited after the expansion in the scope and quality ofhealth services.

Vaccine Production _or Im_Lroved Imunization

2.10 China tlis produced essential vaccines for cbildhood diseases forsome years in seven institutes under the MOPH. However, problems of vaccinequality and potency, use of liquid, rather than freeze-dried vaccine, and

- 10 -

weaknesses in the cold chain have made Cbina's immunization p:.ogram lesseffective and more expensive than it should be. The vaccine component of theproject will strengthen the national immunization program by enabling Chinato produce improved-quality essential vaccines that meet quality standardsfor potency and safety established by the World Pealth Organization. Thecomponent will also provide for packaging of vaccines in small numbers ofdoses appropriate for frequent immunization programs in villages. Improvedpackaging , and freeze drying, will also allow transport with less vulnerabi-lity to temperature variation and provide a longer shelf life. These qualityimprovements, combined with revision of the national immunization schedule,are expected to yield a significant improvement in the coverage and cost-effectiveness of the national childhood immunization program.

2.11 Specifically, the component will:

(a) establish a new production center for oral poliomyelitisvaccine (OPV) in Kunming, Yunnan Province, with an annualproduction capacity of 100 million doses of liquid trivalentvaccine. The rest of the annual requirement (about 40 milliondoses) will continue to be produced in the Beijing institute;

Cb) establish two new production centers for essential vaccines,including DPT, tetanus toxoid, and freeze-dried measlesvaccine, in Sbanghai and Lanzbou (Gansu Province), each withan annual production capacity of 100 million doses of DPT, 40million doses of tetanus toxoid, and 20 million doses ofmeasles vaccine; and

Cc) rehabilitate the quality control laboratories in each of thethree sites, using existing buildings.

2.12 During negotiations, understanding was reached on (i) a timetablefor transitional and final implementation of the revised immunizationschedule as recommended by the WHO preparation team and used to estimate theannual production requirements of vaccine; and (ii) a monitoring system andprocedures by which MOPH will evaluate effectiveness of the new vaccines.Assurance vas obtained that all domestic production of DPT and measlesvaccines, tetanus toxoid and OPV will, after one year from the start ofoperation of vaccine production centers under the project, meet theinternational guidelines established by WHO on the quality of biologicalproducts, including vaccines,

Drug Qualitv Control

2.13 This component will assist MOPH to routinely monitor the qualityand safety of pharmaceuticals, both domestic and imported, and to evaluatethe properties and adverse effects of new drugs to be introduced on themarket.

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2.14 The program developed by the MOPH will be implemented in stages,enabling the manufacturers to progressively raise the quality of the productsand to adjust to higher production standards. To provide the basis for afurther dialogue with Government on the issues of manufacturing, teeting,evaluation and control, the project will support the first phase of such arehabilitation program and will consist of:

(a) upgrading three municipal institutes in Beijing, Tianjin andShanghai for drug quality control. Each of them will becomethe national referral center for a given category ofpharmaceuticals. Each will assist NOPH to develop qualitystandards and training for staff working in the 26 provincialinstitutes for drug quality control;

(b) training pharmaceutical administrators and drug qualityinspectors in the Western China Medical University andZhejiang Medical University. Enrollment of small groups of20-30 students for successive specialized sessions will resultin the training of 140 to 280 persons/year in each college;and

Cc) developing clinic pharmacology and laboratory facilities inthe clinical pharmacology units of the Medical University ofBeijing and the Medical University of Shanghai. Each unitwill undertake tasks assigned by the Bureau of Drug Policy andAdministration for evaluating the pharmarco- dyna-.ics.toxicity, and clinical effects of about eight new compoundsevery year.

Operational Research

2.15 Building upon the assistance provided under the RHME project, thiscomponent will strengthen research programs of the NCPM which are designed toimprove disease monitoring, identify new preventive health strategies,support epidemic prevention stations, and develop the analysis and exchangeof information. The support would include construction, equipment, foreigntechnical assistance and overseas fellowships.

2.16 The component will also support an experiment aimed at implementingand evaluating several new health insurance schemes to contribute to theformulation of a new national policy on rural health insuraace. Theexperiment would test the feasibility of introducing new rural insurancearrangements that would: (a) provide more extensive risk-pooling; (b) befinancially independent of state subsidies yet affordable for the majority ofrural inhabitants, and (c) minimize incentives for unnecessary use ofcurative services while retaining incentives for preventive care. The three-year experiment would be implemented in two counties in Sichuan provinceunder the overall direction and management of MOPH. Assurancea were obtainedthat MOPH would carry out the experiment with the assistance of conbultantsand in accordance with terms of reference and time schedule acceptable to theBank Group. MOPH confirmed that appropriately qualified staff would be

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assigned from both central and provincial levels to direct and manage thisexperiment. Detailed background and description of the rural healthinsurance experiment is contained in Annex 6.

III. PROJECT COSTS AND FINANCING

A. Cost Estimates

3.01 Total Droiect costs. The total cost of the project is estimatedto be US$177.4 million or Y 567.5 million equivalent, net of duties andtaxes from which the project will be exempt. The foreign exchange costwould be US$78.7 million (44Z of the total). Project costs by objective andby expenditure category are summarized in Tables III.1 nd II1.2, anddetails are given in Annex 7. Equipment lists for rural health, drugquality control and operational research have been prepared and unir pricesare based on January 1986 world market prices for imported equipment. Thecost of equipment and materials to be procured locall, and not to befinanced by the Bank Group was estimated on the basis of current domesticprices. Costs for the vaccine production component are estimated on thebasis of bid prices received by MOPH in April 1986.

3.02 Contingencies. Physical contingencies of 1OZ of base costs areprovided for construction, vehicles, equipment and technical assistanceexcept for vaccine production which includes an allowance of 25 Z to reflecta margin of uncertainty attached to the base cost estimate pending award andnegotiation of contracts. Price contingencies are based on the followingexpected rates of increase for both domestic and international prices: 7.2%for 1986; 6.8% for 1987 and 1988; 7.0% for 1989; 7.1% for 1990; and 4.0% for1991. Physical contingencies total 13X of base costs and pricecontingencies are 14% of base costs plus physical contingencies.

3.03 Recurrent Costs. Project investment in rural health will increaserecurrent outlays in the 50 participating counties by about Y 8.2 millioncommencing in 1988, or about Y 164,000 per county. In 1984, total recurrenthealth expenditures in the provinces of Jilin, Sichuan, Hubei and Gansuaveraged about Y 1.8 million per county, which is projected to increase toabout Y 2.7 million per county in 1988. The incremental recurrent expendi-tures generated by the project represent about 9.5% of total recurrenthealth expenditures of the aeove four provinces in 1984, and about 6% ofprojected total recurrent health expenditures for the same provinces in1988. Project investments in drug quality control and operational researchare expected to generate only minimal incremental recurrent expenditurerequirements for operation and maintenance of new equipment.

- 13 -

Table 11.1

oREaMw NxiM Mm OKa N.MT MECTTM CET Tn

(IVWI '00l 0USI 000) z TOtII Forein Is.

local Foaigm Toal Local Fer ln rotal Emam, Cats

A. STIE1NINO MM. WAIN 31 170,77.M2 71324.8 242,09.9 53366.3 22&2,9.0 75,.Z.3 29 5S3. WD1lE W IT 35P04.6 940s.9 IUP7.5 11.22 29,395.6 40,615.1 72 30C. N 1 ? WANl. 2W4IS.9 13,341.2 37,127.1 79651.8 4,169.1 112.0 35 93. OPETIUUL 4OI

1. Nl9VI1UE 1301 C KMH I3 192.4 6,043.2 25,53.6 6v091.4 1,319.5 7.979. 24 62. M. E4LTI DfEtN s S.4 I,56S.0 2.123.4 174.5 439.1 3.5 74 0

Sub-Total W13TIU. LEE 20050.8 7,40.2 27,659.0 6,265. 2377.6 9,643.4 29 6

Totl JISEE CTS 251,213.5 136,340.1 437,553.5 78,504.2 5h,231-3 16,735.5 43 100Physical cbn Xmiciu 2,790.- 32,212.4 3,913.4 1,344.0 10,06.4 13,410.4 55 13Price Ctird,em 37,71.9 33,204.q 71,076.3 1I835. 10,36.4 2211.4 47 16

Tall PROJECT CIST 315736.3 251,756.9 567.543.2 98,633.2 71,674.0 177,357.3 44 130

Table 111.2

a'ImFRPWNI ICIIE MD RM. WT14 PECT

9fU 1611fl3 COST SN~

(Tm '0003 000 lotal-- - 2 hFostn Lim

Local Foisi Total Local Forzimn Total Eeab Costs

1. IN1ET1 COE1

A. ACCDIE CO N 35,904.6 94,065.9 129.970.5 11.220.2 29.395.6 40,615.9 72 30B. CIQL mES

1. 3WEl 79,971.9 9,952.2 0.824.1 24,679.7 3,079.8 27-757.5 11 202. ICWRT IY,69.7 2,457.3 21,53.9 6PI55.2 767.9 6,923.1 13 53. EPIUIC PEW I STATIn 9,515.7 1,187.1 10,792.9 2.973.7 371.0 3,344.6 11 24. C1SN6TUCI' 22,429.9 29798.3 25.229.1 7,009.3 974.5 7,983.8 11 6

Sub-Tout CIVIL L 130,614.1 16,294.9 146,90.0 40,616.9 5.092.2 45.909.1 11 34C. EJPIIT Al OMES

1. E0EfIIT 40.370.9 609S65.1 101,336.0 12.615. 19.01.6 31,667.5 60 232. 1E5 - 9,731.3 9,731.3 - 3,041.0 3,041.0 100 23. INIEUM TRNSIRT,111STAL.CST5 6261.S - 6,281.8 1,963-1 - 1,963.1 - I

w,h-TotI ESflT me PiW1 4,462.7 7M,69.4 117,349.1 14P579.0 22P092.6 36,671.6 60 272. TRADM

1. JlM LIE. LOE. T1116 9,410.9 - 3,610.8 2,60.9 - 2.690.9 - 22. IIDIIE LEVEL LUCM. TLl 5,699.3 - 5.6S.3 1,40.4 - 1,340.4 - 13. 96l111 LNE. LU. T1llBII1 61a62.4 - 6,162.4 1.923.8 - I.923.9 - I4. FBUIIS . T116 _0 - 3,5l5.3 3,55.3 - 1120.4 1,120.4 100 1

Sub-Total T11S 20,662.5 3.55.3 24,247. 6,457.0 1,123.4 7,577.4 15 6E. 1EI1U. NSSISTACE

1. LIU COJTNS 2,20.3 - 2,20.3 689.2 - 689.2 - I2. FORE1171 C.TMT - 1,97.6 1,697.6 - 530.5 530.5 100 0

9br-Tot THCM. AShISTN1E hm5.3 1,697.6 3,902.9 619.2 530.5 1,219.7 43 1F. L9UL 6C EENI 6,043.9 - 6,043.9 IPON.7 - 1,M93.7 - IS. ST1FF EITUllEIIT 9,130.3 - 9,13.3 2,53.2 - 2,953.2 - 2

Tobl SELD IE 5C 231,213.5 I,340.1 437.553.5 73,504.2 5B,231.3 136h735. 43 100Fhsical Conu7s 26700.9 329212.4 53,913.4 83344.0 10i6.4 18B410.4 55 13Pflc CS,UrnEiff 37,371. 33,204.4 71076.3 11,835.0 10,376.4 22211.4 47 la

Total PuCT cuT 315,79.3 251,756.9 567,54.2 911,63.2 7B,674.0 177,357.3 44 130- -

- 14 -

B. Financine Plan

3.04 The proposed Bank loan of US$15 million equivalent and IDA Creditof SDR 57.2 million (US$65 million equivalent) will finance 45Z of totalproject costs, including all foreign exchange costs (US$78.7 million) andUS$1.3 million or 1.3% of local costs. The local counterpart contributionfor the Rural Health component will be provided by province and county-levelbudgets. Local financing for other project components will be provided bythe Central Government.

C. Procurement

3.05 Vaccine Production Comnonent. Under ICB prccedures according tothe Bank Procurement Guidelines, eligible firms were prequalified to bid forthis component in July 1985. Criteria for prequalification included (a)experience a,. a major international producer with production capacitycomparable to that required under the proposed project; (b) commitment tocontinued future production so as to ensure continuity in transfer oftechnology; and (c) proven experience of technology transfer to othercountries. Of ten bidders expressing potential interest, two wereprequalified for the OPV production center and two for the DPTIMeaslesproduction centers. Technical terms of reference and detailed biddingdocuments were reviewed by Bank Group financed consultants and bids werereceived in April 1986 and are currently under evaluation. Contracts areexpected to be awarded on a turn-key basis with the process suppliersresponsible for project management, transfer of technology, plant design,supervision of civil engineering, supply and inspection of goods,installation and testing of plant equipment, training of plant personnel andplant start-up and trial operation.

3.06 Procurement for 0tber Project Comuonents. All procurement ofequipment to be financed by the Bank Group (about 70% of total) would beprocured under International Competitive Bidding (ICB) folloving BankProcurement Guidelines, except as describeJ bel'w. Items vould be groupedinto bid packages to encourage competition and bulk procurement. Localmanufacturers would be eligible for a margin of preference of 15% or theprevailing customs duties, vhichever is lower, in the evaluation of bids.Items and groups of items estimated to cost less than US$200,000 and inaggregate not exceeding US$5.0 million equivalent may be procured through:(a) contracts awarded on the basis of comparison of quotations invited fromat least three suppliers eligible under the Guidelines; or (b) directpurchase for proprietary items or vhere justified by the need forstandardization. The US$5.0 million limit is reasonable in light ofexperience under the REME project. Prior Bank Group review of contractawards would include all contracts of US$500,000 equivalent or more. Samplepost reviews of smaller contracts would be carried out during regularsupervision missions. Remaining equipment comprises basic laboratoryequipment, pharmaceutical and laboratory materials and standard teachingsupplies all of which are available locally and will be procured by

- 15 -

Provincial Health Bureaus for widely scattered local distribution. Thisequipment would be procured in accordance with local procedures and financedby the provincial governments. Selection of technical assistanceconsultants would be carried out in accordance with Bank Group Guidelines onthe use of consultants. Local training and fellowships will be organized byMOPH.

3.07 Draft equipment lists have been finalized by project institutionsand reviewed by MOPE and the Bank Group. An expert procurement committeehas been appointed by HOPH to review quantities and to prepare detailedspecifications. Agreement was reached with MOPE during appraisal that thiscommittee would be appropriately staffed to undertake this task with dueregard to the following criteria: appropriateness of equipmpnt proposed toinstitutional functions; cost-effectiveness, taking into account expectedutilization and impact; and ease of operation and maintenance. For itemsprocured througb ICB, HOPH would be responsible for preparation of biddingdocuments, bid evaluation and recommendations for award; the InternationalTendering Company of CNTIC has been designated to be responsible foradvertising and receiving bids, and for undertaking contract awards onbehalf of HOPH. MOPH would be responsible for taking delivery of equipmentand for its distribution to project institutions. During negotiationsunderstandirg was reached that procurement of equipment would beappropriately synchronized with the construction of physical facilities andthe training of personnel needed to operate and D,aintain it.

3.08 Civil Works. Civil vorks for rural health facilities, for theexpansion of epidemic prevention stations and for extensions to buildingsimder the Drug Quality Control and NCPM components would be procured mainlythrough local bidding amongst local companies and would be financed by theGovernment. Architectural plans have been prepared by provincial, municipaland county design bureaus which would also be responsible for supervision ofconstruction. Sites for facilities have been selected and have been madeavailable by the respective levels of government. To make improvements incivil works design for rural health MOPH is establishing a central unit forhealth facilities research and design. Its role would be to study andsynthesize alternative designs and technologies suitable to improve thedesign of buildings for health care. It would investigate constructiontechniques and layouts to incorporate modern ideas for patient flow,supervision, management and the delivery of technical services. It wouldbave the capacity to produce educational materials and sample designs forprovincial health and design authorities.

D. Disbursements

3.09 The proposed credit of SDR 57.2 million (US$65.0 million equiva-lent) would be disbursed as follows:

- 16 -

(a) 100Z of the CIF cost of imported equipment (includingvehicles), 100% of the ex-factory cost of locallymanufactured equipment and 75% of the :ost of localexpenditures for other items procured locally;

(b) 100% of the cost of consultants;

(c) 100% of expenditures for local training (tuition,transportation, room and board) for the Rural Eealthcomponent;

(d) 100% of foreign expenditures for overseas fellowships; and

(e) 100% of foreign expenditures for the vaccine productioncenters.

The proceeds of the proposed loan (US$15 million equivalent) would bedisbursed against item (e) above.

3.10 Reimbursement of training and contracts for goods ard services,each valued at less than US$200,000 equivalent, would be made on the basisof statements of expenditure, the supporting documentation for which wouldbe retained in the World Bank Loan Office (WBLO) for review by the BankGroup during project supervision missions. In order to reduce theadministrative burden of disbursing against a large number of applicationsNOPE would open a Special Account in a bank acceptable to the Bank Group,with an authorized allocation of up to the US dollar equivalent of SDR 5million. Applications for replenishment would be submitted, withappropriate supporting documentation, at quarterly intervals or when amountswithdrawn equal half the amount of the initial deposit, whichever comessooner. All disbursements for expenditures for training and consultingservices, and contracts for goods and services for amounts of less thanUS$200,000 equivalent, will be made from the Special Account. Disbursementswill be completed by the Closing Date of June 30, 1992, one year after theestimated date of project completion (Annex 8).

E. Accounts and Audits

3.11 Accounts of expenditures for the rural health component will bemaintained by the provincial WBLOs under the supervision of the WBLO in theNOPE. The finance division of the WBLO will maintain accounts for all otherproject components. During negotiations assurances were obtained thatproject accounts would be maintained according to accounting principles andpractices satisfactory to the Bank Group; that annual audits of projectexpenditures would be carried out by independent auditors acceptable to theBank Group; and that the Government would provide the Bank Group withcertified copies of such audited financial statements and the auditors'reports thereon within six months after the close of each Chinese fiscalyear.

- 17 -

Table 111.3: SCHEDULE OF DISBURSEMN8TS(us$ Million)

Bank Group fiscal ProDortion disbursed byvyearyear andsemester Semester cumulative Estimate for All PHN All China

-(USS million)-- this project projects sectors------- (percent)…

1987 1st 5.7 5.7 7 1 02nd 3.2 8.9 4 3 4

1988 1st 6.4 15.3 8 3 82nd 8.8 24.1 11 5 11

1989 1st 11.1 35.2 14 5 142nd 10.4 45.6 13 12 13

1990 lst 10.4 56.0 13 2 132nd 8.0 64.0 10 8 10

1991 1st 5.6 69.6 7 9 72nd 6.4 76.0 8 7 8

1992 1st 3.2 79.2 4 8 72nd 0.8 80.0 1 8 5

IV. PROJECT ORGANIZATION. MANAGEMENT AND IMPLEMENTATION

A. Project Organizton

4.01 Two of the project components - Vaccine Production and DrugQuality Control - fall under the administrative and technical jurisdictionof the Bureau of Drug Administration and Policy of NOPH. Within the Bureau,the Biological Products Division will be responsible for implementing theVaccine Production component, and the Pharmaceutical Standard and QualityControl Division for implementing the Drug Quality Control component. TheRural Health component will be the responsibility of the Rural HealthDivision of the Bureau of Medical Administration. The Operational Researchcomponent will be under the technical responsibility of two units reporting

- 18 -

directly to the Minister of Public Health, namely the National Center forPreventive Medicine, and a leading group for Health lusurance Reform chairedby the first Vice Minister. The Chinese Academy of Medical Sciences, aninstitution which is also direc:;y under the Minister of Public Health, villassist the Bureau of Drug Administration and Policy in developing theproduction of OPV in the Kunming Poliomyelitis Institute which reports tothe Academy. The Bureau of Health and Epidemic Prevention will providetechnical guidance in the upgrading of provincial epidemic preventionstations. A chart depicting the current organizational structure of theMOPH is attached.

4.02 Responsibility for project management and coordination as a wholewould rest witb the WBLO which has already been established in MOPH tocoordinate the implementation of the Rural Health and Medical EducationProject. The WBLO is headed by a director with a day-to-day responsibilityfor all aspects of project execution. He is supported by 25 full-time stafforganized into three divisions responsible for project execution,procurement, and finance and accounts, respectively. The WBLO willcoordinate the implementation of all project components, procurement ofequipment, administration of technical assistance and training, projectfinances (including counterpart funding and loan/credit disbursements) andoverall project progress reports. To this end, it will have a strongliaison function with the technical departments responsible for individualproject components. Finally, the WBLO will be responsible for thepreparation of the project completion report.

B. Project Manaeiement

4.03 Tne project will be directed by a steering group within MOPH,consisting of the heads of the divisions and bureaus concerned, andco-chaired by the director of the Foreign Affairs Bureau and the director ofthe Planning and Finance Bureau. This group will meet periodically and haveresponsibility for setting overall policy guidelines, approving plans andbudgets for individual project components, monitoring the project's overallprogress and effectiveness, and resolving any issues affecting project goalsand implementation. The WBLO is the staff secretariat for this group.

4.04 The pattern of national organization and management arrangementshas been replicated in the provincial health bureaus responsible for theRural Health component. Specifically, leading groups chaired by the provin-cial Vice Governors would oversee project implementation, backed up byprovincial NBLO0 or project managemeat units in the provincial and countyhealth bureaus, each comprising five to ten full-time staff headed by aBureau Deputy Director. The provincial WBLOs have appraised and approvedthe plans and programs developed by the county-level institutions. Theywill supervise all aspects of project implementation including thoseexecuted by the provincial epidemic prevention stations. Assurances wereobtained that the MOPH and the provinces concerned would maintain the WBLOsthrough the project implementation period with appropriate functions andstaffing.

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4.05 The implementation of the Vaccine Production component vill bemanaged by the directors of the three institutes concerned, in closecollaboration with the Biological ProductB Division of the NOPH which willbe responsible for the reassignment of technical staff. Duringnegotiations, understanding was reached that MOPH would reassign to thethree institutes supported by the project the technical staff they vill needto operate the new facilities.

4.06 Drug Quality Control will be executed by the following agencies:the Municipal Health Bureaus of Beijing, Shanghai, and Tianjin for the DrugQuality Control Institute; the Zhejiang Medical University and Western ChinaMedical University for the training subcomponent; and the MedicalUniversity of Shanghai and the Medical University of Beijing for theclinical pharmacology subcomponent. Each implementing agency has set up aproject office headed by the director of the institute/department concerned,under the leadership of the presidents of the universities and the directorsof the Municipal Health Bureaus. Assurances were obtained that the Borrowerwould ensure through a Project Implementation Agreement that themunicipalities of Beijing, Tianjin, and Shanghai and Zhejiang Province willmaintain the project offices within the respective local Health Bureausthroughout the project implementation period and implement projectactivities under the supervision of the Drug Administration and PolicyBureau of MOPH. Execution of a Project Implementation Agreementsatisfactory to the Bank Group would be a condition of effectiveness.

4.07 The Operational Research component will be implemented by therelevant institutes of the NCPM. The Director of the NCPM will beresponsible for overall program implementation and will report directly tothe Minister of Public Health. The rural health insurance experiment willbe implemented by the Health Bureau of Sichuan Province under the leadershipof the steering group established in MOPH.

V. PROJECT BENEFITS AND RISKS

A. Project Benefits

5.01 The project is expected to improve the health status of about 30million beneficiaries in rural areas of 50 counties. NEtionwide there willbe better coverage, quality and cost-effectiveness of child immunization.National capability for epidemiological surveillance and research will bestronger. The Rural Health component will strengtben the capacity of thecounty health care delivery system to deliver an extensive range of curativeand preventive services. The effect will be improved efficiency of communi-cable disease control and chronic disease management, and greater accessibi-lity to and quality of curative services both in the counties and atintermediate referral locations in rural areas.

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5.02 The Vaccine Production component vill substantially increase thecoverage and cost effectiveness of the national imnunization program byraising the proportion of eligible children covered by a full series ofimmnnizations, reducing the cost per fully imminized child and improving theefficacy of the imunization given. It will make possible increasedfrequency of iuznization sessions at the ultimate delivery site.Anticipated increases in unit production cost per vaccine dose are expectedto be more than offset by decreases in wastage in the distribution chain,resulting both from better packaging and from longer shelf-life associatedin part vith the substitution of freeze-dried for liquid vaccines.Substantial improvement in vaccination effectiveness will also result fromthe reduction of losses in vaccine potency.

5.03 The Druz Oualitv Control component is expected to improve thecapability of the drug quality control institutes to test the quality ofdrugs available on the market. It will also improve the training ofpharmaceutical administrators and quality control inspectors. The result isexpected to be a more effective and extensive system of drug quality controlwhich would help to ensure that all drugs meet acceptable safety standards.

5.04 The Operational Research component will support and improve theformulation of national policies on disease prevention and on rural healthinsurance.

B. Proiect Risks

5.05 Experience with the RMR project, and with preparation of theproposed project, indicates that HOPE has the management capacity andcommitment needed for successful implementation of the rural healthcomponent and, with the assistance of experienced international vaccinefirms, the vaccine production component. Consequently no majorinplementation risks are anticipated. Implementation of the operationalresearch component, hovever, does carry inherent risk in that it may taketime for NCPM, a newly created amalgamation of previously independentresearch institutes, to shift from laboratory to policy-focused research.To minimize this risk NCPM's program vill be monitored closely by NOPH andthe Bank Group.

5.06 In the Drug Quality Control component, interagency coordinationcould pose difficulties. The responsibility for drug quality lies withNOPE, whose capacity for pharmaceutical administration would be strengthenedby the project. However, the responsibility for drug manufacture rests withthe State Pharmaceutical Administration which controls the pharmaceuticalenterprises but is administratively independent from MOPH. Due toconstraints in terss of equipment and technology of manufacturers, the StatePharmaceutical Administration might be unable to comply with the standardsestablished by NOPE in the short term. To minimize the risk thatinvestments in quality control would not be effectively utilized becauseindustrial capabilities could not keep pace with rapidly improving quality

- 21 -

measurement standards, the project will finance only the first phase of theHOPE program to raise drug quality testing capacity.

VI. AGREEMENTS REACHED AND RECUNNENDATIONS

6.01 During negotiations, understandings were reached on the folloving:

(a) a timetable for the implementation of the revised immunizationschedule and a monitoring system and procedures by which NOPE willevaluate effectiveness of the new vaccines (para 2.12);

(b) that procurement of equipment would be appropriately synchronizedwith the construction of physical facilities and the training ofpersonnel needed to operate and maintain it (para 3.07); and

(c) that NOPE would reassign to the Shanghai, Lanzhou and Kunmingvaccine production institutes the technical staff needed tooperate the new facilities (para 4.05).

6.02 During negotiations, assurances were obtained that:

(a) all domestic production of DPT and measles vaccines, tetanustozoids, and OPV would, one year from the start of operation ofvaccine production centers under pi ject, meet the internationalguidelines established by WHO on the quality of biologicalproducts, including vaccines (para 2.12);

(b) MOPH would carry out the rural health insurance experiment withthe assistance of consultants and in accordance with terms ofreference and time schedule acceptable to the Bank Group(para. 2.16); and

(c) project accounts will be maintained according to accounting prin-ciples and practices satisfactory to the Bank Group; annualaudits of project expenditures will be carried out by independentauditors acceptable to the Bank Group and certified copies of suchaudited financial statements and the auditor's reports thereonwill be forwarded to the Bank Group within six months after theclose of each Chinese fiscal year (pars 3.11);

(d) the NOPE and the provinces concerned would maintain the World BankLoan Offices through the project implementation period withappropriate functions and staffing (para 4.04);

(e) through a Project Implementation Agreement the Borrower willensure that the municipalities of Beijing, Tianjin and Shanghaiand Zhejiang Province will maintain the project offices in their

- 22 -

respective local health bureaus through the project implementationperiod and will implement project activities under the supervisionof the Drug Ad-inistration and Policy Bureau of MOPE (para. 4.06).

6.03 The following would be conditions of loan and crediteffectiveness:

(a) Execution of a Project Implementation Agreement satisfactory tothe Bank Group; and

(b) State Council approval of the Loan, Credit and Project Agreements.

6.04 Subject to the above conditions and assurances, the project hereinproposed vill constitute a suitable basis for a Bank loan of US$15 millionequivalent and a credit of SDR 57.2 (US$65.0 million equivalent). The Bankloan would be for a term of 20 years, including a five-year grace period, atthe standard variable rate, and the IDA credit would be on standard IDAterms.

- 23 -

Page 1 of 2

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

Documents Available in The Proiect File

General

1. China: The Health Sector. A World Bank Country Study, 1984.

2. China: Lon=-Term Issues and Options, Report No. 5206-CJM, The WorldBank, 1985.

3. Hill, K. (1985) Deogfrabhic Trends in China. 1953-1982 Technical NoteSeries, No. 85-4, Population, Health and Nutrition Department.

4. Young, M. and Prost A. (1985) Child Health in China. The World Bank.

5. Project proposals from participating project institutions.

6. Project detailed cost tables.

Rural Health

7. Krister, J. et al. (1985) Report of an Assignment: Preparatory Phaseof a World Bank-Assisted Rural Health Project in the People's Republicof China (Jilin and Hubei Provinces), World Health Organization,Western Pacific Regional Office, Manila.

8. Growth and Develonment in Gansu. China. Report No. 6046-CHA, The WorldBank, 1986.

9. Muller, M. & Young, M. (1984). The Availability. Utilization and Costof County Hosaitals. Population, Health and Nutrition Department.

10. Krister, J. (1985) Issues and ODtions in Rural Health Investent iDChina, Population, Health and Nutrition Department.

11. Young, M. & Co. (1985) Background Statistics for Appraisal: Forty-NineCounties, Population, Health and Nutrition Department.

- 24 -

ANUU 1Page 2 of 2

Vaccine Production

12. Gibson, B. et. al. (1985) Improving Vaccine Production in China, Reportof a WSO sission, World Health Organization, Western Pacific RegionalOffice, Manila.

13. Orivel, F. (1985). Economic Analysis of Vaccine Production: ChoiceBetween Domestic Production and Iuport of Vaccines in China,Population, Realth and Nutrition Department.

Drug oualitv Cou-xp-.

14. Pharmaceutical-Administration ]a. of the People's lemulic of Cina,Decree No. 18 of the Chairman of the People's Republic of China,September 20, 1984.

15. Essential Druso and Vaccines, Assignment reports by Keiser, B. R. (20January - 20 February, 1985), Schroff, A.P. (2-17 February 1985) andKnapp, G. (2-17 February, 1985), World Realth Organization, WesternPacific Regional Office, Manila.

- 25 -

CllIM ~ ~ ~ ~~ NIM-

RURAL HMLTR AND PREVENTIVE MEDICINE PROJECT

Princi2&l Causes of Death. Urban and Rural Areas. 1980

Percent of all Deaths

Disease In Urban Areas In Rural Areas

Heart disease 23 26Cerebrovascular disease (stroke) 23 17Cancer 20 15Acute respiratory disorders

(excluding tuberculosis) 9 12Digestive disorders 4 5Tuberculosis 2 3Other 19 22

- 26 -

ANNEX3Page 1 of 3

CHINA

RURAL BEALTH AND PREmVNTIVE MEDICINE PROJECT

Immunization Co-verage

Table 1: Percent8&e of Counties in China vith SpecifiedMorbidity Levels!.Mej-s1es Poliouvelitis and Pertus8is. 1983

Morbidity/100.000 Percentage of Counties

'=easles

0 80.01 - 10.00 29

10.01 - 30.00 1630.01 - 70.00 1570.01 - 100 7

100 25

Poliowivelitis

0 760.01 - 0.10 10.11 - 0.50 16

0.50 7

Pertussis

0 80.01 - 10.00 44

10.01 - 60.00 2860.00 20

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

I_munizat ion Coverage

Table 2: RESULTS OF l.PI CL WSThR 8.iIVREYs ON IMMUNIZATION STATUS OF cIILDREN, 1984*

Population Percent Immunized Full Immuni-Sample Age Group No. Surv. BCG DI'T-3 OPV-I Measles zatton

Henan 34,990,000 12.24 mos 30,869 70 78 92 85 53Hebel 13,447,784 12.24 moo 6,280 - 72 87 87 68

Jiangxl 14,205,637 18.24 mos 6,300 54 38 57 58 22Guangdong 26,009,732 12.24 mos 10,081 37 58 72 53 18Liaoning 171,366 12 mos 213 98 99 99 98 96

590,129 12.18 mos 211 96 97 98 57 54Heilongjiang 30,734,684 12.22 mos 13,873 65 74 88 84 50Shanghal. 11,930,932 12.24 moo 2,514 99 96 98 97 84

18.24 mon 2,242 96 86 96 93 66Shaanxi 6,642,895 12.26 mos 5,518 14 46 83 82 14Yunnan 3,000,000 12.24 moo 1,957 72 59 76 73 20Ningxia 346,240 1.5.3 yrs 420 99 95 99 98 94

553,848 1.5.3 yrs 630 - 95 92 91 79Qinghai 1,559,507 1-2 yrs 1,670 57 35 73 60 25Gansu 2,653,889 12.24 mos 5,037 30 17 74 52 5Sichuan 19,324,215 12.24 mos 5,231 33 66 79 72 13Inner Mongolia 4,631,927 12.48 mon 3,448 - 37 90 92 -Hubei 3,020 ,0(00 12.23 mos 1,2603 82 81 85 86 61

Shanxi 5,10(,741 12.24 mon 2,925 79 64 79 74 47Tianjin 7,764,141 12.18 mos 3,360, 82 75 80 88 60

Beijing 9,230,687 12.24 mos 4,039 94 92 96 94 82Guangxi 19,745,049 12.24 mos 2,925 - 43 66 73

*Provisionai tabulation.

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

Immunization Coverage

Table 3: PERCENTACY. UF UNDER-REPORTlNG OF MEASLES, PERTUSSIS, ANDPOLIOMIYE1ITIS, FR(M SURVE1LLANCE POINTS

1981a/ 1984_/ 1984b 1984E/Surveillance Gansu Cansu Shandong

Lintao Lintao 15 Rural qNo. Points I Rural 4 Rural I0 Urban 5 Rural 5 Urban County Hospital Counties

Sample Size 1,579 97,720 55,265 9,621 19,117 5,978 - Unknown(> 7,100,000)

Measles - 2'1 30 - - 76 36 66

Pertussis - - - 8 67 78 0 66

Poliomyelit.is 22 - - - 50

a/ Unpubialshed data provided by Institute for Epidemn1ology and Microbiology. Chinese Academy of MedicalSciences.

b/ Data provided by bureau of llealt i, Ganhtt, 1985

c/ Data provided by bureati of healtth, Shandong, 1985

05*11

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ANNE 4Page 1 of 2

RURAL RELTR -AD PREVUTIVE MNDICINE PROJECT

Table A.: Rural Health Comuonent - SuMar Statisticsof Particioatine Provinces (1984)

Province

Item Gansu Hubei Jilin Sichuan Total

Number of Counties La 15 11 10 13 49(Z of Province Total) (21) (15) (27) (7)

Population (million) 5.13 7.65 4.63 11.21 28.63(Z of Province Total) (26) (16) (20) (11) -

GVTAO&per capita (Y) 270 533 550 441 n.a.

Death Rate Lc 5.9 7.0 5.5 7.1 n.a

Birth Rate & 15.6 14.0 12.4 9.9 n.a.

County Hospital Beds L£ 0.39 0.51 0.58 0.31 n.a.

Total Proiect Investenat 24.0 26.2 16.6 28.6 95.4(Y million)

Total Investmentper County 1.6 2.4 1.7 2.2 1.9

LA Excluding Ningxia Rai Antonomous Region.lb Gross value of industrial and agricultural outputtW Per thousand population, 1984.

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ANNEX 4Page 2 of 2

CHINA

RURAL HELTH AND PREVENTIVE MEICINE PROJECT

Table B.: ConstrUction in The Rural Realh Comonent

(1) (2) (3) (I + 3)

Province County & above Belov county EPS Total(=2) (m2) (m2) (m2)

Gansu 73,200 28,600 2,911 76,111Sichuan 120,491 49,694 9,300 129,791Hubei 87,927 20,509 2,000 89,927Jilin 30,729 14,300 3,006 33,735Ningxia 8,700 6,920 15,620Heilongj-ang 4,520 4,520Shandong 5,590 5,590Jiangxi 2,700 2,700

To,&al 321.047 113.103 36.947 357,994

Table C.: Traigin2 Required Under Rural Health Coununent a/(Nan-Years)

Province Junior Level Middle Level Senior Level Total

Gansu 2,079 1,338 630 4,047Sichuan 1,598 1,070 312 2,980Hubei 2,175 2,058 656 4,890Jilin 1,738 765 618 3.121Ningxia 30 101 9 227Heilongjiang 67 67Shandong 185 185Jiangxi 240 240

Total 7.620 5.332 2.804 15.756

a! Assumes that the duration of training averages 6 months for juniorlevel staff, one year for one third of middle and senior level staff, 6months and 3 months respectively for the other two thirds of the middleand senior categories.

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

SOU1n4 PWN0(E FAL z4AY, 1984

PoIlatio- Per Capita prodwtlon (Y) Health IudicatorsaenAl crd& Infart Bde per Staff

Project Tbtal X X Distrlbitsi Death Rate WIrth Rate Mrtaaity x 1,000 per 1.0000iuntias Millni Rural Illiterate Agriculture Inftistty onare aCRO 0/ 00 CR/0 Rate 0/CD Pop pop (I)

Gorgxian 0.3 79.6 211.0 229.9 215 6.3 10.7 40.9 2.1 3.9

lAmdan 1.4 94.7 301.9 10().2 232 6.2 7.1 41.7 0.67 2.6

Zhrxgian 0.9 94.3 235.3 73.9 187 8.0 8.4 42.6 0.66 3.8

Qixian 1.2 92.6 236.6 119.3 211 7.3 11.1 40.2 1.1 3.8

Yanting 0.6 94.5 314.8 103.7 lf6 7.9 10.9 35.2 1.6 4.7

Zhongjian 1.3 95.4 '39.0 96.3 237 8.1 8.6 43.2 0.81 3.6 '

Nanbu 1.2 95.6 247.4 0.A 163 6.7 10.9 52.3 1.0 3.4

Qiorglai 0.6 88.8 429.3 241.2 344 5.9 9.1 40.2 0.96 5.0

Jianyarg I.3 92.0 381.6 227.9 231 6.1 5.8 41.R 0.88 3.8

Torgliarg 0.8 92.4 316.5 162.9 272 6.4 9.0 41.9 1.4 6.7

Helushn 0.7 9U.1 350.0 328.5 221 5.5 7.9 33.6 1.5 5.0

Yueid 0.2 91.9 237.2 41.4 198 10.2 19.8 85.2 2.n 4.8

Diaji.mg 0.8 93.5 252.3 99.6 225 7.2 9.6 50.9 0.81 4.0

(W. Toe.i t,ialth staff excludirg srde' fran eltenrdew health units.

0

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

GANUJ PIN(NN CI*I3AL IRY, 1964

Pomlati ction (Y) Hlth IndicatoraCnxis Ctdee Infart Bde per Stdf

Project Total Z Z Distributed Dath Rate Rlrrth Rate MDttality x 1,000 per 1,000Oountim Killion Rural Il Literate Agriculture Irdtutry Ilncnae C)R 0/00 CDR 0/00 Rate 0/00 Pop Pop (1)

Mtuinirg 0.4 98.1 24.8 175.1 20).2 57 5.3 18.5 39 0.81 .1

Tbrgwei 0.3 98.8 39.( 196.3 196.3 61 5.0 16.7 43 1.2 0.98

Lirtao 0.4 97.1 32.5 19h.3 31.5 83 5.4 18.3 41 0.76 1.4

Llrda 0.4 84.6 42.5 Yh.1 2.6 87 6.6 20.9 - 0.3 .53

Xitie (.1 67.9 38.9 251.4 33.6 127 7.8 28.4 51 0.76 2.0

'rianrhu ll.7 8.7 35.1 14R.2 33.2 84 5.8 16.4 34 0.72 1.9

Fulxian 0.2 91.1 37.3 225.3 .11.8 156 7.7 17.1 41 1.5 2.1

1aclharg 0.2 97.4 53.2 161.3 14.7 58 5.9 20.3 30 0.87 1.2

Chagxluan 0.2 94.7 22.3 216.2 41.0 150 8.6 16.5 45 0.82 I.R

NilgKdan 0.4 97.1 34.5 220.2 13.4 117 5.6 20.8 46 0.47 1.3

Lirgtai 0.2 97.8 33.3 1511.9 25.3 106 7.9 18.3 49 1.4 1.6

Yotgderg 0.4 91.4 29.6 132.5 85.7 77 5.4 16.5 54 0.7 1.4

MAM i 0.8 87.3 30.2 301 .2 89.6 179 5.6 16.7 - 0.45 1.4

Shardan 0.2 90.1 28.9 27A.1 77.3 176 6.3 16.3 42 1.6 2.0

Jlrta (.1 91.2 3().h 565.1 147.9 358 5.3 12.5 38 1.3 2.0

(l) 1'Eial IL'ltlit st af e xrlIliilg stc af ir4m eituilitp11 IILsnlILhI tinits.

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

IMiME PRIJN (WERAL SWMARY, 1984

Popilation __Per -ta Productio n (Y) HealLh IndicatorsCmxde Crude Infart am pe Staff

Project Total Z I Distribtrld Death Rate Birth Rate Mtrtality x I .000 per 1,000Courties KUlion Rural IlIUterate Agrlwlture Irdustry Incam aOR (/00 CBR 0/0C Rate O/00 Pcp Pop (1)

Torgshan 0.3 92.7 24.5 2h2.2 166.1 176 7.6 16.2 37.0 3.i 3.6

Tianion 1.4 97.8 22.8 451.1 186.5 - 7.2 19.7 38.6 1.6 2.6

liaryarg 1.2 91.7 24.8 449.8 339.8 298 6.2 14.3 38.3 1.5 2.6

iarugarg 0.6 89.7 2n.6 431.8 198.9 282 7.9 12.9 32.3 2.2 3.4

lbrgan (.5 98.9 12.2 341.5 11b.8 252 8.9 15.3 41.n 1.7 2.6 p

Anlu 0.5 91.5 2h.8 513.3 484.2 232 7.0 18.1 35.1 2.4 3.6 w

Hanruian 0.9 89.7 14.5 478.8 333.1 305 6.9 23.6 29.7 1.9 2.5

Yurud 0.5 95.3 32.2 2i2.4 62.3 207 8.6 16.3 42.0 1.0 2.4

ZaOyaM 0.9 94.8 21.8 465.8 257.4 299 7.1 14.9 31.1 1.3 2.8

Xuansen 0.3 96.2 27.9 273.1 39.6 166 8.7 26.7 32.9 1.5 3.1

enshl t).7 89.9 21.1 223.0 130.1 164 7.7 17.7 33.2 1.6 2.5

(I) Total health staff exoludirg staff fran erterlprie lhealtlitiinlts.

I!3

CHINA

RURAL HEALTH AND PREVENTIVE MEDICINE PROJECT

JILIN MWWINQ. (FIERAL R, 1984

Popxlation Per C'.pita Prcxiuctlon (Y) Health Indicatorswidle Cnmde Infart hxl per Staff

Projet Total 2 X DLatr1huted Death Rate Birth Rate Mortauty x I,000 per I ,000Countles Million Ralral Illiterate Pgriculture lrdustry Incare aO 0/00 CIR 0/00 Rate n/00 Pop Pop (1)

Da'an 0.4 72.3 15.6 336.9 304.1 213 5.5 11.4 40.9 9.3 3.3

Qianguo 0.5 77.8 18.7 451.0 451.( 281 4. 13.2 24.9 4.6 2.1

Zenlai 0.3 77.8 15.7 378.5 210.8 378 4.5 11.3 35.6 6.4 2.8

.Iiutal 0.7 90.3 b.4 406.0 115.6 282 5.8 10.1 33.2 5.8 2.3

Panshl 0.6 70.4 19.9 265.2 128.4 28) 6.2 12.4 31.2 5.8 2.2

YongjL 0.7 86.3 17.5 275.1 111.8 287 6.2 11.5 38.9 5.1 1.3

Shuanglio 0.3 73.3 15.4 523.8 243.1 25.1 I . 2.2

Artu 0.2 59.5 17.5 227.1 217.9 306 5.3 3h.h I '.t 3.5 1.7

Dwhina 0.4 72.6 15.6 387.4 213.4 301 5.6 h1. 371.1 1.2 2.6

1l.uhe 0.3 79.9 17.6 252.0 326.2 289 6.4 13.9 31.0 1.4 3.8

(1) Total health staff excludig staff fran erterpris health units.

I1

- 35 -

ANNEX 6Page 1 of 6

CHINA

RURAL HRALTH AND PREVENTIVE MEDICINE PROJECT

DescriRtion Prepared by MOPH for Rural Realth Insurance ExDeriment

1. Backaround

1.1 The numbers of villages and peasants participating in ruralcooperative insurance plans have, in recent years, decreased gradually from80 Z of the total to 5 Z at present. Several factors have contributed tothis decrease such as lack of local level knowledge of insurance principlesand plans, management weaknesses and actuarial unsoundness. However, theprimary cause of problem has arisen with the introduction of the productionresponsibility system which has eroded the financial base for thecooperative insurance plans. As the rural economy develops, peasants aredemanding increasingly better medical care and that the health syste1. beutrengthened in a sound way so that the financial burden due to seriousillness can be relieved.

1.2 Therefore, a major task for China', health policysakers is tostudy and establish a new health insurance system accommodated to ruralcircumstances. The new system should satisfy the following criteria:

a) require no additional subsidies from Government;

b) protect the peasant from finaucial ruin due to seriousillness;

c) strengthen prevention services to raise the health status ofthe people;

d) discourage unnecessary utilization of health services;

e) strengthen the primary care role of the village healthstation and permit serious cases to be referred to higherlevels; and

f) be affordable and acceptable to the peasant.

1.3 Although, at present, there is an urgent need to reform the ruralhealth insurance system, it is technically infeasible to implement a broadscale reform because of lack of experience with sound alternative insuranceschemes. Most importantly, there is inadequate information about therelationship of insurance coverage to utilization. Without suchinformation,premiums cannot be set to cover expected reimbursements by the plans.

- 36 -

ANNEX 6Page 2 of 6

Reforms in the village level delivery system further complicate predictionsof how insurance will affect the utilization and the coat of care. Ruralinsurance reform will be ineffective unless plans are well managed, butthere is at present no experience in managing a village-level insurancesystem of the type that is needed.

1.4 If ineffective reform are instituted now, adverse effects mayarise. Peasants already distrust health insurance schemes because of thepast failures in village cooperative plans. A aecond failure would furtherundermine their faith in insurance and probably make future reforms moredifficult.

1.5 For these reasons, it is only prudent to gather more informationabout the effects of alternative insurance plans before proceeding toimplement reforms on a broad scale. The most efficient way to collectreliable information is by means of an experiment. This component of theRural Health and Preventive Medicine Project is for the conduct of such anexperiment in two counties in Sichuan Province.

2. Goals of the frx eriment

2.1 This health insurance experinent has both immediate and long termpu.p-ses. First, it should demonstrate the feasibility of the experiment tooffset and correct the deficiencies from the cooperative medical plans.Second: it should provide experience that will be helpful in a broaderimplementation of rural health insurance reforms.

2.2 The experiment will provide:

a) estimates of the coBt and utilization effects of alternativeinsurance plans;

b) an opportunity to develop, test and refine a system to managea village-level insurance system;

c) a reinsurance mechanism to be formed to pool risks;

d) a test of the interaction between insurance reform and otherreforms in the village delivery system.

2.3 In sum, the experiment will provide an example of implementationfor the health insurance system and a sound analytic base which otherprovinces can use to evaluate and implement health insurance options.

2.4 The experiment will also have a training component. Work on theexperiment, carried out cooperatively by Chinese and foreign experts, will

- 37 -

ANNEX 6Page 3 of 6

provide a core group of Chinese analysts with theoretical knowledge andpractical experience in advanced health policy-oriented research.

3. Current Status of the Ezxeriment

3.1 Considerable progress has been made toward design of theexperiment in the preparation of the Rural Health and Preventive MedicineProject. Administrative groups have been established at several levels inChina, and a pilot study has been completed.

3.2 A pilot survey of 880 households in the two counties was carriedout in July, 1985. The pilot survey confirmed the ability of a consultantgroup, the Ministry of Public Health and the Provincial Health Bureau staffto cooperatively design and execute the kind of data collection efforts thatsill be required in the larger experiment. Using the survey data, theconsultant group developed preliminary models to predict inpatient andoutpatient utilization and expenditures for different kinds of insuranceplans.

3.3 A working group of national and provincial official visite' .heU.S. in October 85 to work with the consultant group to refine these modelsand draft working documents for the health insurance experiment. During thenext three months, Sichuan provincial and county officials used thepreliminary models to develop proposals for experimental plans. In lateJanuary and early February, 1986, the consultant group visited China again.The models vere further developed and used to estimate utilization and costsfor plans proposed by the counties. In joint discussion, new options wereproposed and analyzed.

3.4 On the administrative side, the Government has already created ordesigned much of the organizational system required for the experiment. ALeading Group has been set up at national level, and there have beendiscussions between the Ministry of Public Health and the State PlanningCommission. A group of technical advisors has been created, consisting ofable, interested health statisticians, health economists and scholars. InSichuan Province, parallel leading and working groups have been established,as well as provincial county-level organizations for managing theexperiment. Township and village-level organizations have also beendesigned, and 56 villages have been enlisted for the experiment.

4. Design and Conduct of The ExReriment

4.1 The experiment will be designed and conducted in four phases: a)a planning phase in which the design of the experiment will be completed indetail; b) a testing phase in which the experimental plans will be pilottested in a few villages before full scale implementation; c) an

- 38-

ANNEX 6Page 4 of 6

implementation phase during which the experimental insurance plans vill beoperational in all test villages and data will be collected; and d) anevaluation phase in which the experimental data will be analyzed and theresults presented to policy makers in briefings and written reports. Thetasks in each phase are given below in outline form.

A. Planning phase (9 to 12 months duration)

1. Decision will be made regarding the extent to whichhealth status and quality of care will be monitored, inaddition to the primary focus of the study, utilizationand costs.

2. Data collection instruments vill be developed andtested.

3. Baseline data will be collected at all sites.

4. Baseline data will be analyzed in order to refine planoptions.

5. Final decisions will be made on which plans todemonstrate.

6. Individual villages will be assigned to experimentalplans.

7. Protocols will be developed for village-levelimplementation of plans.

8. A claims management system will be designed andappropriate personnel trained.

9. A reinsurance system will be studied and created toprotect individual villages from extraordinary claims.

B. Testing phase (approximately 6 months)

1. The insurance system will be started in pilot villages.

2. Neceasary adjustments in insurance plans, managementapperatus and data collection procedures will be made onthe basis of early experience.

3. Revised plans will be started in the remainder of thevillages.

- 39 -

ANNEX 6Page 5 of 6

4. Reliability checks will be performed on data from thecollection system.

5. The final experiment design and procedures vill bedocumented.

C. Implementation phase (approximately 24 months)

1. The claims processing system vill be monitored on anongoing basis.

2. Periodic checks will be made on the data.

3. At the end of the first year of operation, the claimsand utilization data vill be analyzed to determine ifpremiums need to be adjusted upward or downward.

4. Individual premiums or plans subsidies will be adjustedto cover the expected cost of each plan in each village.

5. The reirsurance system will be evaluated in terms of itsreserves and payouts, and changes in the reinsurancepremiums for villages will be calculated.

6. Demographic and other data will be collected on allparticipants at end of the experiment.

D. Evaluation phase (9 to 12 months)

1. All data will be cleaned and edited.

2. Nodels to estimate the effects of plan characteristicson utilization and costs will be developed and tested.

3. These models will be used to estimate the effects ofplan characteristics on utilization and costs.

4. Depending on decisions made in the planning phase,analyses will be conducted to estimate the effects ofinsurance on health status and quality of care.

5. The management system used in the experiment will beevaluated to determine what changes would be requiredfor full scale implementation.

- 40 -

ANNEX 6Page 6 of 6

6. A draft final report that synthesizes the evaluationwill be circulated for review.

7. The results of the evaluation will be presented topolicymakers in formal briefings.

8. A final report that takes account of reviewers' commentswill be prepared and eventually published.

- 41 -ANNEX 7

Page 1 of 3CHINA

PREETIVE IIEDICINE AND RLRAL HEALTH PROJECTSauary kAounts by Year

Base Costs(YUAN Nillian) Foreign Exchange

86/87 07/88 98/59 09/90 90/91 Total x Amount

I. INUESTHENT COSTS

At VACCINE COPOMENT 19.5 52.0 32.5 26.0 - 130.0 72.4 94.1B. CIVIL ON

1. COUNTT 44.4 35.5 8.9 - - 88.8 11.1 9.92. BELOW COWUTY 11.1 8.9 2.2 - - 22,2 11.1 2.53. EPIDE1IC PREVENTION STATION 5.4 4.3 1.1 - - 10.7 11.1 1.24. COSTRUCTION 3.6 8.7 8.5 3.7 0.7 25.2 11.1 2.8

Sub-Total CIVIL WORS 64.4 57.4 20.7 3.7 0.7 146.9 11.1 16.3C. EIJIPIIEfT B VEHICLES

'. EGUIPIENT 52.2 33.8 14.8 0.6 - 101.3 60.2 61.02. VENIO.S 9.6 0.2 - - - 9.7 100.0 9.73. INTERNAL TRANSPORTPINSTAL.CDSTS 2.7 2.0 1.6 - - 6.3 0.0 0.0

Sub-Total EQUIPIENT ND VEHICLES 64.5 35.9 16.3 0.6 - 117.3 60.2 70.7D. iRAING

1. JUNIOR LEVEL LOCAL TRAINING 2.9 2.9 2.8 - - 8.6 0.0 0.02. KIBLE LEVEL LOCAL TRAININ6 2.0 2.0 1.9 - - 5.9 0.0 0.03. SENIOR LEVElE LOCAL TRAINING 2.2 1.8 1.8 0.3 0.0 6.2 0.0 0.04. FELLOISNIPS TRAINING AOADM 1.3 1.6 0.6 0.1 - 3.6 100.0 3.6

Sub-Total TRAININ6 8.4 8.3 7.1 0.4 0.0 24.2 14.8 3.6E. TEDNNICAL ASSISTANCE

1. LOCAL CONSULTANTS 0.7 0.8 0.7 0.0 - 2.2 0.0 0.02. FORE16N CON5ILTANTS 1.3 0.3 0.1 0.0 - 1.7 100.0 1.7

Sub-Total TEDIfICAL ASSISTANCE 2.0 1.1 0.7 0.0 - 3.9 43.5 1.7F. LOCAL RESEARCH 2.1 2.0 1.2 0.6 - 6.0 0.0 0.06. STAFF RECRUITIENT 3.9 2.9 2.2 0.1 - 9.1 0.0 0.0

Total INUESTEiT COSTS 164.9 159.6 80.8 31.5 0.7 437.6 42.6 186.3Total BASELINE COSTS 164.9 159.6 80.8 31.5 0.7 437.6 42.6 186.3

Physical Contingencies 17.8 22.3 11.8 6.9 0.1 58.9 54.7 32.2Price Contiencies 11.9 25.7 20.9 12.3 0.3 71.1 46.7 33.2

Total PROJECT COSTS 194.5 207.6 113.6 50.7 1.1 567.5 44.4 251.8

Foreign Exchange 78.1 89.6 51.8 32.1 0.1 251.8 0.0 0.0

NIb It 1986 17:59

- 42 -

ANNEX 7

Page 2 of 3

CHINAPREVENTIYE MEDICINE MID RURL HEALTH PROJECT

Project Components by Year(YUAN '0003

Base Costs Total

89687 87/88 88/89 89/90 90/91 YUAN USS '000)

A. STRENGTHENIN6 RURAL ALTH SERVICES 122,722.4 86,594.4 32,635.9 144.3 - 242,0496.9 75,655.3D. VACCINE CONEN 19,495.6 51988.2 32,492.6 25t994.1 - 129,970.5 40,615.8C. DR ULTM CONTRIN 11,721.8 12393.1 9,851.2 3,280.3 580.7 37827.1 11,821.0D. OPERATIONAL RESEARCI

1. PREVENTIVE EDICINE ( NCPN ) 89855.3 89622,2 5,839.4 2,106.8 1119. 25,535.6 79979.92. RURAL HEALTH INSURANCE 2,074.3 49.1 - - - 2v123.4 663.5

Sib-Total OPERATINAL RESEARCH 10,929.6 8,671.3 5,839.4 2,106.8 111.9 27,659.0 8t643.4

Total BASELINE COSTS 164,69.4 159,647.0 80,819.0 31,525.5 692.7 437,553.5 136,735.5Physical Continbgenies 17,758.9 22r328.3 11v824.5 6,933.3 68.3 58,913.4 18,410.4Price Continlencies 119892.5 25t668.2 20,923.2 12,281.0 311.5 719076.3 22,211.4

Total PROJECT COSTS 194e520.8 207.643.5 113,566.7 50,739.7 1,072.4 567,543.2 177,357.3

Foreisn Exchange 789128.8 89,598.2 51,765.7 329146.7 117.5 251,756.9 78,674.0

fa 1, 1986 18:02

- 43 -

ANNEX 7

CHIN Page 3 of 3PREIlE EDICINE RMD O WALTN PRC

Smaiy Acmt by Projuc Comwoht(YUAN Nillian)

OPERATIONAL RESEARCH

STRENOTINS NO PRENUTIVERUIAL EALTH VACCINE GUM.ITY EDICINE RRAL HEALTH

SERBICES CONENT COaTROL OM INIICE Total=m=== === = ==- _= _

I. NT COSTS

A. VACINE CKOIUEN - 130.0 - -10.o3. CIVI 1(S

1. UNITY 8B.8 - - - - C.82. DM.C0 ITY 22.2 - -- - 22.23. EPIUIC EVMIN STATIN 10.7 - - - - 10.74. CNSRUICM - - 20.4 4.9 - 25.2

Sib-Total CIIL OM 121.7 - 20.4 4.9 - 146.9C. EIUIPEN AM VHIOES

1. EWIDINT 75.2 - 15.1 10.9 0.1 101.32. VEQES 9.7 - - - - 9.73. DINTEi TRMWRiDISTAL.COST 6.3 - - - - 6.3

Sub-Total EDPI ANTl MENOS 91.3 - 15.1 10.9 0.1 117.3D. TRAININ

1. JNIR LEVEL LMCAL RAINING 8.6 - - - - 8.62. NIn LEVE LOCK TRAII 5.9 - - - - S.3. SEN LEVLLOCAL TRADn 3.3 - 0.2 2.6 0.1 6.24. FBLLOSHi,TRAININM 0.9 - 1.3 0.9 0.5 3.6

Sub-Total TRAIM 18.7 - 1.5 3.5 0.6 24.2E. TECHICAL ASSISTANCE

1. LOCAL COSiJLTANTS 2.0 - - 0.1 0.1 2.22. FEIGN CONStTANTS - - 0.3 0.4 1.1 1.7

Sub-Total TECHNICL ASSISTANCE 2.0 - 0.3 0.5 1.2 3.9F. LOCAL RESEARC - - - 5.8 0.2 6.06. STAFF RERBITNT 9.4 - 0.6 - 0.1 9.1

Total DINESTIENT COSTS 242.1 130.0 37.8 25.5 2.1 437.6Total IDSELIE COSTS 242.1 130.0 37.8 25.5 2. 437.6

Phsical Cmti,imcies 59.9Price Continumcius 71.1

Total PR.ECT COSTS 57.522=3

Foruign Exdni 251.1

Nb 1, 1996 18:03

- 44 -

ANNEX 8

CIINA

RURAL ERATH AUND PREVENTIVE MEDICINE PROJECT

Proiect Implementation Schetule(Percent Completion by Quarter)

Calendar Year 1986 1987 1988 1989 1990 1991Bankg Group -- --

Fiscal Year 1987 1988 1989 1990 1991

Ban Group Quarters 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4

A. Rural HealthConstruction 15 20 20 35 10Equipment 0 30 20 20 10 10 10Training 15 15 15 15 15 15 10

B. Vaccine Production(i) Shanghai(ii) Lanzhou 10 15 15 25 25 10(iii) Kunming

C. DrM Quality Control(i) Institutes

Construction 10 20 20 20 10 10 10Equipment 0 30 20 20 10 10 10

(ii) Pharuacology UnitConstruction 10 20 25 25 10 10.Equipment 0 20 20 15 15 15 10 5Training 10 10 10 15 15 15 15 5 5

(iii) Training ofInspectors

(iv) Constructiou 10 20 20 20 20 10

(v) Equipment 0 20 20 20 20 20

D. Oxerational Research(i) NCPN 5 10 15 15 15 15 10 10 5(ii) Rural Health

Insurance 10 30 20 20 20

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