Peru Second Phase of Health Reform Program Implementation Completion and Results Report

G. Ratings of Project Performance in ISRs

No.	Date ISR Archived	DO	IP	Actual Disbursements (USD millions)
1	06/19/2009	Satisfactory	Satisfactory	0.00
2	12/11/2009	Satisfactory	Satisfactory	0.00
3	06/28/2010	Satisfactory	Satisfactory	0.00
4	02/23/2011	Satisfactory	Satisfactory	0.86
5	08/05/2011	Satisfactory	Satisfactory	1.20
6	01/23/2012	Satisfactory	Satisfactory	3.48
7	09/22/2012	Satisfactory	Satisfactory	4.05
8	05/10/2013	Satisfactory	Moderately Satisfactory	5.65
9	12/21/2013	Satisfactory	Moderately Satisfactory	7.40
10	07/12/2014	Satisfactory	Moderately Satisfactory	7.96
11	12/19/2014	Satisfactory	Moderately Satisfactory	9.27
12	06/17/2015	Satisfactory	Moderately Satisfactory	9.73
13	12/30/2015	Moderately Satisfactory	Moderately Satisfactory	11.98
H. Restructuring

Restructuring Date(s)	Board Approved PDO Change	ISR Ratings at Restructuring		Amount Disbursed at Restructuring in USD millions	Reason for Restructuring & Key Changes Made
		DO	IP
06/20/2011	No	S	S	1.20	Reallocation of funds to increase funds allocated to Component 2 and reduce those for Components 1 and 3.
08/25/2014	No	S	MS	8.58	Based on the MTR, the restructuring (a) revised the results framework; (b) extended the Closing Date of the Project to Dec 31, 2015; (c) increased the threshold for firm contracts to US$300,000; and (d) changed the disbursement estimates.

I. Disbursement Profile

1. Project Context, Development Objectives and Design

1.1 Context at Appraisal

1. 
   Peru was a growing economy, but with persistent inequalities, and undergoing a demographic transition. At appraisal, it had registered strong economic growth, with a 7.6% GDP growth in 2006, 9.0% in 2007 and 9.3% in 2008. This progress contributed to a substantial reduction of poverty. The national poverty rate dropped from 48.6% in 2004 to 39.3% in 2007, while extreme poverty fell from 17.1% to 13.7%. However, inequalities and disparities across regions remained a challenge. Extreme poverty was 3.5% in urban areas and 32.9% in rural areas in 2007. From being heavily rural in 1950 with 33% of the population living in urban areas, by 2007 this proportion had increased to 76%. In terms of age structure, of a population of more than 27 million in 2007, 33% were less than 15 years old and 4.8% over 65.
   

2. 
   By appraisal, Peru had advanced on some health-related MDG outcome indicators; yet, improvements were not uniform ― across all socio-economic groups, regions, and between rural and urban settings, revealing persistent inequalities. Despite its overall decrease, in 2006 the infant mortality rate (IMR) varied from 5 per 1,000 live births in the richest quintile to 45 in the poorest; Lima had a low IMR of 20, but Cusco has the highest at 84. While mortality in the post-neonatal period decreased, the relative share of perinatal mortality as a cause of infant deaths increased. This was due to conditions related to both demand and supply side factors (e.g. low institutional delivery rate, lack of immediate attention for newborns) and strongly linked with maternal malnutrition – more than a quarter of pregnant women, age 15 to 49, suffered from anemia (ENDES 2000-1). Despite progress on nutrition outcomes, one-quarter of Peruvian children under five suffered from chronic malnutrition, while 69% of children under two suffered from anemia. Located at high altitude, the regions of Huancavelica, Huánuco, and Ayacucho, among the poorest of Peru, were the ones with the highest stunting levels (more than 40 percent). At 164 deaths per 100,000 live births, Peru’s maternal mortality ratio (MMR) was almost double the Latin American average. In 2006, institutional delivery in urban areas was 92% and only 44% in rural areas. Finally, financial obstacles still represented a significant barrier to access. In the poorest quintile, 34% of individuals reported they had no access to health care for lack of money, while in the richest quintile only 6% did (ENAHO 2006).
   

3. 
   Evolving health system. The Ministry of Health (Ministerio de Salud, MINSA) had taken some steps to strengthen accountability within a fragmented health care system in an increasingly decentralized environment. Management Agreements (MAs) were adopted to set goals for the Regions/municipalities’ health networks and results-based budgeting was increasingly used. The Comprehensive Health Insurance (Seguro Integral de Salud, SIS), created in 2001 and covering over 16% of the population, reimbursed MINSA public providers based on agreed upon health plans and covered predominantly vulnerable population living in poverty or extreme poverty, although not all in need.
   

4. 
   Rationale for Bank assistance. The project evaluated in this ICR was part of a two-phase Adaptable Program Loan (APL) to support the Government of Peru (GOP)’s Health Reform Program (Programa de Apoyo a la Reforma del Sector Salud – PARSALUD). In both its phases, the overall PARSALUD program aimed at improving maternal and child health outcomes in Peru. The APL series was built on an ongoing dialogue with the Government of Peru (GOP) and on prior analytical work (e.g. RECURSO) and lending operations in the health sector (e.g. Basic Health and Nutrition Project – P008048).
   

5. 
   The first phase (APL 1) in support of PARSALUD I was the Mother and Child Insurance and Decentralization of Health Services Project – P062932, which started in July 2001 and closed in June 2006. The planned investment under PARSALUD I amounted to US$239 M, jointly funded by the International Bank for Reconstruction and Development (IBRD, i.e. the Bank) (US$ 87 M), the Inter-American Development Bank (IADB) (US$ 87 M), the GOP (US$ 64.3 M), and the OPEC Fund (US$ 8 M); the total actual investment was US$232 M ― GOP (US$ 176.80 M), Bank (US$ 27 M), and IADB (US$ 28 M). The objective of the first phase of the program was to improve maternal and child health and to help reduce morbidity and deaths of the poor from communicable diseases and environmental conditions. The specific objective of the APL 1 was to increase access of the poor to better quality health programs and services. PARSALUD I was successful in reducing perinatal mortality and IMR and increasing skilled birth attendance by strengthening the demand and improving the quality of the supply of health programs and services. APL 1 contributed to the success of the overall program and its ICR (ICR000073) rated efficacy as substantial and the overall project as satisfactory ― confirmed by the IEG evaluation. Finally, a set of nine triggers was agreed on to demonstrate readiness for transition from phase I to phase II. All triggers were met at the end of phase I, with the exception of one, due to changes in regulatory framework, independent from PARSALUD¹.
   

6. 
   The project evaluated by this ICR (P095563) supported the second phase of the GOP’s PARSALUD and intended to sustain the achievements of the first phase. The overall objective of the second phase of the program was to reduce maternal and infant mortality and reduce chronic malnutrition of children under the age of 5. The specific objective of the APL 2 are described in section 1.2. The total planned investment under PARSALUD II amounted to US$162.40 M, funded largely by GOP (US$ 132.40 M) and co-funded by the Bank and the IADB (US$ 15 M each); the total actual investment was US$165 M ― GOP (US$ 138 M), Bank (US$ 11.98 M), and IADB (US$ 15 M). The project represented a small portion of domestic financing; yet, there was considerable demand from the GOP for the Bank’s support to policy reforms and for its fiduciary contributions to leverage an expeditious and efficient execution of policies and investments. The project also did provide additional funding for regional governments for investments and interventions not covered by budgetary allocations. Finally, the project was aligned with the national and sector policies and with the Bank’s Country Partnership Strategy (CPS) for Peru for FY12-16, as well as with the Ministry of Economy and Finance (MEF)’s efforts towards results-based budgeting.
   

1.2 Original Project Development Objectives (PDO) and Key Indicators

7. 
   This project was the second of the APL series to continue supporting the broader GOP program (PARSALD II). The specific program objective was to reduce maternal and infant mortality and reducing chronic malnutrition of children under the age of 5. The program indicators were: MMR², IMR and chronic malnutrition of children under 5.
   

8. 
   The stated objectives of APL2 were to continue supporting the Borrower’s effort to reduce maternal and infant mortality rates in intervened rural areas in Selected Regions in the Borrower’s territory, in particular through: (i) the improvement of family care practices for women (during pregnancy, delivery and breast-feeding), and children under the age of three; (ii) the strengthening of health services networks with capacity to solve obstetric, neonatal and infant emergencies and to provide comprehensive health services to women (during pregnancy, delivery and breast-feeding) and children under the age of three; and (iii) the supporting of MINSA's governance functions of regulation, quality, efficiency and equity for improving the new health delivery model of maternal and child health care in a decentralized environment. The objectives were aligned between the Loan Agreement and the PAD.
   

The PDO-level indicators (Key Performance Indicators, KPIs #1-6) were:

1. 
   Increase the proportion of institutional deliveries in rural areas of the nine selected Regions from 44% (2005) to 78% (2013)
   
2. 
   Reduce the prevalence of anemia among children under age 3 in the nine regions from 69.5% to 60%
   
3. 
   Increase from 64% to 80% the share of children in the nine selected regions who are exclusively breastfed until 6 months of age
   
4. 
   Reduce the prevalence of anemia among pregnant women in the nine Regions from 41.5% (2005) to 35% (2013)
   
5. 
   Reduce the hospital lethality rate among neonates in the nine selected Regions from 9.5% (2005) to 5% (2013)
   
6. 
   Increase in the proportion of pregnant women of the nine regions with at least 1 prenatal control during the first trimester of pregnancy from 20% (2005) to 45% (2013).
   

1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification

9. 
   Neither the PDO nor the PDO indicators were revised. However, as per restructuring paper dated August 20, 2014, the Results Framework (RF) was revised to reflect the new proposed end date of the project, which was moved from January 31, 2015 to December 31, 2015. The targets of some Intermediate Outcome Indicators (IOIs) were revised and some IOIs were dropped (IOIs # 2, 5, 7, 9, 10). No additional indicators were added.
   

1.4 Main Beneficiaries,

10. 
    The main beneficiaries were meant to be families (preponderantly rural) with pregnant women and children under age of three in the nine poorest regions in the country: Amazonas, Huánuco, Huancavelica, Ayacucho, Apurimac, Cusco, Puno, Cajamarca and Ucayali. The last two regions were also prioritized due to slow advances on IMR and MMR. Particular attention was to be targeted on indigenous populations as part of vulnerable and poor groups. Other beneficiaries included health professionals who benefited from training and improved infrastructure; local health managers, who benefited from training, tools, and technical assistance; and MINSA who benefited from technical assistance for enhancing government capacities, regulatory framework for local services, and M&E functions.
    

1.5 Original Components

11. 
    The project consisted of four components:
    

Component 1 (total estimated costs US$6.00 million). Improving health practices at the household level for women (during pregnancy, delivery and breastfeeding) and children under the age of three in rural areas of selected Regions (demand-side interventions), by: a) design, implementation and monitoring of a behavioral change communication and education program to promote healthy practices at the household level, including increased demand for health services (Estrategia de Promocion de Practica y Entornos Saludables, EPPES); and b) promotion of SIS enrollment rights and identity rights of the targeted population (Derecho a la Identidad y Aseguramiento, DIA).
Component 2 (total estimated costs US$142.30 million). Increasing the capacity to provide better maternal and child health services for the poor (supply-side interventions); through: a) the improvement of the quality of services in health facilities of the nine regions; and b) the provision of support for the integrated health delivery model and the development of support systems to raise the efficiency and effectiveness of health networks.
Component 3 (total estimated costs US$5.20 million). Strengthening government capacities to offer more equitable and efficient health system in a decentralized environment (governance and financing) by: (a) supporting a regulatory framework and increasing quality in the provision of health services, (b) expanding the health insurance system (SIS) enrollment; (c) strengthening data monitoring and accountability in the system; and (d) supporting the decentralization of health services.
Component 4 (total estimated costs US$8.9 million) Project Coordination and Monitoring and Evaluation (M&E), through the provision of technical assistance, financing of incremental operating costs, and external and concurrent audits.

1.6 Revised Components

12. 
    During the 2011 restructuring, the reallocation of Loan proceeds among disbursement categories was revised, as shown in Annex 11. The contribution to Components 1 and 3 was halved (from 50% of program costs to 25%), while the contribution to Component 2 was increased (from 6% of program costs to 8%). No changes were made to Component 4.
    

1.7 Other significant changes

13. 
    The project underwent two level 2 restructurings. The first, in June 2011, changed funding allocations among components and supported more timely disbursement. It was motivated by the fact that, at the onset of the project, the GOP used domestic resources to advance expenditures for technical assistance activities originally planned to be financed with the loan funds, given that the budget allocation for the loan had not yet been approved by the borrower.
    

14. 
    The second restructuring, in August 2014:
    

1. 
   Extended the Closing Date to December 31, 2015, to complete all Project activities and to ensure full disbursement of loan proceeds, focusing on component 2 and 3;
   
2. 
   Revised the RF to increase clarity, improve the accuracy of indicator definitions and data, and revised project targets in line with available evidence and feasibility of achieving targets. The indicator target dates were also adjusted to the new Closing Date;
   
3. 
   Changed disbursement estimates to reflect the new action plan and respective procurement plan, and
   
4. 
   Increased procurement threshold for prior review for consulting firms from US$100,000 to US$300,000.