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Managing Partner, ILF Coordinator of the Kharkiv expert group on implementation of medical reform
Partner, ILF Head of medical and pharmacy law department
Ukrainian Medicine. Areas of Responsibility and Sources of Funding for Hospitals
The medical reform, whose implementation began in Ukraine back in 2017, changes the roles and responsibilities of those who influence the healthcare system. Thanks to innovation, domestic hospitals are experiencing a significant financial and personnel crisis. There is a need to reorganize the financing and management of medical institutions.
According to the changes, the head of the hospital, the main doctor, is brought to the fore in the healthcare system. In the past, the main doctor carried out the orders of public officials and did not influence hospital financing. But the main doctor is now responsible for the efficiency and productivity of the medical institution, its property, staff, and direction of development. His duties also include implementing the strategy regarding the health protection of community members.
Responsibility in Healthcare
Who is responsible for healthcare now? The Ministry of Health of Ukraine and reforms are blamed for everything: the terrible conditions in hospitals, the constant lack of medicines, poor-quality medical equipment. But the healthcare system works differently at present.
The main aim of the Ministry of Health of Ukraine is to formulate state policy in the area of healthcare and establish conditions for its successful implementation. The executive bodies of local council authorities, which are the part of the regional departments of the Ministry of Health of Ukraine, are responsible for the enforcement of state policies on health.
The National Health Service of Ukraine (NHSU), which is a newly-created executive institution according to the reform, is like a state insurer. The NHSU purchases medical services and medicines for the community, medical institutions, and pharmacies.
The owners of medical institutions are local self-government bodies (LSBs). They include rural, district, city, and regional councils. These are elected bodies that represent the interests of community members, and make decisions on their behalf. It is LSBs that decide the number of medical institutions and the list of services those institutions provide. In practice, LSBs are not only the owners of the hospitals but also managers of these institutions.
Forced into Partnership
There is no value of decisions taken at the state level if local authorities do not want to cooperate to create a useful and effective healthcare system. The reason for it is a new structure of the healthcare system according to which almost all decisions regarding the activities of medical institutions are taken by the main doctor and the LSBs of a particular city or community.
Therefore, a low level of service, a lack of quality equipment, and corruption still exist in those hospitals where the old framework of the relationship between the main doctors of hospitals and the LSBs is preserved.
The main doctor is an operator who provides medical services for people of the local community using money from NHSU and other sources. Those “other sources” do not always exist in a hospital. The funds of NHSU targeted to ensure the provision of services under an agreement between the hospital and NHSU. This money cannot be used to solve other issues as LSBs may propose to the main doctor.
For example, last year in Kharkiv Region, a LSB refused to finance the transportation of patients to another locality for hemodialysis. The chief doctor, understanding the possible risks for patients of skipping this procedure, provided funds from the medical institution’s budget and arranged the transportation of patients. The vehicle used was involved in an accident en route and patients were injured and died. The main doctor was deemed to be one of the people responsible for this and was dismissed.
The main doctor is responsible not only for money spending but for the people. Taking care of the people in this situation led to abuse of power on behalf of the patients on the spending of money. The main doctor risked and took responsibility that could have been prevented by more effective management by the LSB.
The bottom line of the reform is that of cooperation between the main doctor and LSBs, which are the owners of the hospitals. It is for this purpose that the parties sign a public agreement according to which LSBs provide effective guidelines and management of the hospitals and the main doctor focuses on providing medical services. The result of the LSBs’ and the main doctor’s cooperation is the high-quality medical services that people will receive.
Challenges for Local Government
The reallocation of roles and responsibilities is a significant difficulty for LSBs who do not have management and technical tools. It is necessary to reorganize bureaucracy within the framework of the reform. There are two ways to do this:
- To create a Board of Trustees. Hospital managers will need to involve real private business owners and managers in such a Board with experience in managing medical facilities.
- To lease the institution or transfer it via concession. In this case, the investor reconstructs the medical institution at his own expense and will be able to use the state property for free, collecting income for his benefit.
In any case, there is a great need for managers and administrators able to help medical institutions to optimize and reorganize the work process, as well as to change the hospital’s form of ownership, where necessary, in Ukraine.
At present the majority of medical institutions in Ukraine do not meet the technical and technological standards that the NHSU has guided in creating payable packages. Therefore, hospital owners need to look for resources for rebuilding property and buying new equipment. The hospitals would need to have elevators, specialist equipment for operations and other equipment. This significantly affects the nature of funds of hospitals and the procurement market.
By becoming the owner of medical institutions LSBs compete for patients with similar municipal, state non-profit enterprises, and private hospitals. There is the risk that the flow of patients, particularly in hospitals, will decrease, and a hospital will lose its funding when the sum of expenses will become the same. As a result, a hospital could go bankrupt and become a burden for LSBs, leaving them to sponsor hospitals from their own pockets or to close them.
A similar situation happened in Germany when local authorities failed to follow similar innovations and many hospitals went bankrupt, were transferred to the management of others or were completely closed. People prefer medical facilities with better services. Therefore, under the ongoing reform in Ukraine, the high level of corruption, high mortality rates, provided by the poor service Ukrainian state hospitals could bring them to a similar situation as hospitals in Germany experienced.
Consequences for the Market
The medical equipment market is also influenced by this reform. The main change is related to the participants of the market changing the system of their relations. In the past purchasing decisions were made by officials who ensured procurement via funds from the State Budget.
Currently, the medical institution and the supplier build direct relationships. The decision-making system becomes more balanced and shaped in accordance with to the strategic needs of patients and the medical paid packages established in the agreement between the NHSU and hospitals. As a result, the needs of patients have priority over the opportunity for officials to make money via illegal private deals inside a medical institution.
The reform of the Ukrainian healthcare system is a great opportunity for the entire sector and a great challenge for LSBs. Hospitals would need to become separate players on the medical services market. LSBs will turn into real owners instead of being the distributors of subsidies. They become responsible for the health of the community’s members covering the losses of hospitals resulting from their management.
At this stage, healthcare is financially attractive because it serves a market of nearly 40 million consumers and from 1 April 2020 it will receive a transparent system of rules necessary for fair competition.