Reform of hospital sector needs urgent treatment

Alexandra Laliashvili

After global financial crisis, world started to talk about new regulations in every field.

It became obvious that changes are essential. This concerns not only strengthening of banking regulation and establish more stringent state control of financial sector. Health care reform is one of the high priority issues for new president of White House and his administration. There are many talks about reforms of health care system in Georgia. What are the similarities and differences between hardships of Georgian and American health care system? How USA administration and Georgian government are trying to reach the same goal – provide population with affordable and high quality medical service?
ince demolition of Soviet Union, Georgian health care system was characterized with typical problems, just like many other fields – these were outdated infrastructure, high level of corruption, high rate of the patients paying from own pocket that was the indicator of absence of any kind of insurance system in the country. Radical changes were needed in the field. Georgian government has started health care reforms already several years. As a result, insurance was granted by the government to the following parts of the population: Population living below the poverty margin; IDPs (Internally displaced person) of the 2008, August military assault of Russian Federation in Georgia; Children living in orphan asylums, small family houses and boarding schools; School teachers; military composition of military forces; police; national artists, painters and laureates of Rustaveli prize.
According to the data of 8 months of 2009, 1.5 million people (1,446,051) are enjoying “Voluntary state insurance program of the population” (Cheap insurance) the aim of which is to increase affordability of medical services for Georgian citizens. GEL 1.84 million is already spent within the framework of this program (sources: semiannual report of government of Georgia, September, 2009).
However, this is only drop in a bucket and majority of Georgian population is still not insured that makes unavailable to receive full medical service for the patient as the prices of medical service and medicines are increasing continually. In addition to high prices quality of medical service remains another problem. It is essential to reconstruct old hospitals and build new ones, and renew its infrastructure.
There were two alternatives before the start of hospital sector reform in Georgia – improvement of hospital sector by the state or transfer to private sector. Government made a decision to privatize hospital sector.
Healthcare system reform in USA
American system of healthcare is the most expensive in the world and multi-layer. Annual expenses in this field reach $2.5 billion. However, at the same time, 48 million Americans are left without insurance. Companies are not refunding medical expenses even to insured persons. Under the conditions of existing system only rich Americans can afford achievements of American medicine, while for the rest of the people this is a luxury. Eight American citizens out of ten cannot afford to fully cover medical treatment expenses. Three main problems characteristic to USA health care system are:
1. Catastrophically increasing prices in health care system – In the course of last 9 years, insurance premium paid by an employee to its employer almost doubled. Insurance premiums were 3% more than wages fund. USA spent $2.2 trillion on health care system in 2007 that is $7.421 per person. Health care expenses amount 16.2% of USA GDP that is twice more than indicator of other developed countries. Prices in health care system doubled in 1996-2006 years. It has been calculated that in case of such pace of price growth, health care expenses will amount 25% of GDP in 2025 and 49% in 2082 year.
High prices are directly reflected in business profitability as employers have to provide insurance policies to their employees. Percentage of employed people that were paid more than $1000 annually by the company for insurance premium increased from 1% to 18%.
For instance, healthcare expenses of General Motors increase price of each car by 1.525 USD. Company has spent 4.6 billion USD for health care in 2007 that is more than the sum spent on purchase of metal.
High expenses of health care make American companies less competitive on international market. General Motors has $5 billion loss due to health care expenses in comparison with Toyota. Medical expenses of Toyota reflected in a car price are $1.400 less than for General Motors.
2. Millions of Americans are left without insurance policy – in 2000-2007 number of middle-age Americans whose medical expenses were paid by employer companies decreased from 66% to 61%. According to the data of 2007-2008YY, 87 million Americans, below age of 65 were not insured. Considering global financial crisis, even for those people who have insurance policies visit to a doctor and getting of full medical treatment is a luxury as companies are not able to pay insurance premiums.
3. Quality of health care system – despite huge investments, providing high quality medical service to patients is unachieved goal for USA healthcare system. USA health care system evaluated by health care assesment 37-indicator system, wide spread in whole world, received only 65% evaluation. 98000 American citizens are dying annually because of mistakes made by medical personnel. This number exceeds the number of people dead of accidents, breast cancer and AIDS. USA drops behind other developed countries by the quality of inventory and information technologies.
(http://www.healthreform.gov/reports/inaction/persistent/index.html)
Considering all the above mentioned, it is not surprising that from his very first step in White House, new president of USA started to take measures to reform health care system. Barak Obama made first steps to reforming of medical insurance in the beginning of March. He summoned medics and insurance specialists in White House and declared that he was ready to discuss any subject except to keep existing health care system.
One of the conditions of a reform is increase of state subsidies for the population with small incomes. There is a second principle that implies establishing of a new system of price formation. However, accomplishment of the reform presented by president Obama is under question. President’s plan was criticized by Republicans and even Democrats. Experts are prognosticating that Obama will have to overlook own project. However, Obama is not planning to surrender his position. This was proved by his statement made in Senate on 9 September, where president announced details of health care system reform. It is a ten-year plan that costs 900 billion USD. As Obama stated, this sum will not be mobilized from taxes taken of rich citizens, but from internal savings. He noted that everybody should understand that this is a first-priority issue in USA. President announced about his new initiative to establish executive institution at governmental level that would control accomplishment of reform. According to Obama’s plan, it is considered to increase subsidies for 30 million American citizens that provide them with medical services without insurance policies. Plan also considers establishing of individual scheme of payment, changes in insurance forms, subsidies for less solvent population, and strict regulation of insurance companies. (Source: www.ft.com; www.economist.com)
Eight principles of health care reform that is set to be accomplished in April by White House administration:
1. Financial support of families and business – American citizens and business representatives must be protected from bankruptcy due to illnesses, as factually payment of full medical service expenses equals to bankruptcy for many Americans.
2. Medical expenses must become affordable – new reform must reduce administrative expenses, unnecessary tests and services should be abolished, together with such procedures that induce consumers to make unneeded expenses, while they do not improve their health condition.
3. Universality – reform should cover each American citizen.
4. Portability of payment regime – none of the Americans must be obliged to preserve a job only for covering health care expenses.
5. Ability of choice – reform must give opportunity to plan the method of paying for medical treatment expenses. That naturally implies that consumer should have ability to choose insurance schemes attached to employer, together with payment forms.
6. Money investment in prevention of widely spread illnesses – funds should be assigned for fighting against such problems in USA as fatness, sitting life style and smoking. Fight against illnesses caused by them should have a prevention character.
7. Providing patients with safe and high quality service.
8. Maintaining long-term fiscal effect – plan should imply that funds should be spent effectively and in successive steps, additional funds must be sought step by step.
Source: Washington State, Office of the Insurance Commissioner.
Reform of hospital sector
in Georgia
Affordability of medical services and offering high quality service to patients are main goals in a reform of Georgian hospital sector either.
In the beginning of 2007, when work on the reform of hospital sector has been started, the number of state owned hospitals in Georgia was 245, while the number of beds was 14 600. The indicator of their load did not exceed 28% (source: “Reform of hospital sector of Georgia and its results”, Tamta Otiashvili, 2009Y). The plan of replacing old infrastructure with the new one has been developed. It implied construction of new hospitals instead of existing old ones in Tbilisi and every regional center; new hospitals would be constructed in accordance with modern standards and equipped with the high technology beds.
The necessary number of medical institutions and beds has been defined for each region according to the types of services. The plan implied construction of majority of new hospitals in three years. On the basis of decree of Georgian government, the objects to be constructed or reconstructed according to the plan were given a status of special importance.
The aim of development of hospital sector and its principles: Creation of affordable hospital medical service for the population; Dislocation of hospitals in Tbilisi on specific territories (clusters); Development of private providers of medical services; Geographical availability; Financially acceptable, high quality service; Rehabilitation of existing network of infrastructure, arrangement of hospital sector; Construction of new, modern standard hospitals in Tbilisi and in every regional center, correspondingly with 15, 25, 50, 100 beds and more; Construction of multisectoral hospitals equipped with high technology and standard beds.
Construction of 100 new hospitals for providing hospital service with the 30 minute interval for majority of the population (90 percent) was planned. Construction of 77 hospitals in regions (in every regional centre and health resort) and 23 hospitals in Tbilisi was planned. Small-sized hospitals (15 and 25 beds) will be equipped with standard service beds. In regional centers with high level of hospital service utilization, with growth potential of employment of highly qualified specialists and created powers, should be constructed hospitals with 50 and more beds, they should be equipped with both standard and high technology beds. According to “General plan of hospital sector on development”, the number of created beds will be 7800; 3610 in regions, 4190 in Tbilisi. (Sources: Ministry of Health Care of Georgia).
“Investment program” is the basis of general plan for the development of hospital sector. The program implies privatization of existing old hospitals. Received funds will be directly spent on establishment of new hospital system in accordance with the plan approved by the government. Privatization of the hospitals was done on the basis of president’s decree – in the form of direct selling by competitive selection. Old hospitals will be transferred to investor only after construction of new hospitals. In case of meeting liabilities to state, investor will have a free hand in disposing the building and land. At the same time new hospital will be owned by an investor.
Privatization process
Ministry of Economic development of Georgia was obliged to accomplish the process of hospital privatization and reach understanding in writing with investors. The list of objects for sale and bidding terms were defined. Government sold out almost every clinical institution and owners of 80% of hospitals became three companies – PSP, Aversi and Block Georgia. Interest was expressed in 14 lots. Second lot out of fourteen has been abolished due non-feasance of the company. The remaining 13 lots consider construction of 54 hospitals and 2660 beds (820 in Tbilisi).
According to the program Georgia should meet 2011 year with one hundred new multisectoral hospitals of European standards. However, it is obvious, even from the start that this plan will not be accomplished. After failure of second lot, project was left by other participants.
Program was abandoned by several investment and pharmaceutical companies. Pharmaceutical companies Aversi, PSP and its daughter company New Hospital, investment company Award Capital and construction company New Style abandoned the project. After such occurrence, the main player of the project became LTD Block Georgia. The company has signed agreement for 10 lots that is 32 hospitals and 1615 beds. 300 beds are already constructed (Zugdidi and Kutaisi); Construction of new hospital in Dighomi cluster with 300 beds has started; Reconstruction and equipment of Temka and Sanzona hospitals is in the process (source: “Reform of Georgian hospital sector and its results, Tamta Otiashvili, 2009).
Block Georgia attracted funds from Czech national bank in amount of 300 million GEL, for the construction of hospitals. British group UME will manage the hospitals that are the property of the company. UME group’s obligation is quite versatile – attracting of foreign personnel, training of current staff and their retraining abroad, arrangement of normal structure. UME group has experience in health care network management in 23 countries of the world. According to the president’s decree, hospital infrastructure considered by No1,2,3,4,9,10,11,12 and 13 lots was transferred to Georgian-Czech Block-Georgia, Block-Invest and Medi Mex. At the same time, No14 lot will be handled by Block Georgia and Block invest together with Patrika Medi. As it appeared, the companies that abandoned the project will be replaced by Israeli company Info Technology and Turkish SILA. Israel will make investment of $93 million and construct 23 hospitals in the city, while Turkish businessmen will invest $200 million. However, this information is not officially approved. As the Ministry of Economic Development of Georgia noted, coordinated work on the mentioned project is done together with Tbilisi Mayor’s Office and information about actual state of the project will be declared in the nearest future. One thing is obvious existing of 100 new hospitals of European standards in Georgia is utopia.
The ongoing events in the country are impeding accomplishment of the plan – elections, frequent changes of the minister, August military state and problems with the banks and insurance companies caused by world financial crisis. However, as USA president declared about healthcare reform: “This is not a politics. This is people’s life. This is people’s business. This is our future”. (www.WhiteHouse.gov). Just like in USA, affordability of high quality medical service for the population should be of first priority in the country instead of political battles.