Medical Reform And Regions: Why Hospitals Are Facing Funding Shortages

Hospitals are forced to optimize themselves or charge patients for services. Kramatorsk city’s experience

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“How long has it been since you last visited a dentist’s office? Examination for children is UAH 56.10. Entry of the results into the examination card is UAH 28.80! […] And you still need to purchase protective gloves and shoe covers yourself. The reform has been in effect since April 1,” wrote Olena Buhayova, a Kramatorsk resident, more than two weeks ago on Facebook. The post received over 230 comments and quickly spread over the social network being shared nearly 380 times.

The article was first published in Kramatorsk Post. We added commentary from the National Health Service of Ukraine (NHSU).

The Kramatorsk Center for Social and Psychological Rehabilitation of Children faced the same situation. Its director, Tetiana Vernyhora, complained in her Facebook post that the Center’s children used to receive free dental care, but from April 1, services for them became paid. The Center found out about it when one of their children, a girl, had a toothache.

Medical services may become paid for Kramatorsk residents not only at municipal dental clinics, but also at other hospitals. And at some of them, e.g. mental facilities, patients may be end up receiving no treatment whatsoever.

The second phase of medical reform: how it should work

If before April 1, hospitals received funding through healthcare subventions (financial assistance to local budgets from the state budget), now the funds will come from the National Health Service of Ukraine (NHSU) under the so-called Medical Guarantees Program.

The NHSU is basically a state insurance service. Registered as municipal non-profit enterprises, hospitals were to enter into contracts with said Service by April 1. The contracts specify which packages of healthcare services will be provided to hospitals and how much funding they will receive based on this.

This year, the state has set up 26 packages of guaranteed and free healthcare services for patients. Here is their list.

These services are supposed to be free for patients, but only for those of them who have signed a declaration with a family doctor. A person should receive a referral from their doctor first, and then seek help from a secondary care hospital.

Referrals are not needed to visit a gynecologist, psychiatrist, dentist or drug therapist. For those patients who do not have declarations signed with family doctors, only emergency and urgent healthcare services will be provided free of charge.

Treating strokes and heart attacks is a priority

Some service packages are prioritized and their funding is increasing: hemodialysis, stroke and heart attack care, obstetric and neonatal care, cancer care. For the first time, funds are separately allocated for palliative care (mobile and inpatient) and medical rehabilitation.

“A new funding principle is emerging. We have begun to address the substantial disparities that have existed in Ukraine’s healthcare system for years, – said head of the NHSU, Oksana Movchan, at a briefing. – In funding various types of diseases in the first place, when, for example, to treat strokes and heart attacks affecting a large number of Ukrainians, half a billion hryvnias a year was allocated, while for dental care that has not been free for many years, it exceeded a billion. [The changes] in funding mean funding a specific service, such as the prioritized stroke care”.

According to the NHSU, efficient hospitals that patients will choose will be able to increase their funding under the new system. The Service’s data shows that about 40% of Ukrainian healthcare institutions have increased their budgets compared to last year’s state and local funding. Overall, the post-reform budgets of 67% of institutions are larger than before.

The NHSU cites as an example Poltava Oblast, one of Ukraine’s leaders in the number of hospitals with large funding. For example, the budget of the Lubny Intensive Care Hospital increased by 205% and that of the Reshetyliv Central District Hospital – by 200%.

In the Service’s words, “Poltava Oblast has shown such good results because the regional healthcare network was optimized, the local authorities took care of the hospitals by equipping them and staffing them with qualified personnel. So the healthcare institutions were able to apply for a larger number of packages [services], including priority service packages that the NHSU will cover at a higher rate.”

Some Kramatorsk hospitals received no more than 30% of what they need

If we talk about Kramatorsk, the situation with funding hospitals there is not so rosy. The NHSU website has dashboards listing Kramatorsk healthcare facilities that concluded contracts with the Service. It also contains information on how much funding these hospitals will receive and what medical services they will provide.

The Regional Emergency and Disaster Medicine Center and the Regional Territorial Medical Association (Oncology Center) located in Kramatorsk will receive the most. They will be allocated UAH 285.4 million and UAH 214.3 million, respectively. The oncology center will provide the largest number of medical services in the city – 13.

Kramatorsk healthcare workers and officials admit that the NHSU’s funding is not sufficient.

“The main problem with regard to medical reform in Kramatorsk is a significant reduction in funding for non-profit facilities providing medical care to city residents,” said Valeria Melnyk, head of the city’s Health Department, in response to a request from Kramatorsk Post.

According to her, the NHSU provided for an annual amount of no more than 30% of some healthcare institutions’ needs. Such institutions will have to optimize themselves or provide medical care on a paid basis.

The official noted that in the case of municipal dental clinics of Kramatorsk, the amounts approved by the NHSU for this year are 14.4% of the annual needs of the First Dental Clinic, and 12.6% of the Second Dental Clinic. The funds received from the Service will allow the institutions to only provide free dental care to children from 1 to 16 years of age and emergency dental care in the amount of UAH 9.19 per patient.

NHSU commentary:

“Among the hospitals of Donetsk Oblast, there is a significant percentage of those receiving more under their contract with the NHSU compared to last year’s subvention. These are normally powerful multidisciplinary hospitals with a large number of patients. For example, KRAMATORSK REGIONAL TERRITORIAL MEDICAL ASSOCIATION will receive UAH 214.3 million under its contract with the NHSU in 2020, which is 122 million more than the 2019 medical subvention.

Kramatorsk Deputy Mayor Svitlana Nikonenko says that the service fee of UAH 9.19 does not cover the cost of medicines, medical devices and consumables. Therefore, the funds received from the NHSU will not suffice to run the clinics and provide dental care.

NHSU commentary:

“The healthcare service fee does not include the cost of medicines, medical products and consumables provided in a centralized manner at the expense of other state budget programs. The NHSU does not cover the medical services paid for at the expense of other sources, not specified in the contract.”

Head doctor of the Kramatorsk Second Dental Clinic, Valeriia Rusanenko, complains that the funds stipulated in the contract with the NHSU will not be sufficient to cover salaries to employees, pay taxes, and maintain medical equipment in good shape. According to her, the Service had not even transferred the money due on the contract (Ed note: the conversation took place on April 10).

NHSU commentary:

The NHSU transferred an advance payment of UAH 63,480 in accordance with the terms set out in the contract

“Dental care is 11% funded [compared] to 2019. This is despite the fact that the minimum wage increased compared to last year. Because the NHSU has not yet provided us with even 10% of what we need, the head doctors are forced to either send people home on unpaid leave, which is what we do [or charge for services],” says Valeriia Rusanenko.

The underfunding of dental clinics threatens to reduce the number of medical staff and reorganize these health facilities by merging them or even closing them down. Therefore, the local executive committee wants to approve a new price list for medical services provided by dental clinics. The respective draft decision has been presented for public discussion.

With no funding in place, mental patients will end up on the street

Kramatorsk Psychiatric Hospital that provides care to patients not only from this city, but also from other cities of Donetsk Oblast – Kostiantynivka, Druzhkivka, Toretska, Avdiivka, Selydovo – also faced the issue of underfunding.

According to its contract with the NHSU, the hospital should receive almost UAH 7.7 million for the remaining nine months of the current year. In actual fact, the funds received in April did not even cover their employees’ salaries. The Oblast Health Department came to the rescue covering the shortage, says Liudmyla Sevostyanova, the mental facility’s head doctor.

“If it weren’t for the Department, the hospital could be closed and all patients thrown out into the street,” she told Kramatorsk Post.

The NHSU concluded a contract with Kramatorsk Psychiatric Hospital for two packages of medical services: psychiatric care for adults and children on an outpatient basis and that on an inpatient basis.

The outpatient treatment fee is set per 100 visits, with the inpatient treatment fee being set per treated case. The final fee is UAH 7,200, but it is unknown for what period this amount is provided. According to Sevostyanova, the average length of stay of patients at a mental facility is up to 50 days, and if someone is placed there by court order, they can stay for six months or a year.

“There are patients whose caregivers have died, and they are waiting for a voucher to nursing homes. They can wait a whole year for those vouchers. What should I do with these people?”, asks the head doctor.

According to her, the psychiatric care fee is too low and it is unknown how it was calculated. The amount for inpatient treatment set out in the contract is not enough to even pay the minimum wage to all hospital staff, including the head doctor. There is also a lack of money for food and medicines for patients.

NHSU commentary:

“Mental care is at the intersection of two types of care – medical and social. But the National Health Service provides funding for healthcare services, not social ones. The calculations are based on the weighted fee to pay for mental healthcare services. Mental health facilities will receive funds from the NHSU for their willingness to provide mental care services according to the base rate of UAH 7,406.4 per treated case. Depending on an institution’s ability to provide healthcare services in intensive care or without it, the fee will change accordingly – UAH 8,161.8 or UAH 7,273. According to experts, this fee is quite sufficient with regard to healthcare services.”

For more information on what is happening to mental care, read the article on VoxUkraine.

Liudmyla Sevostyanova says that the fee, interalia, does not take into account the fact that people with mental disorders stay long at the hospital, especially those with severe mental disorders posing a threat to themselves and potentially others.

The fee does not take into account individuals hospitalized in a mental institution for compulsory treatment by a court decision (the average length of stay of such people in the hospital is 172 days); there is no provision to cover the treatment of patients under a medical court order of applying coercive medical measures (i.e, individuals who committed crimes and were declared not criminally responsible by reason of mental disorder). Patient treatment in a day hospital setting, psychiatrists’ work in the military registration and enlistment office is not taken into account.

Another problem that arose after the start of the reform’s second phase is that the NHSU does not allocate funds for medication on special terms for patients with mental disorders (persons with disabilities in groups 1 and 2, war invalids, etc.). It is not clear who should be funding it. As a result, about 2,000 people did not receive medication, says Sevostyanova.

NHSU commentary:

«The NHSU pays for services rendered within the Medical Guarantees Program’s budget. The healthcare service fee includes the medicines in the National List, excluding the cost of the medicines, medical products and consumables provided in a centralized manner at the expense of other state budget programs. As regards the privileged categories, the mechanisms for purchasing medication for them are stipulated in Resolution No 1303 “On free and preferential provision of medicines according to doctors’ prescriptions in case of outpatient treatment of certain groups of the population and for certain categories of diseases”. Anything exceeding the MGP budget can be covered under local programs or with the participation of other Ministries».

Minister: Nearly a thousand hospitals faced the issue of underfunding

Maksym Stepanov, Ukraine’s Minister of Health, confirms that one of the consequences of the implementation of the reform’s second phase is massive layoffs of healthcare workers. According to him, 984 hospitals in Ukraine have a budget deficit of 10 to 50% after the transition to the new funding system. Announcing the start of medical reform on April 1, the NHSU stated that it had entered into contracts with 1,662 hospitals. Meaning that more than half of Ukrainian medical institutions faced the issue of underfunding.

Stepanov cited the example of Zaporizhia Oblast, where out of 145 emergency medical care units, 30 were threatened with layoffs. According to him, the situation is more or less the same in all regions of Ukraine. Due to insufficient funding, in addition to the emergency ambulance service, the TB service, mental institutions and highly specialized medical facilities are also at risk.

At a briefing on April 22, the Minister called such a situation “unacceptable” but did not say what measures would be taken to address the problem. According to Stepanov, the Ministry is currently only studying the situation gathering information from regional health departments and auditing the domestic healthcare system. Based on the results, the Government will get a full picture of what is happening to make changes to avoid a reduction in the number of healthcare employees.

“In several days I’m waiting to receive full information on the plans for the so-called “optimization” of the healthcare network from the regional health departments. But I’m waiting for feedback from doctors about the current situation in the context of the implementation of the reform’s second phase, in the first place. I’m totally not ready to allow layoffs of medical workers. This issue is now a priority,” wrote the Minister on Facebook.

Expert opinion: the reform’s successes and shortcomings depend on both hospital heads and owners 

The issue of funding hospitals during the reform’s second phase has a number of aspects, with funds from the national budget being just one of them. This is emphasized by Svitlana Bubenchikova, healthcare reform group expert at the Reanimation Package of Reforms association:

“It’s too early to draw conclusions on the second phase of the reform. A number of unknowns still remain in the equation called “successful reform implementation”.

First, how effectively are the funds used by healthcare institutions? This indicator is extremely important, as it is related to the financial obligations of local authorities and self-government (medical institutions’ owners).

This is about funding hospitals in terms of technical equipment, repairs, utilities and other costs that should be borne by the local budget, including additional funding for the healthcare sector under the local programs.

Medical institutions’ owners should specifically analyze such indicators when deciding on co-funding hospitals and using the funds rationally. It is necessary to collect and analyze reliable statistical, economic, and medical data at the regional level. So the successes and shortcomings of the reform’s second phase depend not only on the NHSU and the MoH, but also on establishing dialogue and collaboration between the hospital heads and owners.

A second nuance concerns the operation of the central component of the eHealth system. This is not the only thing one should pay attention to in the work of eHealth, but this component is very important.

On April 22, the National Health Service created a special eHealth reporting service as part of the NHSU information system. Hospitals need to use this reporting service to generate reports on the services they provided in April. Using this service within the NHSU information system is also mandatory for the providers entering data on services rendered into eHealth through their hospital information systems (HIS).

In addition to an obvious double reporting burden, there is another facet to this issue. Doctors can make a wide range of mistakes when entering data (e.g. with regard to treated cases at the hospital). Experience with a pilot project in Poltava Oblast shows that, at the initial stage, the possible amount of erroneous data can be up to 25%!

Reporting errors will also mean a partial or complete loss of money for services rendered. For example, hospitals offering inpatient surgery and therapy packages will receive funds for three months (April-June) based on the amount of funding calculated from healthcare services rendered and treated cases in 2018 and 2019 (the so-called global budget).

Starting from July, the funding will be based on the new model, i.e. the NHSU will only pay for what was actually done by a hospital (under the approved medical guarantees package) and reported (according to the procedure described above). The NHSU WILL NOT look into where exactly mistakes were made, let alone correct them. So, we can only guess what the hospitals’ possible financial losses will be, since each single mistake in the report means less money coming from the NHSU. Tens and hundreds of thousands of hryvnias. Unfortunately, there is no mechanism for automatic verification and error correction in the NHSU’s system and eHealth.

Nextly but not lastly: the regions had to prepare for the reform’s second phase anyway, and they had such an opportunity. Here is one of the positive examples. Poltava Central District Hospital analyzed the relevant indicators to conclude that it is more economically profitable to outsource such services as laundry, food and cleaning, instead of carrying them on the balance sheet. This is just one example of what managerial decisions can be like in the context of evaluating healthcare facilities’ economic performance.

Of course, the hospital also went through a restructuring process (what many now call “hospitals are closing and doctors are on the street”). By using a rational approach and well-thought-out managerial decisions (in tandem of both the head and the owner), the laid off workers do not end up on the street but are offered alternative employment. After all, the fact is that there is a shortage of medical staff in Ukraine. But this requires a huge amount of work and analysis, both on the part of a single medical institution and the entire healthcare network in the region.

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