Public Private Collaboration Public Private Collaboration in Health Care Provisionin Health Care Provision

Montenegro Workshop Montenegro Workshop September 2007September 2007

Matthias LoeningMatthias Loening

Overview Overview

Hungary Health Sector

Hospinvest

– Company Overview

– Business Model

– Efficiency Improvement

– Quality Improvement

Impact to Health System

Concluding Thoughts

Hungary Health SectorHungary Health SectorContextContext

The health sector accounts for 7.8% of GDP

Public funding alone accounts for 75% of health spending, of which 66% is spent in public hospitals

In 2006 the Hungarian budget deficit was estimated to be 10% of GDP – one of the highest in the EU

The largest part of the state budget deficit is attributable to the losses by the NHIF, which has increased to 1.5% of GDP

These losses are a direct result of overcapacity and a system plagued by inefficiency

Health Sector Financing: By Source (2003)

NHIF63%

Out-of-Pocket21%PHI

1%

Other3%

Gov't (National & Local)

12%

Source: European Observatory, 2005

Downsizing, consolidation and even closure of some facilities are essential to rationalize the public health system and limit the drain on scarce public resources

Hungary Health Sector Hungary Health Sector Current Health Reform ProgramCurrent Health Reform Program

Delivery : Implementation completed April 2007

– Reduced acute care beds by approx. 15,000 (- 36%) and increase chronic beds by approx. 7,000 (+ 26%)

– Emphasis on provisioning will be transferred from inpatient services to outpatient & chronic services

Purchasing: New NHIF contracts allocated April 2007

– The method of reducing beds will be via budgetary caps put into place in inpatient, outpatient and chronic care reimbursement

Financing - There are two options being discussed to be implemented late 2007

– Allowing for a competitive market of health insurers providing the mandatory cover

– Maintain the NHF, however clearly define a reduced package of benefits to allow for the supplementary PHI market to develop

The current government has launched a number of important reforms in the health sector

Hungary Health SectorHungary Health Sector Health System StructureHealth System Structure

In Hungary, reimbursement methodology is per case via the NHIF

The reimbursement covers only OPEX

CAPEX subsidy normally comes from owner

Regional trend to decentralize ownership from MoH to Municipalities and with it CAPEX responsibility

Ministry Of

Health

Ministry Of

HealthNHIF*NHIF*

HospitalHospital

*National Health Insurance Fund

Health Services Reimbursement (OPEX)

Hungary: Organizational Structure of the Health System

Ownership &

Capital fundingMunicipality Municipality

Policy & Regulation

HospinvestHospinvestCompany OverviewCompany Overview

Public Hospital Under

Private Management(subsidiary)

Ownership concessioned

IT & Management

Support

Funding for Services

Hospinvest(Holding)

Municipality NHIF

Revenues from IT & Mgt Service Fees

Consumer(Local Community)

Service

Provisioning

Debt for CAPEX

commitment

Local BankEBRD

Equity Investment

Hospinvest is the first company in Hungary specializing in management of public hospitals

HospinvestHospinvestEfficiency ImprovementEfficiency Improvement

Hatvan

Kiskunhalas

Baja

Kalocsa

Gyöngyös

Eger

SzékesfehérvárVeszprém

Zalaegerszeg

Győr

HospinvestHospinvestQuality ImprovementQuality Improvement

Case Management Protocols

Performance Monitoring

Peer Review

Matrix System

Medical Board

Department of Patient Care Services

Hospinvest Hospinvest Quality ImprovementQuality Improvement

Patient Care Quality and Cost Effectiveness Indicators

1. Appropriateness of requesting CT scans for inpatients

2. All cases that are outliers or above norm days (related to DRG)

3. Pre-operative cases > 24 hours

4. One day surgery cases that have ALOS > 24 hours

5. Transfer of patients from one day surgery to any other unit due to complication

6. Transfer of patients from short stay surgery due to complication

7. Readmission to hospital within 72 hours after discharge (quality emphasis)

8. Transfer to ICU

9. Post-operative wound and systemic infection (e.g. infection rate)

10. Cases of dehydration during hospital stay

11. Elective C-Section Rate per total deliveries

12. ALOS > 2 nights after vaginal delivery

13. ALOS > 4 nights after C-Section

14. 3rd degree laceration during delivery where rectal ring must be repaired

15. Non-reimbursable DRG patient due to readmission (financial emphasis)

Competition

Ownership

Regulation*

Public Hospital Organizational

CulturePerformance

*Refers to opening up of the market to new providers

Input

Question of new market entrants leads directly to output but also possibly change in organizational culture of existing providers

Effect

Performance

Impact to Health SystemImpact to Health System

Rising demand (spending) for health care services and pressures on health sector funding, resulting in increased Government interest in:

- Private sector participation in the provisioning of care to improve service quality, access and cost efficiency

- Promoting private insurance to increase financing (funding) within the health sector

- Likely greater emphasis on OP facilities/care, or integrated networks, not hospitals

These pressures will only increase in transition economies with economic growth as the OECD estimates that for every 1% increase in GDP/capita there is a 1.8% increase in per capita health spending

We see several global trends that will define the market strategy as well as creating opportunities for investing in health

Concluding ThoughtsConcluding Thoughts

Concluding ThoughtsConcluding Thoughts

EBRDs role as a development organization can play an important role in the health sector to supporting the economic transition of countries in the Region

The World Bank has found that a nation’s health and the quality of its health system is a key determinant to continued economic growth within a country

From the market assessment it is clear that there is:

– A significant pent-up demand for quality health care services

– A need for access to capital (debt and equity)

– A potential role for International Financial Institutions such as the EBRD

– Direct linkages for making an economic impact within transition economies by investing in the health sector

However, there is specific challenges unique to the Sector

Contact:

Matthias Loening

Senior Health Advisor

European Bank for Reconstruction and Development

Email: loeningm@ebrd.com