Control Chamber prescribes divesture and price control to state hospitals
16 June, 2011
Control Chamber prescribes divesture and price control to state hospitals


Divesture and price control on medical service - these were two key recipes prescribed by the Chamber of Control of Georgia to the state owned hospital sector after auditing its financial papers of 2008-2010. The audit results showed more than GEL 1 million-worth loss to the state budget through the misuse of the state supported social health-care programs.  The prosecutors’ Office is already involved in the case.

Hospitals ate on the rap sheet of the state owned 1400 non-profitable enterprises. The recent audit of two state-owned hospitals including Iashvili Pediatric Hospital and Gudushairi Clinic made the Control Chamber of Georgia (CCG) think so. CCG audited both the state and privately owned hospitals that participate in the state-supported social health-care programs throughout Georgia and found out that totally the hospitals made more than a GEL 1 million worth loss to the state budget through non-transparent price-making, embezzlement and inadequately held tenders.

Only Iashvili clinic inflicted a GEL 200 thousand loss to the state budget through financial machinations, illegal registration of patients and non-transparent tenders on rehabilitation works and procurements. The state transferred GEL 99 thousand for  IDP  children to Iashvili clinics, but only GEL 38 400 was used on target and GEL 60 600 was embezzled in fact, Giorgi Alasania, head of Audit department at CCG declared during the presentation of audit results event on June 10, 2011. The price of dialyze treatment program was also blown up: Iashvili Clinic management registered the GEL 54 thousand worth 449 dialyze sessions that was not implemented in fact.

The corruption tender scheme [that cost GEL 1.2 million]  held by Iashvili clinic worked as following: clinic announced a tender on rehabilitation works in 2009, two companies participated in the tender and founders of both companies were similar persons. The winner of fiction tender ARTES Ltd did not make comments.  Audit having calculated just one- third of tender works found out GEL 50 thousand to be squandered.

Exact sums misappropriated by Gududashuri clinic is not aired as of yet for its audit has been completed just recently, and will be made public in coming days- Alasania explained to Georgian Journal. Audit of other hospitals participating in the state social programs is still underway but the picture is already clear on the example of two major state owned providers to the state programs.

“That’s why we focused on these two hospitals first of all,” Alasania said. He divides the major financial risks

and deficiencies disclosed by CCG audit in hospital sector in two key segments: improper management of state programs [illegal financing of patients, financing of non-existing treatment as well as non-registration of patients] and cheating in tenders. The single way-out is immediate privatization of hospitals, CCG recommended Georgian government. However the privately owned insurance companies enjoyed 60% profit margin through the state supported health insurance packages of socially vulnerable people the CCG audit found out in February of 2011 that followed by arrest of top-officials at the health ministry and insurance companies.  Notwithstanding, Alasania believes hospitals divesture coupled with stronger state control of price-making can solve bad management problem based on the best world practice.

According to him, some countries like UK can afford to have hospitals in state ownership and provide free of charge medical service to socially vulnerable people through them. But Georgia that cannot afford such a luxury must adopt privatization.

“Some European countries provide state social care through private hospitals but based on reasonable prices. Our problem is price-making policy in fact. For example our hospitals may require GEL 10 thousand for certain medical service when the operation costs GEL 3 thousand. Therefore it should be state not hospitals that will define prices for medical service, and the health ministry with about 3 thousand of personnel must set proper control on state programs implementation,” he concluded.