Hospital Reform Lowlights
26 July, 2012
Hospital Reform Lowlights

Malfunctioned reforms of Georgian hospital sector cut competition at the market, encouraged monopolization and non-transparency, thus depriving consumers of the choice and qualified medical service.   


The governmental strategy to reform and rehabilitate the dilapidated hospital system of Georgia through privatization of hospital sector [undertaken in 2007] so as to make the medical treatment modern and affordable to everyone, did scarcely hit the goal.  The campaign actually resulted in the rapid construction of well-equipped multi-profile hospitals throughout the country, replacing old

hospitals but they stay out of broad public reach.

Having researched the questioned healthcare reforms, the non-governmental Transparency International Georgia (TI Georgia) came to the conclusions that there are insufficient institutional arrangements that guarantee the quality of services and patient rights.

“The total privatization of the hospital sector, along with the lack of effective legislative arrangements in an environment that is characterized by vertical integration of companies in all the sectors, and a disregard for the rights of patients and medical staff, leads to various problems and is unlikely to result in a long-term improvement in health care,” the TI Georgia study aired on July 9, 2012 informs.

Almost all the hospitals in Georgia are owned by private investors whereas insurance companies prevail: they own more than 40% of all hospitals, 30% of the hospitals are owned by individuals and 20% - by other types of enterprises.

However in many cases it is not clear who the actual owner of a hospital is. In several cases there is no information and clarity about the identity and background of certain individuals, enterprises or their owners. This lack of transparency creates doubts about their involvement, experience and long-term plans with the hospitals they own.

The switch of social insurance from a voucher-based system to a regional system made insurance companies monopolist providers in regions. In the large majority of regions, the same company that builds and operates the new hospitals is also the exclusive provider of social insurance that  leads to an interest thus affecting holders of social insurance and creates a risk that the treatment that patients are offered is not based primarily on medical considerations.

As a matter of fact construction and operation of hospitals as well as provision insurance service to the state-insured socially vulnerable people for unprofitably priced package was imposed on insurance companies despite the fact that the project was believed to be not profitable in the very outset. The state literally blackmailed insurance companies in 2010 to undertake the project and analysts predicted that monopolization and infringement of consumers’ right loomed in prospect. To compensate insurance companies for crackdown, the old voucher - based system of social insurance was abolished and different insurance companies were allowed to become monopolist providers in different parts of the country. As a result patients lost the choice to opt for the provider insurance company and the hospital.

There are no guarantees for the medium and long term medical service. According to the tender contracts, investors should maintain the hospitals’ profile for seven years since the contract signature. Out of the hospitals in Georgia, 65% have less than 50 beds and 34% have between 11 and 20 beds. Once it is unlikely that these hospitals will be profitable – especially in the regions – there is a serious risk that basic services, or even hospitals, will disappear in the long run.

The prices for uninsured patients are rapidly increasing as the insurance-companies-owned-hospitals charge them higher than the insured patients. As a result uninsured people cannot afford a treatment or surgery they need.

Involvement of pharmaceutical companies in the hospital sector’s ownership and management is a potential source of the interest conflict. The largest pharmaceutical companies are increasingly becoming active in the insurance and hospital markets.  Pharmaceutical company Aversi is the owner of insurance company Alpha which provides social insurance for Tbilisi and several smaller regions. Aversi/Alpha also owns several hospitals and clinics in the capital and neighboring regions. According to some sources,  in some hospitals, preference is given to the medicines imported or produced by the pharmaceutical company that owns the hospital.

There are insufficient legislative and institutional arrangements that guarantee the quality of services and patient rights. When a patient’s right is violated, he/she can file a complaint at the Health Insurance Mediation Service (HIM). The HIM’s competence is quite limited and it cannot enforce compensation from the company that infringed consumer’s right. It only is authorized to negotiate between the parties. The lack of periodic quality monitoring, along with the HIM’s inability to protect patient’s rights, leads to risks for low quality medical service and limited access.

The position of doctors is becoming worrisome especially in regions. They are underpaid and lack protection of doctors’ rights. Companies as well as the government discourage the professional union from interfering between employer and employee. The low salary and absence of labor rights lays grounds for corruption such as pocket payments. It also increases the risk of brain drain encouraging doctors to leave for other countries where their situation is better.

To find solution to the highlighted problems the non-governmental watch-dog recommends first and foremost to minimize the risk of the regions being left without health care provision through financial incentives, introducing additional obligations for hospital owners and a program that will respond to the disappearance of services and hospitals in regions in a timely manner.

On the other hand, the HIM mandate should enhance and its institutional potential strengthen.

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