First Aid for Ailing Israeli Hospitals: Regulatory Agency on the Way

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A committee set up to revamp the structure of Israel’s health system is nearing a decision to transfer supervision of government hospitals from the Health Ministry to an independent regulatory agency.

The decision is meant to solve an inherent conflict of interests: The ministry itself owns many of the hospitals it regulates, and consequently, its regulation has long been seen as weak.

The committee is headed by Health Minister Yael German, but the regulatory issue is being discussed by a subcommittee headed by Ronit Kan, the former Antitrust Commissioner. Kan’s panel has tentatively decided that a new, independent regulatory agency should be established by law, similar to the Antitrust Authority or the Israel Securities Authority. This agency would report directly to the health minister. It would have its own budget, independent of the Health Ministry budget, and would not be staffed by ministry employees. Its mandate would be to supervise the hospitals’ administration and finances, while the Health Ministry would continue to supervise their standard of health care.

The subcommittee hopes to define the requirements for heading the agency in such a way that doctors will rarely get the job – though they won’t explicitly be barred, lest they claim illegal discrimination. The goal is to solve the “revolving door” problem that currently hampers the ministry’s oversight of hospitals: The ministry is mainly staffed by senior physicians, and its director general is usually a former hospital director, who resumes being a hospital director after leaving the ministry. Nevertheless, it’s not clear how effective this effort will be, since hospital directors would clearly meet the qualifications for most senior administrative positions.

Another question the subcommittee has yet to address is whether the new agency will oversee only government hospitals, or all hospitals. Hadassah Medical Center, for instance, is a private institution, and the absence of any government supervision is thought to have contributed substantially to the financial crisis that has now brought it to the brink of collapse.

The German Committee was established before the Hadassah crisis erupted, and its original mandate was limited to solving the regulatory problems at government hospitals. Now, however, the committee will have to decide whether to subordinate private hospitals to the new agency as well, or alternatively, have them answer to the Health Ministry, which has no conflict of interests in their case.

On one hand, it makes sense for all hospitals to be regulated by the same agency. But on the other hand, the state is reluctant to do anything to upset the Clalit health maintenance organization, which owns 14 hospitals. Moreover, Clalit’s hospitals are generally considered to be far better run than the government hospitals, raising questions about what would be accomplished by subordinating them to the state’s less effective regulation.

In a victory for the Finance Ministry, the committee has also decided to accept its demand to station treasury accountants at all the government hospitals. The treasury has argued for years that without this measure, it can’t supervise the hospitals’ budgets. But the hospitals objected, saying it infringed on their managerial authority.

In addition, the committee has tentatively decided to require the hospitals to set up boards of directors to provide another layer of supervision over their management, as is the norm in most large organizations.

All these new regulatory measures will enable the committee to make another fundamental decision: to leave the government hospitals under state ownership, instead of either turning them into independent corporations or – the treasury’s preferred option – transferring them to the HMOs. The German Committee opposes these ideas for three reasons.

First, they’ve been proposed in the past, and implementing them always proved so complicated that nothing ever happened. Second, transferring the hospitals to the HMOs would give the HMOs control over virtually the entire health system, thereby making them so powerful that no regulator would be able to contend with them. Third, it might divert the HMOs’ attention from community health care, which is their current focus, and which the committee believes should remain their primary concern.

One question that still hasn’t been settled is whether to set term limits for hospital directors and department heads. Most members of Kan’s subcommittee favor such limits, but the doctors on the panel object vehemently.

Meanwhile, a court ruling on Wednesday has paved the way for Hadassah’s striking doctors to finally return to work. At the request of the hospital’s trustees, the Jerusalem District Court agreed that the hospital could continue to pay out on malpractice claims despite the stay of proceedings it has received, which formally freezes all lawsuits against it.

Earlier on Wednesday, Hadassah’s management reached an agreement with union leaders that enabled nurses and administrative personnel to return to work. But the doctors refused to return to work unless the malpractice issue were resolved, fearing that otherwise, they could be personally on the hook for multimillion-shekel lawsuits.

At Wednesday's hearing, the trustees’ lawyer explained that some 227 lawsuits are currently pending against Hadassah. Usually, doctors aren’t named as defendants in such suits. But recently, because plaintiffs fear they won’t be able to collect from Hadassah, their attorneys have begun sending warning letters to doctors saying that if Hadassah doesn’t pay, the doctors will have to come up with the money.

Faced with this threat, attorney Amir Bartov said, the doctors were understandably refusing to work – and “without doctors, there is no hospital.”

Judge David Mintz accepted this argument, and therefore authorized the hospital both to continue paying premiums on its malpractice insurance and to pay whatever portion of any malpractice award its insurance policy requires it to pay. At the trustees’ request, he also extended the stay of proceedings to the doctors themselves, thereby preventing any lawsuits from being filed against them.

Hadassah Hospital employees striking, Feb. 10, 2014. Sign reads, 'Save the medicine at Hadassah.'Credit: Emil Salman

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