Finger-pointing Can't Hide the Fact That Hadassah's Problem Is Structural

Everyone is complicit in allowing the 95-year-old hospital to deteriorate to the extent that it has, because the structural status quo suited all interests.

Many reasons have been advanced for the financial crisis at Jerusalem's Hadassah Hospital, which filed for protection against its creditors two weeks ago.

More often than not, the reason given correlates with the interests of the party advancing it. Thus, the U.S.-based Hadassah Women's Zionist Organization, which owns the hospital, blames lax government oversight and some members of the hospital's board; the government, on the other hand, blames the women's organization, while several journalists have taken issue with the over-generous financial terms given to former hospital director Shlomo Mor-Yosef and the hospital's wholehearted adoption of private medicine, known as sharap.

It's not easy for the layperson to cut through the thicket of accusations and counter-accusations and come to a true understanding of what ails the capital's flagship medical center. What is clear is that the hospital has degenerated into a bloated mess, with 1.3 billion shekels in debt and no-one willing to take responsibility.

Hadassah is one of the largest hospitals in the country, with revenues in 2012 of close to 2 billion shekels ($569 million). The vast bulk of that revenue comes from the country’s four health maintenance organizations (kupot holim), which pay for regular services rendered through the public health system as well as medical care provided by doctors at Hadassah on a private basis for supplemental insurance plans.

In short, while the women's organization finances infrastructure and other expenses, operational expenses are covered almost entirely by public funds. In addition, Hadassah’s revenues are limited by the state, as part of government curbs at all the country’s hospitals, in an effort to rein in healthcare spending.

There is no doubt that Hadassah in the U.S. has been through its own financial crisis and has reduced its funding of the hospital in recent years. The organization sustained major losses as a result of the Ponzi scheme operated by Bernard Madoff, who managed about $90 million, or 11 percent of the organization's financial assets.

At about the same time that the Madoff losses came to light, Hadassah also suffered a drop-off of contributions due to the global economic crisis. As a result, the women organization cut its funding to the hospital to about $20 million in 2009, compared to the $40 million it provided in 2008. $20 million is the minimum sum the organization is committed to providing.

Despite its financial difficulties, Hadassah contributed more than $363 million for the construction of a new hospital tower at the hospital's Ein Kerem campus - an operational burden that has been mentioned as a contributory factor to the hospital's financial crisis.

But the women's organization is not a major contributor to operational expenses and a large portion of the medical center's costs, such as doctors' wages, are not within its control. Physicians' salaries are currently based on a wage agreement between the state and the Israel Medical Association, leaving the hospital's management with limited leeway in addressing the situation.

Health Ministry Director General Roni Gamzu says that Hadassah is a private hospital over which the ministry has no oversight authority. Privately-owned hospitals, Gamzu said, don’t want to be regulated, “but when they’re in trouble they come and ask for assistance from the state.”

Audrey Shimron, executive director of the Israeli office of the Hadassah women’s organization, acknowledges that the hospital has a huge deficit, but argues that "just a tiny portion of it is the result of management problems, and most of it is due to unfair treatment by the government.”

Government's failure to raise the cap on the provision of services provided by the hospital, as well as its imposition of fee discounts, are the major cause of the hospital’s plight, Shimron says. “There are things that the hospital has to do, but the government also needs to lend a hand,” she says.

So, the government says it has no oversight, while Hadassah says that government involvement is at the root of the crisis. Both are right, to an extent, but both are also passing the buck.

Hadassah Hospital has a structural problem. It is a semi-private, semi-public institution that is barely regulated and run with very little supervision. The lines between the responsibilities and obligations of the two main players – Hadassah women's organization and the state – are sufficiently vague to enable each to blame the other. In such conditions, mismanagement can flourish and financial largesse can go unnoticed. Both were rife at Hadassah.

The hospital is also part of a larger problem. The Health Ministry doesn't seem to really supervise any of the country's hospitals, even the ones it owns. In most hospitals, the director has free reign – and often occupies his seat for a term well in excess of 10 years.

Hospital directors have, by and large, been enthusiastic backers of private medicine, which is a booming business. In the case of Hadassah, sharap earns hundreds of millions of shekels each year, but very little of that - 22%, to be exact - accrues to the hospital itself, even though it carries all the expenses. The doctors keep most of the money, leaving the hospital and its services to deteriorate further.

There is no one villain in the Hadassah saga. Everyone is complicit in allowing the 95-year-old hospital to deteriorate to the extent that it has, because the structural status quo suited all interests. Whatever the resolution of the hospital's financial crisis, it needs a structural overhaul if it is ever to be truly healthy.

Olivier Fitoussi