Israeli State Hospitals: Plan to Save HMOs Money Could Destroy Us

CEOs of the nation's government hospitals send a letter to the ministry saying that saving HMOs could destroy their hospitals.

Ronny Linder
Ronny Linder
Send in e-mailSend in e-mail
Send in e-mailSend in e-mail
Ronny Linder
Ronny Linder

A Finance Ministry plan to cut what the health maintenance organizations pay hospitals for every day that one of their customers spends hospitalized may help the HMOs balance their budgets, but it will destroy the hospitals, say the CEOs of the nation's government hospitals in a letter to the ministry.

The letter, titled "Save the public hospitals," comes in response to a ruling by the High Court of Justice that the cost-of-healthcare index, which is used to determine the HMOs' budgets, does not accurately reflect their increased expenses, and that as a result their budgets are being eroded. The HMOs allege that that erosion is causing them deficits of hundreds of millions of shekels a year.

The ruling came about half a year ago, at which time the court ordered the state to reach an agreement with the HMOs about changing the index.

Several weeks ago, the government stated that no such agreement had been reached, and representatives of the Health Ministry and the treasury said they would discuss changing both the calculated cost of a day of hospitalization, as well as the weight this factor plays in setting the HMOs' budget.

The Finance Ministry argues that the change would increase the resources available to the health system as a whole.

The HMOs allege that their current hospitalization budgets do not reflect actual costs, and want those sums increased.

Doing so would cost hundreds of millions of shekels. Instead, the sides are looking for alternative solutions - such as cutting what the HMOs pay hospitals for hospitalizations.

But this in turn would severely damage the government hospitals, which receive nearly all their revenue from the HMOs' hospitalization budgets.

"The state hospitals finished 2012 with a cumulative deficit of NIS 800 million," state the hospital heads in the letter, which bears the signature of Rambam head Prof. Rafael Beyar, Ichilov head Prof. Gabi Barbash, Sheba Medical Center head Prof. Zeev Rotstein, and Hillel Yafeh head Prof. Meir Oren.

"The hospitals also have huge debts to suppliers for medications and equipment. These debts carry over from year to year," they state.

If the Finance Ministry goes through with its proposal, "Every one of us who comes to a state hospital over the next several years will find ourselves in poorer hospitals, with smaller staffs and antiquated equipment. Some of us - those of us who are younger, those who have supplementary insurance or don't have a serious or urgent condition - can obviously turn to the private medical system. Advanced modern medicine won't be practiced in the public hospitals in a way that Israel's citizens should receive, due to the lack of resources and government support."

They estimate that the treasury plan would cut a total of NIS 190 million from the budgets of the 11 government hospitals. This does not include the public non-government hospitals, such as those owned by the HMO Clalit.

They also had harsh words for Clalit. The HMO's thundering silence stems from a conflict of interest, they alleged. The HMO owns 14 hospitals.

"The HMO is willing to subsidize its own hospitals by means of the huge savings it would generate by cutting its customers' hospitalization costs at most other hospitals," they state.

CEO Eli Depes said he does indeed support lowering the payment for hospitalizations, noting that the current means of calculating costs does not place any efficiency demands on the hospitals. The HMOs, unlike the hospitals, have been forced to take efficiency measures, he said.

The main difference between the current method and the treasury's proposal is in the weight given to staff wages. Currently, 75% of calculated hospitalization costs are attributed to wages; under the ministry plan, this would be cut to 68%. The hospitals say this would not reflect their actual wage costs.

Ministry sources offered calming words, saying that there would be no unilateral changes and that the ministry does not intend to drive the hospitals into bankruptcy.

The ministry stated in response, "The health and finance ministries are obligated to set terms to secure the long-term financial stability of the hospitals and the HMOs. Part of this involves discussing updating the system's cost indexes, as the High Court of Justice ruled on July 21, 2012. The sides reached an understanding that they need to change the components of the health services index and how hospitalization costs are updated, so that they are based on objective measures. These changes should increase the resources of the health system as a whole."

Hadassah Hospital at Ein Karem in Jerusalem.Credit: Tess Scheflan
The cost of hospitalizing a patient for a day versus what the hospitals would be paid.Credit: Haaretz
The main health care indexes.Credit: Haaretz