Israel Plans Bail-out for Cash-strapped Laniado Hospital

Venerable Netanya medical center faces $60.5 million debt.

Laniando Hospital in Netanya.
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Laniado Hospital in Netanya has fallen into financial straits and the government is drafting a recovery and assistance plan for it, TheMarker has learned.

There are no indications that Laniado, owned by the Tanz Hasidic movement, was mismanaged, the health and finance ministries found in an initial investigation. Rather, the hospital is facing the problem that all privately owned public hospitals face: rising costs that aren’t fully reimbursed by the health maintenance organizations.

This comes after the financial collapse of Hadassah Hospital in Jerusalem in 2014.

Laniado was 235 million shekels ($60 million) in debt by the end of last year, and had an annual deficit of 50 million shekels for that year.

“The problem at Laniado, as with all public, non-government hospitals, is that unfortunately you have to bail them out every few years, like we did for Hadassah,” Health Minister Yaacov Litzman told TheMarker. He added that the ministry had conducted a thorough check of the hospital’s salary expenses. Laniado will be getting a recovery plan, just like Hadassah, said Litzman.

The hospital is currently operating under the close supervision of the Health Ministry as well as an accountant, and its cash flow is being monitored daily. As part of the recovery plan, the hospital received 15 million shekels from the state in April. The state is likely to transfer another 11 million shekels soon. It also gave the hospital 11 million shekels last year.

The Health Ministry plans to continue its assistance until the hospital’s books are balanced.

Laniado’s troubles don’t stem from a bloated workforce or excessive salaries, the ministry found. Rather, it suffers from a known problem facing all independent public hospitals in Israel: It isn’t being subsidized by anyone. The hospital has more than 30 departments and 400 hospital beds.

Employees have been paid on time, although they discovered earlier this year that pension payments deducted from their salaries were not deposited into their pension funds. The hospital made up the payments several months later, but without paying interest or compensation for the delay.

The state is helping draft a five-year recovery plan that would enable Laniado to pay off debts. It includes salary cuts and cutting back on operating costs. It is unlikely to include layoffs, as Laniado is already slightly understaffed.

Israel has three categories of hospitals: Government owned, those owned by the HMO Clalit, and privately owned. All the government hospitals have faced deficits over the years, and are subsidized by the state, either directly or indirectly. The Clalit hospitals are subsidized by the HMO itself.