Sarel, the Bank

A month ago the Jerusalem District Court, sitting as an administrative affairs tribunal, published a short ruling. The ruling related to the request of the Registrar of Associations to investigate the Sarel Association, which had failed to provide required financial data.

In short, the court ruled, no. No investigation, but Sarel did have to provide the missing data. It also ruled: "The Registrar shall not present the documents or their content to any other body, other than the Justice Ministry and the prosecution".

Who doesn't get to see the documents? That little thingie known as the Ministry of Finance of the State of Israel. The court forbade the treasury to see the financials of a public institution. Not just any institution, but Sarel, which engages in one of the most sensitive areas there is: buying drugs for government hospitals, and which has turnover of some NIS 700 million a year. All taxpayer money, to the last agora.

That ruling is yet another of the shining gems that Israel's court system produces when addressing economic matters. It is also another of the shining gems from the Health Ministry, which is supposed to monitor Sarel's activities. But, as usual, it does no such thing.

The Forum of 11

And why should it? Sarel is the darling of the eleven managers of Israel's eleven government hospitals. The Forum of 11, as it's known in the health system, and the Health Ministry Does Not Buck the Forum of 11.

The Health Ministry is supposed to supervise the government hospitals. But since it owns them, and since Health Ministry officials usually come from those very hospitals, in practice the Forum of 11 calls the shots at the ministry. The observed rules the observer, with the obvious results.

Sarel has a monopoly over the purchase of drugs for the government hospitals. It is supposed to exercise its advantage of size, achieving low prices for equipment and drugs. Does it?

The Forum of 11 defends Sarel and swears it does. That is an interesting statement, since most of the hospitals have never checked other alternatives for procurement. They have, in fact, no clue whether Sarel gets them a good price, or not.

It is even more interesting given that some of Israel's major government healthcare providers do shop for drugs independently, not via Sarel. One is Sheba, a government hospital at Tel Hashomer. It shops by itself and apparently for prices better than it would get from Sarel.

What are its costs, anyway?

The healthcare funds (kupot holim) also snort with contempt when Sarel's services are suggested. Clalit manager Zeev Vurmerbrand even openly declares that Sarel's prices are high.

The Health Ministry suspects as much, too. It suspects as much because it discovered over the years that Sarel is making money hand over fist and never hands any profit over to the treasury or the hospitals. It charges a 7% commission on the price of the drugs to cover its costs.

What costs? Apparently, wages for its dozens of employees. But we cannot know for sure because the wage details of the Sarel Association are buried deep at the Finance Ministry.

Things might be simpler if the Health Ministry, to which the association is subject, were to demand that Sarel disprove the suspicion that its employees are paid enormous wages, through the prices of drugs that the hospitals pay. But the Health Ministry is abetting the Forum of 11, which opposes any demand to expose Sarel's figures, or, expose Sarel to competition.

Why do they oppose it? Maybe it's convenient that Sarel carries out their purchasing, without tender. Maybe because Sarel has turned into a sort of quasi-bank for the hospitals, extending them credit amounting to hundreds of millions of shekels. And maybe because the health system's money is not their own money, so what do they care if a few doctors and workers are gorging themselves at our expense.