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LAW WOULD REVERSE CHANGES MADE UNDER PREVIOUS GOVERNMENT

An end to joint stock hospitals?

TRANSFORMING a public hospital into a joint stock company might soon be at odds with the country's laws.
The Slovak Health Ministry is proposing a law that would completely halt the transformation of Slovakia's hospitals into joint stock companies, a move started by the previous government to cut Slovak health institutions' debt.
The Health Ministry is concerned that the state would lose its influence over hospitals that become joint stock companies.

TRANSFORMING a public hospital into a joint stock company might soon be at odds with the country's laws.

The Slovak Health Ministry is proposing a law that would completely halt the transformation of Slovakia's hospitals into joint stock companies, a move started by the previous government to cut Slovak health institutions' debt.

The Health Ministry is concerned that the state would lose its influence over hospitals that become joint stock companies.

The goal of the draft is to keep national health institutions, institutions that perform in special situations, and teaching hospitals in state hands, according to the Health Ministry's official proposal.

"If a hospital has already been transformed into a joint stock company, the sale of its shares should be approved by the cabinet," reads the draft amendment.

The draft, which is to take effect in January 2008 but halt the transformation process on December 30, also stipulates that the state's stake in joint stock hospitals must not slip under 51 percent.

The government of Mikuláš Dzurinda passed a law on health care providers in September 2004 to open the way to transforming health care institutions from state-funded organisations to business entities. The new legislation made hospital managers responsible for the financial situation of their institutions.

The debt of Slovakia's health care providers reached Sk6.7 billion (€198.3 million) by the end of 2006, while the total debt of the health care sector totalled Sk6.8 billion (€201.3 million), which is 0.42 percent of the country's GDP.

The previous government introduced the change to force hospitals to operate effectively, as the state would no longer be liable for their debts.

Under this law, "the state has lost one of its tools to exercise power and enforce state policies over these institutions," reads a document from the Health Ministry.

"I want hospitals back in state hands," Health Minister Ivan Valentovič told the SITA newswire in early July. He said the healthcare system in Slovakia is greatly destroyed and disintegrated.

The hospitals said that for them, the main issue is preventing mounting debts for their institutions, not their status.

"We do not care whether hospitals will be joint stock companies or state-funded organisations, because that is not the most crucial thing," said Marián Petko, president of the Association of Hospitals of Slovakia. "For us it is important that the rules are set in a way that the organisations cannot fall deeper into debt."

The rules should set tough budgetary criteria, including control mechanisms, and the directors of the hospitals should be responsible for the hospitals' debts, Petko said.

The experience with non-profit state-funded organisations over the past 15 years has shown that they do not solve the problem of debt, he said.

"For example, now some hospital directors do not pay payroll taxes and they do not pay the tax offices and no one files a complaint against them, as they rely on the state covering their debts, which is absurd," he added.

However, Petko said that teaching hospitals and hospitals that provide specialised care should remain in state hands because they are responsible for state policies.

"I cannot imagine how the policies could be secured otherwise," he added.

But the Health Policy Institute think-tank said that halting the transformation process was "a bad decision".

"The transformation is changing only the legal form and not the ownership," Tomáš Szalay of the Health Policy Institute said. "The state would still keep the majority share, however the hospitals would have to lead transparent bookkeeping, they would be subject to independent audits and they would be responsible for the results of their own performance."

It would also make it possible for private capital to enter the system, as Slovak hospitals are hungry for investments and the state, as their owner, has been neglecting them over the long term, Szalay said.

"Cancelling the duty to transform the hospitals, the state-run institutions led by political nominees, will continue prod-ucing debts without dealing with the responsibility for doing so," he said. "It will further compromise the quality and deepen the frustration of health care employees."

The transformation, however, will still have to be carried out one day, with the difference that its price will be much higher, Szalay said. Cancelling the transformation of hospitals was neither in the ruling parties' political agenda nor the cabinet's agenda, he added.

In 2006, Slovakia had eight hospitals operating as joint stock companies. Two hospitals had private owners and the rest were in state hands. Another 29 were non-profit organisations, 30 were budgetary organisations and seven were limited liability companies, according to statistics from the Health Policy Institute.

When former health minister Rudolf Zajac was leaving his post, he said that the failure to wrap up the process of transforming the health institutions was one of his failures in the ministerial post, according to the website Zoznam.sk.


Debt in health care (in billions of Sk, €1 = Sk33.827)
As of Dec 31, 2005 As of Dec 31, 2006
Health care providers total 4.417 6.710
- Under full control of Health Ministry 2.033 4.435
- Transformed into joint-stock companies - 0.014
- Transferred onto municipalities and territorial units as non-profit organisations 2.384 2.275
Health insurers total 1.217 0.097
Health care sector total 5.634 6.821
Debt as a share of the GDP (in %) 0.38 0.42

Source: Health ministry and calculations of Health Policy Institute, 2007

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