NEW INERHC ANNUAL ECONOMIC RESEARCH OF THE SLOVENIAN HEALTH CARE SYSTEM

17.06.2008

INERHC prepared a new annual economic research evaluating some of the areas of the Slovenian health care system.

Apart from the members of the INERHC – economists Aleš Živkovič, Rado Pezdir, and Mićo Mrkaić – external partners Franc Hočevar, Ivan Eržen, and Tit Albreht have also cooperated in the research process. The conclusions of the research show inefficient allocation of health care resources in the areas such as drug pricing and financing policies, pharmacy sector, salary system, and other. The economic losses generated in these areas are also quantified.

HEALTH TECHNOLOGY ASSESSMENT (HTA) GUIDELINES

31.01.2008

INERHC has prepared the first health technology assessment guidelines for Slovenian setting.

The purpose of the guidelines is ensuring quality and transparency of preparation, evaluation, and interpretation of health technology assessment research. The guidelines are based on other comparable documents and are considered as minimum standard in health technology assessment process.

IS THE SLOVENIAN HEALTH CARE SYSTEM FACING A BREAKDOWN?

27.05.2007

ANALYSIS AND RECOMMENDATIONS FOR THE ECONOMIC AND HEALTH CARE POLICYMAKERS

INTRODUCTION

Slovenian health care has been facing an increasing number of structural problems, which also appear in large state and publicly financed health care systems in developed countries. It will be impossible to avoid such problems in the future mostly due to demographic movements, thus demanding significant interventions in the regulation of the current health care system. On the one hand this is a problem involving an inefficient use of public funds, which due to demographic movements increasingly puts pressure on economy and limits highly necessary investments in the health care infrastructure. On the other hand the health care system with its key parameters, establishing the offer of health care services, faces a wide range of rigid instruments of economic and health care policies. The latter mostly includes the system of collective contracts, the determination of costs of medical services and medicinal products on the centralised level, excluding applicable economic studies and activities of interest groups (various chambers and associations), which prevent the offer of medical services being adjusted to the actual demand. The consequences then appear in monopolistic and cartel “annuities” (these consequences can be seen in case of doctors’ salaries, which are not determined according to productivity, thus causing that all the productive and overloaded doctors are not rewarded as they should be; or also at the determination of prices of medicinal products and other costs, connected to treatment etc.), which increase the risks an increasing the number of taxpayers’ diseases and mostly cause inefficient use of public funds and prolong patient waiting times. The present research, implemented by four authors, systematically analyses the existing rigidness in the market of medical services providers and shows that individual interest groups currently prosper in the health care system by concluding agreements on key health care services markets excluding the involvement of payers (taxpayers) and actual needs that emerge from the consumers of medical services. Recommendations, provided by the authors of the study, consider the decrease of the influence, posed by the interest groups (associated in individual chambers) in the process of adopting legislation and the determination of parameters in the medical services market, liberalisation of the market of medicinal products and organisational reformation of public institutions into companies in the field of pharmacies and health care. The analysis puts great significance to the increase of hospital management efficiency and prevention of diminishing the autonomy of operating directors, since this is currently happening due to great influence of interest groups allowed on a system level, current policy and the system of collective contracts, which limit normal business operations of hospitals. Considering demographic trends and macroeconomic situation, it is now evident that additional financial funds will be necessary for larger infrastructural projects in health care despite the solution of the majority of the above mentioned structural rigidness. At this point a very popular possibility offers itself, namely private partnership. The present study recommends public-private partnership only when all structural problems in Slovenian health care system are eliminated. In the opposite case we can expect problems due to the emergence of interest groups merged in public-private partnerships, which will insist on covering private risks by public finances. One of the recommendations also mentions that according to an applicable regulative it is reasonable to include private capital in health care, and additionally diversify the provision of health insurance offers to the private sector. At this point we should point out the part in the study which explicitly shows that in case of absence of larger structural changes and unchanged manner of health care system financing (in other words – if interest groups will continue with their activities and the health care system will be inefficiently financed), demographic trends will cause great problems, which could seriously affect the access of Slovenian consumers to health care services.

The study analyses the question of medicinal products’ prices regulation system efficiency as well as anomalies and discrepancies which the system brings. We have shown that inefficiency emerges on the system, institutional and financial levels and at the same time enables favouring certain interest groups and consequently unjustified as well as inefficient subsiding of private branches which operate in the production and distribution of medicinal products. We shall continue to monitor the rationality and efficiency of public funds granting system for the purchase of medicinal products. In this way we will take a closer look at the process of classifying medicinal products to various lists and also try to estimate the influence of this process on its economic efficiency from the point of view of its transparency. We shall also review the interaction between the regulation of prices of medicinal products and other measures of supervision of the public financial expenses for medicinal products on the one hand and on the other hand the regulation of wholesale branch and pharmacy activities financing system. The part that applies to the medicinal products market will be concluded with an overview of some potential additional measures, worth thinking about, if we really wish to optimise the use of public financial funds intended for the purchase of medicinal products.

The second part includes the proposition of a modification of the legal and organisational form of health care system due to the maximisation of consumer’s interests. Here we have presented an unclear role of the current regulation system, which enables the emergence of cartels and interest groups, which is then transferred in the medical services market rigidness. We also present further real possibilities for public health care financing, mostly infrastructural projects. The study presents that considering the connection of the political and economic market in Slovenia we can expect a public-private partnership as the most real instrument of guaranteeing funds for public health care. Considering the structural features of Slovenian health care we speak in favour of the public-private partnership only as a temporary solution prior to the entry of private capital to the medical services market. The other part of the study ends with an establishment that the worst conclusion of events would be the sustenance of structural problems in health care including public-private partnership, determined according to political preferences.

The third part of the study shifts from the macro to the micro point of view of establishing an efficient financing system of hospital activities. Due to various institutional limitations, which disable the autonomy of a business director, we propose that the organisational structure of hospitals, currently public institutions, approaches the organisation structure of companies, where responsibilities and obligations are explicitly determined, possibilities for political interventions and interventions of interest groups are minimal. We have formed a proposition of modifications of the current articles of associations of Slovenian hospitals for the needs of such organisational structure reformation.

The fourth part of the study reviews structural problems of Slovenian health care system from the macroeconomic point of view and considering the demographic trends (by explicit assumption on the activities of interest groups and inefficient regulatory system) we summarise that the solution to the problem is only in the definition of the basic package, which public health care system is paying for, in the limitation of the GDP stake, intended for public health care and in increasing the scope of private insurance.

The fifth part is the final part of the study. This part explicitly determines and coherently analyses the mechanism of operations in hospital management, thus summarising the previous establishment made, merges them and shows their implications on the health care system operations. The results show that health care system has great potential which could be more efficiently used if extreme regulation, which nowadays determines the Slovenian health care system, would be liberalised. This chapter shows how management and an improved organisation of health care system present objective reserves and unexploited potential. However, prior to such reorganisations the management should be thoroughly trained and given the opportunity to prove itself by setting new objectives and achieving results.

RECOMMENDATIONS TO ECONOMIC AND HEALTH CARE POLICYMAKERS - PROPOSED STRUCTURAL AND FORMAL MODIFICATIONS

REGULATION OF MEDICINAL PRODUCT PRICES

The regulation, which determines the prices for medicinal products that burden public finances, should be modified.
The regulation of prices should not discriminate between the manufacturers of generic or original medicinal products. Concealed subsidising of generic industry should be eliminated.
The regulation of minimum wholesale margin and unjustified subsidising of market wholesale branch should be eliminated from the regulations. Wholesale margins should be market-formed.
The regulation should consider economic criteria and economic efficiency of medicinal products prices determination. Access to new, more expensive, innovative medicinal products should be enabled with the introduction of economic efficiency proving system and justification of the price, which is higher than the allowed price. The institute that involves the minister confirming the price that is higher than the allowed price would be completed with an obligatory submission of health economic or pharmaco-economic study which proves the justification of the price. This procedure should also include a founded opinion on the increase of the price, provided by the Health Insurance Institution.
The regulation of prices should be transferred from the Agency for Medicinal Products and Medicinal Devices to the Health Insurance Institute of Slovenia. In this way we could decrease the moral risks of supervising the consideration of regulatory provisions and increase the efficiency of supervision.
Free determination of prices should be introduced, where the regulations on the regulation refer solely to the price amount, which the Health Insurance Institute of Slovenia is prepared to reimburse. In this way the free determination of prices is allowed and the institute of additional payments is introduced.

REIMBURSEMENT OF MEDICINAL PRODUCTS

The regulation that determines the procedure of classifying medicinal products to lists should be modified.
The transparency of classification should be enhanced, where it is necessary to exclude the confidentiality of the procedure itself.
The classification procedure should include economic efficiency criteria and the element of economic and cost justification of the classification.
The commission should consider the cost efficiency analysis, proven on the basis of health-economic studies and interpreted by the competent authorities at the Health Insurance Institute.
The commission should include a proportional number of professionals in the field of health economics and other fields. It should also include the representative of voluntary health insurance companies who should exercise a function of supervision with the intention to increase the level of transparency.
The classification procedure should evolve on the basis of explicit criteria.
The commission should argue its decisions clearly and objectively and state all the arguments in its minutes. The part of the minutes, which determines the arguments made on the classification, should be accessible to the public.
The members of the commission should not be members of any society, which in any form receives funds from representatives of the pharmaceutical industry. The problematic fact here is that the members of the commission, who represent the medical branch (i. e. doctors), can also be members of associations who receive donations from the pharmaceutical industry. It is necessary to introduce the concept of supervision over the commission members’ assets.
As a condition for the treatment of an individual medicinal product within the classification procedure it would be necessary to introduce the procedure of proving economic efficiency by submitting a health-economic or pharmaco-economic study.
A consistent elimination of cost ineffective and old medicinal products from the list should be initiated.

REFERENCE PRICES SYSTEM

Rigid regulations should be eliminated from the current setting of prices of generic medicinal products.
The modification of prices of medicinal products, listed on the Ministry of Health’s list, that is implemented twice a year, is not founded. The price modification frequency should be increased.
The procedure of setting therapeutic reference prices should be initiated, and this procedure should be valid for medicinal products with overdue patent (and data) protection and for generic medicinal products.

OTHER POTENTIAL MEASURES FOR MONITORING PUBLIC FINANCE EXPENDITURE

The so called “rebate and reimbursement” institute should be introduced. The public health fund should have a statutory right to conclude bilateral trades directly with pharmaceutical companies. The nature of such business relations should enable the public health fund a financial compensation of a part of its expenses for medicinal products, which should be provided directly by the manufacturers. This measure would enable an effective decrease of public finance expenditure for medicinal products.
The participation institute should be introduced. However, this institute should not be included in any insurance product. The objective is to decrease a moral risk which emerges in medicinal products consumption and in this way decrease expenditure for medicinal products.

THE EFFICIENCY OF HEALTH CARE SYSTEM

The obligatory membership in all interest groups chambers should be dropped, similarly to the dissolution of obligatory membership in the Chamber of Commerce. Chambers should become informal institutions, working on a voluntary basis.
Chambers should not be allowed to actively intervene in the legislation. The implementation of most common regulations, which cause market distortion on health care services and medicinal products markets, should be prevented. These mostly include fixed prices enforcement systems, advertising restrictions and limitations of entering the branch. Instead of rules, which interest groups, merged in chambers, determine themselves, the activities of both markets should be determined by the state’s legal order like on all other markets.
Quality control of all offered services on the health care market and medicinal products market should be introduced. In this way consumers would be able to make their own conclusions on the quality of offered services.
The provision of information on waiting times for individual health care service should be improved and in this way the mobility of consumers would be enhanced.
We support publications of data on productivity of individual doctors, whose salaries are paid with taxpayers’ money. We suggest the correction of a collective contract for health care including a variable part of the salary, which would depend on productivity.

FINANCING AND ORGANISATION OF HEALTH CARE PROVIDERS

Public-private partnership would be suggested only in case of elimination of structural problems in health care, which are caused by rigidness and collective contract system, as well as agreements on market trends, determined by interest groups merged in chambers. We also suggest that the public-private partnership would be understood as a step towards investing private capital in health care sector. The health care system should be regulated with the help of the legal system and not via regulations that are generated by interest groups in health care or pharmaceuticals or by limiting capital considering its origin.
We also support the diversification of financial funds, intended for health care, or increase of private funds for health care services, mostly due to public finance pressure, caused by demographic trends.
We suggest an immediate privatisation of all non-clinical activities.
We suggest a thorough reconsideration of the range of publicly financed health care services and of the liberalisation of the health insurance market. The latter means that private and foreign health insurance providers would enter the market and that the insurance portfolio of the existing health insurance providers would be diversified to non-health care oriented investments.
In order to increase and maintain the autonomy of hospitals or their business directors, we support the fact that the current legal form of hospitals would be reorganised and modified from public institutions to companies. In this way the interference of politics and interest groups in hospital management would be prevented. The duplication of functions would also be abolished and the obligations and responsibilities of individual institutions in hospitals would be exactly determined.