Although annually earning about 3 billion kuna in revenues, with investments in the next year to reach more than half a billion kuna and employing about 8,000 professionals, the private healthcare in Croatia still operates under unequal conditions in relation to the public healthcare system and other entrepreneurs. Namely, in addition to a number of law and regulations that need to be adapted to today's needs of the market and the patients, Croatia should also change its mentality which continues to stigmatize private capital in healthcare services, although in more developed European countries it serves as a powerful leverage for the strengthening of the public solidarity-based healthcare system, reports Poslovni.hr on November 27, 2018.
The Association of Private Polyclinics, Hospitals, Spas and Health Care Institutions of the Croatian Employers' Association has recently spoken about this issue. Jadranka Primorac, the president of the association and member of the Managing Council of the St. Catherine's Specialty Hospital, explains why patients would benefit from stronger private and public sector co-operation, and what needs to be changed to enhance this co-operation.
What are the laws and regulations that hinder the development of private healthcare in Croatia and better co-operation with the public sector?
To begin with, there are many contradictions between the Institutions Act and the Companies Act. Namely, private health institutions operate as companies, we pay the business tax on profits, but the 1996 Institutions Act prevents us from paying out the profits. It means that, if we generate any profit at the end of the year, we can only reinvest it into existing business, we cannot use it for any other purpose, any other investment, etc. The law was adopted in 1996 when private healthcare institutions did not exist in numbers like they exist now, and has not been changed since.
Why do you think the law has not been changed?
The law belongs to the government’s administration department, but it regulates institutions in many segments, healthcare, culture, education, social care, which concerns a wide range of ministries, and that is probably one of the reasons why this process is not proceeding faster. In April, we met with Administration Minister Lovro Kušević, and he promised us he would work on it, but no changes have been proposed.
What would be specific changes in the law if it were to be adapted to the private sector?
It should make it possible to pay out the profits and that would certainly provide a certain degree of investment momentum in private healthcare. There is a lot of talk about medical tourism and 300 million euro investments, but given this law, I am not sure that is realistic, because everyone who invests their capital expects that at the end they will be able to use the profits as they please since that is the key principle of entrepreneurship.
Private healthcare institutions also do not have the right to apply for EU funds?
Paradoxically, many public hospitals have been equipped in the 2014-2020 programme period with the help of grants from European funds. Each hospital asked for between 20 and 30 million kuna in grants. However, we still have to see if all those who asked for money have met all the necessary parameters for financing projects from EU funds since everything is being measured, so the question is what will eventually be paid to them if these parameters are not met. On the other hand, private healthcare institutions could not apply for these funds, we could not buy new equipment under the same conditions as public institutions, because private healthcare facilities were not put into operational programmes. We were looking for a way to have some funds allocated, but unsuccessfully. It should be said that this government is not responsible for it, but we are asking now to be included in the new 2021-2027 programming period. We have received promises that this will happen, but the question is how these negotiations will proceed, given the poor utilization of funds available to Croatia in this period. According to our information, the utilization is at just 22%, which is absolutely unsatisfactory and certainly not a positive for the future programming period.
The cooperation between private and public system is still very weak. How many services in the private sector are realized through the Croatian Health Insurance Institute (HZZO)?
It is still not a lot. On an annual basis, around 1.8 % of the funds are allocated by the HZZO to the private sector (about 400 million kuna of the 24 billion kuna HZZO budget). At the same time, we have a continuous increase of revenues in private institutions year after year, and this three billion kuna were paid by patients from their own pockets, while most of them simultaneously pay 15 percent of their salaries for the compulsory health insurance. So the patients are paying twice and do not have a lot of choices. It is not important to patients whether they go to a public or private institution if they receive a service that they do not have to pay from their own pockets. A good example is the Netherlands, where all insurance companies are private, and you have public and private hospitals working together. The healthcare in the Netherlands has been the best in Europe for many years. It is based on several principles; everyone has the right to healthcare, there is solidarity through health insurance which is compulsory for everyone and accessible to everyone, and they have good-quality and timely health services. The people in the Netherlands pay around 120 euro a month per person, which is comparable to Croatia, and during the year they pay additional 500 euro for treatments. Competition between providers of health services is promoted, and contracts are awarded to those who are the best and have the best outcomes of treatments, which is being monitored through patient registers. There are no waiting lists there. All this shows that our healthcare is extremely expensive and very ineffective, because the share of health spending which our politicians often speak about has little to do with the cost-effectiveness of the system.
But they allowed private health insurance companies to enter the system, while in Croatia they are still not integrated into the system and have the same status as private healthcare institutions.
The question of ownership is not important at all. There are rules that the state as regulator prescribes and controls with a series of parameters. Monopoly is not good in any business. When you have market competition, the quality is increased, performance and outcomes of treatments are being monitored, and you know who is who. If a hospital has excellent results in a particular department, then insurers, public or private, would negotiate more such procedure at that hospital. Nowadays, everything is measurable. Also, the HZZO needs to be transformed into a proper insurer that will then be subject to all the laws that other insurers are subjected to because the current situation is not fair market competition. That would make the HZZO finally turn towards patients who are financing it through their salary contributions, and not to the Ministry of Health, as is the case now. The primary role of the HZZO, as well as any health insurance, is to use the money it gives to hospitals to provide more “health” for the insured.
Does this mean that, without the private health insurance, private healthcare in Croatia will not further develop?
The healthcare system will not be maintained at this level with state monopoly and state health insurance unless a radical turnaround occurs. And there is no need to discover anything new here. We should just apply good solutions from well-regulated healthcare systems in the EU countries.
Would the strengthening of the role of private healthcare accelerate the reform of the public health system?
Yes, I believe that the public healthcare system cannot be reformed and I do not believe that it is possible to have full impact on cost-effectiveness as long as the state is the main and sole provider of both the insurance and the treatments.
Maybe the change is not in someone's interest?
The system as it has been set up is unsustainable. When we sum up everything, we have paid almost 30 billion kuna to cover the debts of the public healthcare system in the last 27 years. That is with no interest charged, which in the end makes this amount even larger. Thus, the way in which the Croatian health system is currently functioning is a "bottomless pit," and quality healthcare cannot survive in the long run unless processes and funds are managed rationally and unless there is competition, quality control and cost efficiency control, together with the accountability and professionalism in management.
If these legal changes were to be made and were to encourage foreign investment in healthcare, would anyone have an interest in buying a Croatian hospital that is currently operating with a loss?
No one will buy a public hospital, there is no fear, since that is not realistic, primarily because these are institutions that need large investments in facilities and equipment.
Despite these obstacles, what are the business results of the private healthcare in Croatia? It seems like you are doing pretty well.
The private healthcare in Croatia has an annual income growth of about ten percent; foreigners are coming, health tourism is getting stronger. However, in private healthcare institutions in Croatia, the profit is not as high as in some other sectors, since the price of services in Croatia is low compared to the Western countries and the cost of labour is high. So the return of investment is slow, but if the EU funds were to be opened, if we could acquire equipment through the funds, or if we could use the Investment Incentive Act, the return of investment would be much simpler and easier.
For more on the Croatian healthcare sector, click here.
Translated from Poslovni.hr (reported by Marija Crnjak).
