Oleksiy Gavva,
Chief Doctor of Zolochiv CRH, Kharkiv oblast

The autonomous healthcare institutions and the experience related to implementation of contractual arrangements.

The Zolochiv region of Kharkiv oblast is a typical agricultural area with the population of 32,432. Before the commencement of the reform the network of medical treatment – prevention facilities comprised the Zolochiv CRH (180 beds), 10 family doctor ambulatories and 23 feldsher/obstetrician facilities. The CRH, as a budget entity, was financed from the region’s budget, whereas the family doctor ambulatories were funded from the budgets of local self-government bodies. It should be noted that at that period 100% of the region’s population were services by the general practice doctors – family medicine doctors.

In practice the activities aimed to reform the healthcare management and financing system were commenced a year ago – specifically, in September 2004. In order to implement a new model for local healthcare system management and financing the region’s Rada passed a decision on 19 October 2004 to subordinate the Zolochiv central region hospital to Zolochiv region state administration, with the region’s Rada remaining the owner of this facility. During October – November 2004 the territorial communities (Zolochiv township and village Radas) addressed the issue of transferring their healthcare facilities into joint ownership of the territorial communities of Zolochiv region and passed relevant decisions.

The region state administration was also assigned the function of managing the property of medical ambulatories and feldsher – obstetritian facilities, which belonged to the rural communities on the basis of the communal ownership right. All the funds for healthcare for 2005 were consolidated in the region’s budget without allocation to local Radas. An algorithm for financing healthcare institutions had been formulated and then introduced on 1 January 2005.

The session of the Zolochiv region Rada of 1 December 2004 passed a decision to set up, on the basis of the budget entity Zolochiv central regional hospital, 10 family doctor ambulatories and 23 feldsher/obstetrician facilities, a communal enterprise „Zolochiv central region hospital”, which is a legal successor of the aforementioned budget entity.

To manage healthcare facilities and to introduce contractual arrangements in their activities on 1 January 2005 the healthcare department (with the staff of five) was set up at the Zolochiv region state administration. This department is a principal healthcare funds manager/administrator and procures medical services for the budget money for the region’s population (in line with the Law of Ukraine „On government procurement of goods and services for public money”). This Law is aimed at creating competitive environment in the area of government procurement, ensuring transparency of goods and services procurement procedures and achieving their optimal and rational use. The healthcare department of the Zolochiv region state administration and the communal enterprise „Zolochiv central region hospital” signed an agreement (contract) for provision of medical services to the population of Zolochiv region in 2005, by virtue of which contractual arrangements were introduced in the healthcare sector. Under this agreement the Zolochiv region state administration , through its healthcare department, acts as a Customer of medical services for the region’s population, whereas the communal enterprise „Zolochiv CRH” – as provider (supplier) of these services. It should be noted that the CE „ Zolochiv CRH” is allowed to sign agreements on provision of medical services with other customers as well, whereas the Zolochiv state region administration may find other providers for supplying medical assistance to the region’s population.

On the basis of the primary medical-sanitary assistance center there may be created in the region another autonomous provider – the communal enterprise „Zolochiv primary medical assistance center”. To create this center as of 01.01.2006 a relevant decision was passed by the Zolochiv region Rada. Another provider may also be created on the basis of the dental department. Since 1 January 2005 CE „Zolochiv CRH” has been operating under the agreement (contract) for provision of medical services, which was signed on the global budget basis. This kind of the agreement is the most simple and easy to implement and can be recommended as a first step toward introduction of contractual arrangements in the healthcare sector. The agreement clearly specifies rights and responsibilities of both Customer and Provider. The agreement provides for the transfer of financial resources from the region’s budget for 2005 in the total amount of 3,862,000 hryvnas to ensure conditions needed for Provider to organize medical services for the population, with allocation of specific amounts for in-patient, outpatient – polyclinic and ambulance medical assistance.

It was anticipated that in case of the increase in the total budget funding the total amount of financing also may be increased. That was already done in the current year, and adjustments to the value of the contract will be made due to the anticipated wage increases. The agreement provides that wages for the personnel may not be lower than respective wages of employees of budget healthcare facilities. It should be noted that such a clause is also included in the collective agreement between the administration and the trade union committee of the CE „Zolochiv CRH”.

The contract provides that the Provider may at one’s own discretion reorganize, re-allocate and re-designate the hospital beds and personnel in line with the volume of services provided. The Provider is allowed to use additional sources of financing (including sources such as solidarity – based funding, charity contributions, humanitarian assistance, etc.) in a way consistent with existing legislation.

The Provider’s task is to supply the specified volume of medical services and to step up the efficiency of the use of available resources. The efficiency criterion specified in the contract is the average in-patient treatment length at the end of this contract (this length was to be reduced down to 11.6, but it is already 10.3 today). Other criteria include number of hospitalization cases per 10,000 population (1,283), number of daytime in-patient hospital treatment cases (616), number of ambulatory surgical operations (740.1), number of ambulance calls, and some other criteria.

The Customer makes monthly payments to the Provider for work performed in accordance with the approved financial plan. During the period of the contract there have been no failed payments so far. The Provider monthly reports to the Customer on the volume of services supplied and the money spent.

What are the outcomes of the autonomy of the CE „Zolochiv CRH”, which has not been long in existence yet?

  1. The available funds began to be used more to finance inexpensive and effective kinds of healthcare, such as out-patent/polyclinic-based assistance. In 2005, 40 in-patient hospital beds were eliminated, and a daytime in-patient facility for 20 beds was established at the CRH.
  2. Due to more efficient use of funding there were performed a series of repair projects, telephones were provided for family doctor districts, medical equipment purchased, etc. Re-allocation of funds is by far faster and easier than in budget agencies.
  3. It became possible to reorganize the network of the healthcare facilities according to the volume of services supplied under the contract. The priority direction of this reorganization is to shift major volumes of medical assistance for the population towards the family districts and to strengthen these districts, to improve their logistical base.
  4. Greater autonomy creates better opportunities for introduction of new forms of work compensation. Now we are planning to introduce the capitation payment method in primary medical assistance centers. The problem is that districts in both cities and villages are not homogeneous due to different numbers of feldsher/obstetrician facilities. It is necessary to develop an algorithms which would take into account the money needed to support such facilities within the family medicine districts.

We are prepared to ensure all necessary conditions for creation of private family medicine districts, which will lead to the increase in the number of medical service providers in the region.

Assessing our modest experience in increasing the autonomy, I have to admit that communal enterprises have indisputable advantages over budget entities due to the greater level of autonomy in setting the organizational structure, personnel structure, and introduction of advanced forms of work compensation.

Now there are greater opportunities for planning and flexibly reallocating expenditures to meet the needs. There have emerged new opportunities for obtaining additional funds through contracts with new Customers.

However, autonomous enterprises, provided that this system is widely used, are not entitled anymore to the guaranteed funding and will have to think of the «portfolio» of contracts for their services under conditions of a competitive environment. Our communal enterprise was created in conditions of the existing legislative framework, which is far from perfect. Not all the issues that arise in connection with the taxation of this enterprise have been resolved, and this work is still underway. Although the global budget is the simplest form of contracting and is the ideal solution for the first stage, it is necessary to develop more complex forms of contracting, which would reflect both volumes and costs of medical services. Introduction of such agreements requires a sufficient level of IT development at the enterprise. Owing to the support provided under the EU project „Health management and financing in Ukraine” throughout 2005, there have been computerized the bookkeeping department at the CE „Zolochiv CRH”, the information/analysis department of the region healthcare department and the primary medical and sanitary assistance center, which enable use to look at signing more complex forms of contracts in the future with optimism.