Public Private Collaboration in Health Care Provision Montenegro Workshop September 2007 Matthias Loening

Overview Hungary Health Sector Hospinvest –Company Overview –Business Model –Efficiency Improvement –Quality Improvement Impact to Health System Concluding Thoughts

Hungary Health Sector Context The health sector accounts for 7.8% of GDP Public funding alone accounts for 75% of health spending, of which 66% is spent in public hospitals In 2006 the Hungarian budget deficit was estimated to be 10% of GDP – one of the highest in the EU The largest part of the state budget deficit is attributable to the losses by the NHIF, which has increased to 1.5% of GDP These losses are a direct result of overcapacity and a system plagued by inefficiency  Downsizing, consolidation and even closure of some facilities are essential to rationalize the public health system and limit the drain on scarce public resources

Hungary Health Sector Current Health Reform Program Delivery : Implementation completed April 2007 – Reduced acute care beds by approx. 15,000 (- 36%) and increase chronic beds by approx. 7,000 (+ 26%) – Emphasis on provisioning will be transferred from inpatient services to outpatient & chronic services Purchasing: New NHIF contracts allocated April 2007 – The method of reducing beds will be via budgetary caps put into place in inpatient, outpatient and chronic care reimbursement Financing - There are two options being discussed to be implemented late 2007 – Allowing for a competitive market of health insurers providing the mandatory cover – Maintain the NHF, however clearly define a reduced package of benefits to allow for the supplementary PHI market to develop  The current government has launched a number of important reforms in the health sector

Hungary Health Sector Health System Structure In Hungary, reimbursement methodology is per case via the NHIF The reimbursement covers only OPEX CAPEX subsidy normally comes from owner Regional trend to decentralize ownership from MoH to Municipalities and with it CAPEX responsibility Ministry Of Health Ministry Of Health NHIF* Hospital *National Health Insurance Fund Health Services Reimbursement (OPEX) Hungary: Organizational Structure of the Health System Ownership & Capital funding Municipality Policy & Regulation

Hospinvest Company Overview  Hospinvest is the first company in Hungary specializing in management of public hospitals

Hospinvest Efficiency Improvement Hatvan Kiskunhalas Baja Kalocsa Gyöngyös Eger Székesfehérvár Veszprém Zalaegerszeg Győr

Hospinvest Quality Improvement Case Management Protocols Performance Monitoring Peer Review Matrix System Medical Board Department of Patient Care Services

Hospinvest Quality Improvement Patient Care Quality and Cost Effectiveness Indicators 1. Appropriateness of requesting CT scans for inpatients 2. All cases that are outliers or above norm days (related to DRG) 3. Pre-operative cases > 24 hours 4. One day surgery cases that have ALOS > 24 hours 5. Transfer of patients from one day surgery to any other unit due to complication 6. Transfer of patients from short stay surgery due to complication 7. Readmission to hospital within 72 hours after discharge (quality emphasis) 8. Transfer to ICU 9. Post-operative wound and systemic infection (e.g. infection rate) 10. Cases of dehydration during hospital stay 11. Elective C-Section Rate per total deliveries 12. ALOS > 2 nights after vaginal delivery 13. ALOS > 4 nights after C-Section 14. 3rd degree laceration during delivery where rectal ring must be repaired 15. Non-reimbursable DRG patient due to readmission (financial emphasis)

Competition Ownership Regulation* Public Hospital Organizational Culture Performance *Refers to opening up of the market to new providers Input Question of new market entrants leads directly to output but also possibly change in organizational culture of existing providers Effect Performance Impact to Health System

Rising demand (spending) for health care services and pressures on health sector funding, resulting in increased Government interest in: -Private sector participation in the provisioning of care to improve service quality, access and cost efficiency -Promoting private insurance to increase financing (funding) within the health sector -Likely greater emphasis on OP facilities/care, or integrated networks, not hospitals These pressures will only increase in transition economies with economic growth as the OECD estimates that for every 1% increase in GDP/capita there is a 1.8% increase in per capita health spending  We see several global trends that will define the market strategy as well as creating opportunities for investing in health Concluding Thoughts

 EBRDs role as a development organization can play an important role in the health sector to supporting the economic transition of countries in the Region The World Bank has found that a nation ’ s health and the quality of its health system is a key determinant to continued economic growth within a country From the market assessment it is clear that there is: – A significant pent-up demand for quality health care services – A need for access to capital (debt and equity) – A potential role for International Financial Institutions such as the EBRD – Direct linkages for making an economic impact within transition economies by investing in the health sector However, there is specific challenges unique to the Sector

Contact: Matthias Loening Senior Health Advisor European Bank for Reconstruction and Development