Regional seminars on “Political and Legal Aspects of Implementing European Approaches to Hospital Restructuring and Hospital Network Planning in Ukraine”

Regional seminars on “Political and Legal Aspects of Implementing European Approaches to Hospital Restructuring and Hospital Network Planning in Ukraine” were conducted on September 11^th in Zhytomyr, September 18^th in Poltava and September 25^th in Kharkiv. Among the seminar’s participants were representatives of healthcare departments of regional state administrations; heads and economics experts of regional, central district and city hospitals as well as regional state administrations officials and Project experts Bela Kaunzinger, Lutz Steinhaus, Volodymyr Rudiy, Christian Bonhomme, Eero Linnakko, Serhii Diachenko, Nataliia Louchsheva.

The key issue discussed during the seminar was political and legal opportunity for implementing European approaches to hospital restructuring and hospital network planning in Ukraine. The major issues in Ukrainian healthcare organization, outlined in a report by Volodymyr Rudiy, Project national coordinator in healthcare policy and legislation and member of the President’s National Council on Healthcare, stand as follows:

-          an inflated network of general hospitals. Its structure rigidly duplicates the country’s administrative division down to the level of districts;

-          a large number of low-capacity local village hospitals that are ill-equipped for the delivery of adequate healthcare in terms of both human resources and equipment. These hospitals appear to be not fully-fledged hospitals, but social care institutions and shelters;

-          a significant number of so-called departmental hospitals;

-          lack of a clear and transparent hospital referral system among primary, secondary and tertiary-level hospitals;

-          outdated approaches to hospital planning and management;

-          lack of autonomy and flexibility in hospital decision-making;

-          allocation of financing based on an item-by-item cost estimate instead of on a method accounting for activity results and creating incentives for boosting quality of services and efficient resource utilization.

 Volodymyr Rudiy pointed out that it is specifically the above issues that cause, to a large extent, delivery of low-quality healthcare and inefficient use of scarce state-provided resources. A transition to the practice-proven principles of hospital organization and planning employed by leading European states may help even out these drawbacks. The legal cornerstones that make these changes possible in Ukraine are available now.

As regards the necessary measures on the level of individual facility management, within the current legal framework, we may achieve the following even now, without changes to the form of ownership:

·         boost the autonomy of state and communal hospitals through reorganizing them into state/communal noncommercial enterprises as per Article 3 of the Foundations of Ukrainian Healthcare Legislation; Articles 81, 83, 84, 85, 86, 87, 167, 168, 169, 170, 171, 172, 173 of the Civil Code of Ukraine; Articles 46, 52, 54, 62 – 72, 76, 77, 78 of the Economic Code of Ukraine; respective articles of the Law of Ukraine on Local Self-Government and on Local State Administrations.

·         introduce contract-based state medical services procurement with new, result-oriented payment methods (global budgeting), founded on the current legislation on state procurement.

As for the changes on the level of hospital network planning, Volodymyr Rudyi considers it appropriate to base this process on the hospital district strategy, which is prevalent in EU-member states and other developed countries. This strategy of hospital network planning relies on the central idea of removing the binding link between the planning process and the country’s administrative-territorial division. In European countries, one general hospital (which corresponds to a district or city hospital in Ukraine) is designed to provide services to 100-200 thousand people, with regard to the per capita need in healthcare for persons residing within an hour’s traveling distance of the hospital (within the serviced zone). Sometimes, the service zone (hospital district) may encompass 3-4 (or even more) administrative territorial units, each of which approximately equals an average Ukrainian rural district or small town in population (30-40 thousand persons).

Doubtlessly, the introduction of a hospital district strategy within the framework of the Ukrainian healthcare reform would be most efficient and beneficent if timed with the administrative-territorial reform, which would also include an amalgamation of rural districts. However, as the latter’s progress is halting, opportunity for implementing the hospital district strategy in its classical form in Ukraine is also limited at this point in time.

At the same time, another opportunity may be used on this transitional stage to make the first move towards implementing the said network planning strategy, optimizing it, raising healthcare quality and efficiency of resource utilization, as well as generally improving the state of the healthcare branch. Namely, it is the creation of state and communal enterprise unions as stipulated in the Civil Code of Ukraine. On behalf of the local authorities, a step that is both reasonable and legitimate would involve the creation of interterritorial (interdistrict and city-district) economic hospital unions with communal non-commercial enterprise status, with respective local councils as their founders.  As a result, resources of several rural districts (possibly, districts and cities of regional significance which are administrative centers of the districts but have their own budget independently of the district budget) would be amalgamated for the sake of raising healthcare quality and utilizing resources rationally. The respective provisions of the Civil Code, the Law on Local Self-Government in Ukraine, and the Law on Local State Administrations would lay the foundations for this.

Preceding the creation of said interterritorial economic unions, autonomous hospitals must involve a change of economic-legal status and a reorganization into communal non-commercial enterprises, fostering flexibility in making decisions on managing state-delegated financial resources, determining one’s own organizational structure (units, bed fund, personnel), and implementing innovative approaches to personnel payment methods. A transition to the practice of contract-based state procurement of medical services will favor new, result-oriented methods of payment for hospital activity. An improvement in healthcare quality, an amalgamation of resources coupled with more efficient utilization will be achieved through a clear-cut allocation of functions to each member of the hospital union, as a specific type of care is to be delivered to the entire population of the serviced area, and the hospital bed fund undergoes functional restructuring. Gradually, this will ensure a succession of medical and social care and the integration of the two.

Thus, a gradual transition – or at least the preliminary conditions for creating hospital districts and optimizing the hospital network to align it with the population’s real healthcare needs will be achieved.

According to Article 20 of the Economic Code, state and communal economic unions are, as a rule, created in the form of a corporation or a concern, regardless of the union’s name (integrated complex, trust etc.). A corporation is a contractual union created on the basis of an amalgamation of the uniting enterprises’ shared interests in production, science and commerce. It incorporates delegating certain authority from each member’s centralized administration to the corporation’s management. A concern is a statutory union of enterprises and other organizations on the basis of their common financial dependence on one or several members of the union, involving a centralization of techno-scientific, production development, investment, financial, and foreign-economic activity. Union members delegate some of their authorities to the concern, including the right to represent their interests in front of bodies of authority, other enterprises and organizations. Members of a concern may not, at the same time, be members of another concern.

According to Article 121 of the Economic Code, as members of the union, enterprises retain their status of legal entity, regardless of the union’s legal form, and the provisions of this Code and of other Laws regulating entrepreneurial activity apply to them. A member of a communal economic union may not leave the union without consent of its management, or join activity with other economic units voluntarily, or make decisions on terminating its activity.

Economic unions have top administration bodies (general assembly) as well as executive bodies as per the union’s statute, according to Article 122 of the Economic Code. The communal economic union is managed by the executive board and by the general director, who is appointed and dismissed by the same body as passed the decision on the founding of the union. The composition of the board is determined by the statute. The management procedure of the communal economic union is determined by the statute according to the Law.

 Volodymyr Rudiy is of the opinion that, at this stage, it would be best to start such inter-territorial unions of hospitals in the form of corporations. On the one hand, this organizational-legal form delegates some authorities of centralized administration to the union. On the other, it leaves quite a high level of autonomy and independence for each member medical enterprise. Integrated analysis of economic and qualitative indices of each corporation participant and decision-making on the most reasonable distribution of the healthcare services for the population of the service zone, could be one of the most important, if not essential, centralized functions delegated to the corporation. Another key centralized function might involve calculating corporate tariffs based on an analysis of each member’s expenditures. On the basis of these tariffs, financial resources will be drafted for each member of the corporation, enabling them to provide the population with those services that the facility is responsible for within the union.

 Next, Project expert on informational technology and economic-statistical analysis Serhii Diachenko told seminar participants about the part played by economic analysis in the reforming of the Ukrainian healthcare branch. Mr. Diachenko pointed out the role of economic analysis as operative grounds for sound managerial decisions.

 Seminar participants were also introduced to results of surveys conducted among healthcare personnel and patients in selected healthcare facilities of the Poltava region.