Israeli government puts squeeze on public hospitals

Israel's public hospitals, which have expanded steadily in recent years owing to increased demand from the local population and from hundreds of thousands of new immigrants are now being told to tighten their belts. The health ministry has said that it will set a 4-5% cap on the annual increase in money received from the public health funds (insurers). Each of the medical institutions will now have to negotiate a “global budget” with ministry officials instead of automatically receiving the standard daily rate for most inpatients and differential payments for more expensive treatments.

The policy was forged by the director general of the health ministry, Professor Mordechai Shani, a powerful administrator on loan from Israel's largest medical centre, Sheba Hospital, near Tel Aviv. The controversial policy seems to emanate from a projected shortfall of some $200m (pounds sterling 133m) in funds for health services resulting from the introduction of Israel's universal health insurance system, due to come into effect early next year. Under the system a health tax of 4.8% of income will be collected monthly from each breadwinner and distributed among the health funds.

Meanwhile, Kupat Holim Clalit—the country's largest health insurer, responsible for the health of two thirds of the population—has an accumulated debt of $1bn (pounds sterling 667m). In exchange for government subsidies to keep it afloat Kupat has agreed to transfer ownership of its 14 hospitals to the state. Fearful that Kupat could collapse, unions have said that they will not fight the dismissal of 3% of the staff or longer clinic hours. Instead of a wage cut of almost 3%, staff have lent management this amount, to be repaid in 10 years.

Professor Shani contends that global budgeting for hospitals is used in Sweden, France, and Germany. He said: “The government's aim is to limit public expenditures for hospitalisation, which have grown by significant amounts in recent years to $2bn (pounds sterling 1333m) in 1994. Hospitals may raise money from donors for development projects, but income from insurers will be limited to increase efficiency.” Professor Shani maintains that the longstanding daily payment for inpatients discourages efficiency. Instead, it encourages administrators to keep as many beds filled with patients as possible. Under the new system Professor Shani will personally negotiate with directors of the hospitals and set a customised global budget.

Administrators whose public hospitals already have growth rates of 5% are worried. They argue that it is the government itself that is responsible for the great increase in health costs, since the state approved 50% wage increases to all health workers this year. The directors emphasise that the new policies will reduce competition among the hospitals and lower the quality of services.