What is the cost of surgery? Unknown

28 Jan 2014
Beyond their being institutions that provide medical services, hospitals are large financial bodies. Annual revenues for the 11 governmental general hospitals run by the Ministry of Health have passed the 8B NIS line. These hospitals employ ~33,000 workers and they ended 2012 with an overall deficit of ~900M NIS. The large deficit in ongoing operations is one of the main causes for their distress and difficulty to function on a daily level. It is also one of the reasons that the system is seeking creative methods for covering the deficit, such as developing private health services or medical tourism. One of the reasons for the budgetary distress in governmental hospitals is that, even today, they lack an organizational pricing system. A system like this will enable managerial and supervisory functions in the Ministries of Health and Finance, as well as hospital administrators, to examine the correlation between inputs and outputs, to obtain a proper picture of the costs related to the medical products and services in each of the hospitals and to help reach fair budgetary decisions compliant with morbidity and hospitalization forecasts. Most large business entities operate a pricing system and it presents many advantages for the medical field. For the Ministry of Health, a pricing system will enable better planning of hospital budget frameworks, will help determine a proper basis for fairly budgeting the hospitals, will enable consistent and nationwide standardization of medical procedures, which will enable a comparison between efficiency levels and hospital wards and between one hospital and another, and it will also help determine the prices that hospitals charge the health funds. For the hospitals, a pricing system will help perform economic calculations of the cost of medical services and enable them to determine their economic efficiency. Of course, a system like this one is also important for the Ministry of Finance, as the body that monitors the Ministry of Health budget, and for the hospitals’ main users – the health clinics. In 2000 and 2004, the State Comptroller remarked about the absence of a pricing system and noted that the governmental hospital streamlining program should be based on a system that provides information on costs in various departments and that effective streamlining will not be possible without it. The Comptroller further noted that a pricing system is essential for enabling the evaluation and assessment of the price of health services, as determined by the Ministry of Health vs. their actual cost, and for enabling the implementation of separate engagement agreements between the health funds and the hospitals. The Ministry of Health itself, in a financial report on the state of governmental hospitals in 2010, found that the absence of an organizational pricing system renders the service prices distorted and skewed and that the ceiling rates set by the Ministry of Health, which bind the hospitals, are often unrealistic. It is important that the regulator set a fair price for medical services. Therefore, today, as the technology for creating organizational pricing systems is used in Israel and around the world, the Ministry of Health, headed by Minister of Health Yael German, and Director General Roni Gamzo, must adopt such a managerial tool. Promoting the integration and use of such a system will help find a cure for at least one of the ailments of Israel’s health system. Published in TheMarker on 28 January 2014.