A Tourniquet for the Health System

17 Feb 2014
Pricing of the Hadassah Hospital crisis has been going on for a long time, where its revealed deficit serves as a reminder to the general deterioration in Israel’s public health system. Beyond the health system being an establishment responsible for dispensing medical services, it consists of large and complex economic organizations. For example, annual revenues for Hadassah alone total 1.6B NIS and annual revenues for the other governmental general hospitals, managed by the Ministry of Health, have passed the 8B NIS point. Nonetheless, the health system is forced to operate under a chronic deficit –Hadassah’s deficit totaled ~1.3B NIS and has reached ~900M in the other government hospitals in late 2012. There are many different causes for these deficits. One of them is the manner in which rates are determined for medical services. The Ministry of Health, which determines these rates, does so without knowledge of the full pricing information involved in the inputs of the medical procedure, thus causing a price distortion that usually harms the treating facilities, i.e. the hospitals. Large and complex business entities use a pricing system for determining the production costs for their products. The Ministry of Health lacks such a system, on a national scale. Having one would enable the Ministry of Health management and supervision functions together with the hospital administrators to examine the correlation between inputs and outputs, and obtain a realistic view of the costs related to medical products and services provided in each of the hospitals. A system like this one would help determine a basis for fair budgeting in the hospitals while enabling them to normalize the production efficiency in each of the hospitals within the system. Over the last decade, in two separate reports, the State Comptroller of Israel noted the absence of a pricing system. He stated that it should be used for streamlining governmental hospitals and that, in its absence, it is impossible to prepare an effective streamlining plan. The Ministry of Health itself, in a financial report on the state of governmental hospitals in 2010, stated that the absence of an organizational pricing system causes service prices to be distorted and, in many cases, unrealistic. In the past, the main problem with establishing such a system was in the compilation of information within the hospitals. An effective pricing system requires a central reporting process that includes an interface with medical and administrative systems that monitor the full array of hospital processes. Such systems include, for example, a national medical register, Mazor (health system ERP), MCM (Medical Center Management) and more. Linking the medical systems to a national pricing system would provide senior Ministry of Health officials with the managerial tools required for stabilizing the system and aiding its recovery. Minister of Health, Yael German, and the Director General of the Ministry of Health, Prof. Roni Gamzo, should evaluate the pricing systems existing in Northern and Western Europe, which adopted a central reporting system toward determining Ministry of Health rates. They must act toward integrating a pricing system as a managerial tool within the ministry, enabling it to generate a national view of the health system production costs and to examine its efficiency. The promotion of central reporting process, integration of a pricing system and effective use thereof could contribute to the economic stabilization of the health system and could ease the constant financial pressure burdening hospitals in Israel. The article was published in “People and Computers”.