Written by: Klra Smolov Photo: Tom Kube

The Czech health care system is still in crisis. With accession to the EU rapidly approaching, total reform is inevitable but health care providers must now dig in, hang on, and make plans for maintaining their market positions.

Anita Likov

THE CZECH HEALTH care system, above all else, is short of cash. According to the Health Care Information and Statistics Institute, Czech hospitals owe their suppliers over CZK 9 billion, 5 billion of which is past due, with another CZK 280 million in unpaid leasing installments. Only half of the total 187 hospitals are financially in the black. The monetary situation inevitably affects the way the entire sector operates. Companies, for their part, must be extremely careful when selling expensive equipment to hospitals. Banks are loathe to extend installment plans to hospitals, due to their great indebtedness, and in this way the problem is shifted to suppliers, says Josef Krmenk, director of Siemens Medical Systems Division. Hospitals owe us half a billion crowns But this debt is not yet past due. We are currently looking for a strategic partner for financing. However, medical equipment accounts for only a portion of the firms turnover of CZK 37 billion in this country. Bayer, which specializes in laboratory equipment, has also become caught up in the debt spiral. We do have outstanding receivables, although they are rather marginal. But the situation affects our business and investment possibilities, says Marcin Kouri, Bayer Diagnostics director for the Czech and Slovak Republics. If hospitals lack money for purchasing new equipment, the result is a deterioration in quality of patient care. Debts have an effect on us: without money, you cant invest. While in the EU equipment is out-dated after six years, in this country its used for twenty years and more, says Roman Holba, a department manager for Miele Professional, a provider of washing and disinfecting machines. Hospital creditors also include pharmaceutical distributors. Four of the largest Aliance Unichem, Phoenix, Purus, and Gehe account for 70% of the market, and are owed some CZK 700 million. Last year, they decided to sue. We dont know when or whether well get it (the money), says Pavel Such, director of the Association of Drug Distributors (AVEL), a group that includes the litigating companies. Minister of Health Marie Soukov is expected to submit a health care reform proposal soon. Its main points are optimizing the health care facilities network, and implementing legislative standards and health care financing. One step toward gradual transformation has already been made district hospitals have now been placed under regional administration. Although most interested parties are concerned that the regions will not have sufficient funds to help the hospitals, they hope the situation will improve.

Transparent pricing and payment Greater pressure will be exerted on economic management, in order to determine whether a hospital has a solid basis for existence. This involves effective and professional management, opines Pavol Mazan, of the International Association of Pharmaceutical Companies (MAFS). Such of AVEL is of a similar opinion: not all of the hospitals are necessary; their role could also be played by polyclinics. Some of them must be eliminated, not due to their indebtedness, but rather because of their overall [lack of] efficiency. The need to close hospitals has been under discussion for some time, but its a sensitive issue with a lack of political will for resolution. Experts in the field, however, unlike politicians, are demanding prompt action. We think that the least sensible step would be to come up with a unique solution, instead of adopting an existing, well functioning model from an EU country, says Petr Polievka, the Liva pharmaceutical company spokesman, summing up the majority opinion. Polievkas is an opinion that may carry weight; Liva is a powerful company, currently the leading producer of medications sold on the Czech market.

Next year the Czech Republic is to become a member of the EU, and health care providers promise us that noticeably improved market conditions will follow. Many processes will be accelerated and unified, which will speed up the registration of top modern medications, for example, opines Marie Hrudkov, PR director for Abbott Laboratories, which supplies pharmaceutical products and diagnostic equipment. We believe that pricing will also be improved and made more transparent, as will the size of payments provided by insurers. Equal conditions will thus be created for everyone wanting to do business on the market. Jaroslav Dyka, the Czech and Slovak Republic director for Philips Medical Systems, sees the greatest shift associated with the Czech Republics entry into the EU in certification simplification. Every instrument, prior to its launch on the Czech market, must currently go through a complicated verification and certification process. In the future, certification by the manufacturer should suffice, Dyka says. In commercial terms, I believe that the number of private diagnostics subjects will increase substantially, he adds. Perhaps the health care system will see some basic changes soon, but so far it seems that systemic improvement is subject more to political agendas than the best interest of patients.

Many private health care facilities have emerged and continue to emerge in the Czech Republic, offering patients comprehensive care. Contrary to the widespread assumption that these facilities are only for the wealthy, the lions share of polyclinics operate on the basis of procedures paid for by insurance. Interestingly, it is precisely this subsidized system that causes problems for private clinics. Mediscan, for example, already has two branches in Prague in Prague 4 (diagnostic center) and in Prague 1 (providing a broad range of care). According to DC Mediscan Star Msto director Kateina ihaov, all standard procedures except physiotherapy and treatments for the obese are paid for by insurance. The center offers both therapies and preventive care to three types of patients: 1. employees of firms that have contracted for health care with Mediscan; 2. people who walk in off the street; and 3. foreign clients. We currently have 70,000 registered patients, and contracts with nearly 20 companies, ihaov says, also we are constantly expanding, and we may double our capacity. If someone is interested in above-standard services, he or she can pay extra for a membership card, which costs about CZK 1,000. Similar systems exist at other facilities, such as Soukrom ordinace (Private Clinic) on Mezibransk street or NPI Lkask dm (House of Medicine). The Mezibransk street clinic, where there are twelve treatment rooms for specialists (as opposed to the original four), provides services to about 20 companies, and NPI serves 60. However, private health care providers agree that making a living in health care in this country is very difficult. According to them, the main problem is that health care in the Czech Republic is controlled by insurance companies, which can essentially dictate conditions with strict limits. Inconsistent business conditions are the rule here. Large state-owned hospitals are at center stage, with private facilities marginalized, says Jan Maek, NPIs director, adding that unlike large hospitals that are foundering in debt, private facilities cannot afford to carry debts. According to Maek, prices for individual procedures are set so low by insurers that they dont even cover costs. Private facilities are very limited, they are not allowed to set up the new treatment facilities that they may need; there are set tables for everything, and if you exceed the limit you simply wont be paid for the procedure, Maek complains. ihaov has had similar experiences: So far we arent making money on anything. We would be able to make money if we had more foreign patients, as foreign insurers pay more than Czech ones. According to Maek, local health care still operates on the socialist basis of solidarity, but this results in inconsistent practices. Health care financing reform must appear hand-in-hand with amended laws, allowing evaluations of medical procedures according to realistic costs and above-standard care for anyone who wants it.

Pharmaceutical companies are also indirectly affected by problems in the system, and the lack of funding in the health care sector. Most products are sold through distribution companies, which pay producers with nearly no problems. But what does not please drug producers is the way prices are set in the Czech Republic, particularly payments for medications by insurers. One of the main complaints raised by pharmaceutical companies is that they are forced to cut their prices substantially in the Czech market. Even with unique, original medications, prices are often among the lowest in Europe, says Marie Hrudkov, from the public relations department of Abbott Laboratories, an American firm that manufacturers diagnostic instruments and pharmaceuticals for treating diabetes, respiratory diseases, and HIV. The same is true of Veobecn zdravotn pojiovna (VZP General Health Insurance Company), which often forces original producers to cut back their activities in the Czech market, she adds. Pavol Mazan, the executive director of the International Association of Pharmaceutical Companies (MAFS) confirms this. Prices are constantly being lowered. There are dozens of medications for which the ministry has unilaterally decided to decrease payments, hoping that producers will set their prices so as not to force patients to pay too much extra. Naturally, this system benefits generic drugs that are no longer protected by patents and are therefore older and less expensive compared to new drugs. The Ministry of Health boasts that in this country there is a fully paid drug for every disease. But the problem is that a drug paid for (by the insurer) is the least expensive, and in many cases it is less effective, Mazan claims. The result is that of the six most important therapeutic groups, there are no new, imported drugs in five of them. For purposes of comparison, in the Czech Republic, generic drugs account for 45% of all medications sold, while in the EU they account for only 15%. The Ministry of Health decides which drugs will be paid for by insurers, and how much will be paid, based on twice-yearly recommendations by the so-called categorization committee. However, Mazan says that the decision-making process is neither transparent nor flexible with respect to the market entry of new drugs. This is why MAFS, which associates the major pharmaceutical companies operating in the Czech Republic, such as Pfizer, GlaxoSmithKline, and Novartis, has entered into negotiations with the new Minister of Health on changing the system, which should make decisions more transparent and give producers a chance to appeal them adding medications to the register on a more steady basis. One of the subjects on the agenda will also be a variant for setting fixed prices for medications.

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Czech health care still ailing