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Riga Eastern Hospital's financial results affected by poor decisions taken by hospital management

  • 2017-04-11
  • BNS/TBT Staff

RIGA - Insufficient activity and badly thought out decisions by the management of the Riga Eastern Clinical University Hospital have affected the hospital's financial results, the State Audit Office has concluded.

Regardless of the hospital's important role in Latvian healthcare system, its increasing turnover and steady number of patients, the hospital's losses have been growing since 2011, amounting to EUR 28 million by the end of 2015, the Audit Office points out. These losses will most probably have to be covered by the taxpayers.

The Riga Eastern Clinical University Hospital is the largest healthcare institution in Latvia. It comprises a number of inpatient facilities and provides a variety of diagnostic and treatment services, many of which are not provided by other hospitals in Latvia. The hospital is also involved in research activity, training of new specialists, and others.

The objective of the audit carried out by the Audit Office was to determine whether the Riga Eastern Clinical University Hospital made efficient use of state funding available to it. The Audit Office has found that the Health Ministry and the hospital's management were responsible for the current problems at the hospital - the ministry, being well aware of the hospital's problems, has been ignoring these problems for a long time. All agreements on outsourcing hospital's services are not in the hospital's interests, and implementation of these agreements is not properly supervised. The hospital has no feasible plan how to overcome its problems, and the hospital's annual budget estimates have been too optimistic for many years, as a result the amount of the hospital's losses has been growing.

The financial troubles of the Riga Eastern Clinical University Hospital go back to 2011, when state financing for the hospital was cut due to the crisis. The hospital's tariffs were reduced to the level of regional hospitals' tariffs, although many services provided by the hospital are far more complex and costlier than the services provided by regional hospitals. The hospital asked the Health Ministry to change the tariffs, but no changes followed. Furthermore, the hospital's management has not been able to optimize the hospital's operations in view of the new circumstances.

Yet another problem is that there are rooms and premises of 18,500 square meters in area at the hospital that are not being used. This causes the hospital a loss of EUR 424,000 annually, the Audit Office informs.

The Riga Eastern Clinical University Hospital has outsourced some of its functions and services, but the hospital's estimates necessitating this were often erroneous, the Audit Office has determined. For instance, contrary to the hospital's estimate that hiring a company to clean hospital premises would reduce the hospital's cleaning costs 22.3 percent in 2015, the cost these services actually rose 20 percent or almost EUR 500,000 in 2015. Outsourcing catering services has reduced the cost of catering, nevertheless, catering services still caused the hospital a loss of EUR 1.3 million in 2015.

In the meantime, although the Riga Eastern Clinical University Hospital has sufficient equipment and specialists for doing all clinical laboratory tests, some of laboratory services have also been outsourced. Likewise, the Hand and Plastic Surgery Department of the hospital, the leading and one of the largest plastic surgery centers in the Baltic countries, could generate substantial profit for the hospital, yet part of plastic surgery services have been outsourced, as was part of the profitable microsurgery services.

The Audit Office also points to shortcomings in specialist remuneration and insufficient residency training at the hospital.

According to the Audit Office, making the Riga Eastern Clinical University Hospital profitable requires further involvement of the Health Ministry, the hospital's tariffs have to be revised, and supervision of the hospital's operations has to be improved.