RIGA - More than EUR 700 million or 40 percent of the healthcare budget is allocated to hospitals each year, but the funding primarily supports a fragmented network of hospitals rather than ensuring equal and high-quality care, the division of hospitals into tiers does not work, tariffs are outdated and mathematically adjusted to the available funding, and there is internal inequity in financing, with top-level hospitals suffering the most, the State Audit Office concluded in its audit.
"The basis for effective healthcare in hospitals is a purposefully designed hospital network that balances population, travel distance, staff capacity and sufficient practice opportunities, including healthcare plans in crisis situations and, finally, cost-effectiveness," says Maija Abolina, Member of the Council of the State Audit Office.
The State Audit Office explained to LETA that a set of such proposals was developed in cooperation with the World Bank already in 2016, with a view to gradual optimization by 2025. However, the plans have not been implemented - the 2018 reform did not reduce the number of hospitals, and now there are 41 hospitals in Latvia instead of 39.
The formal division into tiers I-V does not work either, as the State Audit Office has found that in practice there are numerous exceptions, adapting to the actual capacities of each hospital. Thus, a patient in an acute situation may end up in a hospital where the service in question is not provided, even though it is available elsewhere in an equivalent hospital.
The State Audit Office also notes that, although the reform also provided for binding requirements for hospitals to be allowed to provide certain services at all, this has still not been done, with the result that the quality of services varies. Similarly, the evaluation of quality indicators, which was supposed to be linked to funding, has still not been introduced.
The audit found that hospitals at all levels together fail to provide more than half of the specialists needed in admission wards. Although this was assessed on a monthly basis, the trend is worrying in the view of the National Audit Office. A large proportion of on-call staff is provided by residents and trainees, while the shortage of certified specialists persists.
The auditors also found "impossible situations" - for example, an uncertified surgeon is documented as being on call for 452 hours per month in four hospitals, a resuscitator for 424 hours, of which 96 hours are continuous, and a neonatologist is documented as being on call in two locations in Latvia at the same time. "Such data shows formal compliance with the norms, which does not improve patient safety," emphasizes the State Audit Office.
At the same time, there is no justification for the extensive network of admission wards, the total annual funding of which amounts to around EUR 100 million, but the actual patient flow is not taken into account. It is on this fixed payment that the two lowest levels of hospitals depend for their existence, accounting for 45-48 percent of the funding they receive from the state. Meanwhile, only 6 percent of all admitted patients end up in their admission wards. That is to say, while emergency teams in level IV hospitals bring in 16 to 36 patients a day, in some lower-level hospitals it is as low as one patient in 20 days. Despite this, one admission ward in a lower-level hospital costs the state an average of EUR 850,000 annually, the auditors of the State Audit Office have concluded.
The audit also found that urgent care centers, which existed in lower-level hospitals until 2019 and continue to operate elsewhere, provide an even wider range of services but cost less - an average of EUR 350,000 a year. "This comparison clearly shows that changing the name and status increased costs by EUR 2.5 million per year without changing the content of the service," underlines the State Audit Office.
The authority also reminds that already in 2019, the Health Inspectorate found that almost ten hospitals did not meet the required level. For example, if the level was lowered for the second highest hospital, its admissions department would see a 40 percent cut in funding and the state would be able to divert almost two million euros annually to real patient needs. If the admission wards of the two lowest tiers had not been maintained since 2020, almost EUR 57 million would have been found for other needs, but instead the funding of these wards has increased significantly over the years, according to the State Audit Office.
The auditors also remind that since 2011, Latvia has been implementing the internationally recognized system of payment for diagnosis-related group (DRG) services, where payment is determined according to the complexity of the patient's treatment. However, the audit shows that this system is still only partially in place: hospitals are paid by the state in 16 different ways, and many of the tariffs are outdated or mathematically adjusted to the available funding.
According to the National Audit Office, the two top-tier hospitals, which account for 40 percent of hospital admissions and provide complex services, are the most unfairly affected by this system. In particular, in 2025, the Riga East Clinical University Hospital will have its funding reduced by EUR 12.7 million and the Pauls Stradins Clinical University Hospital - by EUR 6.8 million. For hospitals with low patient flow, the fixed funding of admission wards ensures a stable income. This creates internal inequities in the system and hinders the development of healthcare and services where the patients are, the State Audit Office stresses.
Consequently, there is cross-subsidization: basic hospital services are effectively covered by funding for outpatient services. In addition, hospitals work in a constant state of uncertainty - contracts for the current year's funding are amended even on a monthly basis. There is also no traceability of whether unused funds are being diverted to patient needs that are nationally prioritized or to services that the hospital is simply able to provide.
Abolina acknowledges that the system of payment for hospital services is very complex, but it is of no use because hospitals use the money in a different way than the state pays for it. "Moreover, the system's disorder is a very convenient argument for not changing anything, because no issue can be sorted out until all the others are sorted out," she says. But lack of transparency opens the door to allocating scarce funds without question, giving to some and not to others, she adds.
The State Audit Office has made five recommendations to the Ministry of Health, which, if implemented by 2029 at the latest, will ensure that patients receive quality services in an organized hospital network, that a revised network of admission wards has a full team of specialists providing medical care in all locations, and that hospital services are planned by linking available funding to the quality of services. Hospitals will also be paid fairly, taking into account the complexity of patients' cases, the auditors explained.
Minister of Health Hosams Abu Meri (New Unity) admitted to Latvian Radio that some hospitals are unable to offer quality emergency care in admissions wards. The same is true for maternity and trauma care, the quality of which is inadequate in places.
Accordingly, the Minister agrees that the hospital network needs to be reformed. He has proposed reforms and they are being discussed, but "everyone is protesting" and some hospitals and municipalities are "behaving aggressively against us", seeing the reforms as an attempt to close hospitals.
Abu Meri insists that the Health Ministry is not proposing to close hospitals, but to change their division into three tiers and to define more precisely what care is provided in each hospital. There was a wider conversation with hospitals on this in early September and work on changes will continue.
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