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Researches Health financing
RESULTS OF SURVEY ON IMPLEMENTATION OF GOVERNMENT DECREE 43/2006/ND-CP IN PUBLIC HOSPITALS

Nguyễn Thị Kim Tiến*, Nguyễn Thị Xuyên*, Trần Chí Liêm*, Lê Quang Cường, 
Trần Thị Mai Oanh, Khương Anh Tuấn, Nguyễn Khánh Phương et al.
* Ministry of Health

Place of publication: Ministry of Health
Year of publication:  2010 

Background 
To undertake the direction of the Minister of Health as regards reviewing the enforcement of Decree No. 43 in the public hospital system in order to see achievements made as well as weaknesses and unexpected impacts on healthcare and recommend pertinent revisions/variations, the Health Strategy and Policy Institute (HSPI) in collaboration with the Department of Planning and Finance (DPF) and some other departments within the Ministry of Health (MoH) conducted a survey on reviewing the implementation of Decree No. 43 in 18 hospitals at all levels (7 at the central, 5 at the provincial/municipal and 6 at the district level). 

Objectives
1. To analyze the implementation process of Decree No. 43 in hospitals and to review the organization of implementation based on the legal documents concerned;
2. To assess the results from implementing Decree No. 43 in public hospitals in terms of task accomplishment, organizational structure, staffing and financing;
3. To make recommendations as related to the current autonomy policy to assure efficient, equity and development oriented supply of health services.
 
Methods
The cross-sectional in combination with the retrospective methods were applied to study the data related to hospital operations during 2005-2008. Data was collected based on designed forms, review with  health  professionals,  group  discussions,  in-depth interviews and medical records analysis.
 
Main findings
The implementation of hospital autonomy has brought about positive impacts:
Organizational structure: Hospitals have actively rearranged/established new departments and wards and reappoint staff among departments.
Technical operations: Most hospitals expand medical service types, leading to clear changes in technical operations (bed occupancy rate increased by 25% in full autonomy hospitals, 17% at central hospitals, 14% at provincial level, and 16% at district level compared with pre-autonomy period; the number of outpatient visit and admissions in most hospitals at level grew: the difference in total visits between 2008 and 2005 is 1.3 - 1.5 times; the variance in total admission is 1.2 - 1.4 times; the average number of test per patient increased by 1.5 times in full autonomy hospitals; 1.4 times at central hospitals; 2.1 times at provincial hospitals; 1.3 times at district hospitals; the number of diagnostic imaging – CT-scanner per patient visit raised twice in 2008 over 2005; at provincial level this figures was triple …)
Finance: 
Income increase: The implementation of financial independence policy has created conditions for hospital to be more financially active. Units can regulate expenditures in a flexible way. The total hospital revenues increase by year (revenue in 2008 by full autonomous hospitals was 1.8 times higher than 2005; at central level it was 3 times, provincial level 2.9 times and district level 2.5 times). Of which the major increase is from recurrent revenues, including user fees, health insurance reimbursement and others. The revenue ratio and structure also experience notable changes. The revenue ratio of state budget allocation for recurrent expenditures reduced continuously by year at all levels (2.7 times at full autonomous hospitals; 2.5 times at central hospitals; 1.3 times at provincial and district hospitals). Meanwhile, the ratio of recurrent revenue (including user fees, health insurance reimbursement and others) increase in all hospital groups, except the National Mental Health Hospital (recurrent revenue accounting for 96.8% at full autonomous hospitals; 72% at central hospitals; 81.7% at provincial hospitals and 59.4% at district hospitals). With regard to expenditure structure, expenses for human resources increase in total spending at all level hospitals. Compared with 2005, in 2008 the difference in expenses for human resources at provincial hospital is 2.7 times, central level 1.9 times and district level 1.8 times; at full autonomous hospital, the total expenses for human resources in 2008 only increase by 1.2 times over 2005. The drug proportion in the total expenses for technical transactions in surveyed hospitals ranged 56-65%. There are differences among hospitals at levels and they tend to increase by year (comparing data in 2008 and 2005: increase from 52% to 59% at full autonomous hospitals, 51% to 62% at central hospitals, 50% to 56% at district hospitals). However at provincial hospitals this figure tends to reduce (from 71% to 65%). The proportion of administration expenses in 2008 of the total technical transaction expenditures fluctuates 5-11% and tends to reduces slightly at hospitals at all levels, except the provincial one. Expenses for maintenance only accounts for a small ratio of the total technical transaction expenditures, ranging 0.9-1.2% (according to recommendations it should be at 5%). The above ratio tends to reduce clearly at hospitals at all levels after implementing autonomy policy, except slight reduction at full autonomous hospitals (1.3% in 2005, and 1.23% in 2008). 
Increase income for employees: Employee incomes increase significantly by year. Comparing income increases among years shows that additional incomes of employees in 2008 raised significantly over 2005. However such increase is modest at full autonomous hospitals (only at 1.2 times), 1.7 times at central hospitals and 3 times at provincial hospital.
Comparing hospital groups shows that in 2008, the group of full autonomous hospitals have the highest average income increasing rate, at 2.1 while hospitals with limit capacities of autonomy like the National Mental Health Hospital or district hospitals have modest income increasing rate, at 0.6 - 0.8.
Increase investment for medical devices in the form of socialization (or public private partnership - PPP): There are various partnership formats: (1) joint venture with private companies to invest in medical devices for profit sharing; (2) investors invest in medical devices and hold monopoly rights in chemical and consumable supply; (3) hospital staff and employees make capital contribution. Besides joint venture there are two other investment types: (1) preferential loans from investment development bank; (2) time-bound medical device hiring (not popular). The most popular type is the first one. There are 5 of 16 hospitals applying all 3 investment types, namely Bach Mai Hospital, Ophthalmology Hospital, Central Hue General Hospital, Dong Thap Hospital and Phu Tho Hospital. The invested medical devices increase by year, especially high-tech devices like CT-scanner and MRI.
Implementation of hospital autonomy has shown some limitations and dangers:
Existence of service overuse for revenue generating: It can be in the form of increasing test and high-tech services prescription, raising admission to generate more revenue for hospitals, irrational use of drugs, and prolong length of stay.
Increase in treatment costs: If taking into account only irrational services, the inpatient and outpatient costs for health insured patients increase at all level in 2008 over 2005; central hospital: 1.2-2.6 times and inpatient, 1.1 – 2.8 times.
+ At provincial hospital, outpatient treatment costs for health insured patients increase from 1.7-3.3 times in 2008 over 2005; inpatient treatment costs raise 1.5-2.0 times.
+ At district hospital, outpatient treatment costs for health insured patients increase from 1.1-3.3 times in 2008 over 2005; inpatient treatment costs raise 1.6-3.4 times.
The quality of services for patient may be affected due to overcrowding, heavy workload while the number of physician/bed is short at district hospitals and the number of nurses/physician is normally below regulations in most hospitals.
+ Bed occupancy rate increase by year. 
+ The physician/bed indicator is lower than regulations in Circular 08 at district hospital (district hospital can only have 0.18 physician/bed – according to regulations, it is 0.25 physician/bed).
+ The nurses/physician indicator is lower than regulations in Circular 08 at all level hospitals, especially at central level (1.9 nurses/physician).
There is variance in income and working conditions between hospitals at central level, big cities and poor provinces, district hospital. This has led to staff shifting from lower to upper levels, rural to urban areas, worsening the staff shortage situation at grassroots health care level. 
The differences in benefits among levels in autonomy implementation: The central and provincial hospitals get more benefits from the autonomous hospital policy than district hospital due to more advantages in resources and resource mobilization capacities. In the meanwhile, autonomy policy implementation capacities of district hospitals remain limited.
The difference among levels in total revenue: increase at central and provincial hospitals from 2.7 - 2.9 times while that at district only 1.9 times (comparison between 2008 and 2005).
The income additional increase coefficient for staff at district hospital is significantly lower compared with upper level hospitals (0.8 times at district hospital compared with 1.5 times at provincial hospital). Low income is one of the key reasons of personnel shortage at district level (information taken from interviews with hospital leaders).
Investment in medical devices focuses at central and provincial hospitals.
Organization for hospital autonomy implementation according to related legal documents 
Most hospital carried out autonomy policy in accordance with legal documents and guidelines. There are 3 of 18 hospitals active in development and deploying new management methods to improve efficiency and accountability of staffs like assigning tasks to staff and applying staff performance rating system. However, some hospitals apply new management method, transferring autonomy to departments/wards and it is not in line with regulations by Circular 71 on scope of autonomy application.
Investment in medical devices in the PPP form at some hospitals have not been in compliance with regulations of Circular 15 (procurement of secondhand medical devices, 19% of medical devices without project developed before procurement as regulated in Circular 15).
Some obstacles in implementing legal documents on hospital autonomy:
+ Circular 71: Ways to classify institutions in hospital autonomy as in current regulations are not appropriate to the type of partial autonomy to secure partial recurrent expenditures due to large fluctuation, from 10 to 100% (data from hospital interviews).
+ Circular 15: no guidelines on monitoring the value assessment of medical devices invested by partners for profit sharing under joint venture form.
+ The current corporate tax rates are not relevant to the health sector (data from interviews with hospital leaders).
Legal documents and management instruments are not complete and synchronized. 
No master plan on investment in high-tech medical devices for hospitals at levels.
No standards on service quality assessment based on standard treatment protocol leading to non-existence of bases to evaluate the appropriateness of test order.
Non - appropriate user fee policies (results from interview with hospital leaders).
Hospital leaders’ management capacities: Results of autonomy policy implementation are largely dependent on hospital leaders’ management capacities. However such capacities are still limited due to no systematic training on hospital management
The application of a Management Information System (MIS) at hospital remain limited (only one of 18 hospital apply LAN-based MIS)
 
Conclusions
In summary, the hospital autonomy policy enabled improved hospital income, high tech equipment investment, health services volume, including high tech ones. This policy also enabled  improvement of  hospital staff’s living standards. However, the policy on hospital autonomy especially the investment in equipment via type of investors installed machines and took monopoly in supplying chemicals, consumables and hospitals were forced in utilization of chemicals, consumables may lead to the overuse of equipment if there lacks of critical control.
 
Recommendations
Legal documents on hospital autonomy
It should be reviewed and adjust  some  contents in Circular  No. 71 to address problems  related  to  implementation  such  as  the  regulation  on  total  topping  up income per year in partially autonomous hospitals; how to identify and classify technical entities to implement autonomy as specified under Circular 71.
It is advisable to specify the special tax rate for health facilities when undertaking autonomy.
It is important to develop plans on high tech medical equipment investment to enhance appropriateness and effectiveness in investment in medical equipment.
It is required to review and systematize the legal documents related to hospital autonomy to assure consistency.
Further development of legal documents concerned
It is required to further develop the legal document system to enhance the regulatory role  in  regulation  of  autonomous  hospitals  through  issuance  of  appropriate monitoring tools:
+ Developing plans on high tech medical equipment investment at all levels.
+  Developing  standard  treatment  guidelines  to  be  a  basis  for  assessing  the rational use of test and medical equipment as wlel as medicine indications and quality of health services.
It is important to issue some policies concerned:
+ It is advisable to promptly issue a Decree on renovating the financing mechanism (including salary, health service price and HI) in health facilities in the principle that the income should be adequate to cover expenditures so that hospitals could operate systematically and consistently in the light of financial autonomy.
+ It is advisable to change the payment method, from the fee-for-service method to others in order to control expenditures (such as capitation, diagnostic related group based methods).
Inspection, monitoring
The Ministry of Health should enhance monitoring and inspection on hospital autonomy implementation based on the legal documents concerned, especially investment  in  medical  equipment  in  the  form  of  social  mobilization  in accordance with Circular No. 15/2007.
It is advisable to consolidate the hospital reporting and information system.
It is advisable to continue assessing the linkage between joint activities in medical equipment investment to possibility of health services abuse as well as impacts of the hospital autonomy policy on the service user in terms of their accessibility and affordability.
Hospital management
Funding  from  government  budget  for  covering  recurrent     activities  and investment  in  upgrading  medical  equipment  and  infrastructure  in  district hospitals should be increased to meet the need for healthcare at the lower level.
The funding from government budget for hospitals to carry out activities not generating income such as technical supervision, training should be assured.
Hospitals leaders should be provided with training on hospital management and the criterion of hospital management capacity should be added when considering designation.
 
 

03/12/2013
Health Strategy and Policy Institute  
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