Why do Okhmatdyt, Feofania and other Flagships of Ukrainian Healthcare Remain Outside the Law

Ukraine continues to have two healthcare systems. One, introduced in 2018, is based on the autonomy of medical institutions and transparency of funding; their services are available to all, and the institutions themselves operate under a contract with the National Health Service. The vast majority of state-funded facilities providing services to the public are municipal and belong to the citizens, but the number of private operators signing contracts with the NHS is also growing with every passing month. All good thus far, but there’s a hitch: Ukraine’s leading clinics, which provide highly specialist services are still unavailable to patients who expect to get these services under the transparent principle of “the money follows the patient”. These are 33 medical institutions under the Ministry of Healthcare (including the well-known Okhmatdyt, over 30 institutions of the National Academy of Medical Sciences of Ukraine, 5 institutions of the State Management of Affairs, among them Feofania, which Ukrainian President Volodymyr Zelensky called on to open its doors to the general public. These institutions are technically funded by the state, but under the outdated Semashko system whereby the funding a clinic gets depends on the number of beds it has. It is this funding approach that the healthcare reform carried out in Ukraine sought to get rid of. Thus, Ukrainians essentially keep paying for medical services from their own pocket in certain medical institutions that have zero incentive to compete and grow, and the state is unable to give citizens any real guarantee with regard to the quality and accessibility of such services. Let’s try and find out why this problem exists and how it can be resolved.

First of all, let us recall how the National Health Service does things. It receives funds from the state budget to pay for the public’s medical services. When Ukrainians require a medical service, such as a liver ultrasound scan, the NHS pays the appropriate medical institution for this provided that the service in question is on the Medical Guarantees Program list. The patients themselves don’t have to pay anything. Their family doctor writes them a referral for this, valid in any medical institution that has a contract with the NHS.

When the reform was launched back in 2018, all municipal medical institutions that wished to participate in the state financial guarantees program had to become autonomous, i.e. become independent enterprises able to enter into contracts. This presented a challenge for the vast majority of their owners — local government authorities. Prior to the reform, the owners’ power over these institutions was absolute, since it was up to local government authorities to distribute state funds among clinics. Eventually, however, medical subventions based on the number of beds were removed from the state budget. After the introduction of the state financial guarantees program, subventions were abolished, leaving the owners with a choice: whether to fund medical institutions at their own expense or allow them to become enterprises and sign contracts with the NHS. local government authorities chose the second option. It was then that all small and large polyclinics, specialist and general regional hospitals joined the new healthcare system. From that point on they have been providing the public with state-guaranteed services, receiving funds for this from the NHS straight to their bank account. This fosters healthy competition between medical institutions in different regions, since the NHS pays under the extra-territorial principle, meaning that the patient can choose any institution, regardless of his or her place of residence: as long as the institution has a contract with the NHS, the service will be paid for by the state.

The NHS currently covers a wide range of services for the public, from primary care (consulting a family doctor, treatment of the majority of common illnesses, injuries and poisonings, as well as diagnostics) to complex emergency operations and procedures (e.g. myocardial infarction, chemotherapy, etc.). These services are provided by medical institutions that have contracts with the NHS. However, there are certain services that can only be provided at a high level by medical industry leaders, thanks to the resources that the state has been investing in them for many years. For instance, the National Children’s Specialized Hospital Okhmatdyt performs unique bone marrow transplants. Open heart surgery, neurosurgery and other very specific but no less critical forms of treatment are provided only in medical institutions that are beyond the auspices of the state program of medical guarantees and contractual relations with the NHS. Getting into these clinics is often difficult for the average Ukrainian even with a referral from his/her family doctor, as no transparent mechanism exists for it. This violates the principle of justice and solidarity, since many Ukrainians that suffer from serious conditions don’t have access to the treatment they need under the transparent rules.

Of course, there are foreign hospitals that offer such services, which is why we often see fundraising pleas on the Internet: “Help Olenka, Mykhailyk, Natalka”. Complicated operations cost a lot, but German or Israeli clinics will at least perform them as long as they get paid. With Ukrainian state medical institutions it’s not that easy: neither patients nor the NHS can transfer money for services to them since it’s not strictly legal.

The issue here is that under current legislation, state medical institutions are not economically independent entities with the status of a service provider, and thus may not sign contracts with the NHS. Reorganization is necessary to make them autonomous, enabling them to participate in the state financial guarantees program.

So how can these institutions be turned into independent enterprises with their own current accounts and the ability to sign a contract with the NHS? As with their municipal counterparts, this will require authorization from their owners. For a municipal clinic, this means the local community, but a state one is owned by the state, specifically the Cabinet of Ministers of Ukraine. There’s a catch here though: each medical institution belongs to the jurisdiction of a specific central executive body or state body, which means that the decision on reorganization must be issued both by the Cabinet of Ministers and the State Management of Affairs, or by the Cabinet and the Ministry of Healthcare, respectively.

The Cabinet of Ministers even has the power to liquidate an institution and create a new state-owned medical enterprise, although it would lead to mandatory dismissals and loss of license, not to mention the process could take months, during which time the institution would remain idle. That’s why a joint decision by the authorized agencies is so important in order to make reorganization as painless as possible.

What’s interesting is that any such attempts at reorganization today are met with protests from the leadership of these leading clinics. The chief doctors (administrators) aren’t happy with the rates that the NHS offers them for their services. It should also be noted that these people have considerable influence as they are in charge of the most prominent medical institutions, which makes advocating for change here all the more difficult. It goes without saying that a special approach to pricing is warranted when making decisions regarding the future of these institutions. However, there are other considerations to keep in mind here too, such as the effectiveness of management, cost optimization, changes in practices and treatment standards, as well as approaches to service and care.

And yet, even with this seemingly insurmountable obstacle, three factors speak in favor of reorganization. First, according to current legislation, a medical institution must be reorganized into an enterprise to be able to apply for a contract with the NHS. The only clinics exempt from this are those that belong to of the Ministry of Internal Affairs, Security Service of Ukraine and other law-enforcement agencies. Thus, the fact that leading clinics remain in their current state is a violation of the law by the executive branch of power.

Secondly, the owners don’t have to ask clinic administrations as to whether they are fine with the rates offered. A chief doctor’s dissatisfaction is not an argument for delaying reorganization.

Thirdly, the abolition of medical subventions, which was the final push that forced local medical institutions to go autonomous, simply does not work with the leading clinics, since Parliament maintains the old funding system for these institutions in its yearly budget laws through the budgets of the appropriate executive bodies.

If adherence to the law is not reason enough to reorganize these institutions as soon as possible, here’s another: by funding them through the NHS we’ll be able to eliminate the last “gray zones” in the Ukrainian healthcare system, since all payments for services will be cashless and done via bank transfers, making them transparent and traceable. This will be a significant step towards fair competition on the healthcare market, which should improve the quality and affordability of medical services and make healthcare attractive to investors.