Governance of Hospitals in Central and Eastern Europe

This short chapter sets the stage for the remainder of the book by presenting a number of key underlying aspects. Firstly, it explains the reasons to conduct health services research in Central and Eastern Europe and Former Soviet Republics. Secondly, it states the book’s objectives and lays out its structure. Thirdly, it provides an overview of the region’s geography and familiarises the reader with terms and concepts used throughout the book.

The motives that led to this study include the geopolitical importance of the post-communist region, its historical development which constitutes a quasi-social experiment and the identification of unexplored aspects of health-care transition. These opportunities are accompanied by challenges which stem from both a complex nature health and health care as well as from idiosyncratic institutional features of the post-Semashko systems.

The above considerations support the objective of this study: enhancing our understanding of changes that the post-communist health care systems have experienced in the spheres of hospital autonomy, ownership and legal forms, all of which are defining elements of hospital governance. Consequently, the original contributions of this book are in describing the patterns in region-wide transformation of the hospital sector, presenting distinct economic characteristics of the elements of the transformation and completing the discussion with statistical evidence of effects on hospital sector performance.

This chapter establishes the meaning of the post-communist transformation by presenting key socio-economic changes that took place since 1989 and characterising health care systems emerging from transition. The study recognises that the period has been a time of great social, demographic and economic change for the former Soviet bloc societies, which has not been without consequence for the health systems and their reforms.

Firstly, highlighted in this chapter are developments in the institutional environment, macroeconomic growth and downturns, trends in economic inequalities, population ageing, education and burden of disease. These processes, which are fundamental for any form of economic activity, determine the resources available for the financing and provision of health care; moreover, they influence health needs and outcomes. Secondly, the chapter provides an overview of common and distinguishing characteristics of 22 countries of the region: Albania, Armenia, Azerbaijan, Bulgaria, Belarus, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland, Romania, Russian Federation, Slovakia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. Recognising the within-region heterogeneity leads to an identification of peer groups, contextualises the discussion and enables an assessment of reform efforts relative to the respective challenges, capacities and resources. Thirdly, the chapter summarises developments in the health care systems presented in the literature of the subject. This encompasses such key defining elements of health care systems as the mechanisms for revenue collection and allocation, the new prerogatives for the public and private sectors, the consistency and quality aspects of reform as well as the major deficiencies and challenges. The discussion later focuses on the problems specific for the hospital sector, thus setting the ground for the analyses presented in subsequent chapters.

This chapter presents the experiences of transforming the hospital sector in 22 countries of Central and Eastern Europe and former Soviet Republics: Albania, Armenia, Azerbaijan, Bulgaria, Belarus, the Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Poland, Romania, Russian Federation, Slovakia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan. Using a qualitative approach, the country-level case studies produce detailed and internationally comparable descriptions of changes that took place in the area of hospital governance. Next, the individual reform paths are generalised in order to develop and substantiate a model of transforming hospital governance. Going beyond the public-private delineation, the model identifies five unique stages of prevailing forms of hospital governance: (1) the integrated Semashko model, (2) decentralised hospital management, (3) devolved hospital ownership and (4) corporatised and (5) privatised hospitals. Each stage corresponds to a distinct distribution of decision powers, financial risks and residual claims between the sector participants. These characterisations can be interpreted as efficiency factors associated with decentralisation. Recognising the importance of the above processes leads to an extended typology of post-communist health care systems. Accounting for both the dominant financing arrangements and the governance setup improves our knowledge of transition, compared to common classifications based exclusively on the introduction of social health insurance. The chapter concludes with a reflection on good practices and common mistakes found in this region-wide process.

The objective of this chapter is to provide theoretical underpinnings for the stages of hospital governance transition. Considerations of economic efficiency in the context of governance stem from various branches of economic literature that include neoclassical theories, transaction costs, agency, political choice, decentralisation and fiscal federalism, institutional economics and models of organisational behaviour. The arguments are reviewed and synthesised in a discussion of their meaning and implications of the five-stage transition model proposed in the previous chapter. The overarching picture is that the hospital sector transformation in the post-communist countries strengthens incentives for efficiency and cost-awareness, however at the risk of growing access barriers, equality issues and a gradual phasing out of uncompensated care. The structure of governance emerges as an important factor in decisions surrounding the provision of health care and serves a function that is complementary to provider payment mechanisms in determining providers’ responsiveness to high-powered financial incentives. Moreover, in a network of autonomous hospitals, managerial capacity is a critical, if elusive, component of good performance.

Building on previous studies primarily concerned with financing arrangements, the above considerations constitute a more complete picture of economic incentives in the hospital sector. For the health care systems of Central and Eastern Europe and Former Soviet Republics, this extended view of payment mechanisms, governance arrangements and managerial capacity offers a comprehensive framework for a realistic assessment of potential reform paths and their chances of success.

The objective of this chapter is to empirically verify the implications of changing hospital governance. For this purpose, the model of hospital governance transition presented in previous chapters, complemented with a set of control variables, provides a basis for an econometric analysis aimed at explaining the hospital sector performance expressed with a range of measures aggregated at the national level. A random trend model is populated with data from 22 countries over the period 1989–2010. The statistical evidence suggests that devolution of ownership leads to increases in acute care lengths of stay, numbers of admissions, and selected measures of mortality attributable to hospital care. Corporatisation of hospitals can be associated with increased acute lengths of stay and bed occupancy rates. The findings suggest that decentralisation and autonomisation reforms, as introduced in the region, did not contribute to the intended de-emphasising of inpatient care. Higher utilisation rates coinciding with increased mortality may imply that territorial governments may trade off quality for quantity of care when they are given authority over hospital care provision. Reform design features and resource constraints persistent in the transition systems offer possible explanations of this.

This chapter formulates answers to research questions and summarises the key points of discussion made throughout the book. From the background study, revisited are the magnitude of institutional, social and economic change, transition paths underlying similarities and contrasts within the region, the remaining burden of socialist inheritance, main issues in health-care reform and the challenges that lie ahead of the health systems of Central and Eastern Europe and Former Soviet Republics.

The study of hospital governance identified a gap in the existing literature and noted an internationally growing research interest in the aspects of hospital autonomy, ownership and legal forms, to which it provided three complementary views. Firstly, it produced an account of individual country experiences that add up to a regional pattern of hospital governance in transition. The resulting conceptual model has the capacity to account for hospital reforms in the post-communist region. Considering the limited prevalence of privatisation, the orientation towards changes taking place within the public sphere is an advantage of this model. Secondly, the study explained the theoretical underpinnings of this conceptual framework, with an emphasis on economic incentives and the implications of each transition stage for the system performance. In this view, governance is considered as complementary to health-care financing, enabling high-powered incentives to take effect and creating incentives of its own. Thirdly, the study demonstrated that governance is quantifiable, its effects measureable and statistical analyses feasible in this context. The analyses produced statistical evidence of reform effects on selected measures of hospital resources, utilisation and health outcomes. The combined three perspectives are indicative of limited success achieved region-wide during the two decades of transformation.