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Hospitals in Poland Facing Dire Financial Situation due to Rising Costs and Lack of Valuation Adjustments

HEALTH & MEDICINEHospitals in Poland Facing Dire Financial Situation due to Rising Costs and Lack of Valuation Adjustments

The financial condition of county hospitals in Poland is extremely poor, as evidenced by increasing losses in operations and mounting debts. The situation has been exacerbated by the reform of the pay system for employees in medical entities, which was implemented in July 2022 and was not followed by an appropriate increase in the valuation of services. Since then, the financial state of health facilities has been deteriorating. “Unfortunately, the prospects for the future are also alarming,” says Krzysztof Żochowski, Deputy President of the Nationwide Association of County Hospital Employers. He points out that in 2024 a further valorisation of medical personnel’s salaries will come into force and without changes to the rules for service valuation, which will allow for financing of the increases, county hospitals will continue to accrue debt.

“If nothing changes, the financial situation of hospitals will continue to worsen. Increasingly, we will have to devote the funds we have at our disposal, instead of improving patient treatment, to financial costs, interest payments, and payments for late deliveries. The system will simply become unregulated and this will lead to the need to limit services, close departments or even some hospitals. This will result in disaster,” warns Krzysztof Żochowski.

According to the Supreme Audit Office, there were 313 county hospitals in Poland in mid-2022, which provide health care services funded by the National Health Fund (NFZ). In August 2023, the Supreme Audit Office published a report on the audit of their activities in the years 2020-2022. It primarily found that the main problem hindering the functioning of county hospitals is their worsening financial situation, resulting in rising debt. As of the end of June 2022, county hospitals’ total liabilities exceeded PLN 7.3 billion, with current liabilities amounting to almost PLN 777 million.

The Supreme Audit Office also notes that the method of financing county hospitals changed during the declared epidemic in Poland, which temporarily improved their financial results and obscured the real picture. In 2021, of 22 hospitals audited, 16 achieved a positive financial result. However, by the first half of 2022, only three entities reported a net profit, while the rest (19 facilities) incurred a net loss. The audited hospitals had significant difficulties in balancing their operations and were late in making payments, which entailed the need to pay interest.

However, the real financial crunch for county hospitals occured in the second half of 2022, due to rising inflation and overall cost increases, as well as the reform of the wage system for employees in medical entities, which was implemented on July 1, 2022. As a result of this reform, the scale of minimum wage increases ranged – depending on the group of employees – from 17 to 41 percent.

A report prepared jointly by the Association of Polish Counties and the Nationwide Association of County Hospital Employers, in cooperation with the Warsaw School of Economics (SGH), shows that this further deteriorated the financial situation of county hospitals. Of the 211 facilities that participated in the study, as many as 191 recorded a loss in their main activities in 2022 (compared to 172 a year earlier), and 151 recorded a net loss (compared to 112 a year earlier). Their sales revenue increased by just over PLN 1 billion, operating costs increased by PLN 1.6 billion, while their liabilities increased by over PLN 2 billion year-on-year.

“Alongside decisions at parliamentary and ministerial level – perfectly legitimate ones regarding the increase in our employees’ remuneration – there must be a precise increase in valuations so that we can pay these raises. If it does not happen, our financial situation will worsen,” warns the Deputy President of the Nationwide Association of County Hospital Employers.

In the vast majority of county hospitals, the change in service valuation rules (as indicated in Recommendation No. 65/2022 of the President of the Agency for Health Technology Assessment and Tariffication from July 2022) did not secure funding for the obligatory pay raises and the coverage of increasing commodity and service prices caused by inflation.

“In the case of facilities that are permanently on call, the cost of readiness, which is a significant part of costs for county hospitals, regional hospitals and some others, must also be taken into account. We do not know when a patient will show up who we will have to provide services to and then issue an invoice for, we have to be ready for that at all times. And this is a huge cost – the cost of readiness of a surgical block, a hospital emergency department, diagnostic support, laboratory, imaging examinations etc. This also needs to be taken into account in valuations,” assesses Krzysztof Żochowski.

He emphasizes that the prospects for hospitals next year are “alarming,” and their financial situation will likely continue to worsen – especially as another valorisation of medical personnel’s wages will come into force in July 2024.

“The new government should first of all honestly pay for work and make an accurate assessment of services. Basically, it should read this valuation from the market, because the government is not supposed to determine how much a person should earn and how much everything costs. The market creates such data and mechanisms must be introduced that will provide the government with accurate knowledge on this subject and will allow it to adjust state policy to this market diagnosis. Without an accurate assessment of services, without honestly paying for good work, there will be no well-functioning healthcare system in Poland,” emphasizes the Deputy President of the Nationwide Association of County Hospital Employers.

The Sejm is currently working on a bill amending the Act on the method of determining the minimum base salary of some employees in medical entities. Under the current regulations, the levels of the minimum basic salary of medical personnel and basic activity personnel are determined once a year, on 1 July each year, and the basis for determining the staff coefficient for a given position is the required education or specialisation. As a result, some employees receive remuneration lower than what their actual qualifications would imply. Changes proposed in the bill include an increase in the labor coefficient and changes to the remuneration rules for nurses – from an assessment of qualifications based on documents to an assessment of actual qualifications. During the first reading in the Sejm at the beginning of December, all parties expressed their support for further work on the amendment in the health and public finance committees.

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