Historically, much has been said and written about the crisis in health; however, this time the crisis is not the same every year around this time, when large hospitals they run silver, mobilized public opinion and Congress get some additional resources.
This time, the transformation of social security and the depth of the economic crisis has revealed serious financial problems and system failures that could only be resolved with substantive decisions. The government rather than help open the way is further complicating the situation because of its ambiguity and indecision.
In this short article, I will begin by presenting a set of figures that force us to think about the economic health problem. In the second section I will discuss some ideas that I think appropriate to renew the entrepreneurial dynamism and health services for all Colombians. In the final section I propose some conclusions.
1. SOME FIGURES TO THINK
a. Evolution of assurance
Changes in insurance and service delivery have been remarkable after the change of the social security system in health. The number of Colombians with health insurance increased from almost 5 million in 1993 to over 20 million in 1999. The number of medical consultations grew by 215% in five years. Hospital discharges increased by 44%, especially in care delivery. The fivefold increase assurance and duplication of services were the counterpart of an increase of 210% in actual resources mobilized for health (with growth of 180% in resources from the national budget and 230% on the contributions of social security ). No other sector of the economy has registered in the last 5 years the rate of such transformations. And no other country in Latin America, as The Economist recently showed, recorded a leap forward that can even be compared.
The results of the expansion of resources and services were socially very progressive. Fabio Sánchez CEDE researcher at the University of the Andes, has shown in recent research that the poorest population groups benefited more than proportionally of public resources. Transfers of public resources in health services to the poorest 40% of the population, increased by 290%, while those to the upper class decreased by 80%.
This view contrasts with the financial situation apparently presents today the system. As a whole, the health insurers have increased losses, which last year reached almost a billion pesos. In addition the overall flow of funds from the EPS has been rather poor, since the building has been almost nil assets, liabilities have increased more than one billion pesos and has been notoriously destroyed the heritage of the system.
However, the overall figures lead to a misleading view of the system, it actually hides a large divergence between the public and private components. More than the whole system, losses are public EPS. As seen in the chart No.3 private EPS had losses in their first three years of operation, but the data for the first half indicate that l999 will be the first year of financial balance for them, and may even obtain positive financial results . This contrasts sharply with public EPS whose initial profits have evaporated and turned into mounting losses that threaten the destruction of heritage. For this year, the losses of public EPS will approach 600 billion pesos; the value of assets will decrease in absolute terms, liabilities increased by 700 billion pesos and most severe destruction of heritage of almost a billion pesos will be observed.
In contrast to the deterioration of public EPS, private EPS, even amid the economic downturn last year, have increased their affiliates in more than one million people and are now very close to reaching the 50% affiliated to social security. But his progress was not only quantitative. From my experience in more than 17 countries in Latin America in the last 5 years I can say without doubt that many of the new EPS have the most advanced in Latin America business and service delivery innovations.
Service providers, IPS, have a more complicated situation. Much of the growth of new provider organizations was achieved on expectations of contracting and payment of public bodies: Social Security, and Caprecom Cajanal and the Territorial Health Departments. In fact, in the last year of the previous government all these public institutions increased their recruitment beyond their financial possibilities. The most visible failure recorded it the ISS with its famous spreadsheets, which proved to be the worst system of purchase and payment of health services. In her with together, these public entities generated a debt to IPS by increased 500,000 million figure, which is similar to that estimated by the Colombian Association of Hospitals and Clinics.
b. Evolution of the Colombian economy
Talking about the crisis in health and ignore the overall situation of the economy is a big mistake. Today the country is a disaster in its economy, manifested by an impressive slowdown in growth, a severe crisis in the public financial system, serious cash problems throughout the economic cycle, and a large group of companies generating losses.
At the beginning of the nineties the country presented a remarkable period of expansion and growth, which came to an end between 94 and 95. Thereafter, growth was initially mediocre and negative in the last two years. One way to appreciate the effects of economic disaster is to contrast the observed income, with which would result of following the trends of the economy in the first part of the decade. For the cumulative effect of low growth, the economy today has a 25% lower per capita income than would have been expected.
This deterioration of the economy has finally reflected in the financial statements. The best-known indicator is the state of the financial system, which has presented in the aggregate a huge portfolio deterioration and increasing losses. Analogously to the health system, disaggregation of information reveals that the greatest catastrophe the manifest public banks.
This financial downturn has greatly affected businesses. In the past two years he has been presenting a slump in profits across the country, and a loss of working capital. Analyzing the balances of the 5000 largest companies in the country, it shows how only 5% of them are creating value (260 companies) while the other 95% are losing money in their operations or funding (2967 companies 5000 , representing 59% of the total, have net losses), or produce nominal earnings below the opportunity cost of capital.
The situation is so complex that for companies? Nás large registered in the securities markets’ portfolio day have skyrocketed to the point that the average and exceeded 250 days. In fact, between June 1998 and June 1999, the working capital of the entire private sector fell by about 6 billion pesos. If you consider that health is today almost 10% of the economy is not so inexplicable then increased portfolio hospitals.
c. A detailed look at the financial results of the entities health
Understanding the financial situation of health institutions involves analyzing the return they have over their assets; a comparison against the average firms in the economy; study the operating margins, asset turnover, etc.
The first ele? Nento to consider is the average size of companies. In Money magazine, in order to compare the average data of IPS and private EPS, I built a company whose model is similar to any of the 5000 largest private companies in the country, $ 20,000? Nillones, similar to the average the 5,000 largest companies in the country. Its sales during 1998 was four times higher and higher operating income 20 times that of the average company. However, net income was negative.
Compared to a typical undertaking of the economy, a private clinic sells half average, tripled operating profits and net profits recorded them.
What should, then, and in relation to the rest of the economy in an almost depressive period, unsatisfactory business performance of health services? The answer is yes nple: health institutions adopted a financial structure with very high debt and little equity, which proved very fragile in the current environment. In addition, positive operating results are not ultimately expressed in profits, as the administrative expenditure both in clinics and in the EPS is much higher than in the business whole country.
The contrast of healthcare companies with the rest of the economy may be interesting in relation to their Return on Assets (known in financial jargon as ROA). Healthcare companies, on average, have a ROA similar to the average for the economy, but achieved with greater asset turnover and lower sales margin. With the expansion of coverage, health ceased to be the high-margin business and little turnover was up 70, to become a high turnover business assets with low operating margin. As can be seen clearly this is a structural change.
This type of business is severely beaten in a crisis like the current one. A business with high turnover and low margin requires a lot of liquidity and is very sensitive to the deterioration of credit and payment system. In the case of developers, it is also due to the reduced contribution of equity. A rotation of such business assets as low heritage is extremely vulnerable to the kind of economic crisis currently affecting the country.
But regardless of their economic situation, to achieve more adequate profit margins these companies must reduce their fixed costs. Compared to its heritage, health care companies have administrative and financial expenses 20 higher voices than the average company in the economy. In the case of public entities, the problem is clearly on expansion of bureaucracy: Today 45% of the staff of public hospitals is administrative. On the other hand, I would have better information on the administrative status of private clinics.
The information analyzed to infer that the health crisis can not be further analyzed in disconnection with the rest of the economy. The brutal downturn in the economy reduced revenues from social security, and increased demands for health services. The fiscal crisis, in turn, has had more than proportional manifestations in the public hospital system.
On the other hand, there is a deep global crisis in payment systems has made the resources do not flow and its financial cost is very high.
Thirdly you can not lose perspective and impute all health problems to the state of the economy. With the crisis have uncovered more clearly the problems of governance, and this may explain the differences between the public and private sectors, and likewise between the different regions of the country.
In the public sector the process of transition and adaptation to the new system has been slow and full of political interference and lack of definition has led to problems of inefficiency, bureaucracy and corruption high perpetuated.
In the private sector the institutional lag comes from two sources. As already mentioned, the financial fragility of entities made them very vulnerable to the economic cycle, and this vulnerability tends to be irrigated throughout the system. Moreover, it can be said is the problem of lack of collective action initiatives by private entities own. Not everything can be solved “Moors inward” and requires that the entity set to acquire increasing responsibility in the running of a system that evidence public address poverty. Also in the private sector leadership it is required to face the collective and social problems.
SOME IDEAS FOR RENEWING THE DYNAMISM OF THE SYSTEM
The crisis affecting our health system is background. Cloths of warm water to continue postponing problems or attempts to return to the past, before this crisis demands a new type of decision-making, both public and institutional nature of enterprise, more timely and more ambitious than ever. Let us make a brief visit to which I consider most important.
a. Business solutions
This type of solution can be grouped into two types, those related with added value and those related to achieving further institutional consolidation.
The country increased the amount of resources devoted to health. Health services increased more or less in the same proportion that increased resources, indicating that, in the aggregate, there was little increase productivity. Or that some productivity gains was offset by increases corruption and inefficiency of others. In general, I think it was a five-year history go to enhancing the effectiveness of its control of costs.
The public sector has to resolve once and for all, and tools are clearly given by the laws in force, the problem of governance of their institutions. Without the problem of benefits liabilities, generous former Government multiplied by more than one trillion pesos, the conflicts of survival of hospitals will not be resolved. And also must get rid, once and for all, the illusion of continuing to expand their public EPS: the weaker should be settled as soon as possible, and ISS resize it to become viable. Payment of public resources systems have to become more agile and transparent.
But the companies that survive, whether public or private, also must accelerate its strategic with the whole system relationship. After five years of experimentation and learning, it is already time promote forms of contracting and payment that have been more simple, fair and, above all, stimulating productivity. The activity fee poorly fulfilled its role and must be overcome.
Institutional consolidation will also be the order of the day in the next three years. The system can no longer prey to dwarf that we saw in the first years. There should be less EPS but larger and much more efficient. And optimize their relationship with lenders form. The sporadic system associated with payments by activity should be step to more integrated systems on the provision of services (the panel closed or semi-closed proved more viable than the forced separation of insurance and benefit scheme), or the new generation of alliances between the EPS and its providers, or between groups of lenders to boost the quality of the provision of services. Business communities will allow to overcome individual inefficiencies that fragmentation allows today.
Of course, an essential part of business consolidation is in the financial reorganization of companies. Not it can plan a universal system that works with “Silver of the mister, or the Treasury”. Capitalization, capitalization, capitalization is the strategy that should be generalized to emerge from the crisis. In addition to the resources of the partners, which are necessary, capitalization also can be based on new paradigms, such as securitization processes, the stock market launch, the integration of public and private entities to seeking debt restructuring law of economic intervention submitted to Congress, etc.
b. Global solutions
The renewed corporate dynamism must be combined with the strategic orientation of the whole sector. It is essential that the Government do the relevant definitions and leave clear rules. There is multiple evidence of this lack of orientation, for example in the budget of the truth, the Government has stated its intention to eliminate the assurance in health for poor people and draw on the resources of the system subsidized to continue to finance the deficit of the public hospitals.
On the other hand, he searched through bills 032, and 033 add resources of $210,000 million for large public, from resources of the Fosyga’s social security hospitals. In addition, the guideline would seem to give priority to finance cost overruns of the public entities at the expense of halt the expansion of the coverage of social security to the poor. To top it off, the ambiguity in the orientation of the recently approved Development Plan is having severe costs for the expansion of the private system, because it questions all their bases to be revised yet unknown bases. This ambiguity and contradiction of health policy could exacerbate the structural crisis, if it does not act in time. I am convinced that fortunately the Constitutional Court “knock” the Development Plan for its procedural defects.
Is it not i? nposible see what should be the main lines of action to address the solution of the new problem faced today by health. A clearer strategic direction of continuity should be a process underway, to search for more efficiency and equity. It is essential to accelerate the transformation of the operation of the public hospitals and pay off most of the public EPS, which are clearly unsustainable, to consolidate the system alternative, which has shown ability to make things better and more effectively reach the poor. And it should sponsor the attack system subsidized, apparently promoted by those who have lost privileges of the old system. Delete the siste? subsidized na, which has given new services to more than 8 million of truly poor people, would be sacrificing the country’s main social achievement in the ulti? nas decades.
Rather than continue clamoring for public budget resources that do not exist, would have to apply imagination and use capital market to solve liquidity and asset failure of institutions. There are many possibilities. Why not develop incentives aimed at capitalizing on the system of the EPS and private clinics, of Social insurance and public hospitals – and the formation of partnerships to solve their structural problems of financial fragility? , Why not pay benefits liabilities of hospitals with actions of institutions, aligning incentives for workers with more efficient management?, you develop a certain private liquidity to unclog the sistem payments flows? na? Do not include health companies in external financial restructuring and business capitalization of multilateral banking loans? Or use resources of the social emergency of the agreement with the IMF to extend the security of the poor and not the bureaucrats?
These next two years are going to be keys to imagination and sense of social responsibility can make a second wave of progress in health initiatives to build a siste? na which are all true? proud component.