POLICY EFFORTS TO STRENGTHEN PUBLIC HOSPITALS IN ISRAEL
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34 Eurohealth SYSTEMS AND POLICIES
POLICY EFFORTS TO
STRENGTHEN PUBLIC
HOSPITALS IN ISRAEL
By: Ruth Waitzberg and Sherry Merkur
Summary: Although Israel has a national health insurance system
which provides universal access to basic health care services, a
majority of adults take out voluntary health insurance (VHI). The VHI
enables them to seek specialist and hospital care in for-profit hospitals
rather than the already overstretched public hospitals. The problem
with private funding is its regressive nature that exacerbates disparities
in access and quality of care. Private provision also negatively impacts
on the public system by drawing away physicians, patients and
revenues from public hospitals. The government is addressing these
challenges through a multi-pronged effort aimed at reforming the
VHI market, encouraging physicians to work full-time in the public
sector, and moving to activity-based payments in public hospitals.
Keywords: Voluntary Health Insurance, Public Hospitals, Procedure-Related Groups,
Israel
The Israeli health care system has a community and procure, or directly
relatively low level of public funding provide, hospital services. The NHI pays
a premium to the HPs primarily according
Since 1995, Israel has had a national health
to a capitation formula that considers the
insurance (NHI) system that provides
person’s age, gender and whether they live
for a broad benefits package to all Israeli
in the periphery or centre of the country. 1
citizens and permanent residents, which
the government updates each year. The
Each year, the government determines
benefits package includes an extensive
the level of funding for the NHI, which is
list of services including inpatient,
financed primarily from public sources
ambulatory, emergency and preventive
(via payroll and general tax revenues).
care, diagnostic tests and medicines.
When compared to other OECD countries,
Ruth Waitzberg is Research
Associate, Myers-JDC-Brookdale, Israel has relatively low rates of health
Four competing, non-profit health plans
Jerusalem, Israel; Sherry Merkur care spending. In 2016, health expenditure
is Research Fellow, European (HPs) are responsible for providing all
in Israel as a proportion of gross domestic
Observatory on Health Systems and their members with the NHI benefits
product (GDP) was 7.4%, 2 well below the
Policies, LSE Hub, London, United package and for ensuring reasonable
Kingdom. Email: ruthw@jdc.org OECD average of 9%. 3 The share of public
accessibility and availability of health
financing declined from 70% in 1996
services. They provide care in the
Eurohealth — Vol.23 | No.4 | 2017Eurohealth SYSTEMS AND POLICIES 35
Figure 1: The Israeli health insurance market
PUBLIC HEALTH EXPENDITURE (61% of THE) PRIVATE HEALTH EXPENDITURE (39% of THE)
Depth: all benefits Depth: OOP 65%;
cost covered except VHI 35% of
small co-payments private expenditure
(6.45% of
HPs income)
Meuhedet (14%)
Maccabi (25%)
HPs VHI (84%)
Leumit (9%)
Commercial
Clalit (52%)
VHI (57%)
Scope (benefits covered): Scope (benefits covered):
NHI health basket Complementary
Breadth: universal coverage by 4 Breadth: (% of adult population Supplementary
competing HPs (% of population covered by type of VHI) Duplicative
covered by each HP)
Notes: HP: health plan, NHI: national health insurance, OOP: out-of-pocket payments, THE: total health expenditure, VHI: voluntary health insurance.
6 7
Source: adapted from
to 61% in 2016 of total health expenditure plan that offers a standard package to has the fourth highest VHI coverage rate
(THE), which is considerably below the all policyholders, with fees determined among OECD countries, behind France,
OECD average of 72.5%. Accordingly, solely by age by each HP. HPs provide Slovenia and the Netherlands (based on
‘‘
the share of private financing (at 39% of the HP-VHI plans in addition to the OECD data for 2015). One distinguishing
THE) is one of the highest among OECD mandatory health basket they provide feature of the VHI market is the
countries. This increase was accompanied under the NHI Law. prevalence of multiple coverage: 97% of
by a sharp increase in spending on C-VHI owners also own HP-VHI, and 47%
- Commercial insurance companies
voluntary health insurance premiums. 4 5 have more than one commercial insurance
market both collective and individual
plan. This raises concerns that consumers
commercial voluntary health insurance
may be paying twice for policies that
(C-VHI) policies, tailored to the
Israel preferences of the purchaser.
provide the same or overlapping coverage. 8
has the fourth VHI has a complementary, supplementary
and duplicative role in the Israeli health
Public hospitals function under
pressure
highest VHI system. VHI policies cover (a) services
that are not included in the NHI basic
Of the 44 general hospitals* in Israel,
35 are non-profit owned by the Ministry
coverage rate health care package (for example, dental
care for adults or alternative medicine);
of Health (MoH), municipalities, HPs
or NGOs. They are considered “public
among OECD (b) services that are covered by the NHI,
but only to a limited extent (for example,
hospitals” in Israel. The remaining
nine are smaller for-profit hospitals and
countries in vitro fertilisation and physiotherapy);
and (c) services that are covered by the
operate 3% of the beds. 9
NHI, and can be purchased in the private Public general hospital care in Israel is
Voluntary health insurance and the sector. Such services are provided in one of the most crowded among OECD
dual coverage problem the private sector with enhanced choice countries. Table 1 shows that, compared to
of provider, faster access or improved the OECD average, Israeli public hospitals
On top of the NHI, two forms of voluntary
facilities. VHI does not cover or reduce function with about half the average rate of
health insurance (VHI) are available in
co-payments in the public system. 1 6 acute care beds and nurses per population.
Israel: VHI offered by the HPs to all of
Average length-of-stay (ALoS) in Israeli
their own beneficiaries; and commercial
Even though the Israeli NHI benefits hospitals is also one of the shortest, and
insurance, offered by commercial
package is broad compared to other OECD occupancy rates of acute care beds is one
insurance companies to individuals
countries, Israel’s VHI market is still one
or groups.
of the largest. In 2016, 84% of Israel’s adult
- Health plan voluntary health insurance population had HP-VHI, and 57% had * Israel adopts the OECD definition for general hospitals,
(HP –VHI) is a collective insurance C-VHI 7 (see Figure 1). Accordingly, Israel see http://stats.oecd.org/fileview2.aspx?IDFile=5700cad3-
3cc3-4055-b732-0d4ba59faf17
Eurohealth — Vol.23 | No.4 | 201736 Eurohealth SYSTEMS AND POLICIES
Table 1: Hospital activities indicators, Israel and OECD average, 2016 Between 2007 and 2011, the number of
elective operations increased by 58% in
Israel OECD for-profit hospitals, compared with an
Acute care beds/1,000 population 2.3 3.7
increase of only 4% in public hospitals.
By 2013, almost two out of every five
ALoS (acute care) 4 6.7
(38%) elective procedures were carried
Occupancy rate of acute care beds 93% 78% out in for-profit hospitals. The shift in
Nurses/1,000 population 4.9 8.9 volume from public hospitals to for-profit
Physicians/1,000 population 3.1 3.4 hospitals has raised a number of concerns
Discharges rate/100,000 (all causes) 15,890 15,815
including: a two-class system of care;
loss of revenue for public hospitals; many
Source: 3 10 senior physicians undertaking private
work in for-profit hospitals in the late
afternoons and evenings, raising concerns
of the highest among OECD countries, this purpose in 2013 – 2014. 11 Challenges about quality of care provided during those
reaching almost full capacity at 93%. related to the hospital market, which are times of day and longer waiting times for
Over the last decade, although the physical discussed below, represent a growing elective operations in public hospitals. 12 13
capacity of public hospitals has increased, concern that is now being addressed by
it has roughly paralleled the natural changes in policy. Moonlighting is drawing away public
growth of the population. For example, hospitals’ doctors
between 2010 and 2016, the number of Private funding, the fuel for private
The increasing private health care funding
acute care beds increased by 6%. 9 Yet, the activities
is to some extent crowding out the public
rates of beds per population have remained
VHI is the main source of funding for sector in the competition for physicians’
stable over the last decade. ALoS in
private hospitals’ activities. Individuals time: prices in the private sector are
general hospitals is four days, and has also
with VHI coverage (and often multiple higher, and physicians in that sector are
remained unchanged over the last decade.
coverage) look to private hospitals in paid on a fee-for-service basis. Therefore,
order to access care. The main reasons physicians have strong incentives to
Challenges facing the public for preferring private hospitals is the prefer private practice. Many of the best
hospital sector possibility to select the surgeon, which and more senior physicians have reduced
is not allowed in public hospitals, their publicly-paid activities, which leads
Over the last decade, budget deficits in
and shorter waiting times for certain to increasing waiting times in the public
hospitals and HPs have been a major
elective procedures. sector. Moreover, it increases the gaps in
concern. Strengthening the public system
access and quality of care between those
has been one of the main efforts of the
Over the last decade, Israel’s for- with VHI and those without. 14
MoH and Ministry of Finance (MoF),
profit hospitals’ activities have grown
which convened a National Committee for
significantly, particularly for surgery. Prices do not reflect real costs
The main source of income for Israel’s
Figure 2: Distribution of Governmental hospitals’ gross income by type of service public hospitals comes from the sale of
provided and type of payment, 2016 services to HPs. Hospital reimbursement
rates are determined by a joint MoH
37% Inpatient PD and MoF pricing committee, under the
“Price List for Ambulatory and Inpatient
26% Inpatient PRG Services”. This maximum price-list also
determines the type of payment, which
23% Outpatient PRG/FFS
can be per diem; per activity, so called
8% Births PRG by NII procedure-related groups (PRG); or fee-
for-service (FFS).
6% Emergency FFS
As shown in Figure 2, in 2015, a quarter of
the gross revenue of government-owned
hospitals was for inpatient care paid for by
PRG, 37% for inpatient care paid by per
diem, 23% for ambulatory care paid by
FFS or PRGs, 8% for births paid by PRGs
and 6% for emergency care paid by FFS. 15
Note: PD: per diem; PRG: procedure-related group; FFS: fee-for-service; NII: National Insurance Institute.
16
Source:
Eurohealth — Vol.23 | No.4 | 2017Eurohealth SYSTEMS AND POLICIES 37
addition, for-profit hospitals are not subject
to the MoH price-list and charge FFS. This
Box 1: Changes to the C-VHI market situation creates negative spill-over effects Box 2: Specific objectives of the
on the public sector: cream skimming full-timers programme
• Creation of a “standard policy” for
of patients by for-profit hospitals leaves
surgery and specialist consultations: • to increase the availability of senior
insurance conditions and policies must the most severe and costly cases for
physicians in public hospitals outside
be the same for all insurers and public hospitals. Furthermore, the public of regular work hours, thus improving
insured, including coverage, premium hospitals usually receive patients with quality and safety of care;
and co-payments. The premium can complications and readmissions from
vary according to eight age-groups and • to contribute to the development of the
for-profit hospitals. Consequently, over next generation of clinical leaders in
gender, and a few personal risk factors,
such as previous medical conditions. the past decade, the case-mix treated in public hospitals, and develop
public hospitals has become more costly physicians who look to the publicly
• Insurers must offer the different policy financed system as a sole and
packages separately, each with its own than the average, but hospitals have not
satisfying source of income;
price and without mutual dependency been reimbursed for these additional costs.
of ownership. Examples of insurance Since MoH prices are set as national- • to improve the image of the publicly
policies are policies for surgery and financed system and related
use averages, and PRGs are not adjusted
specialist consultations; medications public trust;
for severity of case, these costs are not
not in the NHI; transplants overseas; • to increase the volume of care provided
and severe diseases. 8 reflected in the price list, and public
by public hospitals; and
hospitals are under-funded and are finding
themselves in chronic financial deficits. 17 • to reduce waiting times for elective
operations and ambulatory treatments.
Until 2010, MoH price lists were not based
Three measures to strengthen
on a methodical costing process. Per
public hospitals
diem and FFS rates were set about three In mid-2016, the MoH put forward a plan
decades earlier based on the historical Since 2015, the MoH and MoF have been according to which selected physicians
expenditures of certain hospitals. Since addressing the aforementioned challenges in public hospitals would be offered
then, rates were updated for inflation, but through a series of policy reforms, some of significantly enhanced pay in return
no major recalculations were undertaken, which are described here. for working additional hours in a public
despite significant changes in cost hospital and agreeing not to work in the
structure due to technical and medical 1. VHI reform to limit private funding private sector. The overall objective of the
advances. Therefore, some activities are full-timer initiative is to strengthen Israel’s
Since 2015, the government approved
‘‘
underpaid and others are overpaid. The publicly financed health care system by
several changes to the C-VHI market to
gaps between costs and prices create improving its availability, quality and
address the multiple coverage issue and
a series of inefficiencies caused by the safety (see Box 2). The initiative may
protect consumers. 18 The changes create
influence of economic considerations on also contribute to efforts to constrain the
simplified and more transparent insurance
medical decisions. private provision of care. 13
products to help refine consumer
choice and potentially enhance market
3. Adoption of Procedure-Related Group
competition based on quality rather than
(PRG) payments to improve payment for
price (see Box 1). Another change was that
public hospitals
VHI can cover services provided only by
physicians have physicians with selective contracts with
the insurer, and providers cannot extra-bill
The MoH has been working to build a
consistent costing and pricing mechanism
strong incentives patients. This measure intends to limit
private funding, and consequently limit
for public hospitals to reduce gaps between
costs and prices. A hospital payment
to prefer the private provision of care. reform (the PRG reform) began in 2010,
which consisted of costing hospital
private practice 2. Cooling-off period to limit diversion
of patients to private practices and the
activities and setting differential pricing
for inpatient care per procedure by medical
full-timers programme fields. Once the price for a specific
In addition to the imprecise costing and
procedure has been set, the per diem
pricing mechanism, the unbalanced In December 2015, new legislation
payment is replaced by the PRG. In 2015,
competition of public and private stipulated that a physician who has started
there were over 300 PRGs codes, which
hospitals poses further difficulties to treating a publicly-funded patient cannot
account for half of all procedures and a
public hospitals. For-profit hospitals can, provide that patient with privately-funded
quarter of all discharges. 15 19
on the one hand, select the low risk or services during a period of at least four
low cost patients and, on the other hand, months. This law attempts to limit the
PRGs differ from diagnosis-related
do not incur the cost of emergency care diversion of patients from the public to the
groups (DRGs) because they classify
or teaching and research activities. In private system. 14
patients based on the main procedure they
Eurohealth — Vol.23 | No.4 | 201738 Eurohealth SYSTEMS AND POLICIES
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