Ministry of Health: Medical institutions will receive guidance on how to convert to enterprises


Ministry of Health of Ukraine has developed guidelines for medical institutions on how to become an enterprise under the law on autonomy of medical institutions (“On amendments to some legislative acts of Ukraine concerning improvement of legislation on healthcare”). “It proposes 13 steps written in plain and clear language – a step by step instruction on how to become a communal non-profit enterprise. This document is published on the MoH website, and today (…) we are going to distribute these recommendations in regions and suggest that medical institutions begin preparations for restructuring without delay and do it within an exemption period when it is much easier,” said Pavlo Kovtoniuk, Deputy Minister of Health of Ukraine, at a press briefing held at Ukraine Crisis Media Center.

Pavlo Kovtoniuk assured that the Ministry of Health will help medical institutions gain a new status. “This is a very important step in healthcare reform that will enable a medical institution to be effective within a new system after the adoption of draft laws on the new system of medical financing, which the government submitted to the Parliament, under which money follow medical services. All medical institutions in Ukraine will work under contracts, and if an institution has the status of a non-profit enterprise, it will be much easier to do this,” he said.

What does autonomization change?

Autonomization of medical institutions involves their reorganization into enterprises instead of the current model of vertical control when each step is to be coordinated with the Ministry of Health. In these circumstances, they will be able to solve their economic issues, including wages policy, and the head doctor becomes a manager elected through a competition.

Reorganized institutions will be financed not under the itemized cost estimate but based on their own financial plan. Each medical institution will have a bank account. “We protect the money – it remains in state banks, but the institution may freely use them,” noted Mr. Kovtoniuk. Previously, balances were taken back into the budget at year end, now the savings will remain in the institution, which can invest them in something at its discretion. Now institutions may be financed through both budget funds and corporate and individual funds.

Employees of medical institutions will sign employment agreements and no longer be state employees. Their wages will no longer be tied to a category pay scale – wages will be determined by an institution’s management. This will motivate the staff. Also, medical institutions can employ doctors-individual entrepreneurs, who have registered and have a license for medical practice, under employment contracts. This model will encourage economic initiative of management of medical institutions and motivate them to use funds effectively. At their discretion, medical institutions will form associations with other institutions that have the status of an enterprise to redistribute functions and optimize the use of resources.

Thus, accountability and control over the use of funds will remain. Medicines will be purchased through ProZorro system. Supervisory boards will monitor activities of the institutions. They will not interfere with their daily activities, but will participate in making important decisions. It is obligatory for institutions of the secondary and tertiary levels. Besides, boards of overseers with representatives of the public and local authorities may be established.

Autonomization does not mean privatization

“There are many myths around this process. They say that ‘all institutions will be privatized’, ‘many doctors will be dismissed’, and so on. In general, all these rumors are myths. The status of the enterprise deals neither with the dismissal and employment, nor with privatization and non-privatization. It just enables the institution to function as a normal enterprise, and the head of the institution to be a normal manager,” noted Pavlo Kovtoniuk.

The mere fact of reorganization does not provide grounds for dismissal; the employment relations with workers are continuing. Dismissals are possible only if the institution decides to reduce the staff.

When and how will this happen?

If the President signs the law, it will take effect in six months. Medical institutions will be offered favorable treatment until the end of 2018. “Favorable treatment” means a simplified process of transition to a new model in terms of how many and which documents should be prepared, how the problems of debt will be solved and so on. Thus, the institutions that will be reorganized into enterprises during this period, from 2019 will be able to enter into contracts with the state and work according to the new model. The Ministry cannot force medical institutions to reorganize themselves. They can do this only on their own initiative or the initiative of local authorities, because they belong to local communities.

“We know from the ‘sporadic’ experience, that the transition to the new status takes about 6 months if there are no problems, so they have time to do it. If this is not done, it does not mean that institutions will remain without money, but they will remain without many advantages offered by the new funding model, when a medical service is paid for instead of allocating a certain amount to support this institution as it is today,” noted Pavlo Kovtoniuk.