What you need to know about the transfer of district hospitals to the communities: open dialogue recap

What is the proper way to transfer ownership of district hospitals to the communities? Why is it urgent? How can a community budget funds for a hospital it does not yet own? Can the communities with insufficient capacities transfer the hospital ownership to the regional entity? Will patients’ contracts with primary care physicians as well as hospitals’ contracts with the National Health Service of Ukraine be valid during the hospital ownership change?

These are some of the questions discussed by the participants of the open dialogue “New administrative and territorial structure – new local government system: action plan for community health facilities and their owners”. Speakers of the discussion included representatives of the Ministry for the Development of Communities and Territories, the Ministry of Health, and the National Health Service of Ukraine (NHSU). A total of 295 participants from 24 regions of Ukraine and the city of Kyiv joined the dialogue online. They are heads of regional health departments, heads of health care facilities, doctors, lawyers, heads of local self-government, members of regional, district, and local councils. About 5,000 viewers followed the live stream on Facebook and YouTube. Dialogue participants were able to ask speakers their questions.

Check out the highlights of the open dialogue in the long read by Ukraine Crisis Media Center.

The Law no.3614 that the Parliament passed in September 2020, distributed revenues and expenditures between the budgets of territorial communities and districts, entrusting most of the resources to the communities. Thus, the districts are already unable to fund district hospitals. There’s an urgent need for the transfer of ownership, so that the communities can include hospital spending in their 2021 budget.   

Hospitals get most of the funding that, in particular, covers salaries, through the contracts with the NHSU. Local self-government entity that owns the hospital is responsible for its maintenance, utilities, other current expenditures, and development, so that it can guarantee quality health services to the residents. In practice, not all the communities rush to take the hospitals, while after the transfer, some expect the state aid. Still, there are positive examples – before the new district councils started, previous district councils were able to complete the transfer of the facilities to the communities. Open dialogue participants said that timely and well-balanced decisions proved to be most efficient in the current situation.

The first stage of decentralization aimed at creating a network of territorial communities capable of providing services closest to the people, so that they won’t need to seek them at  district level, said Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine.

“Six-seven years ago, in the early stage of concept development (of the local self-government reform – edit.), the healthcare system was designed as a three-tier network, in which primary care is provided by the communities, secondary care – by district health facilities run by a district level authority, and tertiary care is provided at the regional level.”“The situation has since changed. A few years ago, the Ministry of Health started pursuing a new policy. Since then, the reform is implemented differently. Our Ministry is interested in keeping the network of health facilities. Whether they will stay at district, community, or regional level is a different question. According to the Law no.907-IX, almost all taxes were transferred to the community level, which needs to be taken into account. As taxes were moved to a different level, facility ownership needs to follow them,” the Deputy Minister said.

Compared to other sectors, the hospital ownership transfer is a more difficult task, Viacheslav Nehoda underscored:

“We are now jointly working with the Ministry of Health, communities, district councils, and regional administrations that coordinate it, to transfer hospital ownerships.  Effective January 1, 2021, all the communities will be funded directly, so the solutions need to be found in the communities. A hospital is transferred to a community or several communities (their residents are serviced at the facility), and the communities have to decide how to operate the hospitals. It is thus possible under the Law on cooperation between the territorial communities. While salaries are provided by the central government (depending on the medical services plan), local self-government provides for maintenance, utilities, and other current expenditures. The central government’s share of funding is several times bigger than the hospital needs covered by the local self-government,” Viacheslav Nehoda said.

Iryna Mykychak, Deputy Health Minister of Ukraine added that the communities are not always willing to assume responsibility for operating secondary care providers (hospitals).

“Under decentralization, the newly created communities received broad powers and quite big funding. Yet, we feel that there’s a constant responsibility problem – empowered communities are reluctant to take responsibility for operating secondary care facilities. Previously, in each district, there was at least one hospital. Hospitals used to get 70 per cent of their funding from the central government as grants. After the government guaranteed healthcare benefit package was put into action (on April 1, 2020), local self-government entities considerably decreased hospital funding in their healthcare spending, compared to 2019. Local self-government decided that the entire funding should come from the central government. Now, in times of a pandemic, we clearly see this problem.” 

Iryna Mykychak added that today, in times of a change, it is of utmost importance to maintain and upkeep a capable health provision network. To achieve that, the communities need to start a dialogue. 

“It is very important that the communities engage in a dialogue, to avoid the situation when a financially capable community will upkeep an advanced hospital in a small area, while less capable communities (or even districts) will have to maintain a hospital that was previously funded and well run, that has good funding through the government guaranteed healthcare benefit package, but actually cannot operate due to the lack of funds. Regional health departments have no direct influence on the operation of hospitals, let alone the communities. Heads of the health facilities are contracted by local self-government entities, they get paid based on the contract with the NHSU. There are also hospital districts at regional level. Unfortunately, their operation is not very efficient, while in some regions they have not yet started. Current restrictive measures have also marred the situation. Hospital district councils need to cooperate with the communities to design patient pathways, map health service provision, create a network of hospitals, keep medical workers, and guarantee quality healthcare to all citizens of Ukraine.”

Andriy Vilenskyi, acting head of the National Health Service of Ukraine added that provision of health services within the guaranteed benefit package is standardized.

“In any region or town of Ukraine, citizens are entitled to quality provision of health services. The National Health Service of Ukraine has uniform requirements for the health facilities it contracts. The responsibility over the facility’s conformity to the requirements is on the local self-government, not on the NHSU. If a community establishes a quality health service provider in its territory and has more service packages, the quality of healthcare in the area will improve.”

According to the Law no.1009-IX, district councils and district government need to transfer ownership of the municipal property to the communities by July 1, 2021. Viacheslav Nehoda explained that it can be approached as the final tentative date for the ownership transfer of small facilities. To ensure that the key facilities are funded and operational, ownership needs to be transferred by the end of 2020, he added.

“District councils can keep these facilities until July 1, but they will be fully responsible for their operation (utilities etc.). Preliminary calculations show that most of the district councils have no resources required. So, please, keep the July 1 deadline for the transfer of small items. To ensure that all education and health facilities are operational starting January 1, 2021, the communities have to plan the respective funding already now,” Viacheslav Nehoda said.   

For example, Mariupol district of Donetsk region has already completed the ownership transfer and has a clear plan of how to move ahead.

“As a newly established district council, prior to swearing in members of the district council, we let the council members of the dissolved districts pass the decisions and transfer health, education, and cultural facilities to the new territorial communities,” said Stepan Makhsma, head of Mariupol district council. “The consolidated communities will thus be able to plan their 2021 budget and project their spending on health facilities. In our district, we have the communities that do not own a hospital, so, for secondary care, they will need to conclude the contracts with either neighboring communities or the big city of Mariupol,” he proceeded.

As of today, the contracts between the NHSU and health facilities are valid, but hospitals must amend the state registration, explained Andriy Vilenskyi, acting head of the National Health Service of Ukraine.

“If a health facility changes its name as the owner changes, and the owner assumes responsibility for the facility, the facility needs to submit respective data, notifying that the state registration was amended. Then, the facility must notify the licensing body (the Ministry of Health) of the change of the name and owner. Also, it must amend the e-health system respectively. But the contract remains valid.”  

As for the contracts between doctors and patients, there are two scenarios, Andriy Vilenskyi added. According to the decree of the Ministry of Health no.503 of 2018, change of ownership is not a cause for contract termination. But that same decree holds the doctor’s resignation as a valid cause.  

“For example, should the new owner decide to close the facility and start a new one instead, the doctors will be discharged. All contracts will be suspended, and new ones will need to be made. Our advice is to refrain from this scenario when implementing the health facility reform.”    

To recap, if a health facility changes the owner, contracts with patients remain valid. If a health facility is closed and a new one is created instead as the ownership is transferred, patients need to conclude the contract with the physician anew.

Iryna Mykychak, Deputy Health Minister of Ukraine, said there had been a number of cases when hospitals were closed due to inexperience of the new community heads.

“The newly created communities often have new heads that lack managerial experience. This problem can be addressed through training for community heads in each region. From the heads of the health facilities we learned about the 8 a.m. emergency sessions called by the councils to close or reorganize the communal non-profit enterprises. Our joint position with the NHSU is that such inefficient reorganization will only do harm. In these difficult times, medical workers are overloaded. They are mentally and physically exhausted. The country, and the entire world, is dealing with the pandemic. Each medical worker is of value today. Whenever the head and the council of a community lacking understanding of what a medical facility is, make such a decision, it will not have beneficial effects. We constantly contact the regional government heads to identify such situations, consult, train, and assist them.”

Open dialogue participants from across Ukraine dialed in and spoke of their experience with the ownership transfer of municipal property to the communities. Here is what they said.

Viktor Lysak, director of the health department of the Poltava regional state administration:

“The transfer is underway. We are constantly monitoring the progress, and cooperating with the communities. Risks arise when several communities – for example, two or three, are formed within the former small districts. Some disagree to co-finance the hospital maintenance. We have good examples as well. A longtime community started the co-financing of Kremenchuk central district hospital. It has been contributing its share to develop the hospital. When our power utility debt neared UAH five million (USD 177,000), the communities realized that the hospital will not last without their contribution. The utilities demanded payment. This hospital, for example, also provides services to another community.
But more disputes are coming. Currently, Kremenchuk consolidated community wants the hospital ownership. There is a discussion, which is legitimate and correct. That’s competition.
The risks also go beyond the hospital upkeep. Village councils used to contribute funds to the development of primary care facilities and their units, as well as outpatient primary care units in the communities. Still, there is some misunderstanding today. Our health department implements the government policy, we explain individuals and council members how non-profit municipal facilities operate. We explain that we do not challenge their control of the funds received from the NHSU or reporting. Municipal non-profit facilities were established as autonomous and efficient operators of resources and quality service providers.”

Pavlo Miroshnychenko, first deputy mayor of Snovsk, Chernihiv region:

“Our community was established four years ago covering the entire Snovskyi district that was dissolved. The district used to operate a central district hospital, after the consolidation, we took ownership of it. We do have problems with funding, medical equipment, personnel, and heating. But we are not the only ones. In the previous years, it was easier, next year will be tough. Yet, we have not regretted ever since we took the ownership of the hospital. It was already ours – it treats our people, and employs our medical workers. These are our premises, throughout these four years we were renovating them, we have installed new windows.
There have been no dismissals, except for the delivery unit that was dissolved, because the number of babies born was low. Residents travel to give birth in the city of Chernihiv or neighboring Koryukivka.Our other units currently lack four doctors. Next year, we’ll run two new programs. As part of the first program, we are willing to purchase housing for the young doctors, if they don’t have one. We will also adopt a program providing lump sum assistance of UAH 100,000 (USD 3,537) to the doctor at the start of their career, so that they can buy an apartment or a house, and settle in. We invite the doctors to come, we will be grateful. We have a beautiful land, nature, town, and a wonderful community.”

Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine: 

“The Law no.1009-IX provides a clear answer: ownership of the facilities is transferred to the community in the territory of which they stand. Nevertheless, additional legal ways can be found that do not go against the law. According to the law, a district hospital is joint property of the consolidated communities. If together they decide that it will do better under the ownership of another community that will incur most or all of its maintenance expenses, one should keep looking for a solution. Whenever you’ll have this problem, it’s better that you come with it to our Ministry, so that we will work together to resolve it.”

Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine: 

“The Law on Cooperation of Territorial Communities provides many opportunities previously unavailable. Transfer of ownership is capital spending, while provision of services or health services in particular is a different expense section funded from the government budget. These decisions are to be made based on the number of community residents.
The part that is left after you subtract the revenue received by the central community from income taxes from the total hospital expenses, can be distributed among all the communities according to the agreement, so that the residents of those communities can get services as well. It goes without saying that (patients) will not be denied medical care in any case, but the cooperation will help better develop the hospital. Healthcare is primarily about professional doctors and quality equipment. It requires investment. If the communities get to realize that the hospital is not only a community ownership asset, but also their prestige, and health of their residents, they will find the funding. Primary and secondary care can respond to 95 per cent of patients’ requests.”

Andriy Vilenskyi, acting head of the National Health Service of Ukraine: 

“I would like to say something very important: a contract between the National Health Service of Ukraine and a health facility is a powerful tool to attract the government investment. If the community decides to develop a certain type of services, it can attract additional funding, engage more doctors, as the example of Snovsk shows. Also, the territory of the community will be attractive for other residents to live in. Health services are one of the key types of services requested by the citizens. Understanding that is important. 
You need to look beyond the population size. I would like to underscore that patients are entitled to access health services where they want to, their choice is not limited to their place of residence. If a community (regardless of its size) feels capable and has enough money to maintain the facility, you should go for it. As for primary care, the number of patients that will sign the contract, should be enough to back the operation of the primary care center.”

Iryna Donets, director of the legal department at the National Health Service of Ukraine: 

“The Budget Code of Ukraine clearly stipulates that the owners of community health facilities are responsible for utilities and energy use. That’s not included in the government guaranteed healthcare benefit package. On the other hand, we understand that all community health facilities contracted by the National Health Service of Ukraine are autonomous non-profit community enterprises that use the funds obtained under the contract with the NHSU, based on the financial plan endorsed by the owner. If that is included in the financial plan, the community facility can allocate the NHSU funding to those needs.   
Get a consultation beforehand, ask a formal explanation of the state agency that ensures proper and efficient use of the government funds – the State Audit Service, to avoid the situation where the decision-makers – the owner and the head of the facility, will have to undergo checks by the oversight bodies.”        

Iryna Mykychak, Deputy Health Minister of Ukraine:

“I am convinced that inpatient care, or secondary care needs to be operated at regional level. It is from there that patient pathways are clearly seen, they can be optimized and arranged. Also, (the owner) can rationally locate the services, proportionally to the population size. There are a number of indicators that shape the hospital district.  
Funding or operating inpatient care at regional level is authorized by law. The communities are different, what matters is their vision. If a community is willing and capable of running and funding the central district hospital, it deserves a thank you. Also, whether the hospital is operated efficiently, should be monitored. There are central district hospitals thought to be capable, well-funded, fully equipped and staffed, but their communities have insufficient   financial capacity. It is logical that they get transferred to the regional budget holders. Much work needs to be done at regional level. Regional administration, regional council, and the communities need to discuss and make a motivated decision to the benefit of the citizens, medical workers, and the state overall.”

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Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine: 

“You are not a decision maker, but you can help the council members figure out the problem. After a political decision is made, legal details can be discussed. 
As for the “Big Construction”, the funding comes from the central government budget, the State Regional Development Fund or other sources, and will terminate at the end of the year. The type of ownership will not affect it, more so if the facility is to be completed in the long term. After the ownership type changes, some amendments will need to be made, but you should be able to approach these issues ordinarily with the funding authority. The major question you need to decide on is where you will be starting from January 1, 2021.”

Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine: 

“You’ll need to also transfer the tax revenue that the community received together with the powers. Why would we create the communities that refuse? It should not be treated as a joke. Local self-government is not a private household. It requires same responsibility and standards of service as the civil service. The law applies to everyone, including ministers and local self-government heads.”

Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine: 

“That’s a topical question for many consolidated communities, as the transfer is not as quick as one would want it to be. Not everyone followed the example of Mariupol district council members that did not take the oath of office immediately, so that the members of the previous council could promptly tackle those issues. From the legal standpoint, budgeting funds for the facilities that are not yet within community ownership, is a certain risk.  
Still, these funds need to be allocated in the local budget. Ask the managers of your health facility what its expenses are. Let’s hope that the district council will make the decisions quickly. Get advice from the financial team, particularly at regional level on how to budget the health facility expenses with an asterisk, so to say. Some funds need to be allocated, you should be able to amend the local budget throughout the year as a last resort.”

Viacheslav Nehoda, Deputy Minister for the Development of Communities and Territories of Ukraine: 

“Last week, the bill amending the law on civil-military administrations was passed. As soon as the law comes into effect, the civil-military administration is supposed to provide an explanation. As the bill has not been yet signed into law, and we have not seen the final draft, we will not be able to discuss it now. The bill was passed as an urgent piece of legislation, as it concerns the consolidated communities in which it was not possible to hold local elections. The law is to tackle property reorganization, funding, etc.” 

Andriy Vilenskyi, acting head of the National Health Service of Ukraine:

“The government budgeted UAH 150 billion for overall health expenditures, and allocated UAH 123 billion (USD 4.3 billion) for the government guaranteed healthcare benefit package that covers the costs of services that health facilities provide, including the services for patients with COVID-19. We’ve said a number of times that the funding is scarce, but that’s what the government can actually disburse. So we need to plan how to equally distribute these funds throughout the year and live up to the commitments that the government made to the medics. We would like to have more, but even with the funds available, the National Health Service of Ukraine will be able to accomplish its main functions and implement the government guaranteed healthcare benefit package.”

Ukraine Crisis Media Center holds discussions that are topical for the communities. Follow the updates on our web site UCMC DOBRE and Facebook page. We encourage our readers to submit their questions, we would later pass them on to the experts participating in the discussions, so that they answer them on livestream.

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Decentralization Offering Better Results and Efficiency (DOBRE) Program is USAID’s five-year program, implemented by international organization Global Communities, and funded by the United States Agency for International Development (USAID). The Program is working to enhance good local governance and create improved conditions for the development of consolidated communities (CCs), increase citizen engagement in decision-making, and ensure accountability and transparency in public administration. The DOBRE Program implementing Consortium, led by Global Communities, includes: Ukrainian Crisis Media Center (UCMC); SocialBoost; Foundation in Support of Local Democracy (FSLD/FRDL), Malopolska School of Public Administration at the Krakow University of Economics (MSAP/UEK), Poland; National Democratic Institute (NDI). The USAID DOBRE Program operates in 7 target Oblasts: Dnipropetrovsk, Ivano-Frankivsk, Kharkiv, Kherson, Kirovohrad, Mykolayiv, and Ternopil. Since June 2020, DOBRE Program started operating in three more Oblasts: Zaporizhzhia, Chernivtsi and Chernihiv.