Challenges for the Financial Sustainability of Hospitals

Introduction

In recent years, healthcare systems have been successful in ensuring longer and healthier lives and thus economic growth. But on the other hand, healthcare costs are also steadily increasing and consistently outgrow the economy for decades (World Economic Forum [WEF], 2012). Due to financial crises and the most commonly cited challenges such as growing cost pressures, with population aging, consumer expectations around healthcare coverage and quality and new technologies, some started to argue for the bold and immediate controls on healthcare costs (Thomson et al. 2009). However, there is little consensus as still some advocate for more investment in healthcare, citing established links between health and wealth (World Economic Forum, 2012). Therefore, the issue of financial sustainability of healthcare system has frequently come up in the world in recent years (Thomson et al. 2009).

Briefly, the rising costs and scarcity of resources are the main reasons underlying the health policy debates on the financial sustainability (Gülüzar & Nehir, 2018). Healthcare system consists of all the people and actions whose primary purpose is to improve health (World Health Report [WHR] 2000) and its financial sustainability is understood as the balancing rising cost pressures against limited resources in the healthcare sector. Thus, any imbalance arises from the ability of healthcare systems to meet their obligations resulting from entitlements and instituted rights (Prada, 2012). Therefore, the financial sustainability has become to be central to health policy debate, but still – according to the World Health Organization’s healthcare system performance framework – it is not the policy goal but rather 'policy constraint' (Economic Policy Committee [EPC], 2001).

Rising healthcare spending results from interacting factors affecting supply and demand, among them, technological progress (change of pattern utilization), demographic change and consumer expectations (raising income). Healthcare systems do not have much influence on the structural factors that are driving greater demand for healthcare, such as aging, wealth and lifestyle. But they can control the incentives underlying supply-side inefficiencies and thus they should ensure that more value are created by delivering more and better services with the same or fewer resources (WEF, 2012).Then, resource constraints apply to government inability or unwillingness to generate sufficient resources to meet its healthcare system obligations (fiscal sustainability or fiscal balance) and also economic sustainability (the necessity of trade-offs within both the healthcare sector itself and between the healthcare sector and the rest of the economy) (Thomson et al. 2009).

However, regarding to the causes of such imbalance between expenditure and revenue, different aspects or approaches have been presented in the literature. According to Ruggeri (2002), there are three aspects of financial sustainability. The first one applies to the ability of economy to sustain current and future healthcare expenditures. The second area is connected with the resilience of the fiscal system to pressure from rising health expenditure and the last one applies to the extent to which governments can remain committed to the constitution for the provision of healthcare (Ruggeri, 2002). Then, Thomson et al. (2009) pointed at three policy as the relevant area of considerations by policy-makers to decide how best to meet the healthcare system’s objectives in the face of rising healthcare costs and resource constraints. The first is the level of healthcare spendings and it applies to the “questions about the value of the benefits gained from health spending against other sectors of public expenditure, and the extent to which societies are willing to pay for healthcare on a collective basis”. The second area of consideration is the level of coverage provided, which brings up issues of solidarity and distribution of benefits between population groups” and the third one is possibilities of increasing the value from existing health system resources and related with the question - „how can we improve performance while respecting budget constraints?” (Thomson et al. 2009).