Scholarly article on topic 'Healthcare reforms in Cyprus 2013–2017: Does the crisis mark the end of the healthcare sector as we know it?'

Healthcare reforms in Cyprus 2013–2017: Does the crisis mark the end of the healthcare sector as we know it? Academic research paper on "Economics and business"

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Abstract of research paper on Economics and business, author of scientific article — Panagiotis Petrou, Sotiris Vandoros

Abstract As part of a bailout agreement with the International Monetary Fund, the European Commission and the European Central Bank (known as the Troika), Cyprus had to achieve a fiscal surplus through budget constraints and efficiency enhancement. As a result, a number of policy changes were implemented, including a reform of the healthcare sector, and major healthcare reforms are planned for the upcoming years, mainly via the introduction of a National Health System. This paper presents the healthcare sector, provides an overview of recent reforms, assesses the recently implemented policies and proposes further interventions. Recent reforms targeting the demand and supply side included the introduction of clinical guidelines, user charges, introduction of coding for Diagnosis Related Groups (DRGs) and the revision of public healthcare coverage criteria. The latter led to a reduction in the number of people with public healthcare coverage in a time of financial crises, when this is needed the most, while co-payments must be reassessed to avoid creating barriers to access. However, DRGs and clinical guidelines can help improve performance and efficiency. The changes so far are yet to mark the end of the healthcare sector as we know it. A universal public healthcare system must remain a priority and must be introduced swiftly to address important existing coverage gaps.

Academic research paper on topic "Healthcare reforms in Cyprus 2013–2017: Does the crisis mark the end of the healthcare sector as we know it?"

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Health Policy xxx (2017) xxx-xxx

ELSEVIER

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Health Policy

journal homepage: www.elsevier.com/locate/healthpol

Health Reform Monitor

Healthcare reforms in Cyprus 2013-2017: Does the crisis mark the end of the healthcare sector as we know it?*

Panagiotis Petrou a,b'*, Sotiris Vandorosc

a University of Nicosia, School of Sciences and Engineering, Department of Life and Heatlh Sciences, School of Pharmacy, Pharmacoepidemiology-Pharmacovigilance

b European University, Department of Health Sciences, Health Economics, Nicosia, Cyprus c King's College London, 30 Aldwych, London, WC2B 4BG, United Kingdom

ARTICLE INFO

ABSTRACT

Article history:

Received 24 November 2016 Received in revised form 12 September 2017 Accepted 3 November 2017

Keywords:

Crisis

Reforms

Cyprus

Efficiency

As part of a bailout agreement with the International Monetary Fund, the European Commission and the European Central Bank (known as the Troika), Cyprus had to achieve a fiscal surplus through budget constraints and efficiency enhancement. As a result, a number of policy changes were implemented, including a reform of the healthcare sector, and major healthcare reforms are planned for the upcoming years, mainly via the introduction of a National Health System. This paper presents the healthcare sector, provides an overview of recent reforms, assesses the recently implemented policies and proposes further interventions. Recent reforms targeting the demand and supply side included the introduction of clinical guidelines, user charges, introduction of coding for Diagnosis Related Groups (DRGs) and the revision of public healthcare coverage criteria. The latter led to a reduction in the number of people with public healthcare coverage in a time of financial crises, when this is needed the most, while co-payments must be reassessed to avoid creating barriers to access. However, DRGs and clinical guidelines can help improve performance and efficiency. The changes so far are yet to mark the end of the healthcare sector as we know it. A universal public healthcare system must remain a priority and must be introduced swiftly to address important existing coverage gaps.

© 2017 The Author(s). Published by Elsevier Ireland Ltd. This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

1. Background

Cyprus is yet to introduce a universal health coverage system (UHC), and currently features two fragmented and uncoordinated health sectors: A highly regulated public and an unregulated, forprofit private sector [1,2]. The public sector is funded by the Ministry of Health, and the legal basis for attaining a public beneficiary status is Cypriot or EU citizenship, and satisfying one of several socioeconomic or employment status criteria. Public servants are entitled to free public healthcare regardless of income, which provides an indication of the uneven access to free public healthcare [1-3]. People who do not meet these criteria must pay out-of-pocket to finance their health needs at the public or private sector. The aforementioned issues mean that out-of-pocket (OOP) payments are the primary source of healthcare funding (57%), which

* Open Access for this article is made possible by a collaboration between Health Policy and The European Observatory on Health Systems and Policies.

* Corresponding author at: Panagiotis Petrou, 14 Andrea Neokleous Street, 2417, Nicosia, Cyprus.

E-mail addresses: panayiotis.petrou@st.ouc.ac.cy, petrou.pa@unic.ac.cy (P. Petrou), s.vandoros@kcl.ac.uk (S. Vandoros).

exceeds public funding (43%) [2,3]. Cyprus' total health expenditure (THE) as a percentage of gross domestic product (GDP) is 7.4%, which is among the lowest in Europe [4].

The fragmentation of the health sector impeded the introduction of supply- and demand-side measures, such as co-payments, integrated clinical guidelines, prescribing behaviour monitoring, medical audit and price regulation of medical activities in the private sector. Moreover, the conundrum of public and private sectors escalated to an inefficient allocation of resources, such as the duplication of health infrastructure and lack of some specialties such as general practitioners [5].

A much anticipated, approved by law National Health System (NHS) has not been enacted, something that has been attributed to a number of factors related to politics and concerns regarding its long-term viability [1]. This long-standing anticipation led to stagnation of further efficiency improvement initiatives such as the introduction of electronic patient records and a Health Technology Assessment (HTA) programme. In particular, low spending on universal prevention programs and public health policies constitute major barriers to efficiency gains [5].

A major drawback of the current system is the impaired capacity to gather and analyse data. Having access to reliable health indi-

https://doi.org/10.1016/j.healthpol.2017.11.004

0168-8510/© 2017 The Author(s). Published by Elsevier Ireland Ltd. This is an open access article underthe CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/).

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cators is important in any macroeconomic environment, but its importance is magnified during financial recessions, since crises have significant effects on health [6]. In this context, the scope of this paper is to present the recently-implemented changes, assess the reforms and propose future interventions which will increase efficiency. A paper by Cylus et al. [3] provided an excellent approach, analysing the implementation of the health insurance scheme. We build on this to discuss the new measures that have been introduced since its publication, due to the Memorandum of Understanding (MoU) [7]. A recent study by Petrou and Vandoros [8] discussed recent reforms, but focused exclusively on pharmaceuticals. This paper follows up on these previous studies [3,8,], while it discusses the interaction between health, financial crises and mandatory reforms.

2. Policy reforms

In early 2013, the MoU with the Troika came into effect, which mandated several reforms in healthcare [7] (Tables 1 and 2 ).

One of the first measures in 2013 was the introduction of an annual fee for all beneficiaries in order to strengthen the sus-tainability of the funding structure. This was combined with the requirement to update and align the prices of the public health sector with actual costs incurred to the system, and to revise the criteria for public beneficiary status. Moreover, as a tool to address tax-evasion (one of the contributing factors to the financial crisis), the public beneficiary status was linked to a person's social insurance contributions. However, this led to the exclusion of several patients' categories from free public health care. Such categories include new entrants in the labour market and refugees, since obtaining beneficiary status requires a minimum of three years' consecutive contribution to the social insurance fund. The Troika also mandated wage cuts and a freeze in recruitment in order to constrain public expenditure, which were at first implemented in 2012, prior to the MoU [9]. However, a reduction in income and unemployment (as a result of the crisis), sparked a gradual shift of patients towards public healthcare services [10], which peaked in 2011-2012 for inpatient care, demonstrating a 13.5% increase versus the previous year [11,12]. Additional workload and reduced resources impaired the functional capacity of the public health care sector [1]. Consequently, many patients have to choose between long waiting lists in the free public sector [13,14], or paying out-of-pocket for instant access to the private sector. Relatively high out-of-pocket payments, in the context of the financial crisis, emerged as a barrier to indicated medical care for a 28% of the population, second only to Greece [10]. In 2013, there was an increase in the number of patients who were reimbursed by the MoH for treatment in the private sector by 21.7%, due to excessive waiting times. On an individual basis, patients may be referred- and reimbursed by the MoH- to the private sector if the public sector cannot provide timely care and/or if the condition does not fall within the competencies of public sector. This practice was criticised as being financially damaging [15]. A downward trend was noticeable by 2015, indicating efficient monitoring [16].

Regarding rational and efficient prescribing, the value of clinical guidelines in providing summarised guidance to physicians [17] had previously been ignored in Cyprus. The presence of an ageing population, which shifts the pattern of health delivery from acute care to chronic disease management, further augments the importance of integrated, chronic-patient oriented, guidelines [9,18].This resulted in the preparation of 20 clinical guidelines for an array of health conditions in 2013. A recent survey on these demonstrated high satisfaction rates among physicians [19]. In addition, clinical algorithms aiming to regulate laboratory ordering were introduced for nine high volume and per-unit cost laboratory tests.

Traditionally, governments in Cyprus, lulled in a false sense of fiscal security due to above-EU average economic growth, avoided demand-side measures. An increase in demand, without corresponding improvement in health outcomes is associated with an increase in health expenditure as well as waste, and may expose patients to unnecessary and potentially harmful interventions. Prior to the crisis, the lack of demand-side measures was prominent in all layers of the public health care sector, especially pharmaceuticals, emergency care and laboratory test ordering [7], while inefficient practices were previously not changed, due to lack of clinical guidelines and HTA.

A co-payment, in the form of a fixed uncapped amount was introduced in 2013 (three and six euros for family doctors and specialists, respectively). Results varied depending on the setting: the co-payment reduced visits to primary care physicians, but mental health visits proved inelastic [20,21]. In the laboratory sector, a co-payment in the form of 0.5 euros per test - capped at 10 euros per visit - was introduced, after which, paradoxically, there was an increase in the number of tests prescribed per patient in the emergency services [22]. Nevertheless, a recent study reported that the co-payment reduced the utilisation of cholesterol tests, without any negative impact on lipidemic control [23]. As a lack of demand-side measures had led to emergency services overuse [3], a 10-euro fixed co-payment fee was introduced for all emergency room visits, which led to a significant reduction of (primarily non-emergent) visits [24] thus reducing an often unnecessary burden. This is expected to facilitate faster provision of health care when needed the most.

Despite the reduction in the number of people covered by public healthcare, the Troika also prioritised the introduction of the NHS, which will reduce the currently high out-of-pocket payments and safeguard access to healthcare for the whole population. Towards this direction, the tender for the electronic IT system, which is necessary for an NHS to function effectively and efficiently (and another Troika request) was awarded in late March 2017, showing that there are steps taken in this direction.

In the hospital sector, Cyprus is also working on the replacement of the per-diem reimbursement scheme with DRGs, which can increase hospital efficiency [25,26]. This sector merits additional attention as hospital care accounts for the largest proportion of total health expenditure in Cyprus [3,4]. In line with striking differences between the public and private sectors, the product mix composition of these sectors varies significantly: the private sector features a large number of relatively small hospitals (16 hospitals, plus 21 polyclinics and 39 clinics totalling 1455 beds), in contrast to only nine public hospitals with 1435 beds. Currently, public hospital management teams follow rather administrative tasks and can only marginally influence the centralised resource allocation and decision-making process. The MoH announced interventions to promote competition between private and public hospitals in the context of the NHS, including restructuring and public hospital autonomy, so that they can operate as independent entities on a decentralised level. Ultimately, this aims to minimise politically motivated resource allocation and interventions, which impair their productive efficiency [7,27].

The cumulative impact of the reforms and the austerity measures led to a decline in health expenditure per capita, and as a result, health expenditure per capita ranked among the lowest in Europe in 2014 (2266 PPP$ per capita) demonstrating a 2.5% annual average reduction rate, from 2009 onwards [4].

3. Future challenges and responses

There is still great potential to further minimise waste while improving quality of and access to healthcare through further dis-

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Table 1

Healthcare reforms.

Policy

2016-2017

Budgetary Framework-Fiscal Policy: Public and Private sector

Performance: Public and private sector

Supply Side: Public sector

Demand Side: Public sector

Introduction of temporary contribution to all employees of both public, broader public and private sector (0-3.5%) A permanent contribution of 3% on pensionable earnings of state employees to the Public Employees' Pension Plan

Freeze of recruitment, increments and general wage increase in public and broader public sector until 31 December 2016. Suspension of COLA for public and broader public sector until the end of the first quarter of 2016 Reduction in MOH's budget -3.5% vs last year

Preparation for the introduction of DRG reimbursement system

Introduction of 1.5% annual fee to all beneficiaries of public health care sector Scaled reduction in emoluments of public and broader public sector pensioners and employees Reduction in MOH's budget - 2.7% vs last year

Introduction of laboratory ordering algorithms Introduction of Health technology assessment program

Introduction of clinical guidelines

Introduction of co-payment in emergency room visits Introduction of co-payment in laboratory ordering Introduction of co-payment in pharmaceuticals Introduction of co-payment for consultation

Further reduction of 3% on all wages of public and broader public sector employees and pensioners Reduction in MOH's budget -10.9% vs last year

Reduction in MOH's budget -2.6% vs last year

Award for the tender of the IT system of the NHS

Eligibility criteria: Public

sector

Revision of income thresholds for free public health care

: l ^ h

O £1J

Table 2

Beneficiary criteria before and after the crisis.

Beneficiary Categories

Benefits

Income Criteria

Other criteria for eligibility

Category A

Category B Chronic Patients

Chronic Patients with severe conditions

Before Crisis

After Crisis

Before Crisis After Crisis Before Crisis

After Crisis

Before Crisis

15,377 euros per person

15,400 euros per person

Income between 15,377 20,503 euros per person

Abolished

Income criteria were set to 150,000 euros per annum

0% Personal Contribution

1.5% of their annual income-Free access at point of care

50% Personal contribution

0% Personal Contribution for treatment of specific condition only

0% Personal Contribution for treatment of specific condition only

0% Personal Contribution

Families with 3 and more children

Public servants and Officials (elected and appointed)

students, social benefit receivers, children under the

supervision of welfare services, residents in military

exclusion zones, students at the school for the blind and

the school for the deaf etc.

Families with 3 and more children

Public servant and Officials (elected and appointed) social

benefit receivers, war casualties, children under the

supervision of welfare services, residents in military

exclusion zones, students at the school for the blind and

the school for the deaf etc.

Diabetes, Cancer, Rheumatoid arthritis, lupus erythematosous, Parkinson, epilepsy, HBV, HCV, Bowel inflammable diseases, psychiatric conditions, progressing renal failure

Diabetes, Cancer, Rheumatoid arthritis, lupus erythematosous, Parkinson, epilepsy, HBV, HCV, Bowel inflammable diseases, psychiatric conditions, progressing renal failure, Psoriasis, Attention-deficit/hyperactivity disorder

I Dementia

II Dialysis patients

III Human immunodeficiency virus

IV Transplanted patients

V Hemophilic patients

VI Polycythemia vera

VII Immune Thrombocytopenic Purpura

VIII Congenital heart diseases

IX Paraplegic, quadriplegic

X Myasthenia gravis

XI Multiple sclerosis

XII Growth hormone deficiency

XIII Cystic fibrosis

XIV Type 1 Diabetes mellitus in children

XV Autism

XVI Minors with body deformities

XVII Patients with thalassemia or drepanocytic anemia

After Crisis

For the following conditions, income criteria were introduced (150,000 euros per annum)

I Multiple sclerosis

II Myasthenia gravis

III Dementia

IV Human immunodeficiency virus

V Myelodysplastic syndromes

VI Drepanocytic anemia

VII Myeloproliferative disorders

VIII Congenital heart diseases

IX Growth hormone deficiency

X Cystic fibrosis

XI Type 1 Diabetes mellitus in children

XII Autism

XIII Individuals with body deformities

0% Personal Contribution

For the following conditions no income criteria apply

I Dialysis patients

II Transplanted patients

III Hemophilic patients, patients with immune Thrombocytopenic Purpura and other bleeding disorders

IV Family Mediterranean fever

V Paraplegic, quadriplegic

VI Thalassemia patients

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semination and optimisation of clinical guidelines. In this context, all ad-hoc clinical guidelines committees much be institutionalised on a permanent basis with specific terms of reference, including revisions, updates and educational activities, towards encouraging rational prescribing [28]. It is also imperative to create a medical audit and performance management plan to assess compliance to the clinical guidelines. This will increase transparency and reduce information asymmetry in decision making, while promoting efficiency in a period of reduced resources, thus improving quality of care [29]. From an organisational point of view, the government must promote meritocracy in order to overcome chronic inertias [1].

The hospital sector merits more attention. It has been argued that small hospital size, as is the case in the majority of private sector hospitals, might impede efficiency enhancement [29], while several authors have contested the assumption that private hospitals are more efficient than public ones [30-33]. The ambitious conversion of public hospitals into semi-autonomous and self-financed entities might not necessarily lead to significant efficiency gains, especially given the introduction of a DRG remuneration scheme [34]. Therefore, it is vital to safeguard access of costlier patients to appropriate care [35] since experiences from other countries underline the risk of channeling healthier patients to the private sector and leaving public hospitals to deal with costlier and riskier patients [36,37]. It is also worth noting that public hospitals currently provide health care for severe cases, which are not always offered in the private sector and private hospitals might not be able to bridge this gap immediately.

As Cyprus just exited the MoU, it is expected that temporary wage cuts will be reversed. This will increase fiscal pressure on the public sector and most importantly on public hospitals which are scheduled to become autonomous within five years after the law is enacted. If, however, wage cuts become permanent, sustaining staff resilience will be challenging, especially given the massive health market restructuring and its scheduled unification.

The introduction of the much-needed and long-anticipated NHS faces significant challenges. The consolidation of the heterogenic for-profit private and the highly bureaucratic public sectors may create an administrative barrier. The lack of proper planning raises concerns on whether the number of GPs, which has decreased, is sufficient for a strong primary health care sector which will act as a gatekeeper [5]. A multi-payer health system option has also been put forward. However, the small size of the market and the degree of competitive forces requires further investigation regarding the feasibility of such a payer type. Moreover, given that the current system has led to uneven access to healthcare [1], findings from other countries suggest that this phenomenon might be further exacerbated [38-40]. As a response, Cyprus should swiftly introduce the designed universal coverage single payer health system.

4. Conclusion

There are certain positive elements towards achieving an efficient and sustainable health sector in some of the recently-implemented changes. However, challenges remain. Co-payments might have reduced waste in some areas, but certain adjustments such as exemptions and caps, based on socio-economic criteria or chronic diseases should be introduced, to avoid any barriers to access for vulnerable groups, patients with chronic diseases or those who face affordability issues. Especially during recessions, user charges may cause problems [41,42], so improving efficiency should be done without jeopardising access to treatment for those who need it.

Importantly, the recently revised public healthcare eligibility criteria reduced the number of people covered by public health

sector, which is in the opposite direction of the universal health coverage that Cyprus aims to implement. This has removed a safety net for these individuals in a time of financial hardship, which is when they need it the most. The public sector's overload and reduced number of staff has limited access further, thus leaving these patients with out-of-pocket payments as the only option.

The government must continue the reforms that will create the pillars of a much-needed and long-overdue NHS, meaning that it is important not to abolish the long-term strategic planning in favour of any short-term, and short-sighted, opportunistic gains. Further changes should focus on performance management and medical audit and clinical guidance. All aforementioned issues require transparency, accountability and meritocracy, free from any political interference.

The crisis led to reforms that in some cases increased efficiency while sometimes causing barriers to care, but more time is needed to get a full picture of their effects and consequences. In any case, these changes have yet to mark the end of the healthcare sector as we know it. This will only be completed once universal coverage under a single payer is finally implemented, facilitating access to care for everyone.

Acknowledgements

We are grateful to the Editor of the Health Reform Monitor Section of the Journal, Dr Wilm Quentin, and three anonymous referees for their useful comments and suggestions. Dr Panagiotis Petrou is grateful to Constantinos P. Petrou and Eugenia Petrou-Poiitou, and to Maria Michael (administration officer at Health Insurance Organisation) for her support. All outstanding errors are our own.

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