Hadassah’s Woes Continue

February 27, 2014
BY Dmitriy Shapiro
With strike over, Israeli hospital continues to face uncertain financial future

022814_Hadassahs-Woes-ContinueThe dust may have settled at the Hadassah Medical Center in Jerusalem, but the underlying financial troubles that caused workers to go on strike earlier this month remain, as an organization that predates the State of Israel struggles to move on.

Staffers at the two Hadassah hospitals in the Jerusalem enclaves of Ein Kerem and Mount Scopus returned to work on Feb. 19 following a two-week strike protesting unpaid wages and the financial disarray of the Hadassah Medical Organization. One of Israel’s largest private hospital managers, the group, according to Haaretz, currently is running a $360 million deficit.

Despite the workers’ return — who ended their strike after hospital administrators and the workers’ union agreed to gradual reductions in pay for higher-paid staff and a delay until mid-April of any requisite layoffs — the medical organization and the American institution that founded and owns both hospitals find themselves playing a prominent role in an Israeli reassessment of privatized health care and corporate mismanagement.

Standing as somewhat of an anomaly amid an otherwise socialist health care system, HMO is managed by an executive board, most of whose seats are held by Hadassah International, the Women’s Zionist Organization of America. The president of the international body, Marcie Natan, admits that the hospitals made critical management mistakes but that Hadassah has long been engaged in a process of reform.

“We brought in PricewaterhouseCoopers about 10 or 11 months ago to do a study using a team of experts from the U.S. and Israel working together,” Natan, who represents an estimated 330,000 members around the world, offered in a phone conversation with Washington Jewish Week from Israel. They “looked at the structure here at the hospital and made recommendations to put it on the road to a full recovery.”

The team recommended that HMO cut 550 members of the hospitals’ staff, of which 250 have already been cut; salary reductions for highly paid doctors; reforming private visitation contracts; renegotiating union contracts; and increasing more lucrative services such as maternity care.

The group made clear that none of the reforms would end HMO’s deficit problems without renegotiating contracts with the state-supported health insurance funds. Such contracts make up the greatest part of an Israeli hospital’s operating budget.

Natan said that every hospital negotiates a three-year contract with health funds and that when HMO negotiated its last set of contracts, they provided deeper discounts for services offered at Hadassah Medical Center — 25 to 26 percent — instead of the usual 18 percent at other private hospitals in the hope of capturing a larger market share of patients.

“In retrospect, that was not a good decision on the part of HMO’s management because it actually cost the hospital money to service the patients,” said Natan, adding that negotiators agreed to the concession knowing that they could renegotiate three years later.

According to Natan, since then, the government put a freeze on all contract negotiations to stem the rising cost of benefits, leaving HMO with an unsustainable discount.

David Chinitz, professor of health policy and management at the school of public health at Hebrew University-Hadassah, said that part of the problem is the lack of accountability in the Israeli financial system.

“The Israeli Ministry of Finance and the Budget Department is known for being neo-liberal, and that means they want to constrain the public budget,” explained Chinitz. “But on the other hand, their style is very centralist and I would say almost Bolshevik. They want to keep control so they negotiate the wages, they set the prices, and these things that they do create different kinds of strains and stresses on the health funds and on the hospitals.”

Similar to the insurance exchanges brought about by health care reform in the United States, Israeli health funds came out of the country’s 1995 reforms dependent upon yearly government allotments meant to cover their expected costs.

“Israel has actually implemented the model that America has been after for more than 20 years, and it’s done it quite well,” said Chinitz. “The problem is the overall political economy structure and public administration in Israel — and in particular, the centralized control of the ministry of finance over wages, over prices; it doesn’t let this nicely designed system work in a smooth fashion.”

Another criticism of HMO’s management results from the higher-than-average salaries paid to doctors. Natan described this decision as necessary to establish the quality of health care Hadassah members envisioned.

“Jerusalem is not the city that attracts young up-and-coming doctors; they’re much more comfortable and much happier in the Tel Aviv area,” argued Natan. Hadassah, “understanding that we wanted a hospital that would be the leading institution here in Israel, was comfortable with management making agreements with the doctors that did give them more than they would have gotten if they’d gone somewhere in Tel Aviv.”

Though a private institution, Hadassah Medical Center prides itself for serving everyone like a public hospital — no matter how critical patients’ conditions or where they are from — as envisioned by Hadassah pioneers. Natan said that the hospital often sees the most critical conditions, despite health funds paying the same rate no matter how long the patient stays in the hospital or how many staff members are needed to provide care.

Hadassah donors and members are the largest single funding source for the hospitals, with a total yearly contribution averaging around $85 million for capital, operational and research expenses.

“If the [Israeli] government isn’t prepared to help in some significant way, no matter what this hospital does, we cannot continue to maintain it as a state-of-the-art research and clinical care facility,” said Natan, highlighting how Hadassah’s hospitals serve as the Hebrew University’s medical school.

Chinitz agreed.

“If the government decides to raise the wages of physicians in their hospital, it’s no skin off their nose because the Ministry of Finance is going to pay, but for Hadassah, where’s the money going to come from?” he said. “Hadassah has it worse because it doesn’t have the safety net either of the government or a health fund.”

dshapiro@washingtonjewishweek.com /JNS.org contributed to this story.

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