Hungarian hospitals drowning in debt, suppliers risk bankruptcy, services compromised

Hospitals in Hungary are sounding alarm as rising debts restrict operations, with officials reporting there are very few medical interventions for which the available funding provides sufficient financial coverage.

According to Zsolt Kiss, the director general of the National Health Insurance Fund (NEAK), by the end of March, the past due debt of hospitals has reached a concerning HUF 117 billion [€300 million).

The government has promised HUF 40 billion [€ 77 million] consolidation for the sector by June. However, the total debt settlement of around HUF 103 billion [€ 264 million] only covers the outstanding debt by 29 February.

As the President of the Hungarian Hospital Association, György Velkey, ​​commented during an interview: “The controlling calculations show very clearly that there are hardly any medical interventions for which the funding provides sufficient financial coverage. Thus, the work in hospitals produces constant losses, and unfortunately, hospital management and directors have very little room to move.”

He added, “The Hungarian state does not finance care at the level that people need in terms of quality and quantity.”

Debt at a critical limit

The indebtedness problem has been weighing on Hungarian healthcare for over 20 years despite government debt management measures. Initial steps towards reformed funding at the state insurance company are progressing slowly.

In 2023, debt increased by an average of 3.7 billion [€9,4 mln] per month, it is expected to rise by HUF 20 billion [€50,8 mln] per month in 2024. The government plans to settle hospital debts of HUF 104 billion [€264,5 mln] in two instalments.

The first one has been provided primarily for settling invoices of state-owned suppliers, including energy providers, pushing back payments to medical device suppliers and pharmaceutical wholesalers. The second instalment is expected in July.

At the same time, the Ministry of the Interior is working to curb the growth of the debt with additional support. The method of debt will change, and settlement will not be once a year but several times, as it was confirmed at a hospital debt working group meeting in mid-May.

Hospitals are powerless to manage primary debt, partly caused by the lack of financing reform, amortisation, and rising energy prices.

The National Health Insurance Fund Management (NEAK) finances based on homogeneous disease groups. This means that each medical activity has a code with an amount next to it.

Neither inflation rates, wage increases, or overhead costs have been incorporated into NEAK’s financing.

Close monitoring, new methodology, and a transparent controlling system should be elaborated, analysed and evaluated periodically in the future.

Hospital administrators removed

The Hungarian population’s health statistics are at the bottom of the EU comparative morbidity data. Underfunding is a decades-old problem, with the Hungarian state spending relatively little on healthcare about GDP, and even regional healthcare spending cannot be maintained at the necessary level with the current financing.

At the end of last year, the two top officials of the National Hospital General Directorate and 24 hospital directors were removed from their positions after their hospitals’ debt reached record levels.

Inflation, weakening of the national currency and amortisation costs that have not yet been reimbursed lead to the reinforcement of the debt spiral, especially for hospitals that treat patients suffering from more serious and complex causes.

As Velkey pointed out, “We are also vulnerable to the suppliers. Due to the significant payment arrears, our negotiating positions are actually difficult.”

Hospital suppliers are sounding the alarm

Since hospitals pay late, suppliers’ financial situation is also strained, further affecting the hospital’s care and treatment quality. Seventy-five per cent of the total hospital debt is owned by medical technology suppliers.

A surgical instrument supplier has already collected its hospital debt through debt collection.

At a joint press conference in March, three professional organisations asked the government to ensure that hospitals’ overdue debts are covered as soon as possible and that debts are fully settled faster.

“Despite the biggest consolidation to date, it seems that all this was a half-solution. The situation is worse than ever. By the end of February, the debts reached the pre-consolidation level again, as if the debt settlement had not taken place,” according to László Rásky, Secretary General of the Medical Association.

Based on a survey conducted among its members, Zsolt Tóth, the general secretary of the Hungarian Medical Cluster, said that the majority of suppliers did not receive even half of their expired outstanding debts, whilst they are contractually obliged to pay the VAT by the deadline.

The situation of supplier companies is critical; the small and medium-sized companies in the sector may go bankrupt due to a lack of income or may be forced to make layoffs or stop deliveries.

As Tamás Rádai, the director of the Association of Health Technology and Medical Technology Suppliers (ETOSZ), told the Hungarian Telegraph Office (MTI), “the impacts of hospital indebtedness are already visible in healthcare care: it is becoming more and more common that the operation of a hospital department has to be temporarily suspended. 10-15 per cent of suspensions are due to device supply disruptions.”

Hospitals against the wall

According to Velkey, “consolidation has begun, but the entire hospital system is still burdened by tens of billions of debt.”

“Indebtedness is a symptom of the health sector. The problem must be addressed, but it won’t be resolved. Since the political system changed, the health system has remained underfunded, and the consequences are visible year by year,” he commented in another interview.

“Unfortunately, the amount of debt cannot be significantly reduced from the available sources without worsening the service level,” he added.

The healthcare inflation rate caused prices to increase by 30 per cent, with older infrastructure, operating procedures, and inadequate management also contributing to high indebtedness.

[By Zsolt Kopári, Edited by Vasiliki Angouridi, Brian Maguire | Euractiv’s Advocacy Lab]

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