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Healthcare, Breaking the Vicious Cycle

Author: P. De Santis, C. De Franceschi, D. Ielo

Date: 11 December 2013

Type: Policy Brief

Topic: Health

EXECUTIVE SUMMARY

This paper presents an operative proposal for the structural improvement of the Piani di Rientro (PdR).

The proposal originates both from a factual remark and from a firm belief.

The factual remark is that the PdR, in the way they have been structured and managed since their creation, are not performing well. As a matter of fact, despite the lower growth of spending, (i) the Regions exposed to PdR do not fulfil the LEA (Livelli Essenziali di Assistenza) requirements, (ii) out of the 10 Regions that entered into a PdR program, 8 never accomplished to exit the program (with 5 of them remaining in recovery status for more than 6 years) (iii) the process of industrial restructuring, which was supposed to reduce the direct costs of production and reorganize the provision of services, still staggers.

The firm belief is that, in the current conditions, the reduced amount of available resources translates directly into lower services provided, with negative impact on overall population health status. The increasing health access and service quality gap between the Regions in PdR and the others is an evident sign of such perverse effect.

In our diagnosis the determinants of the current situation can be traced back to (i) a structure typically oriented towards short-term oriented measures instead of clear performance objectives; this is true both from an economic and financial perspective andin terms of the overall healthcare system and of the systemic restructuring of service provision processes and demand-led management (ii) a governance model mainly constituted by a soft consequence management for both political and technical decision-makers and supervisory bodies (iii) limited managerial skills for industrial restructuring in high-complexity environments (iv) extra burdens that further exacerbate the current situation in terms of interests to be paid on previous default positions.

Consistently to the diagnosis, our therapy proposes concrete measures of improvement in each of the 4 above-mentioned areas. In particular, apart from the revision of the PdR structure and the investment in adequate managerial competencies, we propose a governance model that: includes healthcare performance as a reason to enter into PdR; defines heavy consequences from entering into PdR; establish a management procedure to quickly operate a deep turnaround in the emergency phase. Moreover, we propose the establishment of a Bad Bank that incorporates the defaulted credits of suppliers, as well as the design of a debt-restructuring plan. The measures can generate a 10 billion Euro reduction of healthcare debt, out of the currently outstanding 24 billion Euro of previous healthcare debt estimated by the Corte dei Conti, and a further reduction of such debt due to the positive effect of higher transparency and reduced uncertainty on financial markets. The new public debt, 10 billion Euro, necessary to implement the measure corresponds to 0.7% of GDP and in our opinion it is already largely discounted in the credit default swaps and in the country spread.
 

Credit

Let me remind you that credit is the lifeblood of business, the lifeblood of prices and jobs.

Herbert Hoover

Health

Good health is essential to social and economical development and it empowers all of the public sectors.

World Health Organization

Innovation

Innovation is the specific instrument of entrepreneurship. The act that endows resources with a new capacity to create wealth.

Peter Drucker

Human Capital

Talent is a source from which water flows constantly renewed. But this source loses its value unless it is properly used.

Ludwig Wittgenstein