This chapter reviews the critical problems identified and the key recommendations that emerged from the Hospital Strategy Project. It also describes how these fit together to provide an integrated vision and strategy for Africa’s public hospital system.

Critical Problems:

Situation analyses carried out by the Hospital Strategy Project  identified a complex network of interlinked, systemic, and institutional problems that contribute to some of the failings of the public hospital system. Together, they have led to a negative spiral of declining or static real budgets, increasing demoralization of staff, declining quality of care, and rising loss of public confidence in the system. The following paragraphs describe the problems.

I.- Hospital Funding.

Several factors are contributing to the severe and growing funding gap the public hospital system is facing.

Tight fiscal policy has led to slow real growth in the overall health budget, despite growing demand for health services as a result of population growth, urbanization, and epidemiological factors. The situation as been made worse by the rapid pace of reallocation of health budgets, both between provinces and between hospitals and primary health care services. This has left large parts of the hospital system facing substantial budget deficits and without the time or resources to adjust to these resource constraints in a rational and controlled way.

This situation has been aggravated by the poor and deteriorating capacity of the hospital system to recover costs through user fees. Poor cost recovery is attributable to a combination of problems, including inappropriate revenue and budgetary policies that provide managers with no incentives to collect fees, poor structure of and pricing in the user fee schedule, poor collection systems at the hospital level, and a large and growing shift of paying patients away from public to private hospitals. The current functioning of the user fee system also undermines the equity of the hospital system, because subsidies are not effectively targeted at the poor.

The size of the hospital funding gap and the speed at which hospitals are being forced to adjust to it are having extremely negative effects on the hospital system. In the absence of rational planning approaches and tools, provinces are being forced to make crude—across the board budget cuts—without regard to the particular needs of individual institutions. This undermines staff morale and quality of care and reduces public confidence in the hospital system.

II.- Distribution, Allocation, and Use of Hospital Resources.

The hospital system is characterized by inefficient and inequitable distribution of financial, physical, and human resources, with a heavy bias toward urban areas and academic hospitals. The impact of this is made worse by the absence of effective systems and capacity for rationalization, for rational future allocations, and for efficient resource use at the micro level. These problems have been further aggravated by budget constraints and the rapid reallocation of resources away from hospitals to primary health care.

III.- Hospital Management.

Management of the hospital system is characterized by extreme over centralization, with hospital managers having almost no authority to manage their own institutions. This has led to severe underdevelopment of management systems, structures, and capacity at the hospital level and to a distorted management culture. The net effect of all these problems is demoralization of hospital managers and severe under management of hospitals, most of which are simply administered by provincial head offices rather than actively managed. These problems are aggravated by poor remuneration and career paths for managers, which prevents the public system from attracting and retaining good managers. Over centralization has also undermined the legitimacy and functioning of hospital boards, thereby diminishing the accountability of and public trust in the hospital system.

IV.- Labor Relations Policy and Management.

Antagonistic labor relations, which have improved only minimally in recent years, have plagued the public hospital system. This situation is due to a combination of problems in labor relations policy and management.

On the policy level, an effective labor relations framework for the public service is lacking. On the implementation and management level, severe problems are caused by the highly centralized nature of bargaining and of the handling of all labor relations matters, by poor management systems for handling personnel matters, by extremely limited personnel management and labor relations skills and capacity at all levels, and by resistance by some elements of management to progressive labor relations policies.

These factors have resulted in the isolation of both hospital management and workers from policy-making and negotiations, and have resulted in ignorance, a lack of trust, and a culture of adversity. The overall effect is thus a cycle of poor labor relations, which overwhelms the machinery set up to deal with these problems, which further worsens conflict, lowers morale, and reduces productivity.

V.- Relationship between the Public and Private Sectors.

Interaction between the private and public sectors in the hospital system does not generate any of the potential positive effects of such interactions, but instead has a strongly negative net effect on the public sector. This occurs in several ways. To begin with, the rapid expansion of the private hospital sector in recent years has undermined public provision by draining large numbers of highly skilled staff out of public hospitals and by drawing increasing numbers of paying patients out of the public hospital system. This has been a particular problem in smaller towns and cities, but is manifest throughout the country. The private health insurance system also exploits public hospitals by “dumping” expensive cases on the public system once their benefits have been exhausted in private hospitals. In addition, insured patients frequently claim to be uninsured, and thus do not pay for their care at public hospitals.

Together, these various factors translate into a fairly substantial subsidy from the public to the private sector, a perverse and undesirable situation, particularly considering the already generous public subsidy granted to private health care through tax concessions on contributions to medical schemes. This situation is not, however, attributable simply to exploitative behavior by the private sector. Instead, it is the result of a complex interaction between a poor regulatory environment and gaps in government policy, which private sector players naturally exploit. These regulatory and policy issues will, therefore, have to be comprehensively addressed if the potentially positive contribution of the private sector is to be realized.

A New Vision and Strategy:

To address these multiple and severe problems, a new vision is required for the public hospital system. This vision can be expressed through a number of objectives that are consistent with the principles of the national health system currently being implemented by the Department of Health and the provincial health administrations.

The overall goal of the public hospital system is as follows. The public hospital system will create and support a national network of dynamic, efficient, responsive, and accountable hospitals, which will deliver high quality, affordable, and accessible health services to all South Africans and will act as the supportive backbone of the national health system.

To attain this overall objective, the public hospital system has specific goals to ensure:
• Equity in access to hospital services, which implies that all citizens should have equal access to adequate standards of hospital care for equal need, regardless of their income or place of residence.
• Decentralized management of all hospitals, with as much delegation of authority and responsibility as possible to each hospital.
• Maximum efficiency in the distribution and use of all hospital resources.
• Accountability to the community and responsiveness to the needs of patients and their families.
• Full integration with and support to the district-based primary health care system and the wider health are system.
• Responsible stewardship of public funds.
• Creation of a safe, fair, and stimulating working environment for all hospital workers.

Conclusions and Next Steps:

The analysis, research, and consultative process undertaken by the Hospital Strategy Project has generated consensus on a new vision for South Africa’s public hospital system and on most of the critical aspects of an integrated strategy designed to achieve that vision. Agreement has been reached on a wide range of detailed and far-reaching proposals to restructure the public hospital system. Where consensus does not yet exist or is not required, this project has provided the framework and detailed proposals to allow the Department of Health and public health administrators to move rapidly toward consensus positions and policy decisions. This project has thus provided a detailed road map to help the government and other stakeholders in the complex and challenging task of moving from an antiquated, inefficient, and inequitable hospital system to a modern, effective, equitable, and responsive one.

However, none of this will be achievable without careful and systematic attention to the process of implementing these various strategies. While the full project report makes detailed recommendations on implementation, none of this will have any impact unless the relevant authorities at the national and provincial levels devote time, energy, and resources to the implementation process. In this context, the Hospital Strategy Project is concerned that numerous competing priorities and a lack of resources and capacity will prevent adequate attention being devoted to the implementation process. If this occurs, the substantial investment already made in this project and the opportunity presented in the detailed strategies will go to waste. To avoid this, a number of specific measures will be required, including the following:
• A policy decision should be taken at the highest levels that endorses, after any necessary amendments, the vision and strategy outlined here and commits the Department of Health and public health administrators to achieving this vision and implementing the strategies within a defined timetable.
• The Hospital Coordinating Committee should be tasked with coordinating the implementation of he integrated strategy outlined here and should be required to report to the Health Ministers Forum n progress at defined intervals.
• Careful attention should be paid to the respective roles of the Department of Health, public health administrators, and any other stakeholders in the implementation process. The Hospital Coordinating Committee should be given responsibility for drawing up a document that outlines these respective oles and should request stakeholders to commit themselves to taking on these roles.
• Attention should also be paid to the resources, skills, and capacities that the Department of Health and public health administrators will require to ensure successful implementation. Specifically, decisions should be made about whether, when, and to what extent outside assistance will be required in implementing these strategies. Once these decisions are made, funding and technical assistance should be arranged in a timely manner to ensure that the current momentum is not lost.

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