Municipal nonprofit organizations (NPO), which most Ukrainian healthcare facilities have become, are trying to develop the healthcare business – which is an absolutely new challenge for them. Being an enterprise means generating profit, controlling and minimizing costs, retaining and developing personnel, soliciting and retaining customers. It is not easy, but possible. How? Some possible activities of municipal hospitals in this regard will be described hereafter.
1. Change organizational setup
In general, the organizational setup of municipal NPOs is not appropriate for doing business. In the years since state-owned enterprises, hospitals have continued to unreasonably retain an excessive number of hospital housekeeping personnel. And this entails funds for the maintenance of unnecessary premises, salaries, etc. There is a room for improvement within such an organization. Downsizing and layoff are painful but vital processes.
An example. The staff of the hospital includes a caretaker, several plumbers, locksmiths, house-painters, welders and others. However, there is also a municipal enterprise nearby that provides the public utilities for the district and includes all these specialties in its staff. It is more cost-effective to procure the relevant services from a specialized municipal enterprise or from private contractors, namely, business entities. The CEO of a municipal NPO knows the specifics of the operations, understands the needs, so the CEO should choose what suits the best for the hospital.
2. Introduce paid services
The list of paid services should be approved by the order of the hospital. In this case, draw up the list on the basis of the Ukrainian Cabinet of Ministers decree No. 1138 “On the Approval of the List of Paid Services Provided by State-Owned and Public Healthcare Facilities and Higher Medical Educational Establishments” dated September 17, 1996.
The goal of the business is to generate income, so provide as much as possible paid services that are beneficial to the enterprise.
Providing services means to bear the cost. The profitability primarily depends on the flow of patients (customers). And the organization of such a flow is already a marketing issue. Yes, that is marketing: advertising and promoting such services in all possible and effective ways to the target audience.
Since, the target audience may be the relevant community, and for some medicinal services it may be, actually, the entire population of Ukraine or not only Ukraine, therefore, it is necessary to develop an appropriate marketing strategy. How? The field for creativity is large.
For instance, the hospital employs a physician to whom people travel for consultation from afar. Why not use this fact in the advertising campaign? The text should be short and strong as well as easy for reading. There are also related non-medical paid services, in particular, improved nutrition, wards, etc. This is a resource for generating additional income for the enterprise as well.
3. Collaborate with insurance companies
The service requires payments. In fact, the patient has to pay for everything that is not paid by the government. There are no other sources of financing for the activities of hospital. Yes, there is also financial assistance from the community within the regional programs, but this is just assistance, and not a permanent source of funding that can be counted on from year to year.
Cooperation with insurance companies shall become an additional source of funding. However, the healthcare facility must provide such a level of service so that it would be interesting for insurance companies to cooperate and attract customers.
As a rule, insurance companies work on the basis of their own, carefully and well-developed contracts. In order to balance the interests of the parties, it is worth to involve a professional lawyer when negotiating such a contract.
The CEO also is entitled to initiate the operation of a non-profit health insurance fund. There are successful examples when community members understand that for cheap constant contributions in case of illness, the patient receives a bonus, namely high-quality medical and related services. Tens of thousands of people become participants in such health insurance funds. And it provides additional ongoing funding for hospitals.
The health insurance funds are created in the form of charitable organizations that do not have the goal of making a profit. Their activities are regulated by the Law of Ukraine “On Charitable Activities and Charitable Organizations.” There are enough examples of statutory documents and descriptions of the activities of such organizations on the Internet.
4. Pool resources
The legislation does not prohibit the municipal NPO from interacting in various forms and pooling its own resources in order to use them effectively. Consolidation is not a panacea, but one of the tools for optimizing all processes: it helps not to duplicate business functions.
Several municipal NPOs operate on the basis of the property of the national healthcare facility. In this case, it is efficient to consolidate resources. You have at least three alternative options for such consolidation at your disposal: to create a municipal economic association of several enterprises or to lease the integral property complex of another enterprise, or to create a joint municipal enterprise. As a result of these steps, you optimize administrative functions, reduce staff, consolidate property and financial resources, expand the list and quality of services, and others.
5. Optimize production functions
This refers to everything, except medical services: laundry, cleaning, food, transport, heating, and others. Instead of keeping old premises to be heated and refurbished and old equipment, procure relevant services from third-party vendors.
For instance, drivers and vehicles owned by the municipal NPO. If we are not talking about the use of fleet vehicles 24/7 and not about specialized vehicles, then it is most probably not profitable to keep fleet vehicles (fuel, repairs, storage) and pay for the work of drivers. It could be more interesting to pay for a taxi service or reimburse physicians for expenses if medical workers had to urgently arrive at the workplace outside of working hours.
Laundry and boiler room. It is worth considering whether it is more profitable to draw up contracts for washing and connecting to city heating networks.
6. Expand service packages under contract with NHSU
Is it expedient and cost-effective for facilities to work on separate service packages? This issue needs to be reviewed separately. There are no overall answers, since make an assessment separately for each facility, taking into account the current situation with personnel, equipment, the needs of the population, competition, and others. Analyze, according to which packages your facility could make an agreement. Think if these services would be in demand.
7. Modernize remuneration system
There is a systematic shortage of medical personnel in many regions of Ukraine. It is the task of every CEO to create such working conditions so that new personnel come to the hospital and the old ones develop and remain. In this case, the issue of labour remuneration comes first.
Usually, the salary of municipal NPOs’ employees is calculated on the basis of the Ukrainian Cabinet of Ministers’ decree No. 1298 “On Remuneration of Employees on the Basis of the Unified Rate Schedule and Coefficients for the Remuneration of Employees of Facilities, Establishments and Organizations of Certain Branches of the Budgetary Sphere” dated August 30, 2002 and the Order No.308/519 of the Ministry of Social Policy and the Ministry of Health “On Streamlining the Conditions of Remuneration of Employees of Healthcare Facilities and Social Protection Institutions” dated October 5, 2005.
The status of a municipal enterprise dictates other principles of remuneration, based on a collective agreement. It is regulated by Ukraine’s Law No.3356-XII “On Collective Contracts and Agreements” dated July 1, 1993.
Modernize the remuneration system in municipal enterprises. Increase salaries by streamlining all processes. At the same time, you have the right to use the tariff system familiar to the industry or any other approaches.
8. Find and launch investment projects
Now investment projects in the medicine sector are more attractive for Ukrainian and foreign investors than it was before. The amount of funds that the government allocates for healthcare is increasing every year and the market is becoming liberal. The field for investments is wide – from the modernization of equipment to the construction of new hospital buildings, the latest medical services, and others.
The investor could enter into a concession agreement for the hospital or its department with the local authorities. As part of the concession agreement, the investor negotiates with the local authorities on a certain guaranteed level of profit (financing), and also implements the business model that has already proven its efficiency in other countries.
He/she invests in refurbishment or modernization, and arranges all processes. For the next 49 years, the investor runs the relevant business and gradually returns his/her investment. The sources of profit are the services bought by:
• Government under agreements with the National Health Service of Ukraine (NHSU);
• Financing of targeted aid programs of communities (districts or cities);
• Patients (out-of-pocket).
Investors are looking for the projects that are attractive for investments within the public-private partnerships, in particular, under concession agreements or joint activities with municipal hospitals. This is an additional source of funds to reorganize the facility into a profitable enterprise.
Oleksii Bezhevets
MBA, Partner at Legal Alliance Company
The Antimonopoly Committee of Ukraine (AMCU) has granted permission to Vesco Limited (Limassol, Cyprus), which unites the clay mining business of the investment company UMG Investments of SCM Group, to purchase more than 50% of the shares of PJSC Chasiv Yar Refractory Plant (Chasiv Yar Donetsk region).
“The AMCU has granted permission for the stated actions and imposed obligations, which stipulate the implementation of concentration in the markets of aluminosilicate refractories and refractory clay of Ukraine,” the agency said in a press release.
The committee recalls that these obligations were offered by Vesco Limited itself last fall for a period of five years and consist, in particular, of selling to third-party buyers, if there is a demand from them, of at least 50% of the annual sales volume of the plant’s goods at market prices.
Another obligation is not to allow limiting the volume of supplies of refractory clay without economically justified reasons to third-party buyers who intend to purchase them for the needs of their own production in Ukraine.
In addition, Vesco will have within two years, in the absence of alternative sources of supply of refractory clays mined in Ukraine in volumes that fully meet the needs of Ukrainian consumers, to ensure the sale of refractory clays in favor of such companies in volumes from 20% of the total annual sales of concentration participants, if there is demand, at market prices.
Initial registrations of electric vehicles (new and used) in January-November 2020 decreased by 2% compared to the same period in 2019, to 6,823 units, including 92% of used cars, the Ukrautoprom association reports.
Thus, in the 11 months, the market of electric vehicles turned to negative dynamics, while over the ten months there was still a slight increase (by 1%), despite the drop in sales in October by 15%, and in the seven months, the growth was 7%.
This situation is due to the fact that, according to the association, in November compared to the same month of 2019 the number of registrations of electric cars decreased by almost 28% from November 2019, to 514 units (481 passenger cars and 33 commercial vehicles), which is also almost 22% less than in October 2020.
However, at the same time, the report states, the share of new cars increased to 10% from 6% in November last year, used electric cars from abroad were purchased by 461 persons (31% less than a year earlier), while the demand for new cars rose by 29%, to 53 units.
The most popular passenger electric car remains Nissan Leaf (126 cars were bought in November). The top five cars also include Chevrolet Bolt with 69 units, Tesla Model 3 with 55 units, Tesla Model S with 36 cars, and BMW i3 with 23 vehicles.
Commercial electric vehicle statistics for November were formed by Renault Kangoo Z.E. with 26 vehicles and NISSAN e-NV200 with seven units.
Head of the parliamentary committee on the health of the nation, medical care and health insurance Mykhailo Radutsky has named those who will be the first to be vaccinated against coronavirus in Ukraine for free.
“The first wave is doctors, the military, police. Doctors are mandatory. First of all, these are medical workers, these are the military, this is the police, this is the National Guard and the elderly from the risk group,” Radutsky said on the air of the Right to Power (Pravo na Vladu) program on 1 + 1 TV channel.
According to him, 4 million Ukrainians can already be vaccinated for free on COVAX.
In turn, Deputy Minister of Internal Affairs Anton Gerashchenko said that as many as 25,000 people fell ill with coronavirus among law enforcement officers, of whom 78 people died.
The fall of the Ukrainian economy in 2020 may amount to 5.5% of GDP with a further recovery of growth by 3.5-4% in the next two years, analysts at Deutsche Bank expect.
According to the materials of Emerging Markets Outlook 2021, experts admit that the next tranche of the International Monetary Fund (IMF) will be allocated to Ukraine in early 2021, which will pave the way for obtaining funding from other international partners.
At the same time, the central bank will leave the discount rate at 6% per annum, according to the review.
The National Bank of Ukraine (NBU) is oriented on the growth of the country’s international reserves in 2020 from $25.3 billion at the beginning of the year to more than $27 billion at the end of the year, Deputy Governor of the National Bank Yurii Heletii has said.
“The indicator of international reserves will be higher than at the beginning of the year. Let me remind you that at the beginning of the year it was $25.3 billion. Our target is more than $27 billion,” he said.
According to the banker, the final volume of international reserves will depend on placements by the Ministry of Finance.
He explained that in the October forecast of the NBU, which assumed that international reserves at the end of this year will amount to $29 billion, it was planned to receive financing from the IMF, the World Bank and the EU.
According to the official, the state of international reserves is satisfactory and, according to the composite criterion, which is calculated according to the EU methodology, exceeds 90%.
As reported, the European Commission, on behalf of the European Union, issued EUR 600 million to Ukraine as part of the macro-financial assistance program related to COVID-19.
