In the heart of Europe we find Belgium, operating with a GDP of €410 bn, with a modest yet steady economic growth rate of 1.4%. In line with expenditure shares in other EU nations, it spends around 10.6% of its GDP on healthcare, which equals around €3,858 per capita. Its overall healthcare (HC) expenditure on all activities from healthcare administration, hospitalization and public reimbursements, was around €43.5 bn in 2015. Expenditure on hospitals represents around 22% of the total spending.
1/3 hospitals are operating in the red
32 out of 91 general hospitals in Belgium, based on a study dating 2016, reveal negative balance accounts for the 2015 fiscal year. This is almost an 8% increase since 2014. The evaluated hospitals (61 private and 30 public) actively partook in this study, and the results are unrefuted.
The ageing population, -typified by rising chronic illnesses and more long-term care needs commonly provided by hospitals – paired with a proportionately smaller group of working-age public-fund contributors, are all factors highlighting the acute and unsustainable nature of the current hospital financing and provision mechanism.
Why are hospitals in the red?
A definitive (and self-evident) contributor to this financial situation is the increasing cost of healthcare. Another substantial factor in Belgium, are the costs of medical professionals.
Fees for professional were deliberately controlled in 2014, with only a 0.5% increase, yet are now showing a faster growth rate again, close to 2%. This renewed growth in 2015 is accounted for by the stable mean increment of wage costs across all professions in the country.
Furthermore, due to heavy investments in the previous years and the immense utilization of credit loans, the debt ratio is also increasing consistently, on top of already existing deficits. Debt ratios in Belgian hospitals currently average 36.4%, in comparison to 33.2% four years ago (2012).
General hospitals have continued to invest similar amounts to previous years, around €1.4 bn, and several have moved to new infrastructures and facilities. These were added-value and often necessary investments, that increased the care capacity for patients, yet nonetheless took its toll on the debt ratio.
Health institutions must deliver higher loan contributions each year as a consequence. Out of the 91 general hospitals under evaluation, 13 have insufficient cash flow to cover their incurred debts.
Operating profits and negative margins
€106 m (€40 m less than the previous year) is the operating profit of the general hospitals under analysis. This has sunk to below 1% of the revenues generated; 0.8% currently, in comparison to 1.1% in 2014. The financial vulnerability and their capacity to absorb unexpected costs and investments is thereby affirmed.
The developments in the pharmaceutical sector and the close to 7.5% increase of pharma sales, offered some support to the overall modest hospital revenue increases of 2.6%. Simultaneously, budgets for fees for specialists and physicians and other financial means, did not match the other growth, and only increased by 2.2% and 1.6% respectively.
Hospital services are equally suffering from negative margins. On average, for every €100 revenue, €3.5 are experienced as a loss. This is also an increase from previous years, around 11.5% more than in 2014.
How are (public) Belgian hospitals currently financed ?
Hospital costs are financed as follows:
Overall, 80% of financing consists of a fixed amount; the remainder is variable.
- Consultation and technical procedures – variable reimbursement schemes of fee-for-services
- Day care and other tertiary care – lump sums
- Pharmaceuticals – in part on a per product basis, and in part through a lump sum
- Non-medical hospital activities (laundry, nursing, hospital pharmacy, etc.) – closed-end envelope from State funds based on national averages of length of stay per pathology type
- Investments – in part by State funds, in part through the hospital itself and bank loans
The Future: Hospital organizations to scale down on specialism offers and increase network collaborations
A significant government-led reform, which is already obtaining widespread support from hospital organizations, is expected in 2017, in order to ameliorate this financial situation. Viability and effectiveness studies are being made as we speak, to seek the most sustainable models and service solutions. One expected outcome, is that hospitals will be stimulated and directed to collaborate more extensively, creating network structures, and to steer away from provider models where each institute wishes to offer all specialism fields.
It is also expected that once hospitals scale down their extent of specialty fields, a larger share of services can be met by a more sophisticated and comprehensive basic/standard (non-hospital) care provider.
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About Laura Weynants
Performs primary and secondary market research to create country reports at TforG. Interviews KOLs and medical sector professionals to build on TforG’s healthcare market expertise and competence networks. Complementing five years of sustainability policy and CSR communication, she now focuses on grasping key medical market trends, structures and opportunities in medical sectors worldwide. Coming from an international background of living in Germany, Spain, USA, UK and Belgium, she has gained a keen insight in international organizations and language skills to perform first hand investigations. She graduated from Sussex University Brighton, UK with a BA English Literature and Sociology and achieved a Master Degree in Sustainability and Corporate Social Responsibility in EOI Business School in Madrid, Spain.