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Health systems in transition <strong>Latvia</strong> Contracts with inpatient facilities are based on tariff (price) per bed day, which differs according to the rank of the hospital, such as university, regional multi-profile or local multi-profile. In addition, contracts include fee-for-service payments for operations and diagnostic procedures. For certain conditions, casebased payment is applied. The contracts for outpatient services are negotiated between hospitals and the SCHIA territorial branches (Section 3.7 Payment mechanisms). The contract defines the budget per year and the planned service volume. Providers bear the risk of overprovision of services. However, if the provider exceeds the contract budget by only 5%, this excess is not covered by the SCHIA. If it exceeds by more than 5%, the provider may receive reimbursement at 25% of overproduction costs, if it is possible to justify the excess provision by reference to extraordinary circumstances that the provider could not foresee. Payments are a mix of prospective and retrospective payments. Preventive programmes and GPs’ direct referrals for outpatient care are covered according to utilization levels (retrospectively). Other payments are made on a prospective basis. Fixed financial limits on income from contracts require providers to comply with the terms of service provision determined in normative documents. Thus, almost all risks in contracts are shifted onto the provider side. In practice, the sole risks faced by providers involve incurring a financial deficit. There are no other consequences for providers if they deviate from a contract. Competition between providers for contracts is limited. Providers are also not particularly responsive to competing for a larger contract sum that would permit an increase in the volume of patients receiving statutory provision. Usually, there is a certain balance kept between government-financed patients and private patients (paying out of pocket), as providing services to patients on a private basis offers opportunities for higher earnings. 3.7 Payment mechanisms Paying for health services Methods of paying for health care services are determined by government regulations. Contracts between the SCHIA and service providers ensure compliance with the system. The main service groups and corresponding payment methods are shown in Table 3.5. 95
Health systems in transition <strong>Latvia</strong> Table 3.5 Payment methods for health services Family health care services Dental services Outpatient specialists Laboratory tests and visual diagnostics Inpatient services National programmes e.g. TB, Fixed budgets. HIV/AIDS, infectious diseases Source: Authors’ own compilation. Capitation, additional fixed payments, fee-for-service payment per specific activity, bonus payments. Fee-for-service payment per activity according to tariff. Consultant specialty-specific episode tariff, fee-for-service per specific activity, flat rate payments. Fee according to a tariff. Bed-day tariff plus fee-for-service per specific activity, e.g. operation and examination, case-based payment. Outpatient services In the mid-1990s, outpatient services began to be paid according to a “point system”. Each service was assigned a number of points according to a scale of service intensity. The payment of provider institutions (polyclinics) was determined by the number of points corresponding to the services delivered by doctors and nurses. This payment system proved to encourage costly interventions and provision of a volume of services greater than necessary, and was therefore gradually abandoned. At the end of the 1990s, a capitation payment scheme was introduced for GPs, who extensively began to change their legal status from employees in polyclinics to self-employed in their own practices, which they either set up individually or rented space within the facilities of polyclinics. Specialist services were still paid according to the list of interventions. At the time of writing, primary care services payment schemes also include the addition of fees for defined activities and bonus payments. GPs also receive fixed payments, such as a practice allowance, a PHC nurse allowance and some additional payments for the number of chronically ill patients on their list. Services provided by outpatient specialists receive a flat rate per episode of illness. Every outpatient specialty has had its own specialty-specific episode rate calculated. If specialists perform costly procedures, these are paid for additionally for each episode according to specific tariffs. Patients have to pay a patient fee in addition to the consultant episode payment. Diagnostic services (lab, visual diagnostics) are paid for according to specific tariffs. Several outpatient specialty services (such as psychiatry, TB, STIs, and diabetes) are paid for by means of a flat rate mechanism, according to a budget which includes salaries for personnel and costs of running the services. 96
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6. Provision of services 6.1 Public
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