Political changes at the end of the eighties have triggered a major restructuring and reform process in Central and Eastern Europe. The drive towards free market mechanisms and democracy in the former socialist countries has been supported by the EC Phare programmes since a very early stage. But what seemed at first to be a short endeavour turned out to be a long, still ongoing undertaking, which is only starting to slowly bear fruit.

The European Commission Phare is one of the donor agencies active in the health sector (see inset); others include the World Bank, UNICEF, and UNFDP. Also there are a significant number of so-called bilateral donors, each with their own specific objectives. Particularly important for the Health Sector is the WHO (World Health Organisation) with its "Health for All" strategy, who acts as a reference point.

IESE has been active in the field of health management for many years. Our involvement in Phare health projects started in 1992 in the former Czechoslovakia where we worked with the King's Fund College, London. This initial project involved Profs. Antoni García Prat, Jaume Ribera, Josep Valor and myself. Since then, we have worked on many projects in practically all the Phare countries.

European Commission rules require teams of experts with at least three different European or "Phare" nationalities. A worthwhile bi-product of this "bouillon de culture" is that each expert, already knowledgeable in his or her national system, has to confront challenges and ideas arising from the different environments and contexts in which he or she now works; that of the aid recipient country and the different home countries. A small contribution to the making of Europe!

This work in such an important and complex sector has provided us with a grand circle view of the challenges these countries are facing in the process of restructuring their economy.

SYSTEM OVERVIEW

The Socialist Health System

The Socialist Health System was introduced in the Soviet Union in the 20's as part of the "new" organisation of the state. The so-called "socialized medicine" system based on prevention, access and equity, together with the "ending of exploitation of men by men" would lead, in the long run, to a decreased need for clinical and medical services. Under Stalin, the system changed to a more clinical approach, health care was supposed to serve the drive for production, maintaining the labour force's health and controlling absenteeism. In the following 60 years, no major changes were made and, in fact, this approach served as a blueprint for all other communist states.

This "national health" type system is based on the right, guaranteed by the constitution, to free medical care from qualified personnel provided by state health institutions. With a bureaucratic central planning function, it was run, financed and managed by the state. The structure was vertical, strictly hierarchical and party-influenced with no freedom of choice for the major part of the population; only the so-called "nomenclatura" had unlimited and free access to higher quality service, a fact which led to the development of secondary markets.

Decline and problems of the system

The decline of the system was predictable as initial investments were not repeated. It was as if the system was supposed to run without maintenance. Resources dedicated to the health sector decreased as a percentage of the national budget, especially during the arms race in the eighties, and thereafter as the general economy worsened.

Infant mortality, usually a good indicator of a health system's quality and the standard of living in general, showed first positive and then, at least, stable trends for decades in the USSR, but deteriorated sharply in the early seventies. This aggravation, together with the decrease in life expectancy encountered in all ex-communist states in the late seventies and early eighties happened long before the collapse of the economic system.

Now that the systems are open to external analysis, their weaknesses are more obvious. The system is undercapitalized and labour-intensive with enormous overcapacity and low efficiency. Access, originally conceived as being one of the strong points of the socialist system, proved to be a major problem with the emergence of large, secondary markets.

High praise for the central planning system turned out to be hollow boast: there had never been any real planning due to the lack of need-oriented criteria and reliable data. Now, when strategic planning is so badly needed, people find the idea anathema, perceiving it as part of the old discredited control system.

Owning information is considered a source of power and this makes the task of information analysis very difficult. Interested parties have been exploiting the data-collecting system for decades and wish to continue to be the only ones to do so.

The centrally organised budget system does not allow for many adjustments to different local needs, thus leaving little room for manoeuvre on the ground. The reported reality is made to fit what is budgetarily correct. Most executives of the system are merely administrators with a very compartmentalized view of the system. As a result, decisions are made in isolation on logically linked issues such as, for example, investment, operating expenses and maintenance costs.

Executive positions are held by physicians who often have no real management training and who are more interested in clinical practice than the institution's financial soundness. Appointments to all levels are mainly political with the risk of resulting incompetence and instability. Following the appointment of a new Minister, there has often been a complete change of ministerial staff from the State Secretary to the janitor. For long periods, foreign consultants have often been the most stable part of some ministries.

The old power structures with information flowing up and orders coming down remained active in most parts of the system. Assuming responsibility was demonstrably very dangerous in former times thus generating a high present aversion to risk. Unless there is a clear legal basis, decisions are usually pushed upwards until they reach the Minister, who must then examine all these, often trivial, issues, leaving little time for strategic thinking. There is a widespread demand for laws and regulations as they are seen to simplify decision-making and relieve managers of the need for creativity in finding solutions.

In most countries, physicians and other personnel are still on an underfinanced state budget, earning salaries far below those of less qualified personnel in the private sector. Consequently, the most valuable human resources are leaving the system. This explains poor working morale and a perfunctory attitude towards duty on the part of the remaining employees. Pharmaceuticals have to be imported and they consume a major part of the health budget. Medical and other equipment is very often antiquated and of poor quality. Some represent a real danger for the patients. The situation is much worse in the poorer countries in the south.

The environment has not been a concern in the socialist system where, often, a smoking factory chimney was a symbol of progress. The regulations are still behind Western European standards. Even if they exist, there are no means to enforce them. This all affects the incidence of respiratory and oncological diseases. Other health concerns are the high consumption of alcohol and tobacco, abortion as a means of contraception and a high suicide rate.

The Reform of the Health System

The official ministerial declarations on health reform contain goals like improving the population's health, improving the system's efficiency, cost containment, better use of resources, increased quality of services, access and equity.

Although these output measures sound attractive, usually the reforms are input-oriented. This is due, in part, to the strong hospital orientation of the physician-led system. Also, Ministers tend to prefer photo opportunities such as inaugurating a new linear accelerator rather than meeting with staff to discuss the management of investment spending. Since resource allocation is highly, if not wholly, politicised, it is considered preferable to apply straightforward political criteria without any analysis. The more hard analysis available, the harder it can be to make a "politically sound" decision later.

This bias towards tangible inputs is also revealed in the development of the national health information systems. Usually hardware is thought to solve all problems and little effort is spent on the design and organisational development of the overall system.

Health systems in Western European countries and their recent reforms have been used as paradigms. Some elements appear so attractive that the implications of their integration are not thoroughly thought through. Parts of the German system (populated by private, independent and well-off physicians) has been copied without proper adaptation.

Due partly to the leadership instability, the change process is often poorly managed: the need for good communication is neglected. Wrong expectations, fear and misunderstanding lead to resistances from stakeholders and the general population. The result is that important structural problems - as in the health sector: overcapacity, financing systems, hospital planning - have not been addressed yet.

Sometimes the consultant is viewed as a source of ready-made solutions without any need for ministerial involvement. Ministerial offices are often understaffed and the project work adds to their normal duties. People above a certain age may be no longer willing or able to change. The younger are often much more enthusiastic, open to change and willing to learn, but they may be too busy with day to day issues.

FIRST RESULTS

We have been working on projects dealing with health financing, investment strategy, accounting, hospital cost control systems and health information systems in Slovakia, the Czech Republic, Romania, Poland, the Baltic States, Albania and most recently the new state of Bosnia Herzegovina. The latest work has involved designing up the Phare programmes in some of the countries.

Despite the drawbacks and problems encountered, we were able to witness some tangible successes: the introduction of modern cost control systems in hospital management in Romania and the final parliamentary passing of the health insurance law in Poland.

But probably much more has been achieved in the details: we have met very enthusiastic people trying to perform miracles within the economic and equipment limits they face. They are also eager to improve their management skills, something that is difficult to do in their own country. Now, with new tools and know- how, they master their job better, with increased responsibility, and a move towards decentralisation and privatisation all contributing to their sense of creativity. Here, the experience with pilot projects was very rewarding: dealing with concrete issues progresses faster with better results. This gave positive feedback to the reform-makers and pushed the reform process forward.

Another good learning point was that not all that is "old" is "bad", e.g. prevention in the centralised, compulsory system, or the collaboration of physicians in polyclinics. It might be advisable to maintain some of these characteristics in the new system.

Phare projects and other Technical Assistance (TA) projects have shown their first results. While these achievements are easier in other sectors (homogenisation of laws and standardisation, etc.), there is no 'European way' in the Health Sector. And it was not always possible to avoid falling into the same problems of the Western systems as it is difficult to learn from experiences elsewhere. But the TA programmes provided know-how in the approach to common problems and the management of change. This is a learning process on all sides: donor, recipient and consultant. One positive output is certainly the number of well trained locals, although not always in their original field of work, and more experienced consultants with a better idea of what the future Europe could be like.

The work in the Health sector in these countries has not finished. There is still a lot to do even though the sector gets sometimes neglected, due to other more obvious priorities. But to promote sound economic systems with a view to future expansion of the European Union, health and social aspects in these countries will be as vital for them as future member states as they are for the existing members.

Conclusion

More links, and an increasing number of private business contacts will be made with all these countries. Problems similar to those we have seen in the health sector, inherited from the long period of communist rule, will inevitably sooner or later be encountered in other sectors. In fact, they are probably not much different from those found in Western countries, only more widespread and deeply rooted in behavior. Some points of mutual understanding have been created. Phare local units in the different sectors are continuing to assist the reform and restructuring processes. They are also a good source of information and a way of making contact with the recipient country.

Bibliographic References

- "European Health Reforms, Analysis of Current Strategies, Summary", WHO, Regional Office Europe, Copenhagen © 1996.

- "Gesundheitssysteme im Vergleich", Markus Schneider, BASYS, Augsburg © 1994.

- "Market Mechanisms and the Health Sector in Central and Eastern Europe", A. Preker et al., The World Bank, Washington © Dec. 1995.

- "Phare Progress and Strategy Phare Health", Helene Bourgade, Phare Implementation Unit, European Commission, Brussels © July 1994.

- "Soziale Sicherung in West-Mittel-und Osteuropa", Axel Weber et al., Nomos, Baden Baden © 1994.

- "The International Handbook of Health Care Systems", Richard B. Saltman (ed.), Greenwood Press, Westport Conneticut © 1988.

- "What is Phare", European Commission DG1a, Brussels, © 1995; and http://europa.eu.int/en/comm/dg1a/dg1ahome.htm.

Phare, originally "Poland Hungary Assistance for the Restructuring of the Economy" was created in 1989 and then progressively extended to other CEECs. These are now: Albania, Bulgaria, Czech Republic, Estonia, FYROM - Former Yugoslavian Republic of Macedonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia. The newest member is Bosnia Herzegovina, now grouped with the other Balkan states in the newly created "OBNOVA" programme. Looking towards future European integration, association agreements (the so called "Europe Agreement") have been signed with nine of the countries (italized) with Phare acting as the "Pre Accession" instrument of the European Commission.

A condition for any Phare funding is commitment to democracy and progress towards a market economy.

- Objectives:

- Support the restructuring and reform process in the countries during their move towards free market and democracy to assure long-term viability and sustainability in line with macroeconomic developments and social acceptability.
- Assist the partners in implementing the "Acquis Communautaires": institution-building, harmo-nization of laws towards convergence on the economical, sociopolitical and cultural fronts.
- Bring industries and major infrastructure up to Community standards through increasingly large investment funding.

- Areas of intervention:

- Restructuring of state enterprises and private sector development, modernisation of banking and financial services.
- Agricultural restructuring and reform
- Public administration and institutional reform (e.g. customs)
- Reform of social services and employment
- Education and health
- Infrastructure (telecommunication, transport), environment, nuclear safety.

- Types of programmes:

- National Programmes in priority sectors
- Multi Country Programmes
- Cross Border Programmes
- Democracy Programmes

- Types of approaches:

- Know How Transfer / Technical Assistance: policy and strategy design, institutional building, conferences, pilot implementation, training, study tours.
- Investment, Infrastructure.
- Academic Development (TEMPUS), support of NGOs (LIEN), support to participate in European Union Programmes.

- Budget:

- At the end of the first six years: 5.4 Billion Ecus.

- http://europa.eu.int/en/comm/dg1a/dg1ahome.htm
- http://europa.eu.int/en/comm/dg1a/phare/phare.htm

 
Very enthusiastic people try to perform miracles within the economic and equipment limits they face