Before the first private hospital for cardiovascular surgery and cardiology was established in Croatia, patients seeking open-heart surgery had three choices: seek treatment outside of the country, be placed on a waiting list for treatment at a state hospital or die.
The two public heart facilities that exist in the Republic of Croatia, an independent state with a population of 4.6 million, could not adequately serve the number of patients needing surgery.
"Waiting lists were long, and the number of patients was increasing," says Ranko Ugljen, M.D., chief of surgery at Magdalena Hospital, about 25 miles from the capital of Zagreb.
Opened in August 1997, 210-bed Magdalena is the only private hospital in Croatia. Some 65 state hospitals provide most of the care in the former communist state situated on the Adriatic Sea in Central Europe. Croatia declared its independence from the former Yugoslavia in 1991. A war with Serbia ensued, ending with the signing of the Dayton Agreement in 1995.
Croatia didn't need to look beyond its borders for hospital investors willing to risk money in a transition country.
Seven Croatian shareholders, including some doctors, borrowed almost $10 million from a bank to open the hospital in Krapina. About $6.6 million went for equipment and $2.7 million for construction. The founders rented an existing facility and later added an intensive-care unit and an operating room. Doctors didn't start performing open-heart procedures until January 1998.
Ugljen touts the benefits of Magdalena: improved services, shorter waiting lists, skilled doctors and better salaries for doctors.
Although Magdalena isn't a panacea for the shortage of cardiac facilities in Croatia, it offers another option for cardiac patients who otherwise would travel abroad for treatment, decide against it or simply die waiting, Ugljen says.
"Magdalena was opened to serve patients better," he says. The hospital planned to perform 350 open-heart procedures in its first year, but because of patient demand, that figure more than doubled. Each hospital room houses only two patients and has a bathroom, quite a contrast to some of the crowded state- and county-owned hospitals. With a staff of 25 doctors, Magdalena has attracted some of the best surgeons in the country, and officials boast that they maintain their surgery schedule.
As of September, 300 procedures had been performed. But Ugljen laments, "We have to slow down, not because we want to, but because we don't have the budget (to treat all the patients)."
The Ministry of Health pays a portion of a patient's bill at the hospital; the patients pay the rest out of pocket. For the first year, the ministry provided a monthly budget of about $1.4 million (U.S.). This year it cut the budget to about $900,000 (U.S.).
But that isn't enough to cover all the patients the hospital treated, Ugljen says. If the hospital treats more patients than the budget allows, patients are supposed to make up the difference or the hospital must pull funds from other sources and budgets.
Though Magdalena doesn't think the state-provided budget is sufficient, some public hospitals think it's too much. They are competing with private Magdalena for limited government funds. However, a recent loan from the World Bank Group may pacify the public hospitals.
In early October the World Bank lent $29 million to Croatia for healthcare reform, primarily to improve primary, secondary and hospital care. The loan can be used for financing capital investments needed to improve the delivery of healthcare and technical assistance.
"We promote system reform to make it more efficient and put in place a financing plan that is more effective (than the state budget)," says Julius Varallyay, the country officer for Croatia at the World Bank. The loan cannot be used for recurrent expenditures. The World Bank granted Croatia a loan in 1995 to modernize medical equipment.
In Croatia, the state pays for healthcare; private insurance is virtually nonexistent. As in some other countries in Central and Eastern Europe, such as Poland, health insurance is compulsory.
In theory, companies deduct 20.6% of every employee's salary for social security and health insurance. The state health fund receives 9% of that amount, as well as 9% of a 21% employer payroll tax. In reality, many companies in Croatia are struggling to stay afloat in a postwar economy and don't contribute to the health fund.
"There is not enough money for healthcare," says Matko Marusic, a physiologist and researcher who is also editor-in-chief of the Croatian Medical Journal, a peer-reviewed health journal. "The state fund is always short of money. Insurance money that is supposed to be collected is not being collected," he says. "The state closes its eyes."
Minister of Health Zeljko Reiner, M.D., says he is not satisfied with the health system. "We have inherited a system that is totally run by the state, which we are transforming."
As part of that process, Croatia has already converted three hospitals that were designated for military brass and Communist Party leaders to general hospitals open to the public.
But privatization of hospitals in Croatia is slow, Reiner says, because the country is in transition and recovering from war. "Not many investors dared to invest," he says.
William Aaronson, a professor of health administration at Temple University, Philadelphia, has worked extensively in healthcare in Central and Eastern Europe. He says, except for physician services, privatization of healthcare is not widespread in Croatia.
"In most transition countries, privatization is very slow," Aaronson says. "Croatia's laws have allowed and encouraged the private practice of medicine, but not private hospitals. The primary reason has to do with the financing of healthcare and (the lack of funds) for private health insurance."
Privatization of hospitals depends heavily on patients' ability to pay for expensive hospital care. However, only 3% to 5% of patients at Magdalena can afford the services there, says Ugljen.
"Ninety-five percent of the population cannot pay what is being asked at Magdalena," Marusic says.
And this is despite a steadily improving economy. "Everybody complains," Marusic quickly points out. "But the situation is better than what most say."
Although low by U.S. standards, salaries in Croatia have increased for the past three years; the average net monthly wage in 1998 was $388. The country has an inflation rate of 5.4%. However, it was about 3% to 4% before a value-added tax was introduced in 1998. The gross domestic product has been increasing in the past several years and reached $4,757 per capita in 1998. The chief concern is an unemployment rate of about 19%.
Although telecommunications have been privatized and some utilities are expected to be privatized by year-end, Reiner says that for hospitals and health insurance to be privatized, Croatia would have to reform health system financing. "We would like multisource financing of health insurance," he says.
Though opening a private hospital has certain advantages, Marusic maintains that healthcare reform in Croatia should begin with the insurance system.
He compares Magdalena Hospital with a diamond in the rough. "Magdalena is a great idea," but it is being muddied by the current state of healthcare, which incorporates a capitalistic system into remnants of communism, Marusic says.
"Magdalena is mixing capitalism with communism," and that won't work, he says.
Additional health insurance should open new possibilities for healthcare in Croatia, Reiner says.
Aaronson agrees. "Real private insurance requires that consumers or employers have the opportunity to opt out of state-mandated health insurance."
"I sincerely hope there will be more private healthcare," Reiner says. "It is the driving force to stimulate people to work better, be more efficient and serve patients better."