Academic journal article Iranian Journal of Public Health

The First Stages of Liberalization of Public Hospitals in Iran: Establishment of Autonomous Hospitals and the Barriers

Academic journal article Iranian Journal of Public Health

The First Stages of Liberalization of Public Hospitals in Iran: Establishment of Autonomous Hospitals and the Barriers

Article excerpt


Privatization of public services has been mentioned as a way to solve public sector's traditional problems such as inefficiency and lack of motives among its staff (1-3). Hence, preference of private over public units has been raised by many theories such as agency, property-right as well as public choice (4-7), although some have argued that public sector has been attacked by false assumptions (8). Some governments have used private sector's mechanisms in their public sector entities under the "new public management" (9). Health sector, as one of whom traditionally managed by governments, has also been subject to some extent of privatization as well. Even nations such as the UK with longest running public health systems has shown some interests in diluting the role of the central government at their health services especially across hospitals (10). Privatization or liberalization has resulted in improved efficiency in some nations such as the USA (11) and Germany (12).

Although privatization may resolve inefficiency problem in the public sector, evidence suggest that sudden and mass liberalization of public sector could lead to dysfunctional consequences, as caused a massive fiscal shock across the former Soviet nations after the dissolution (13). Moreover, some governments believe that privatization of health sector would mean as shirking their duty of saving and improving public health stated and supported through 1978 Alma-Ata and 2004 Mumbai Declarations (14). Based on such evidence and believes some models especially one developed by Harding and Preker (15), suggest that liberalization of hospitals could be considered as a spectrum, with some intermediate steps (Fig. 1). Based on this model, at the first stage of privatization public facilities would be acknowledged as autonomous units, distinguished from the budgetary units by having greater freedom at financial management, recruitment and promotion of staff.

In Iran, the economy has been mainly owned and administered by the public sector. The privatization efforts were taken more seriously after 2003, when the government was allowed to privatize or decentralize of 80 percent of the state assets according to the Article 44 of the Iranian Constitution. Based on such a general policy, the Ministry of Health and Medical Education (MOHME) gradually started moving toward liberalization of public university owned hospitals in 2006 (encompassing about two-third of all 900 hospitals in Iran), with granting autonomy to 18 hospitals. Then MOHME asked all medical universities - which act on behalf of the MOHME in each province and are responsible for delivering health care, academic education at medical sciences and monitoring public and private healthcare organizations - to announce at least one public hospital from their catchment area as autonomous, delegating them the appropriate management and autonomy in 2009. MOHME stated the goals of the reform as (i) continuous quality improvement; (ii) productivity improvement; (iii) acceleration of health services delivery and (iv) increase of patient satisfaction with services across hospitals (16).

In parallel, the MOHME added another incentive for hospitals switched into autonomous with increasing their annual budget compared to the regular public hospitals. This extra budget was committed by the MOHME and two main basic insurance organizations in Iran, Social Security Insurance Organization (SSIO) and Medical Services Insurance Organization (MSIO). The insurance organizations committed to pay a double bill to autonomous hospitals. In addition, the MOHME committed to increase the budget from 1.2 times of the bill to 1.6. Hence, altogether the budget would increase by about 64 percent for converted autonomous hospitals while patients would pay only as equal as regular public hospital charges.

In response to MOHME's order, the Iranian medical universities all over the country announced 36 teaching hospitals to undergo the reform and convert into the "board of trustees-operated" or autonomous entities, which increased the total number of the autonomous hospitals to 54. …

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