International Companies to Assume Management in State-owned Hospitals

On July 1 Georgian Health Minister Aleksandre Kvitashvili updated the parliament’s committee for healthcare and social issues on the current situation in the hospital sector and pointed out international companies will be involved in management of state-owned medical assets. The Minister specified the accent will be made on the hospitals tender-winner insurance companies are expected to rehabilitate and construct as part of the state program.

"State-owned medical assets may be handed over to international companies in management. Negotiations are underway with several international companies", Kvitashvili noted and added a pilot program will go to Academician O. Ghudushauri National Medical Center.

Kvitashvili unveiled negotiations are underway on handing over the management of Ghudushauri National Medical Center to one of the British investment groups.
Zaza Sinauridze, director for Ghudushauri National Medical Center, says the potential investor has already completed the clinic audit.

The Georgian government owns a 100 percent stake in Ghudushauri national medical center.
At the meeting Kvitashvili also stressed the role of the insurance industry as a key player in the hospital sector development project. The Health Minister assured the committee members the involvement of insurance companies will guarantee drawing required investments to the sector.

The Health Minister specified the new plan calls for constructing forty six new hospitals in regions of Georgia.

“Functional projects have been already approved, while technical-engineering data will be approved by the end of this month, after which insurance companies will launch construction works”, Kvitashvili noted.

The Health Minister updated the committee on the ongoing and planned rehabilitation projects in the hospital sector. Namely, three district hospitals are being rehabilitated in the Samtskhe-Javakheti Region with the financial support of the US Agency for International Development (USAID), while the Ambrolauri District hospital in the Racha Region is being reconstructed with the financial support of the World Bank (WB). Kvitashvili said the government has already applied to USAID for disbursing additional funds for rehabilitating other district hospitals too.

The Health Minister continued G. Zhvania Pediatric Clinic of State Medical University is being also rehabilitated and a full rehabilitation project will be carried out in the Railway hospital too. Negotiations are underway with the Ivane Djavakhishvili Tbilisi State University administration on organizing a clinic on basis of the university clinic.

At the meeting opposition MP Magda Anikashvili from the Christian-Democrat faction noted the accumulation of the insurance and hospital sectors into one center would generate monopolies and restrict the consumer rights for free choice.

In response Kvitashvili assured the opposition MP the move would not deteriorate the medical service quality. However, the insurance premium price may increase and this should be considered as an only expected problem, Kvitashvili concluded.

As reported, in spring 2010 the Georgian government announced repeated tender as part of the hospital sector development program and nine insurance companies took part in the tender, namely, Alpha, Imedi L, GPI Holding, Archimedes Global Georgia, Aldagi BCI, Vesti, IC Group, Irao and Cartu, as well we the fellowship of Samtskhe 2010.

The winner companies will provide insurance services to 888 392 beneficiaries all over Georgia and construct total of 46 hospitals with 1130 beds.
Kvitashvili also updated the committee members the Georgian government will complete negotiations with a new owner of the Tbilisi Republican Hospital this week to conclude a purchase agreement.

Kvitashvili divulged InterHealthCanada company has won the tender announced by the Ministry of Economy and Steady Development. Under the deal with the Georgian government, the Canadian company must invest 30 million USD in the Republican Hospital development. Representatives of InterHealthCanada are expected to visit Tbilisi this week and meet with officials of various state offices.

In the meantime, Aihop Israeli company has left the hospital sector development general plan. However, the Georgian government does not rule out to resume cooperation with Aihop if the company meets the requirements.

The Georgian government has annulled the obligations Aihop had assumed as part of the hospital sector development plan and handed them over to insurance companies due to the 2010 spring tender results.

"If Aihop manages to draw required funds and fits to make investments in the hospital sector of Georgia, the government will offer the company concrete projects. However, the company cannot remain in the project, because we want to prevent the two-year experience with Block-Georgia", Kvitashvili noted.

Aihop assumed the obligations as part of the hospital sector development program in 2008. The Israeli company was to organize a cluster of medical assets in regions of Georgia with 1100 beds.

As to Block-Georgia, Georgian-Czech company, the Georgian government has, on the one hand, deprived the company of all hospitals and obliged to construct ten new clinics in regions and, on the other hand, imposed a fine of 4 million GEL because of unfulfilled liabilities.

The Block-Georgia office for public relations says the company has already signed agreements with the Ministry of Economy and Steady Development on property transmission and assumption of new obligations.

As reported, Block-Georgia was to construct several hospitals with 1700 beds as part of the 100 new hospitals project, while the new contract agreement obliges the company to construct clinics with 545 beds in Kutaisi and Tskaltubo, the Imereti Region, and Zugdidi, the Samegrelo Region.

Block-Georgia says negotiations are underway with TBC Bank on opening a credit line of 8 million USD under the guarantee of the US Agency for International Development (USAID).

Block-Georgia says the company has returned the assets, in which the company has made investments, to escape the full-scale penalty sanction.

According to the decision of the Ministry of Economy and Steady Development of Georgia, Block-Georgia has been deprived of the following assets in Tbilisi: 4th Clinic, 5th Maternity House, 3rd Children Clinic, Iv. Javakhishvili Tbilisi State University Clinic, K. Eristavi Experimental and Clinic Surgery National Center and K. Tsinamdzgvrishvili Cardiology Scientific-Research Institute.

Moreover, the Government has returned the hospitals, which are located in the Dusheti, Sagarejo, Gardabani, Khoni Districts, as well as two hospitals in Kareli, the Shida Kartli Region, A. Dzotsenidze Regional Clinic in the Imereti Region, as well as medical assets in the Khoni District and the Autonomous Republic of Achara.
As reported, Block-Georgia was handed over several tens of hospitals in 2007. Under the agreement with the Georgian government, the construction of hospitals was to end in 2011, but the company failed to fulfill the liabilities because of the global economic crisis.

Unfortunately, the Georgian-Czech company seems to have to pay a fine, that is, the difference between the investment amount the company has made in clinics and the legislation-provided penalty amount. According to preliminary estimations, the difference makes up 4 million USD.

"At this stage audit is underway in all clinics, after which the fine amount the company has to pay will be computed, that is the audit aims at calculating the size of investments the company has made in the clinics, so as the company pay the difference between the investment amount and the total amount of the fine", Aleksandre Kvitashvili told the parliament’s health committee members.
Kvitashvili specified the Ministry has determined the fine amount on the ground of preliminary audit and the losses the company exclusion from the program has inflicted to the state budget. However, an ultimate decision on the penalty sanctions will be made following a detailed audit in the clinics.

Kvitashvili said the amount of investments the company has already made in the hospital sector development will be computed and the equipment, which have been installed in the clinics, will remain in the state ownership.