Банкеръ Weekly


Hospitals Mired in Credit

Paradoxically, More Hospitals Settle old Debts Piling Up New Ones

Debts of the state and municipal hospitals have long exceeded 400 million levs, and the worst is that more than 150 million levs of them are overdue receivables. That is how many of the clinics are forced to transfer each lev they receive (with a delay) from the Health Insurance Fund to the accounts of their many creditors. What is earned from the clinical pathways barely covers staff salaries and maintenance, while unpaid bills for medicines, equipment, electricity, water and heating are swelling more and more. Although the state owns a controlling stake in a large part of the key to the health system clinics, it has no right to repay their debts, or to subsidize them further as commercial companies. It is no secret that hospitals are sinking, because the vast majority of clinical pathways are underfunded, and the more serious and urgent cases assume even greater debts. Meanwhile, pharmaceutical companies and distributors are waiting for money for up to 60 days and are not very much interested, that somebody may be financially troubled and clinics do not have money to pay wages and food, or to work on recovery plans and sooner or later they will pay back.

Much of creditors are uncompromising and impose constraints on the accounts of health facilities, stop supplies to them and put them in a positions to be unable to continue their activities. Facing a situation with no way out, more hospitals solve their financial problems accumulating new debts. For example, hospital Mezdra Ltd. announced a tender for selecting a financial institution to provide a working capital loan of up to 200,000 levs for the needs of its operations. The background of the case is very indicative. In February 2013 a contract was signed between hospital Mezdra and Sopharma Trading JSC for supply of medicines, infusion solutions and psychotropic drugs totaling 247,621 levs. However, the hospital had old debts to the same supplier of over 305,000 levs, of which it had paid almost 170,000 levs without interest. In March 2014 a second agreement was signed between the two entities for a period of 13 months, which deferred obligation of 260,000 levs. By late October 2014 the hospital regularly repaid its the contribution of 21,000 levs a month, although this was almost impossible for it. The problem is that in 2014 the Health Insurance Fund pays to the hospital only 65-70% of what it actually spent, which is its monthly limit, and the money for its over-limit activity came with two or three months later. Meanwhile, the hospital covered its liabilities to CEZ, for plumbing, to Petrol and West Overgas, pays wages and benefits and remained without working capital to buy medications. On October 14, Sopharma Trading stopped supplying medications, although there is a contract concluded following a procedure of the Public Procurement Act and in spite of that Mezdra hospital properly complied with the agreement for payment in installments. The hospital can sign a long term contract with another company only if Sopharma Trading gives up and the hospital is lacking money in cash. Representatives of the pharmaceutical company said they would continue only if they get at least half of the outstanding debts to them totaling 306,000 levs. Before the threat to stop operating, the medical board of the hospital decided to take the credit. It invited to the negotiated procedure without notice the local branches of Cibank, Societe Generale Express, Unicredit Bulbank, Postbank and FIBANK, and the quick money it seeks comes to 200,000 levs.
In the last year five more hospitals have sought a credit solution to their financial problems. These are the Hospital Dr. D. Pavlovic in Svishtov, University Hospital Rockefeller in Petrich, Hospital Belene, the Specialized Hospital Dr. Treyman in Veliko Tarnovo and Hospital Levski. Svishtov hospital has taken a loan from the Municipal Bank amounting to 500,000 levs for payment with creditors and for 60 months it must return just over 579,000 levs. Petrich Rockefeller has requested a five-year loan for up to 600,000 levs to refinance its loans, and has put as collateral bank accounts, a mortgage on property and a guarantee from the local municipality. To the offer only responded First Investment Bank, which provided a credit of 170,000 levs without VAT.
  Hospital Belene placed an order for a loan of 400,000 levs, saying it will repay it by its own means and an annual subsidy from the principal of the house - the local municipality. A loan of 124,573 levs was given to the hospital by a Pleven branch of Investbank.


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