Healthcare financing, rebuilt
Ukraine changed how it pays for healthcare, from funding buildings to funding treatments. That single change altered the behaviour of the entire system.
The inherited health system financed institutions: a hospital received money based on its number of beds and staff, regardless of how many patients it treated or how well.
Why that design fails
Because it rewards capacity rather than care. A hospital with empty beds is funded identically to a busy one, so there is no reason to attract patients, improve quality or close a facility that nobody uses.
It also produces a system with far more beds than a country needs and far less equipment, because beds attract funding and equipment does not.
What replaced it
A national purchasing agency that contracts with providers and pays for services delivered. Primary care is paid per patient registered, which is why the declaration a citizen signs with a family doctor matters: it moves money.
Specialist and hospital care is paid per treatment under defined packages, with published tariffs.
What changed as a result
Hospitals began competing for patients, which they had never had to do. Facilities with no patients lost income, which forced consolidation that decades of policy documents had failed to produce.
And patients acquired a choice they had not had, since the money follows them.
What remains difficult
Tariffs that do not cover actual cost in some areas. Rural facilities where competition cannot work because there is no alternative provider. And a workforce whose salaries remain low relative to the region, which is now the binding constraint on everything else.
The general lesson
How a system is paid determines how it behaves, more reliably than any instruction. Change the payment and the behaviour follows; leave the payment and no amount of policy changes anything.
Moving from funding a building to funding a treatment changes the unit of payment — and when the unit of payment changes, behaviour changes. I have seen the same in supply: pay per operating hour rather than per machine and maintenance improves by itself. The general lesson is that you produce whatever you measure and pay for.
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