The behavior of non-financial debt of EPE Hospitals

The minimums reached in the debt stock level did not result from a reduction in its accumulation flow over the years, but from annual regularizations that do not sustainably solve the structural problem of hospital indebtedness.

“The historic lows reached in 2019 were due to an extraordinarily significant capital injection at the end of this year, which is not the result of a structural downward trend in debt accumulation.”

This article presents the main conclusions of the research project Analysis of the behavior of non-financial debt of EPE Hospitals, developed by a group of students from the Nova Economics Club (NEC), in partnership with the Public Policy Institute and under the supervision of Dr. Joana Andrade Vicente. The project's motivation was to analyze the reality behind the historical minimums of this variable, announced by the government at the end of 2019.

The element under study corresponds to payments with a delay of more than 90 days from hospitals in the state's business sector to their suppliers, among which the pharmaceutical industry stands out. These hospitals emerged in 2005 (resulting from the transformation of SA hospitals, created in 2002), as a result of the need for greater efficiency in the use of public resources and financial sustainability of the system, thus endowing them with business management and a greater degree autonomy in relation to SPA hospitals, in line with the principles of New Public Management.

Data from the General Budget Directorate (which only made them available in 2011 were used, so it was not possible to analyze the period between 2005 and 2011). After analyzing them, our group concluded that, following the signing of the Memorandum of Understanding that year, which required the settlement of all arrears and the prevention of their systematic appearance, this debt decreased significantly until the end of 2015, partly due to progressively less growth over the year, but also due to extraordinary injections of capital from the State Budget at the end of each of those years.

However, as of 2016, the pace of non-financial debt accumulation by these entities began to increase, leading to adjustments being made almost exclusively at the expense of extraordinary regularizations. In this way, the historic lows reached at the end of 2019 were preceded by months of debt accumulation at an increasing pace, reflecting an old structural control problem.

This situation is explained by the combination of several factors. Firstly, there is the problem of under budgeting for Health. Secondly, the weakness and insufficient incentives for good hospital management inherent in these hospitals are noted. The extraordinary regularizations themselves accentuate this problem, because they create a situation of inevitable moral risk on the part of the hospital management, which has incentives for a greater accumulation of debt after some announcement of capital injection (which is verifiable in 2019). In this way, possible solutions could involve a greater degree of hospital autonomy, accompanied by more realistic budgets and random audits, which prevent moral hazard problems.

In conclusion, the minimums reached in the debt stock level did not result from a reduction in its accumulation flow over the years, but from annual regularizations that do not sustainably resolve the structural problem of hospital indebtedness.

The exposed article results from the partnership between Jornal Económico and Nova Economics Club, the group of students of Economics of the Nova School of Business and Economics.

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