Healthcare is a fundamental component of any society, reflecting its core values and priorities. In Lithuania, the healthcare system is marked by a pronounced division between private and public hospitals. Lithuania’s healthcare services are divided into outpatient (ambulatory) and inpatient (stationary) services.
State-owned hospitals are financed through public funds from the National Health Insurance Fund (NHIF). Almost all of the services that they provide are reimbursed by the NHIF. They also have a monopoly on access to NHIF funds for inpatient services. Conversely, securing a reimbursement contract for inpatient services is nearly impossible for private hospitals. The latter predominantly depend on out-of-pocket and private insurance payments. Reimbursement agreements between the NHIF and private institutions are confined to outpatient services and involve much less funds compared to what is available for public entities. Despite that, public institutions are often slow in their operations, resulting in long waiting times for consultations and treatment. In contrast, private hospitals can offer more personalized and timely care for the patients, albeit at a higher cost.
Due to the unequal distribution of state funds, private hospitals are charging patients premium fees in addition to the reimbursed amount covered by the NHIF. Basically, it means that they are paid twice for the same service. According to the Law on the Healthcare System of the Republic of Lithuania, charging premiums is permitted only in exceptional cases where specific conditions are met. However, in practice, this has become more of a norm than an exception. Recent NHIF data shows that 79% of day surgery procedures performed in private hospitals which were covered by the NHIF were also supplemented by patients’ out-of-pocket payments. These payments come in the form of “comfort fees,” which are borderline legal and very difficult to regulate. Public hospitals, on the other hand, are not allowed to charge premium fees.
Such a situation made private hospitals grow revenue at a faster rate than their public counterparts, which then allowed them to lure doctors away from the public sector, offering larger salaries. Despite the NHIF being responsible for administering these payments, as an institution, it lacked the legal authority to prevent malpractice. For example, even in cases where the NHIF would terminate the reimbursement contract due to breach, no limitation existed on how soon a hospital could re-enter into a new contract with the NHIF. A hospital could apply for a new contract immediately after the termination of the previous one.
Another shortcoming was the fact that the NHIF could not mandate a clinic to compensate for budgetary breaches. Even if the NHIF requested to rectify the breach, the NHIF’s decision was not binding on the hospital, and the NHIF had to seek judicial recourse to recover the funds through court, allowing the hospital to continue providing healthcare services without adhering to the legal requirements of the reimbursement contract. Put simply, the NHIF lacked effective leverage to ensure the efficient use of its budget and to prevent patients from paying premiums. This situation prompted the Parliament to adopt amendments to the Laws on the Healthcare System of the Republic of Lithuania and the Healthcare Insurance. The amendments will come into effect on July 1, 2025.
The goal of the amendments was to give power to the NHIF to impose stricter sanctions on medical institutions that violate reimbursement contracts. For example, after the amendments come into effect, the NHIF will have a comprehensive list of criteria for terminating the reimbursement contract and suspending a hospital from accessing NHIF funds. In addition, private hospitals will find it more difficult to apply premium surcharges to payments because they will be at risk of breaching the reimbursement contract and having it terminated. On top of that, the NHIF will have more authority on recovering the misused funds much faster, by simply deducting payments from the hospital and performing write-offs without even going to court.
Although the amendments were adopted with the goal of protecting patients from paying twice for their healthcare, these changes will undoubtedly restrict the expansion of private medical institutions. However, it is unclear whether they will have any positive effects on making public hospitals more effective and fixing their short-staffing problem. Addressing this issue and leveling the playing field between public and private hospitals necessitates a multifaceted approach, including increased funding for both sectors, robust regulatory measures, and incentives for providing high-quality services.
By Darius Paulikas, Head of Life Sciences, Widen Legal Lithuania
This article was originally published in Issue 11.7 of the CEE Legal Matters Magazine. If you would like to receive a hard copy of the magazine, you can subscribe here.
