Spain Crisis Forces $7B in Cuts on Hospitals

For some cancer patients, Spain’s debt crisis means living on borrowed medicine. Virgen de la Luz hospital in the rural province of Cuenca turned away two women with lung and breast cancer in May after Roche Holding AG (ROG) stopped supplying tumor fighter Herceptin, according to documents obtained by Bloomberg News. The women got the drug after a 24-hour wait thanks to a hastily-brokered deal to borrow it from another clinic. To rescue Cuenca and the rest of Spain’s health system, which sank into debt alongside the regional governments that operate it, the state arranged an infusion of guaranteed loans and demanded 7 billion euros ($8.8 billion) in cost cuts. Yet doctors and patients warn the prescription for cutbacks may cause more pain than the budgetary malaise it was meant to cure. “The situation is not going to change,” said Jose Andres Guijarro, a gynecologist at Virgen de la Luz who helped found a citizens group protesting cuts at the hospital. “If we didn’t have money to pay before, we won’t have it now.” Patients and hospitals across Spain are wrestling with the same dilemma. Even as old debts get paid off -- the country’s 17 regions ran up some 12 billion euros in unpaid health bills through last year -- new ones are piling up. As a result, the need to break the cycle with spending cuts threatens to redefine the very notion of Europe’s tradition of socialized medicine: how best to treat patients, not how to make ends meet. “As long as it is state-funded, the health system will always run a deficit,” said Miguel Llorens, financial director for Hospital Provincial de Castellon. Roche stopped taking his IOUs as well, and he says he pays the Swiss drug giant in cash. Solar Panels Tangled in a debt crisis that left him requesting a 100 billion-euro European Union bailout to help banks reeling from a real-estate collapse in its fifth year, Prime Minister Mariano Rajoy sliced 7 billion euros out of the health system as part of about 45 billion euros of cost cuts and tax hikes. The spending cuts come in exchange for 35 billion euros in syndicated bank loans the central government arranged on behalf of town halls and regions, which pay for health care. The hope is that the bailout will help get the flow of drugs moving again. Roche says its Spanish creditors paid their debts last week. That put medicine distribution “back to normal throughout the country,” including in Castellon and Cuenca, the Basel, Switzerland-based company said in an e-mailed statement. Still, Llorens says things aren’t back to normal on the ground. When a patient needs Herceptin or another Roche medicine, he sends the company a pre-order. Roche bills him. Only after the bank transfer clears does he get the product. One Solution The square-bearded former nurse says he expects the credit agreement with Roche to resume in September. That will only solve one of his many worries, though: he must find about 3 million euros of cost cuts this year to meet his 85 million-euro budget. So he has mounted solar panels on the roof to save on electricity, endorsed salary reductions -- including a 20 percent pay cut for himself -- and left retired doctors’ positions open to trim his payroll. Llorens, who started working at Castellon as a nurse when he was 18, says while hospitals need more funds, they must learn to become more efficient. Before the loans, the average hospital was paying bills almost a year and a half late, industry group Farmaindustria estimates. The spending cuts are the only way forward, or else unpaid bills will start to pile up again, according to Gloria Rodriguez, the regional government liaison for the Spanish Federation of Healthcare Technology Companies. The debt crisis helped put one in 10 members of her organization out of business, she said in an interview. Spain’s regions “were spending happily,” according to Rodriguez. “Now they have seen they can’t finance it.” Band-Aid Rajoy’s measures will mean longer hours and less pay for doctors and nurses, and higher costs for patients accustomed to spending little to nothing to visit a physician. It’s fair to call the regional bailout a band-aid for bigger structural wounds in the health system, said Kaushal Shah, an analyst for Business Monitor International in London. “The situation is far from over,” she said. Despite its debt, Spain spent less per capita on health in 2010 than France, Italy, Germany, or the U.K., according to the World Health Organization. The budget demands may erode the fundamentals of the system, said Carmen Torralba, mayor of Sotorribas, a 900-resident cluster of villages outside the city of Cuenca.

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