State institutions are obligated to define how much competition is good to be encouraged and howmuch cooperation should be encouraged among insurers and healthcare institutions

2. Current trends in healthcareThere are several very prominent trends that affect healthcare systems on national and global levels. The firstone is reorganization of health care system, in a way which provides reducing of resources for itsadministration, encouraging the provision of high quality services at the least possible cost, expansion of thequantity of provided services and collection and distribution of funds (Murray &Frenk, 2001; Johnston, 2004).In case of nationalized health systems, the government takes care of these issues, while in modernizedsystems, these tasks are delegated to healthcare institutions and insurance funds that operate at loweradministrative costs and negotiate prices in a way consumers demand (Kotzian, 2008). So, reorganizationof healthcare systems includes five imperatives:better performance through mergers, acquisitions and newpartnerships; maintenance of cost competitiveness based on ability to provide value; demonstrated qualityas part of the value challenge, an exceptional service as a key aspect of competitive advantage; realintegration of all the subjects or parts of a system, not just their cooperation, etc. (Zuckerman, 2014). The second trend is the expansion of private healthcare institutions, which is notable on a global level, aswell as in Serbia. In Serbia, there is currently 1,553 registered private health institutions (not includingpharmacies and dental offices), out of which 15 are general hospitals, 52 sare pecialized hospitals, 14 arehealth centers and 123 are polyclinics. Private health care institutions in Serbia are well-equipped; they have35 scanners, 11 magnets, one device for radiotherapy, 700-800 ultrasounds, 30 mammography devices and50 X-rays. They employ about 3,400 doctors of various specialties (Institute of Public Health of Serbia “DrMilan Jovanović Batut“,2013). The number of reported visits to private health care institutions in Belgradewas 479 583 in 2012. Patients and corporate clients of private healthcare institutions paid approximately 95million RSD during the same year, which amounts to nearly 200 Euros per capita that Serbian citizens paidfor health services in the private sector (Institute of Public Health of Serbia “Dr Milan Jovanović Batut“, 2012). The next important trend is a movement toward an integrated, patient-focused health approach. Sinceconsumers pay much attention to a qualitative dimension of healthcare services, they decide to either usepublic provider services, which are tax financed but which maintain a fixed quality, or a range of differentprivate provider services of high quality. Their decisions depend not solely on variables such as socio-demographic characteristics, income and health situation, but also on the quality of treatments that thepublic sector provides. Some research results point out that there is a positive correlation between a lowerpublic service quality (longer waiting times, above all) and a higher likability of turning to services of theprivate sector (Jofre-Bonet, 2000). This is especially the case in Serbia, where waiting lists for certain healthtreatments are extremely long. For example, around 10,000 patients are waiting for diagnostic methods,about 14,000 patients for orthopedic surgery, while the number of cardiac patients who require surgery isaround 8,000 (Serbian Republic Health Insurance, 2013). By considering these data, as well as the tendencyof continuous growth in the number of patients, the significance of private health care institutions is morethan evident for the whole state, in addition to the importance of profit they bring to their owners.Changes also occur in insurance companies and insurance services they offer. Globally observed, it is notedthat the expansion of new insurance schemes will help reducing the health expenditures of individuals andhouseholds and enlarging the number of insured, as the lack of health insurance is directly associated witha limited access to medical services and worse health conditions (Smith, 2008; Borghi et al., 2008; Cannoodt,2012). Ten insurance companies currently operate on the territory of the Republic of Serbia (among themsome are owned by the insurance companies based abroad). Table 1 provides an overview of the marketshare of insurance companies by type of voluntary health insurance in 2013. Although Serbia has a longhistory of insurance business, the first private health insurance appeared in the 90s of the last century. Thereason for this is primarily in the socio-political system that functioned in the former Yugoslavia, as well asin the organization of health sector during that period. Since then, voluntary health insurance sector in Serbiarecords a steady growth every year and the current situation can be seen in Table 2. It is estimated that, inthe years to come, voluntary health insurance in Serbia will grow by 5% annually (about 30,000 premiums)(Delta Generali, 2012). Bearing in mind that the European average is 24% of new users of voluntary healthinsurance every year (Delta Generali, 2012), it can be concluded that many years will pass until Serbiareaches the European level.422015/76Management
Table 1: Market share of insurance companies in Serbia(NBS, 2013).Table 2: Overview of insurance according to the types of voluntary health insurance in 2013 (NBS, 2013)On the basis of presented data, it can be concluded that only 6% of the Serbian population uses some formof voluntary health insurance, while a great portion of it goes to travel health insurance, which is mandatoryfor citizens when traveling abroad.The main reasons why health insurance has not grown in the past 20years are:• The low level of life standard;• Lack of sufficient tax incentives for voluntary health insurance premiums;• Lack of education of the population on the functioning of voluntary health insurance and insufficientpromotion of their services;• A small number of voluntary health insurance packages;• Lack of correlation between mandatory and voluntary forms of health insurance and public andprivate health institutions;• Unfair competition of private health care institutions and other institutions.Given the importance of achieving a larger insurance coverage as a part of health improvement reform, it isnecessary to monitor expenditures on medical care services and the impact of voluntary insurance onconsumers’ protection (Barber & Yao, 2011). While public health insurance should cover medically necessaryhealth services, other types of insurance coverage are meant to be offered by private companies (Ward &Johnson, 2013). However, lower income of citizens and the lack of education in this area may prevent themfrom purchasing voluntary insurance premiums. In order to promote private insurance coverage, many statesdefined certain obligatory insurance types, “such as employment-connected health insurance, whichobligate employers to insure their employees” (Battistella& Burchfield, 2000; Monheit&Vistnes, 2008; Guyet al., 2012; Karuppan, 2014). Despite the fact that private and public insurance are often observed asextremes, they, in fact, overlap as a result of government intervention in the insurance market. So far, privateinsurance is dominant in developed countries with organized regulatory schemes. Besides the incentive for43Management2015/76Insurance companies Total premium (in 000 RSD) Market share AMS 28068 2.59% AS 750 0.07% AXA 389 0.04% DDOR 164033 15.14% Delta Generali 562949 51.97% Dunav 122314 11.29% Globos 946 0.09% Takovo 2355 0.22% UNIQA 158336 14.62% Wiener 43050 3.97% TOTAL 1083190 100 Type of voluntary health insurance Number of companies Number of the insured Total premium (in 000 RSD) Parallel health insurance 1250 3151 10209 Supplemental health insurance 4189 621676 625136 Private health insurance 189 3289 82404 All other voluntary health insurance (combinations of travel insurance during staying abroad) types 13681 25116 365441 TOTAL 19309 653232 1083190
growth of private insurance market, such regulations and public intervention are necessary due to a numberof factors, including the need to regulate the operation of financial institutions in general, prevent marketfailures, preserve the health of citizens and timely address various health risks, etc. (Roberts, 2004).3. Relationship between insurance companies and private healthcare institutionsThere is a wide range of relationships between insurance companies and private healthcare institutions.The so-called hybrid health management organizations, the vertically integrated framework of fullcooperation, represent one extreme. These models of cooperation are operated through integration ofprivate health care and health insurance organizations (Vargas et al., 2010). In such systems, consumerand physician data are commonly collected in order to perform better and detect and eliminate certainproblems (Miller &Luft, 2002; Mohammed et al., 2014). The appearance of such cooperatives is a result ofmore sophisticated consumers’ requirements, consumers who are willing to change healthcare institutionsor insurance companies if dissatisfied with services they receive. This possibility of losing customers makeshealth organizations respond to consumers’ needs and preferences for better quality at reasonable costs(Thomson & Dixon, 2004; DiCenzo&Fronstin, 2008). Modern consumers are seeking information aboutvarious health insurance types and health care providers (Deloitte, 2008) in order to compare differentoptions and make affiliation decisions (Becker &Zweifel, 2008). In such cases, consumers choose certainorganizations based on their evaluation of various attributes of the offer, such as: package of services, highquality of medical services, efficiency of service provision and a waiting period to receive healthcare services,politeness of medical and non-medical staff, family coverage, access to specialists, right to choose a doctor,etc. (Amaya et al., 2014). Based on the critical assessment of information about the quality, price and patientsatisfaction, most consumers would, most probably, change the medical or insurance organization if notcompletely satisfied (de Jong et al.,2008; Lako et al., 2011). Fully integrated systems of healthcare institutionsand insurance companies can prevent losing of consumers, as services provided this way are synergized,highly efficient and professional. Insurance companies can sell insurance packages that cover medicalservices of a certain private medical provider, which make them take care of consumers and develop long-term relationships, based on their complete satisfaction with the performances of a hybrid system. But, such full cooperation is rare in practice, especially in developing countries. Insufficient development ofthe healthcare sector in Serbia has resulted in a weaker mutual cooperation of private health care institutionsand insurance companies, no matter those insurance companies are participating in the total income ofmedical institutions by up to 35% per year (MediGroup,2013). As a matter of fact, in their cooperation,insurance companies play a dominant role because they are able to, by their sole discretion, determinewhich health care institutions they want in their cooperation network. This dominant role allows them todictate the terms of cooperation, from financial (in addition to regular discounts they are allowed byhealthcare institutions, they often request permanent special prices, which is legally impermissible), to thecontractual clauses on the priority right when scheduling their policy holders, which is contrary to medicalethics. Despite these conditions, medical institutions agree to sign cooperation agreements, as they gainfinancial benefits from them, given a significant revenue they receive from the insured patients. In fact,cooperation with insurance companies is recognized as necessary especially in the initial period ofestablishing health institutions, because, without a necessary budget to invest in marketing activities, brandstrength of insurance companies is the one that provides clients. Later, with the development of healthcareinstitutions and their positioning in the market, this interdependence can move in favour of health careinstitutions, so that the quality of packages of insurance companies will depend on whether a particularmedical institution is in their joint network. Bearing in mind the tendency of grouping of health institutions inSerbia (the first private health platform “MediGroup” was formed during 2012 and 2013), it is expected thatthe position of private healthcare institutions will further improve, so the insurance companies must respecttheir demands more. In fact, some private institutions are already recognized for their quality (recognizedexperts, good equipment and excellent accommodation facilities), which is why insurance clients simplyinsist on medical services of a particular institution when purchasing insurance premiums. In addition,strengthening of the role of private health care institutions within an interdependent relationship withinsurance companies is also reflected in the fact that health care institutions are beginning to deal with theprovision of various services that are on the verge of services that are normally offered by insurancecompanies. By preparing for this situation and observing the practices of the Eastern European countries,which has resulted in several court proceedings between insurance companies and private health442015/76Management
45Management2015/76institutions, insurance companies in Serbia put pressure on the National Bank of Serbia to ban the sale ofservices that resemble insurance for all other institutions, except insurance companies. So far, they partlysucceeded in doing that, since the Insurance Act introduced in January 2015 made acting of all legal entitiesand their representatives punishable (in financial sense or imprisonment) in case they are proved to beengaged in selling services that resemble insurance. This especially concerns private medical institutions,as they have already begun to offer this kind of service packages to customers, so reactions of insurancecompanies and legal authorities are now expected. In a way, healthcare organizations and insurancecompanies may turn into competitors for consumers, as they sell the same service packages. Althoughsome consider that this competition may encourage good performance of both sides (Maarse et al., 2005;Chalkley&Khalil, 2005), the fact is that opportunistic behaviour by any side will increase the consummationof financial resources without improving the health of the population. The necessity to introduce some sortof control mechanisms in this area and monitor their expected effects on health care has been discussedin literature (Scott & Farrar, 2003; Marinoso&Jelovac, 2003).In order to avoid the situation of growing competition between private healthcare organizations andinsurance companies in Serbia, it is important to address the key policy questions that should regulate therelationship between those subjects. Those key questions are the following: • First, areas of acting of private healthcare institutions and insurance companies should be preciselydetermined and divided, so it would become clear which organization should be allowed to sellcertain service packages. By making a clear, legally imposed framework of business activities,there would be no overlapping in courses of action, and, consequently, no need for competitiverelations. • It is important to notice to what extent private insurances are being encouraged, as a way ofproviding greater choice to consumers, to cooperate with a number of various private healthcareinstitutions that are expected to compete with discounts they allow to insurers. This represents animportant issue in the Serbian market that should be regulated in order to enable fairer marketrelations. • State institutions are obligated to define how much competition is good to be encouraged and howmuch cooperation should be encouraged among insurers and healthcare institutions. • It is important to clearly determine how broadly private insurance coverage should be extended andhow important consumers’ choice and service customization are in order to meet the needs ofdifferent socio-economic groups. • Finally, a highly sensitive and important issue is setting the medical and insurance service prices,as well as stipulate the ways in which business subjects within the network should share financialand other business risks (Sekhri&Savedoff, 2006).Providing legal answers to these key policy questions would significantly improve practice in the Serbianmarket and provide solid basis for further deve

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