Management of the Health Insurance Company of the Ministry of the Interior: millions of CZK spent on marketing, gifts, and consultants
PRESS RELEASE on Audit No. 14/33 – January 4, 2016
The Supreme Audit Office (SAO) scrutinized funds collected in accordance with law in favour of the Health Insurance Company of the Ministry of the Interior of the Czech Republic within the period from 2012 to 2014. The Health Insurance Company is the second largest in the Czech Republic with more than 1.2 million insured persons. In 2004, the Health Insurance Company received insurance payments that overreached CZK 26,400 million.
In 2014, the Health Insurance Company spent CZK 26,100 million for provided health care procedures. There are some 26,000 contracted health care providers. In 82 % cases, the decree on health care reimbursement was violated when contractual supplements were concluded, which allowed reimbursements of different costs of the same health care services. Auditors scrutinized costs of similar special health care procedures, including joint replacements and artificial pacemaker implantations. Cost differences sometimes reached as much as 46 %. For example, the implantation of a specific pacemaker cost CZK 200,000 with one health care provider and CZK 106,000 with another provider. Costs were influenced by individual arrangements with representatives of particular health care providers. Different costs of health care procedures were also paid to thermal cure providers.
The SAO also scrutinized the consumption and absorption of the Health Insurance Company’ funds, which are created from insurance payments and should mainly cover health care expenses. From 2009 to 2013, the Health Insurance Company used nearly CZK 13 million from the funds to implement two projects, which did not aim at providing health care services to insurance payees at all. The amount was used to cover costs of administrative tasks instead of health care.
Auditors also aimed at costs of marketing, promotional gifts, and external consultants. In 2013, costs of marketing services made the third biggest expenditure group – after wages and social security contributions – and amounted to CZK 47 million.
Act on Public Contracts was violated when the Health Insurance Company selected suppliers to recruit newly insured persons. No procurement procedures stipulated in the Act were used before contracts with the suppliers were concluded. In 2013, an above-the-threshold public contract worth approx. CZK 17 million (VAT not included) was divided into smaller sub-contracts and ordered directly from selected suppliers. In 2013, recruitments of newly insured persons cost nearly CZK 21 million (VAT not included), which makes CZK 999 for one newly insured person. In 2014, the Health Insurance Company ceased these recruitments at the request of the Minister of Health. The law has forbidden recruitments of new insurance payers through a third party since September 2015.
Costs of promotional gifts amounted to CZK 16.7 million in the period from 2012 to 2014. For example, the Health Insurance Company purchased gift sets worth from CZK 600 to CZK 1,600, bags for CZK 594, sleeping bags for CZK 499, web-cameras for CZK 426, and sets of two wine bottles for CZK 420 each.
Auditors also scrutinized costs of external consultancy services and found errors as well. For example, a total amount of CZK 867,000 was paid to a consultant of the CEO of technical security and asset management in 2012 and 2013, but the contract included tasks, which staff members of the Health Insurance Company could have done themselves.
The operational funds were also used for wages and bonuses. In 2013, the average wages of employees overreached CZK 32,000, while the average wages of top managers (bonuses included) were over CZK 285,000 and over CZK 315,000 in 2014.
When scrutinizing the prevention funds, which are used for thermal cure expenses, auditors revealed that the fund also included so called “general director’s fund“, which was only drawn under the director’s requests. Some insured persons were favoured, for example, when their thermal cures were covered in spite binding payment conditions were not met. At least CZK 2.4 million were drawn from the fund in the period from 2012 to 2014, for example to cover costs of preventive thermal cure procedures (over CZK 1 million) for 44 insured persons who did not belong to a specific category of clients for whom preventive programmes were approved. Among those favoured persons were members of the Management Board and the Supervisory Board.
The SAO has also warned that there were systemic risks in the area of health care services. For example, insurance plans are approved after too long periods, conditions and cost limits in case of long-term intensive treatments are not set, the existing per-capita payments to general practitioners do not follow the act on public health insurance, and the current legal regulations do not motivate the suppliers of medical devices to reduce costs.
The SAO concluded that authorities, which decided upon management of the Health Insurance Company and supervised it, failed to carry out their tasks properly.
Communication Department
Supreme Audit Office