Rich clinic, poor clinic: looking for efficiency, public hospitals in Chile go head-to-head with private providers. (Healthcare).

Only a few years ago, the wine-growing areas of Puente Alto were as country as country gets, an Andean hamlet whose primary landmark is a high bridge over a narrow stream prone to floods from melting snow. The Dr. Sotero del Rio hospital, a five-story Spanish colonial structure, slightly crumbling from wear-and-tear, was originally built as a sanitarium for this once-rural community.

Since then, the surrounding area has exploded with growth, turning Puente Alto into a sprawling lower-class suburb of the capital Santiago, replete with busy sidewalks, mass transit and mini-traffic jams in the old town square. The overworked public hospital is now the main healthcare provider for 2 million people. The hospital also manages two local walk-in clinics and a second hospital in neighboring suburb San Ramon.

Far across the city in the leafy upper-income neighborhoods of Vitacura and Las Condes, wide sidewalks, five-tiered fountains and a new wing in progress frame the entrance to prestigious private hospital Clinica Alemana. Founded in 1905 by Chilean descendants of German immigrants, Alemana and smaller hospitals like it in the wealthier areas of urban Santiago represent what works in healthcare around the world--money, and plenty of it.

And that knotty problem--how to get better care for millions of Chileans in a country that, unlike many of its neighbors, has both the technology and the money to do it right--is driving decision-making downward, from the offices of government bureaucrats to the doctors. A new government health reform plan ambitiously alms to shift the balance in medicine back to prevention and push private healthcare providers to absorb more of the population. At the same time, private hospitals and insurers are trying to reach out, eager for the growth more clients and their pesos promise.

Alfonso Diaz Hernandez, general surgeon and medical director at Sotero del Rio, says he likes the reform idea. He expects it will give him even more frontline decision-making power "I have had to make my own decisions for a long time now, ones that often go against the grain of the Health Ministry," Diaz says.

Diaz has learned that people are more effective if given a specific task to complete in a set time period, rather than tying them to a punch-the-clock system. As a result, he says, he has been re-training doctors in the walk-in clinics nearby to do more simple surgery and diagnostic exams. That leaves the larger Sotero del Rio hospital to concentrate on more complicated--and deadly--maladies.

For every five surgeries performed at the clinics, the hospital saves approximately US$74,000, says Diaz. In turn, patients who suffer from the most common and the most life-threatening diseases, such as heart tremors, liver cancer, cervix and uterine cancer, are registered as quickly as possible in the hospital.

Diaz is like a lot of doctors in Latin America. On average, health spending as a percentage of gross domestic product is more than 7%, compared to just over 6% in the late 1980s. Public healthcare is taking on increased responsibility to meet these demands, representing now half of all health spending, compared to 45% before. The increased government role is taxing the system as never before. Governments are responding by delegating more authority to doctors, a proposition Chile is formalizing in the hope that it will make for better care and, ultimately, better use of scarce resources.

Squeeze play. Two-thirds of Chileans--10 million people--now rely on the strained public health system. A private health system introduced during the military regime has succeeded in part, absorbing upper-income workers easily. But the insurers and private clinics say they would like to see more of the public system privatized. To that end, the government's reform establishes a "basic plan" that allows members to see a primary physician, who will make recommendations for specialist care, along the lines of a managed-care model common in the United States.

Part of the problem for big public hospitals in Latin America, though, has been population growth, and a tendency to wait to seek medical care rather than make regular visits to a doctor. Housekeeper Delfina Friant paid for her daughter Pamela's hernia exams in cash at a private hospital, then sent her to a public hospital emergency room for treatment. "They had given us a date for her operation two months from the accident, [but] she was in too much pain", says Friant, 62. Private surgery costs on average three times that of a public hospital.

Sotero del Rio also has had to absorb the population shock over the last twenty years, and now performs basic exams such as checking insulin levels for diabetics and doing x-rays because local medical centers that were supposed to handle the load are themselves backed up with walk-ins. Because of the confusion, it takes on average 15 visits to make a diagnosis.

Many people, too, simply go straight to the hospital when they are in pain, bypassing the local walk-in centers, since they know they will get quicker attention, even though they do not need hospitalization.

Diaz has slowly shrunk the line outside the emergency room by sending people back to their neighborhood centers. His hospital also takes emergency patients for the new Hospital Padre Hurtado--which has no emergency unit--in exchange for a surgeon from Padre Hurtado to assist with operations at Sotero del Rio. "If I keep people moving, then I can treat more patients," says Diaz.

The private side, too, is redirecting money for healthcare. Clinica Alemana admittedly began as little more than a "hotel service," where the guest paid to stay in a private room at the clinic and brought their own doctor, and where service was less about medicine than about soft pillows, says Claus Krebs, medical director at the Clinica Alemana.

Over time, however, Alemana has grown to offer accident and emergency-care insurance through schools and catastrophic disease insurance where the clinic assumes the risk above a pre-determined deductible, which also applies to services such as maternity and neonatal care. Because patients make Clinica Alemana their first choice, members of the plans become long-term clients, while the clinic assumes risks like an insurance company, but at a marginal cost, says Krebs. Thus a private clinic spreads costs across a pool of patients.

"Clinica Alemana has worked hard at creating a community of patients," says Krebs. Alemana now has a full-time staff of 600 medical specialists and offers services through tailored packages for each age group. Since its founding, too, Alemana has had a program which now donates approximately US$2 million a year to creating treatment centers in working class neighborhoods and helps support public hospitals.

Family style. Health insurance companies, too, have always emphasized freedom of choice, allowing patients to pick and choose among the many separate services, from ambulatory to clinic, for check-ups, exams or surgery Patients with private health insurance must pay 100% of their treatment first and be reimbursed later, so they tend to shop around. The process also leads to patients seeing different, independent specialists, often in physically different places. The patient is solely responsible for completing exams, picking them up and turning them over to the corresponding doctor

This is true at the Clinica Alemana, too, even though doctors there could perform any exam in the book and the hospital has a full-time staff of specialists. Because the patient decides when and where to be treated, there is no follow-up unless hospitalization is required. Since extra exams increases costs and takes time from the patient, many do not complete their recommended exams.

Dr. Krebs agrees that this "independent spirit" has spun out of control, and now there is a tendency in medical schools to teach what it means to be a family doctor--a personal practitioner who tracks a patient over time. Beginning in 2003, Clinica Alemana--once a small island of exclusivity for a few-will begin to provide something much closer to what most Chileans need: a plain-vanilla family doctor who can spot problems coming, and save money for patients.

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RELATED ARTICLE: Cutting: Costs--Without Cutting Corners

Chile's healthcare reform, called Universal Access with Explicit Guarantees, aims to establish priorities based on national health statistics and greatest financial burden. It calls for neighborhood clinics to perform routine procedures like checkups and for large hospitals to handle major events, such as surgery and childbirth. For the period August 2002 to August 2003, 56 disease groups have been identified as the responsibility of the hospitals, with established costs and set time periods to complete diagnosis and treatment.

If public hospitals don't become more efficient, it costs them. Should a hospital not meet the time requirement, for example, the patient will be sent to a corresponding private facility at the cost of the public institution. Government regulators hope that such pressure will punish poor management in hospitals.

Under the plan, the Health Ministry will pay US$84 million to eliminate current hospital debt. Local clinics will see an increase of 18% in their budgets, with the goal of turning them back into the focal point of attention for public health. Regulators hope the smaller clinics eventually will deal with 80% of cases, acting as a buffer for the hospitals. The investment also creates new care centers and increases staff, split 50-50 between part-time and full-time hires.

The hiring plan rankles unions. They claim the government plan simply transfers problems from hospitals to the already-limited local facilities. "We don't need laws to tell us what should be a priority in healthcare, we see it every day We all agree that prevention is cheaper than curing, yet primary attention centers are treated like the bastard children of healthcare," says union leader Esteban Maturana.

Rigid labor laws will be tested, too. By law, hospital administrators cannot hire part-time workers or outsource services. Most administrators, however, have no problem hiring out laundry or food service at hospitals. "Frankly, it is not directly related to treatment," says Alfonso Diaz Hernandez, general surgeon and medical director at Sotero del Rio. "My budget reduction priority is focused on how quickly I can send someone home after gallstone removal--within 24 hours--without risk of complications."