Controversy over privatisation of regional hospital

The management rights of the main hospital in Eger, the capital of Heves county in northern Hungary, have been transferred to a private company. This move sparked fierce resistance from the opposition-led local municipality, trade unions and local citizens’ groups alike. Doctors and paramedics staged protests. Even the legality of the transfer was questioned by regional authorities; nevertheless, eventually the new operator was permitted to take over the hospital.

Background

Markhot Ferenc Kórház Hospital in the northern city of Eger was established in the 1950s and serves some 300,000 people in the city and its agglomeration today. Due to its importance, the hospital was under the governance of the municipality of Heves county. The hospital received its last major public money infusion in the framework of the hospital renovation programme in 2004. Currently, the hospital generates an annual revenue of HUF 6 billion (€20.2 million as at 13 February 2009), almost exclusively funded by the National Health Insurance Fund (Országos Egészségbiztosítási Pénztár, OEP).

The hospital has maintained a relative fiscal balance in recent years, although the financing of upcoming future equipment renewals seemed uncertain. Consequently, it came as a surprise at the end of 2007 that the county local government announced the functional privatisation of the hospital; the subsequent protests of the staff and civil associations triggered extensive media coverage.

New private operator

The county local government declared the private company Hospinvest as the winner of the privatisation tender on 25 March 2008, despite suspicions of corruption given that the tender specifications had strikingly fitted the profile of Hospinvest. It was the only bidder with the annual turnover required; therefore, rival proposals put forward by the city municipality and by another consortium led by the Medical School of the University of Debrecen were ruled out. Hospinvest is said to maintain a close relationship with the governing Hungarian Socialist Party (Magyar Szocialista Párt, MSZP), which has a majority within the county decision-making body.

Hospinvest, established in 2000, has become the market leader in the field of healthcare-related services, with an investment of €4 million by the European Bank for Reconstruction and Development (EBRD) in 2007. At the time of the tender, the company was managing two hospitals, renting a sanatorium and owned a hospital pharmacy chain in 12 localities, in addition to various laboratories and modern equipment in diagnostic image processing technologies.

Although most of the revenue in these health institutions also comes from OEP, Hospinvest’s remarkable business success was achieved by efforts at cost saving in operations, modernising equipment promising short-term returns – such as the outdated heating systems in hospitals – and opening profitable hospital pharmacies to the public. Moreover, the company introduced more flexible wage systems and personnel policies, such as replacing highly paid chief doctors with cheaper staff.

Functional privatisation implies a change in the employment conditions of staff, with former public service employees having to conclude a new employment contract under the Labour Code. The latter regulates employment relationships in the private sector and does not include a wage tariff system as is the case in the public sector laws. In a legal sense, this is a special case of a transfer of an undertaking, which is meticulously regulated by relevant Hungarian legislation. For instance, public service employees declining to maintain the employment contract with a new operator should be made redundant and provided with severance payment and other allowances.

Extensive opposition to privatisation

Political protest

Conflicts first arose at political party level. As the hospital is located in the city of Eger, but its ownership rights are exercised by the county local government, the different positions of political parties on the issue created difficulties and contributed to the extensive and intense protests, as well as the sustained media coverage. Albeit with a narrow one-vote majority, Heves county is the only socialist-led county in Hungary, while the city’s independent mayor governs the municipality in coalition with the Alliance of Young Democrats – Hungarian Civic Union (Fiatal Demokraták Szövetsége – Magyar Polgári Szövetség, FIDESZ-MPSZ), the major parliamentary opposition party.

Thus, ruling parties in the city municipality had opposed the idea of privatisation put forward by the county. Following the county’s decision on privatisation, the municipality of Eger, referring to its obligation to provide adequate medical attention for its citizens, immediately demanded the management rights of ‘its’ hospital but without success.

Trade union protests

Trade unions voiced their objections as soon as the county’s intention became known. All trade unions present in the hospital manifested their disapproval by organising a strike for 6 December 2007 with the aim of drawing attention to the issue. Eventually, the strike was called off as trade unions still hoped that the county would abandon the plan. Meanwhile, the Democratic Union of Healthcare Employees (Egészségügyi és Szociális Ágazatban Dolgozók Demokratikus Szakszervezete, EDDSZ) took the lead in organising the employees and collected almost 1,000 signatures of the hospital’s 1,300 staff for a petition demanding that their public service employee status should be maintained.

As this demand went unmet, trade unions organised a successful two-hour warning strike on 26 September 2008. A general strike started on 6 October but lasted only three days as a result of the low participation rate (16%) of the employees. This strike was later declared unlawful in the first instance by the Labour Court of the neighbouring Nógrád county, arguing that it was not organised in the economic or social interests of workers but in order to limit the Heves county local government in exercising its rights as owner. As the situation escalated, some doctors went on short-lived hunger strikes. As a last resort, so-called ‘mosaic strikes’ were staged; in other words, each time somebody went on strike, a colleague would cover for them.

EDDSZ called for solidarity action from other trade unions, which resulted in several road blocks around Eger. Moreover, the railway union affiliated to the Democratic League of Independent Trade Unions (Független Szakszervezetek Demokratikus Ligája, LIGA) called for local solidarity strike action and achieved the temporary suspension of train services in Eger.

Employees refuse to work

In addition to the usual forms of collective action, EDDSZ also made a surprising and risky attempt to impede the hospital takeover by approaching each employee affected by the privatisation and asking them to deposit their new, blank employment contract at the trade union office to demonstrate that they refused to work for the private operator. The direct approach to each worker aimed to prove that Hospinvest would not be able to run the hospital, lacking sufficient staff. Accordingly, EDDSZ launched a well-publicised attempt to win over doctors, paramedics and other workers who would refuse to work in the reorganised hospital.

In this way, the trade union effectively delayed Hospinvest’s launch of operations by two months beyond 1 September 2008. Eventually, after recruiting new staff, including Hungarian doctors working abroad, the company reached the number of workforce required for the OEP contract; nevertheless, it lost some 600 well-qualified employees, including the majority of the hospital’s doctors.

Civil group protests

The privatisation also mobilised local civil groups, which supported the city municipality in its struggle for ‘their’ hospital. They jointly organised public meetings, participated in street rallies and launched a legal procedure in which the court established that Hospinvest’s bid did not meet the criteria required in the tender announcement and thus it should be treated as void. In the final stage of events, this joint protest received a boost from other national civil organisations, some of them from the far right of the Hungarian political landscape, which further increased media coverage.

Commentary

No consultations or negotiations were held between trade unions and the county governance on the privatisation of the hospital, due to the legal and institutional conditions applying to the privatisation of budgetary institutions in Hungary. Certain trade union rights connected to the privatisation of state-owned enterprises were laid down in the early 1990s; however, in the case of budgetary institutions, trade unions are not in a position to consult or negotiate with the competent body – in this case, the county local government – that owns the institution and takes the final decisions. According to the public sector law in force, only the institution’s management is regarded as a social partner for the trade unions and/or the public employee councils elected by all employees. In general, this is a serious ongoing problem for trade unions negotiating wages, working time and working conditions in budgetary institutions, and it becomes a vital issue in the case of privatisation decisions.

Regarding the labour court’s decision, the argument seems unusual in claiming that the trade unions’ protest against changing the workers’ employment status was unlawful for not being ‘in the workers’ economic or social interest’. According to Hungarian strike law, workers only have the right to strike in pursuing these interests.

Given that the case of the hospital in Eger is not a unique one, it highlights the incoherence of the Hungarian healthcare reform. Although the government’s attempt to reform the health insurance system failed with the referendum in March 2008 (HU0804029I), it has opened the way for improvised, local privatisation processes. These are, to a great extent, subject to local power games. Interestingly, in an interview, the former Minister of Health, István Mikola, who was in office under the FIDESZ government between 1998 and 2002, endorsed the functional privatisation of the hospital in Eger. Despite the fact that this is contrary to his party’s position on the matter, it is in line with his policy pursued as health minister, which paved the way for such privatisation by introducing the relevant legislation still unchanged today.

Márk Edelényi and László Neumann, Institute for Political Science, Hungarian Academy of Sciences

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