NIK: The ills of the hospital in Łask

The competition for the 20-year lease of the hospital was won in 2012. Non-public Health Care Center Dialysis from Sosnowiec (seven years later it changed its name and moved its headquarters to Łask). In turn, the local ZOZ leased medical equipment and facilities to the company for five years. In return, the company undertook, among other things, to provide health care services at least to the extent that they had been provided at the hospital up to the date of the agreement, as well as to launch other therapeutic activities at the facility and to invest in its infrastructure.

The NIK's audit shows that local authorities had limited ability to enforce the provisions of this contract. All because, although it covered such a long period, it did not provide for appropriate contractual penalties. The situation changed only in 2018 when the parties signed an annex introducing penalties for failing to meet the deadlines for capital expenditures, but they covered only some of the tasks the company was to perform. The annex also included a provision inconsistent with National Health Fund procedures, making investment outlays contingent on whether the National Health Fund would sign a contract with the company. As a result, the contract, even with annexes, did not fully protect the interests of the district's residents. The current district authorities have pledged to hold talks with the company on the subject.

The problems at the Lask hospital were already brought to the attention of the NIK during its previous inspection, conducted in 2017. At the time, it turned out that not only did the starosty fail to respond to signals of labor rights violations at the Łask hospital, but it did not even check whether the company was fulfilling the investments declared in the tender offer. Indeed, in the contract it pledged to spend nearly PLN 43 million over 20 years, but by the end of the first quarter of 2017 it had completed work for only PLN 7.4 million (17%). In turn, it spent about PLN 2.4 million of the PLN 26 million pledged to adapt the hospital's premises to current regulations.

The results of the most recent audit, covering the period 2017-2022, showed that the Łask County District Office still has not implemented important audit conclusions. For example, it did not take any action to determine whether technical obstacles actually existed that prevented the establishment of an emergency department at the hospital, as the company claimed. The district also failed to enforce the provisions of the contract regarding the establishment of a dialysis station and MRI lab at the facility, making it difficult for patients to access these services.

The company's CEO explained that the company failed to meet the investments announced for 2012-2017, because the Lodz branch of the National Health Fund did not declare funding for the hospital's dialysis station and MRI laboratory. In turn, the establishment of an ED was not possible because, according to the CEO, the governor did not take the hospital in Łask into account when mapping the region's emergency services.

Meanwhile, the Lodz NFZ, which was approached by the NIK for an explanation, stated that the opposite was true - although the Fund had announced competition proceedings for hemodialysis and peritoneal dialysis services on several occasions, the County Hospitals company did not submit bids in them. The same is true of contracting for MRI examinations.

In the case of the ED, on the other hand, the director of the Health Department of the Lodz Provincial Office said that the company had not established an emergency department at the hospital and had not notified the NFZ of its readiness to provide such services, which is why it was not included in the State Emergency Medical Service System Action Plan. Had it met the conditions, it could have submitted a special application to this effect, but it did not.

The NIK also points out that the company managing the hospital in Łask liquidated the Gynecology and Obstetrics Department there without the written consent of the district board. It informed local authorities that the liquidation would take place as late as December 2019, and the reason was said to be the unprofitability of the ward. The financial records provided showed that the costs of its operation were higher than revenues by about PLN 1 million. The branch was generating a loss, and revenues were not even enough to cover salaries and their derivatives. However, before it was liquidated, as of August 1, 2020, the ward was providing services only in gynecology, as there was a shortage of qualified obstetric staff. Eventually, though, by the end of 2021. Lask County Board had not ruled on whether or not to grant permission for liquidation, the company closed the ward on December 31, 2021.

The chairman of the company's board of directors claimed that in this case the company had complied with all formalities, but the lease agreement stated explicitly - the written consent of the Łask County Board is absolutely required for limiting the scope of medical services provided by the hospital in Łask. Above all, however, after the liquidation of the ward, the company should provide new services to patients, and this did not happen.

In January 2017, the company launched a Urology Outpatient Clinic at the hospital, and in April 2018, it also launched a Night and Christmas Care Clinic. At the end of that year, however, it eliminated the Stroke Unit, and moved the services provided there to the Neurology Department. Only in two wards (Rehabilitation and Anesthesiology and Intensive Care) was the number of beds kept constant, in the others it was reduced. The largest number of beds was eliminated in the Department of Maxillofacial Surgery and Laryngology, from 16 to 8 beds, and in the Pediatric Department, from 15 to 8 beds. The district governor explained that the reason was a change in regulations regarding the number of nurses in the wards, as well as indications from the Regional Public Health Center.

An audit conducted by the Supreme Audit Office (NIK) at a hospital in Łask showed that the facility was still understaffed as of January 2022. Nurses were in short supply in the Internal Medicine Department, among others. The starost explained that the standards for working hours had been changed due to the pandemic and the establishment of a covid ward at the facility, but as the NIK notes, the simplified procedures were only in effect until the end of 2021.

The Chamber also has reservations about the contractually incompatible valorization of the hospital's rent, carried out by the local government from February, instead of from the first of January of a given year. Outstanding receivables for the period from 2019 onward were adjusted in the course of the NIK audit, by a gross amount of 28 thousand zlotys; earlier ones, in the amount of about 6 thousand zlotys, were time-barred. The starost explained that such valorization calculation occurred by mistake.

The company also paid rent on the property lease late - for some of the audited installments, this delay ranged from 1 day to 31 days. The CEO explained that this was primarily due to the financial difficulties the company faced until 2017, as well as too short payment terms under the lease agreement (in an addendum to the agreement, the deadline was extended to the 20th of each month).

In June 2019, due to financial difficulties, the company asked the district to agree on terms for terminating the hospital's lease. The draft agreement stipulated, among other things, that the district would reimburse the company for its expenditures on modernizing and expanding the facility and bringing its premises up to current regulations, which increased the value of the building. The company also proposed a mutual waiver of all claims. However, the district administration presented its own proposals for, among other things, fixing the value of the expenditures that increased the value of the building, as specified in the contract, i.e. up to 50% of those expenditures including depreciation. The local government also demanded compensation, among other things:

• PLN 3 million of the stipulated contractual penalty,
• 33.6 million gross due to lost rent,
• 6.3 million for lost rent on movable property,

The company did not accept these terms and in August 2019 asked for a suspension of negotiations.

A significant deterioration in the company's financial situation occurred in 2020, when its equity was reduced from over PLN 2 million to nearly PLN 1.5 million. The company's continued operations came under question due to a negative financial result for 2020 and a loss from previous years reaching more than PLN 14 million. A provision of about PLN 3 million was set up for pending court proceedings, which were either after judgments in the first instance or in similar cases decided against the company, but the value of the litigation totaled more than PLN 8.2 million. Most of the proceedings were related to medical errors (more than PLN 7million). The starost explained that despite the difficult financial situation, the company did not take into account the threat of insolvency and declared to run the hospital in accordance with the contract. For this reason, in 2020. The district board did not take any action on the matter.

In 2021, the County Hospitals company increased sales of medical services and earned a profit of 153 thousand zlotys, which was used to cover previous years' losses. It also increased equity to more than PLN 1.6 million. Among the company's strategic goals for 2022 and 2023 were to maintain liquidity and raise external funds for the modernization of the hospital, including the renovation of the operating theater.

Source: NIK