Corruption and waste in the health system by Transparency International Italia

Associazione contro la corruzione

CORRUPTION AND WASTE IN THE HEALTH SYSTEM

“Unhealthy Health System”project report co-funded by the European Commission

UNHEALTHY HEALTH SYSTEM is a project by:

Associazione contro la corruzione

and by the Department for Public Administration

in partnership with:

with the collaboration of:

This report has been edited by RiSSC – the Research Centre on Security and Crime. AUTHORS: Lorenzo Segato, RISSC, edited and supervised the report and drew up chapters 1, 4, 5, 6, 7, 8 and 9 / Alessandra Pinna, RISSC, reviewed chapters 7, 8 and 9 / Matteo Ceron originally drew up chapter 8 / Davide Del Monte, TI-Italia, wrote chapter 3 /Francesco Sardella wrote appendix 1 “Regulations” / Francesco Saverio Mennini and Lara Gitto wrote appendix 2 “A B-convergence model of public spending in the European Union before and after the Maastricht Treaty” / Thanks go to Salvatore Sberna, EUI and Alberto Vannucci, UNIPI, for their precious suggestions and contributions to the text. We also thank: Members of the Advisory Board Francesco Macchia, Chairman ISPE / Maurizio Arena, Chairman Osservatorio 231 Farmaceutiche / Maurizio Bortoletti, Colonel of Carabinieri, former commissioner ASL Salerno / Francesco Mennini, Faculty of Economics - Tor Vergata University / Michele Cozzio, Observatory of Italian and EU law on Public Procurement - University of Trento / Marco Masoero, Polytechnic - University of Turin / Paolo Rossi, Director Department of Orthopedics CTO Turin / Claudio Galtieri, Supreme Audit Institution - Lombardy / Amedeo Vercelli, AICQ Piedmont / Simonetta Pasqua, Department for Public Administration / Luigi Fruscio, ASL Bari. Components of the Group of Experts Claudio Bellumori, Finance Police / Andrea Messori, SIFACT - Clinic Pharmacy and Therapy / Cesare Cislaghi, AGENAS - National Agency for Regional Health Services / Ermanno Granelli, Supreme Audit Institution / Daniela Francese, Journalist and author of the book “Unhealthy Healtcare” / Mario Eumeni, Finance Police / Renato Carletti, ANAC (ex CiVIT) - National Anticorruption Authority / Maurizio De Lucia, National Antimafia Authority / Giuliano Marlotti, Healthcare Service APSS / Patrizia Di Berto, FP - CGIL (Trade Union of the Healthcare sector) for more information: info@transparency.it - www.transparency.it November 2013

GENERAL contents 01. EXECUTIVE SUMMARY

02. FOREWORD 08 03. INTRODUCTION 09 04. GENERAL OUTLINE OF THE SECTOR 14 05. RESEARCH METHOD 16 06. THE CORRUPTION PHENOMENON 18 07. CORRUPTION IN THE HEALTH SYSTEM

08. COMMON CRIME PATTERNS

09. PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SYSTEM

10. APPENDICES 74 11. BIBLIOGRAPHY 90

04 // 01. EXECUTIVE SUMMARY

01.

EXECUTIVE SUMMARY

There is little awareness of the phenomenon of corruption in the health system: despite the numerous scandals and convictions made in past years, today it is impossible to calculate how widespread the corruption is, what damage it causes and which sectors are most at risk.

The aim of this research, put together by RiSSC and Transparency International Italia, is to contribute to the debate on the topic, and explore the phenomenon in order to single out the types of recurring crimes and main drivers (opportunities and vulnerability) behind the corruption within the National Health Service. As a result, this will give us cues in order to draw up risk analysis models and early warning systems. The report does not aim to measure or estimate the (real, presumed, official or perceived) level of corruption in the health system; it does not analyse its (direct or indirect) costs or calculate the hypothetical risk of corruption. Furthermore, the research has come up with 15 proposals to reduce the opportunities for corruption in health. The proposals have been selected and investigated by a group of experts and validated by the project’s advisory board. They are a starting point for the advocacy phase of the project and will therefore be developed and described in more detail in a follow-up stage to this document. THE CONTEXT With regard to corruption, Italy lies among the last places in the international rankings: in 2012 it earned penultimate place in Europe in the CPI ranking, the index for the perception of corruption in the public and political sector, with a score of 42 out of 100 (Greece took last place, with 36/100). In the World Bank Worldwide Governance Index, under the entry “control of corruption” Italy went down from a best of 77.1/100 in 2000, to 57.3 in 2011. The Global Corruption Barometer published by Transparency International in July 2013 highlights

how Italian citizens consider corruption a very serious problem for public administration, especially due to the expansion of clientelism and nepotism. These are figures in line with those presented by the European Commission in 2012 in its last Eurobarometer on corruption, in which 89% of the Italian citizens interviewed considered the country’s economic system to be seriously affected by the phenomenon. However, in 2011, basing its findings solely on official data, SAET, the Department for Public Administration Anti-corruption and Transparency Office, presented the image of an absolutely marginal phenomenon: “of every 1,000 crimes recorded in Italy, one is against the Public Administration” and “for every 1,000 state employees, there is one crime reported against the Public Administration”. Macroscopic variations can be seen at regional level, as shown by the studies carried out by the University of Gothenburg: Italy is the country in Europe with the highest domestic variation in the presence of corruption phenomena. With respect to the health system, international assessments recognise that the Italian health system provides a good level of service at costs that, albeit representing a significant portion of public spending, are in line with other OCSE countries. Italy is within the OCSE average both for life expectancy at birth : GDP per capita ratio, and for the life expectancy at birth : health expenditure per capita ratio. The resources used in 2011 for the health system accounted for around 75% of the regions’ current overall spending. The cost items that weighed most heavily on the total were: staff (32.2%), purchases of goods and services (31.3%), and NHS drug spending (8.8%).

01. EXECUTIVE SUMMARY // 05

THE PHENOMENON Qualitative analysis: • In terms of quantity, corruption in the health system continues to be a widely obscure phenomenon, but its effects are there for the eye to see. In recent years, the State Auditors’ Department found that in the health system “episodes of disreputable dealings combine with aspects of bad management, at times favoured by the lack of control systems, with surprising ease” and that “the health sector presents unacceptable levels of inappropriate organisation and management that foster the already negative consequences caused to the general public by the frequent episodes of corruption”. • The general factors that favour corruption are the consensual nature of the crime, absence of direct victims, distance between the agreement and victimisation caused, sophistication of the criminal organisation and combination with other underhand administration phenomena. • There are 12 drivers behind the corruption in the health system, four of which on the demand side, and eight on the supply side. On the demand side: an uncertain or weak regulatory framework; information gap between users and the health system; high degree of fragmentation of the demand for health services; fragility in the demand for care services. On the supply side: great political interference in technical-administrative choices; complexity of the system; far-reaching powers and broad discretionary margins in health authority and hospital choices; state personnel’s low level of accountability; low ethical standards among public workers; information gap between the health system and private suppliers; growth of private health care; and lack of transparency in the use of resources. • Problems emerge in particular owing to the fragmentation of the regulatory framework at regional and subregional levels; the abuse of urgent decrees; and the explosion of lawsuits, whether justified or instrumental. The new anti-corruption law (law no. 190/12) and the implementation decrees also display problematic areas, as they reduce some prescribed penalties – and as a consequence the terms of expiry - while ignoring some types of crime, and not providing suitable protection for whistleblowers.

• The organisational complexity and decentralisation in the health system make it more difficult to perform checks and this leads to the division of resources and multiplication of centres with decision-making power, even at lower levels in the administrative structure. • The information gap exposes to the risk of corruption citizens who are in a weak position and ill-informed with respect to the doctor acting on their behalf for the NHS, which determines health service demand and supply. The gap also exposes companies to risk, especially those which invest in R&D, as they find themselves dealing with unqualified or incompetent officials. As a result, the NHS is limited in its choices due to inadequate, insufficient, obsolete or pointless selection criteria, depending on the case in question. Non-fungibility is another cause of this risk, because it enables procedures open to public scrutiny to be bypassed. • Entrusting private entities with ever increasing portions of the public health service increases the risk of corruption owing to the natural conflict of interest – profit for the private entity, and reduction in health services, ideally by investing in prevention, and costs for the NHS. Weak control systems and the immense economic and political power that revolves around these contracts lead to dangerous patterns of largescale corruption, as has been seen in numerous regions. • Politics has spilled into the health sector, going beyond the normal boundaries of its sphere of action, in the control and appointment of top figures in the health organisations. As a result, correct administration is upset in the sectors of appointments, tenders and private accreditations, and in some cases politics even controls the whole regional health system. • The civic sense and integrity of the health sector need to be strengthened. Whistleblowing, that is, reporting illicit or suspicious activities in order to prevent corruption in public administration, disciplined by law no. 190/12, is considered by the health sector interviewees as snitching rather than as a prevention tool and is a source of tension among the personnel. “Structural analysis of regional health spending [...] makes evident the need for careful promotion of the culture of lawfulness and public ethics in this sector too,” asserts the Garofalo Report.

Early warnings are drawn up on the basis of a set of qualitative and/or quantitative indicators of corruption risk levels. In the literature, these indicators are also called “red flags” when they indicate a higher probability of corruption.

06 // 01. EXECUTIVE SUMMARY

• Health system personnel can draw profit from the low level of accountability for their actions, which is an incentive to breach the rules. Internal appraisal systems suffer from corporatism and self-protection that in fact reduce control capacities. Director appraisals are almost always very positive, regardless of the quality of the services provided or the institution’s economic and financial management results. Despite the spread of voluntary codes of conduct and ethical standards, these rarely contain effective measures in terms of investigatory and sanctionary powers, or protection for those who report illegal activities. • To date, transparency remains a good intention. Even though recent regulations are strongly pushing towards greater transparency in the PA, the problem remains. Quantitative analysis: • The average estimated rate of corruption and fraud in the health system is 5.59% with an interval that varies between 3.29 and 10% (Leys and Button 2013). For the Italian health system, which is worth around 110 billion euros a year, this translates into around 6 billion euros a year subtracted from care for the ill. • The risk of corruption in the purchase of devices for mechanical, radiological, electrical and physical therapy amounts to 11-14%, according to a study by PriceWaterHouseCooper (PWC 2013).2 • The public view is that health (in particular services resulting from tenders and bids) is a corrupt sector. 40% of the Italians interviewed – against the EU average of 30% - consider corruption to be widespread among those who work in the public health sector, a percentage that then rises to 59% for the officials awarding contracts (EU average 47%), a figure exceeded for politicians at national level (67% Italy, 57% EU).3 • According to the Bribe Payers Index 2011, health ranks seventh, but it is probably the sector in which citizens, especially the weakest, pay the highest costs for corruption, even paying with their lives. • Public money wasted in corrupt or suspect public tenders (cases of suspected corruption) accounts for 18% of the overall tender budget, 13% of which derives from the direct cost of corruption, maintains PWC.

THE CRITICAL POINTS: The cases analysed within five spheres (appointments, drugs, procurement, negligence, private health) highlighted the following problems: APPOINTMENTS: Political weight, conflict of interests, revolving doors, spoil system, incontestability, discretionality, lack of skills. DRUGS: Bogus price increases, patents, bribes for prescriptions, false scientific research, fake prescriptions, unnecessary prescriptions, fake reimbursements. PROCUREMENT: Unnecessary tenders, incorrect procedures, prejudicial tenders or cartels, infiltration of organised crime, lack of controls, false supply certificates, unreported breaches-irregularities. NEGLIGENCE: Advancement of waiting lists, diverting towards the private sector, false declarations (intramoenia, that is, private practice by hospital doctors), failure to make payments (intramoenia). PRIVATE HEALTH: Lack of competition, lack of qualification checks, hindrances to entry and low level of turnover, pointless examinations, false DRG registrations, false documentation. THE PROPOSALS: In order to combat corruption in the health system, improve services, award good performances, increase competition and reduce costs, it is necessary to seek measures to lower these risks. Following the analysis of episodes of corruption that have afflicted the Italian health system, TI-Italia and RiSSC, with back-up from a group of experts, have singled out 15 proposals to help the “unhealthy health system”. Immediate application of these solutions would reduce the risk of corruption in the health sector, free up resources and lower costs without affecting the services provided. The proposals touch on all the sensitive issues in the health system: medical negligence, transparency of information, management of tenders and purchases, spending control, private health, executive appointments and the risk of the infiltration of organised crime. The proposals - which have not been completely developed in this report

01. EXECUTIVE SUMMARY // 07

are just a starting point. In the future, their expansion will lead to the implementation of good practices to reduce corruption in the Italian health system. We propose: • Straightening out the relationship between politics and health • Disclosing how public resources are used • Increasing doctors’ efficiency and intensifying checks on their activities • Changing spending control procedures • Promoting ethical practices among doctors to prevent every form of corruption • Increasing checks on how tenders are carried out in the health system • Publishing indicators and outcomes of doctors’ activities • Accrediting private health facilities on the basis of their effective capacities • Increasing competitive comparisons among drug companies • Promoting whistleblowing • Publicising the payments made in the health system • Outlining relations between the public and private health systems more strictly • Making more data on health spending open to the public • Amending the rules for funding health spending • Preventing the risk of organised crime infiltrating tenders

The study was carried out on public tenders issued in 2010 in five sectors (Urban/Utility Construction, Road & Rail, Water & Waste, Training, Research & Development) in eight European countries (France, Hungary, Italy, Lithuania, the Netherlands, Poland, Romania and Spain). Public Procurement: costs we pay for corruption. Identifying and reducing corruption in public procurement in the EU. 3 Eurobarometer 76.1 – Attitudes of Europeans towards Corruption. Data for Italy. 4 The Bribe Payers Index measures the likelihood that company executives will accept the payment of bribes abroad. More information on the Bribe Payers Index 2011 can be found at the link http://bpi.transparency.org/bpi2011/. The sectors most vulnerable to corruption are public tenders and construction works, followed by the utilities, building, mining, energy production and health, seventh out of the 19 sectors analysed. 2

08 // 02. FOREWORD

02.

FOREWORD

The white book on corruption, drafted in 2012 by a Study Commission for the Italian Government, defined health as “one of the sectors most exposed to the risk of corruption for financial reasons.” 5

The Italian citizens seem to agree: when questioned by Transparency International (TI) for the Global Corruption Barometer 2013, they declared that they had very little trust in the integrity of the sector: only 15% deemed it “clean” or, to put it better, healthy. As if this was not enough, the numerous scandals which have affected the health sector, from the “Mani Pulite” (Clean Hands) period onwards, demonstrate its particular vulnerability and sensitivity. To us, and for the country, it seems a priority to reinstate the integrity, ethics and responsibility of the health sector, which is why, in partnership with the Research Centre on Security and Crime (RiSSC), we decided to promote the “Unhealthy Health System” project. Thanks to co-funding from the European Commission and the Department for Public Administration and precious collaboration from ISPE – the Institute for the Promotion of Ethics in Health – we were able to analyse the forms that the corruption phenomenon takes and the sector’s many shadowy areas and weaknesses that have given rise to cracks in which disreputable dealings and negligence have been able to flourish for years. On the basis of the results of this analysis, we will outline some “ethical methods” which can guide willing health institutions to restore much higher levels of integrity and responsibility than at present. The true goal of the “Unhealthy Health System” project is to define – and therefore where possible to implement – a series of concrete measures to limit the impact of corruption on the health sector, starting from the 15 proposals you will find in this report. From procurement to codes of conduct, from the (dangerous) relations between politics and administration, and between the public and private sectors, from protecting whistleblowers to creating a more

ethical context, institutions and health authorities can make use of the tools that will be made available by TI-Italia and RiSSC. No doubt these are ambitious objectives. Hence, we immediately felt that we could not embark upon this road alone, and needed the support of two external bodies which could provide their skills and know-how. A top advisory board helped TI-Italia to outline the specific road to take, by indicating the most correct direction and the obstacles to avoid along the way. Hence, the results will not just be theoretical and temporary, but real, solid and implementable. The research group also made use of the specific skills and know-how of a group of experts who gave a positive impulse both in identifying the faults and problematic areas in the sector, and in defining and drawing up the 15 proposals. We hope that this report may represent an authoritative point of departure for our long campaign to try to restore the ethics and integrity in a sector – health – which seems to have lost these principles and values. In order for our action to have a concrete and effective outcome, we need everyone’s support. Including yours. Maria Teresa Brassiolo

The “White Book on Corruption”, also known as the “Garofoli Report” is the report La Corruzione in Italia per una politica di prevenzione (Corruption in Italy: for a politics of prevention) drawn up by the Study Commission for Corruption Prevention Measures in Public Administration (Commissione per lo studio e l’elaborazione di misure per la prevenzione della corruzione nella pubblica amministrazione) and presented in Rome on 22 October 2012. The quote is found on p. 221.

03. INTRODUCTION // 09

03.

INTRODUCTION

Corruption6 needs no presentations. Although there is no precise data on the issue, the scandals and sentences in recent years show that, at global level, the phenomenon seeps into all economic sectors, especially where there are greater investments of public resources.

On the other hand, its effects are evident. The European Commission has recently pinpointed three main problems associated with corruption: the significant economic, social and political harm that it causes in some EU countries where there are high levels of corruption; the failure to adopt a common approach to anti-corruption tools within the EU; the lack of faith among European citizens in the capacity of the public institutions to guarantee that the market works correctly owing to corruption, with the consequent illfunctioning of the markets and competition.7 Italy, the patient afflicted by the cancer of corruption Transparency International has been present in Italy for over 15 years. Its operating base is located in Milan and it has numerous members and volunteers scattered around the whole country. The organisation’s aim is to promote ethical conduct and practices to fight corruption in both public institutions and private companies. Transparency, Integrity and Responsibility form the three fundamental bases to the activities of the organisation, which takes these essential values as the starting point to make an effective mark on the country’s ethical and regulatory situation. In terms of corruption, Italy always lies among the last places in the international rankings: the indicators drawn up by Transparency International cut no slack, with our country earning penultimate place in Europe in the 2012 CPI ranking, the corruption perception index for the public and political sector, with a mark of 42 out of 100 (in last place was Greece, with 36/100). In the World Bank

Worldwide Governance Index8 under the entry “control of corruption”, our country’s score collapsed from a good 77.1/100, its best result obtained in 2000, to 57.3 in 2011. The more recent Global Corruption Barometer (GCB) published by Transparency International in July 2013 highlights how Italian citizens consider corruption a very serious problem for public administration, especially due to the expansion of clientelism and nepotism. Unfortunately these figures are in line with those presented by the European Commission in the last Eurobarometer on corruption in 2012, in which 89% of the Italian citizens interviewed consider the country’s economic system to be seriously affected by the phenomenon. For too many years, the consequences of corruption have been undervalued, and relegated to the rank of morally questionable conduct that is nevertheless not overly harmful for the public. Only recently, also thanks to the growing research and number of organisations specialised in fighting the phenomenon, but above all owing to the economic crisis and explosion of the public debt, have we managed to focus more specifically not only on the nature of the phenomenon, but also its causes and implications: corruption is not simply an act against public ethics,

In this report, the term corruption is taken to mean “abuse of a delegated power in order to obtain undue advantage”. European Commission, 2011, Impact Assessment, Commission Staff Working Paper 8 The WGI, published by the World Bank, measures the governance level in 212 countries around the world, using 6 indicators, amongst which “control of corruption”. The other indicators are: government effectiveness; political stability and lack of violence/terrorism; regulatory quality; rule of law; voice and accountability. http://info.worldbank.org/governance/wgi/index.aspx#home 6 7

10 // 03. INTRODUCTION

but an attack on the country’s resources. Indeed, according to the State Auditors’ Department it inflates the costs of public works by up to 40% more than normal and weighs on the state’s coffers in the region of several billion euros a year. The same State Auditors’ Department has estimated that every year Italy sees 16% of foreign investments vanish owing to this phenomenon, since they judge a very corrupt country not to be very reliable and prefer to keep their distance. It is difficult to deny that the country’s system is seriously, if not pathologically, affected by the virus of corruption. However, we must not fall into the trap of considering all the economic sectors and all geographical areas affected in the same way. A first important distinction that needs to be made is between private and public organisations, since the former appear to be more likely to use effective preventive systems at least: the introduction in 2001 of companies’ administrative responsibility through legislative decree no. 231 meant that in the private sector they began to consider the fight against corruption from a preventive point of view a long time before the public sector, which instead for years – and in part still now – has continued to operate outside every minimum standard of control and prevention. Suffice it to think of the countless episodes of corruption or peculation that in recent years have involved the biggest political parties and various regional, provincial and municipal councils, situations in which no type of accountability for spending was foreseen comparable to that requested in private practice or, more simply, by common sense. Without then forgetting the shady universe of government-controlled companies which are still a long way behind in applying internal organisational control and spending systems. Once again, on this point it is worth quoting the State Auditors’ Department, whose “Sentence on the Equalisation of the State Budget” presented on 28 June 2012 read: “On the question of negative reflections on the state budget, we cannot ignore three great phenomena: that of corruption, tax evasion, and the transfer of public functions to private entities. […] A highly important aspect is that of the transfer of public functions – and the relative financial resources – to entities outside the Public Administration, established for that end in the form of private companies. […] Among other things,

the phenomenon has reached extraordinary dimensions in the area of local institutions as found in the “2012 Report on the Coordination of Public Finance”: over 5,000 bodies manage the services of said institutions, with a level of debt calculated at over 34 billion. In short, a black hole that needs to be dealt with as soon as possible. Instead, with regard to the distribution in geographic terms of the corruption phenomenon, some research published by the University of Gothenburg at the end of 2010 comes to our aid.9 This research analyses and assesses the levels of governance in every single European region with the level of corruption as one of the various indicators. Its results show that Italy is the country with the highest domestic variation in Europe for the presence of corruption phenomena: an imbalance in the performances between the regions in the centre and north and those in the south which is “dizzyingly” highlighted in the final judgement on quality of governance in general. As the same study shows,10 among the 18 EU countries examined, Italy is the one with the highest degree of variation at regional level, with three regions (Bolzano, Val d’Aosta and Trento) among the best in Europe and two (Campania and Calabria) among the worst. (ILLUSTRATION 1)

Therefore, corruption is an unsustainable burden for the state and a crime harming the whole citizenry, who find themselves having to bear unjustifiable costs in terms of both public spending and quality of the services on offer. Therefore, corruption is an unsustainable burden for the state and a crime harming the whole citizenry, who find themselves having to bear unjustifiable costs in terms of both public spending and quality of the services on offer. In the present, most critical situation, it is no longer tolerable that these criminal phenomena continue to hinder the already difficult path towards the country’s economic, political and social recovery; all further hesitation in this respect will be fatal. Corruption and waste: two unsustainable afflictions for democracy and for the state’s coffers. At the pressing request of many civil society organisations, international bodies and a large part of the citizenry,

03. INTRODUCTION// 11

PERCEIVED CORRUPTION IN HEALTH CARE SYSTEM IN ITALIAN REGIONS ILLUSTRATION 1: SBRENA ELABORATION of QoG data BOLZANO

0,80 0,74

TRENTO

0,71

Aosta Valley FRIULI VENEZIA GIULIA

0,30

Piedmont

0,01

VENETO

-0,20 -0,29

EMILIA ROMAGNA

-0,32

UMBRIA

-0,41

Tuscany

-0,42

Lombardy

-0,51

MARCHEs

-0,55

LIGURIA

-0,70

Sardinia

-0,85

Latium

-1,05

MOLISE

-1,06

BASILICATA

-1,17

Apulia

-1,31

PUGLIA

-1,59

CAMPANIA

-1,64

Sicily

-2,10

-2,50

-2

CALABRIA

-1,50

-1

-0,50

some efforts have been made by recent governments at regulatory level in order to bolster the fight against corruption in the country, starting from law no. 190/2012. Indeed, for the first time in Italy, this so-called anti-corruption law imposes a governance on all public institutions that is explicitly orientated towards preventing and limiting corruption phenomena. Furthermore, the most recent legislative decrees nos. 33/2013 (transparency of the public administration) and 39/2013 (ineligibility for and incompatibility of roles) and presidential decree no. 62/2013 (code of conduct of public employees), all issued pursuant to Law no. 190/2012, give a further push in the direction of greater responsibility and transparency of the public institutions.

0,50

While with regard to the regulatory picture we can therefore say that some steps, however incomplete, have been taken, in practice the impact that these new laws will have on the public sector in terms of efficiency and prevention of corruption remains to be seen. The “NIS – National Integrity Systems” report, published on 30 March 2012, highlights how in practice the lack of integrity and responsibility on the part of the political institutions – the parties first of all – and the public sector are holding back the country’s economic and social development: unclear regulations, inadequate control systems, lack of access to information and a persistent state of conflict among institutions become unsurpassable obstacles on the road to recovery and economic growth.

“Measuring the Quality of Government and Subnational Variation”, University of Gothenburg, December 2010 “Italy displays far and away the most within-country variation among the 18 EU countries in the sample according to the data, with regions spanning over three full standard deviations. Although Italy’s mean score is just above the mean EU regional average at 0.11, it has three regions in the top 10% of all 172 regions (Bolzano, Valle d’Aosta and Trento) and two in the bottom 10% (Campania and Calabria)”, “Measuring the Quality of Government and Subnational Variation”, p. 137, University of Gothenburg, December 2010. 9

12 // 03. INTRODUCTION

WITHIN-COUNTRY REGIONAL VARIATION OF QoG illustration 2: Quality of Governance 2010, ITALY 3 Country mean

Range of QoG

max difference (high to low region)

3 1

-1 -2 -3

BE BG

PL DE

03. INTRODUCTION// 13

The question of the not very transparent or responsible behaviour of politics has been widely covered in the media, also owing to the sequence of scandals within many of the bigger political parties. This has led to harsh criticisms from citizens, associations and the media on the conduct within the parties and the highest institutions representing the will of the people. Glaring cases like that of Belsito, Lusi or Franco Fiorito (better known in the newspaper columns as “Er Batman”) have struck the public opinion and, to use an euphemism, highlighted the widespread “happy-go-lucky management” of public resources by political parties and institutions. Regardless of the uproar and the almost folkloristic hue given to these cases in the media, for us it is essential to underline how these practices of bad political management do not only have a negative effect on the state coffers but, also and above all, on the quality of the democracy and capacity to govern the country.

All these costs inexorably fall onto the citizens’ wallets who, unbeknownst to them, pay for them through higher taxes and imposts, such as in the exemplary case reported by Professor Alberto Vannucci in which “a backhander of 950 thousand euros paid to the mayor of a municipality in the Milanese hinterland would be recovered, among other things, by raising families’ gas bills with an extra cost of 0.04 euros per cubic metre, that is, 17 per cent more, corresponding to what the municipal company paid to the supply company”.12

However, what weighs equally, if not more heavily, on the public administration are the economic costs caused by corruption, negligence and bad management. In addition to the “direct costs” mentioned above, as underlined by the Commissione per lo Studio e l’Elaborazione di Misure per la Prevenzione della Corruzione (the commission responsible for studying and drawing up measures to prevent corruption), we also need to take into consideration the additional costs that are less easy to identify but perhaps weigh even more on the economy and efficiency of the national system: “delays in defining administrative practices; malfunctioning of the public tools and mechanisms to monitor the collective interest; inadequacy and even pointlessness of some public works, public services and supplies; imprudent allocation of the already scarce public resources; loss of competitivity and the brake placed on the country’s growth”.11

Davide Del Monte TI-Italia Project Officer

In a situation like the present, of a country thrust into a dramatic and ongoing economic crisis, it is no longer tolerable that similar behaviour takes place. In their heart, every citizen must feel involved and, as far as possible, take action personally to request utmost transparency, integrity and responsibility from those who hold the delegated power.

This list of the indirect costs of corruption has been taken from the white book on “La corruzione in Italia. Per una politica di prevenzione” (Corruption in Italy. For a Politics of Prevention) published on 22 October 2012 by the Study Commission for the Drafting of Corruption Prevention Measures. 12 Atlante della corruzione by Alberto Vannucci, EGA-Edizioni Gruppo Abele, 2012. The quotation can be seen in full on the web site “Riparte il Futuro”, the campaign promoted by Libera and Gruppo Abele: http://www.riparteilfuturo.it/tag/costi-della-corruzione/ 11

14 // 04. GENERAL SECTOR OVERVIEW

04.

GENERAL SECTOR OVERVIEW

What is the general state of health of the Italian National Health Service where the phenomenon of corruption takes root?

International assessments13 recognise that the Italian health system provides a good level of services with costs that, albeit representing a significant portion of public spending, are in line with other OECD countries.14 Italy is within the OECD average both for life expectancy at birth : GDP per capita ratio and for the life expectancy at birth : health expenditure per capita ratio.15 The resources used for health in 2011 account for around 75% of the regions’ current overall spending16 and in recent years there has been a continuous growth trend,17 which nevertheless experienced a turnaround in 2011-2013 following specific regulatory forecasts. As of 2011, overall spending, amounting to around 112 billion euros, began to decrease by 0.6% compared to the previous year, with a reduction in the percentage of GDP from 7.3% to 7.1%. The cost items that weighed most heavily on the total were: staff (32.2%), purchases of goods and services (31.3%) and NHS drug spending (8.8%).18 The OECD report gives a positive judgement of the quality of care, against a slightly lower amount of expenditure than average. However, Italy is in last place for spending on prevention programmes and public health policies19. In terms of health, Italy20 ranks third in Europe for life expectancy, and within the EU average for the GDP : life expectancy ratio. Child mortality (one of the indicators generally used to measure the level of efficiency of a country’s health system) is lower than the EU average, with a rate of reduction in recent years among the best in Europe.

In terms of resources, with respect to the EU average, in Italy there are more doctors and fewer nurses per inhabitant, while equipment levels have increased significantly. From 1997 to 2010, the number of tomography (CAT) and nuclear magnetic resonance (NMR) scanners has increased six- and twofold respectively, making Italy the country with the highest number of CATs and NMRs per inhabitant in Europe, together with Greece and Cyprus.21 The availability of beds in Italian hospitals is a lot lower than the EU average (3.5 per 1,000 inhabitants, against an average of 5.3; in Germany the figure rises to 8.3), with one of the highest levels of reduction per year in Europe (-2.9% per year, EU average -1.9%). Italy, once again with Cyprus and Greece, occupy some of the top places in Europe for the consumption of antibiotics, both in absolute terms (daily dose, DDD) and in growth trends (between 2000 and 2010). The worst data emerges from spending for prevention programmes, which puts Italy in last place with 0.5% of health spending (EU average 2.9, Romania in first place with 6.2%). According to ISTAT, the Italian statistics institute, Italian public health spending is lower than that of other European countries. “At equal levels of buying power, against just over 2 thousand dollars per capita in spent in Italy in 2007, France spends 2.844, Germany 2.758 and the United Kingdom 2.446. Spain, the Netherlands, Greece and Portugal have lower spending levels per inhabitant than in Italy”.22 This analysis is also confirmed in the studies published by CERGAS-Bocconi.23

04. GENERAL SECTOR OVERVIEW // 15

Column C

Column E

Column D

Column F

3.052

2.894

2.862

2.636

2.504

2.345

2.282

2.244

2.171

2.097

1.869

1.783

1.785

1.614

1.450

1.231

1.068

995

972

821

745

677

4.156

4.056

2.524

1.152

902

899

714

619

EU-27

FYR

3.337

3.383

3.058

3.439

3.607

3.890

4000

5000

3000

2000

1000

ILLUSTRATION 3 - Health spending per capita. Source: OECD Health at a Glance, 2012

employees: 36 bn €

procurement: 34 bn €

drugs 9,9 BN €

private health 8,9 BN €

other: 22 BN €

ILLUSTRATION 4 - Composition of health spending in 2011 ELAB: RiSSC

OECD, Health at a Glance 2011 – Main results: Italy: “In Italy in-hospital case fatality following a heart attack or stroke is lower than the OECD average. Italy does well also in avoiding hospital admissions for people with chronic conditions such as asthma, chronic bronchitis and diabetes. Italy is close to the OECD with regard to the percentage of women screened for breast cancer, but is behind in screening for cervical cancer. [...] Italy spent 9.5% of GDP on health in 2009 (against 8.1% in 2000), slightly less than the OECD average of 9.6%. Spending per person is also slightly lower than the OECD average”. Source: http://www.oecd.org/els/health-systems/49084476.pdf (in Italian), accessed 13.06.2013. 14 According to Piacenza and Turati (2013), despite spending less than other comparable public systems, the Italian national health service does well in terms of quality (average) of the services provided and figures among the top positions in the international rankings on the overall assessment of health services. 15 OECD, 2012, p. 17. 16 Opening ceremony for the 2013 legal year– Report written on the activity in 2012 of Luigi Giampaolino, President of the State Auditors’ Department (Corte dei Conti). 17 The average annual increase was 6% in the period 2000-2007 and 2.4% in the four years from 2008 to 2011 18 Source: http://www.quotidianosanita.it/governo-e-parlamento/articolo.php?articolo_id=10402. 19 OECD (cit.) and Il Sole 24 ore, Speciale Sanità (health special), 22-28 January 2013. Source: http://www.sanita.ilsole24ore.com/pdf2010/Sanita2/_Oggetti_Correlati/Documenti/In-Europa-e-Dal-Mondo/EUROPA_2.pdf?uuid=710aea9c-6568-11e2-bd27-3c524e377c12. Accessed 13.06.2013. 20 The figures shown below are taken from OECD, 2012, Health At A Glance 2012. 21 There is no benchmark for the ideal number of CATs and NMRs per inhabitant, nevertheless the report notes that “an excessive number [of CATs and NMRs] can lead to the abuse of these expensive diagnostic procedures, with minimal or no benefits for patients” (OECD, 2012, p. 74, own translation). 22 ISTAT – public health spending, available on http://noi-italia2010.istat.it/index.php?id=7&user_100ind_pi1[id_pagina]107&cHash=39abf23d62, accessed 13.06.2013. 23 Armeni P. and Ferrè F. 2013. “La spesa sanitaria: composizione ed evoluzione”, in Rapporto OASI 2012. 13

16 // 05.RESEARCH METHOD

05. research METHOD The research intends to explore the phenomenon of corruption in order to identify the main drivers behind corruption within the National Health Service, which can give cues for drawing up risk analysis models and early warning systems. 24

The analysis was carried out in the following stages: definition of the concept of corruption; definition of the research method; data collection and analysis; elaboration of the results. Furthermore, the research comes up with 15 proposals to lessen the effects of the drivers of corruption in the health system. The proposals were selected and investigated by a group of experts and validated by the project’s advisory board. They are a starting point for the advocacy phase of the project and will therefore be developed and described in more detail in a follow-up stage to this document. The report does not aim to measure or estimate the (real, presumed, official or perceived) corruption in the health system; nor does it not analyse its (direct or indirect) costs or calculate a hypothetical risk of corruption. Where possible, we include results from other studies that can help to interpret the phenomenon. The Concept of Corruption The analysis is based on the concept of corruption meant as “abuse of delegated power for private gain”,25 which includes both the cases of fact provided for in the Criminal Code and conduct in which power or public service is distorted to private advantage. They are situations in which striving to obtain private (or personal) gain interferes in the performance of an activity in the public or collective interest (Libera/CORIPE, 2013, 33), resulting in the breach of public administration best practice and impartiality principles, or minimum duties of diligence, loyalty, impartiality and exclusive service to take care of the public interest.26 As a result, the research does not include phenomena of health service failures in

which there is no psychological element on the part of those involved to obtain private or personal gain to the detriment of the public interest. We have not analysed wastefulness in the health system, inefficiency, negligence, favouritism, nepotism, conflict of interest or breaches of obligations set out in the employment contract when they are not part of a profit-orientated criminal set-up. We did consider situations of corruption with direct monetary payments or other economic benefits, or with indirect advantages towards third parties, or with non-economic ends (prestige, career possibilities, electoral success), obtained beforehand (bribes) or afterwards (kickbacks). The cases of corruption examined comprise vertical forms of corruption, which include subordinated corrupted-corruptor relationships of a hierarchical (including the public-private relationship) or economic nature. We have not considered horizontal forms of corruption, that is, those in which equal subjects make agreements in order to implement illicit schemes (for example, agreements between private subjects to share public tenders and make bogus changes to prices). The definition includes both “grand corruption” and “bureaucratic corruption”.27 The first involves the top structures of a community, that is, the bodies allotted – because they are appointed or elected and therefore delegated by the members – to govern the community and implement its policies through the allocation of public resources. In this case, the corruption can affect public spending choices, which are directed towards more “remunerative” sectors instead of towards the more necessary ones, or the choice of the beneficiaries of these resources thanks to the possibility to set the “rules of the game”. It is a very

05.RESEARCH METHOD // 17

serious form of corruption, not so much for the economic dimension, as the general detriment caused to a country’s efficiency and development capacity. Falling into this category are relations between private interests and favourable regulatory provisions, which are often linked to legitimate (e.g. big companies, banks, professional categories) or illicit (organised crime) interests, and vote-buying, that is, adopting provisions to favour a private interest in exchange for the guarantee of electoral support. The second involves the public administration structure and its hierarchical relationships, within the public administration (superiors towards their subordinates) or towards the private party, supplier or service user. It goes from paying small sums to speed up (or not slow down) procedures (petty corruption), up to bribes linked to the abuse of decision-making power. Corruption in tenders or contracts with the public administration falls into this category. How the information was collected The study was mainly based on data collected through: • Analysing literature - study reports and official reports published by public and private organisations, academic literature, books, and grey literature (on-line sources, daily newspapers and journals, speeches at conferences, sentences) • Collecting sample cases - a random sample of recent cases of corruption in the health system, divided up by field of analysis (appointments, procurement, drugs, private health, negligence), from the last two years, selected using a search engine to find the situations given most media coverage in the years 2012-2013. We then added to the research by analysing the most significant cases reported in the main literature on the subject

selections were made thanks to recommendations from members of the Advisory Board, while some interviewees volunteered and others were issued a direct invitation. Then we checked whether the officials themselves would take part in the investigation. • A worktable (experts’ working group): the group involved 15 representatives from the following categories: armed forces, magistrates, journalism, trade unions, health authorities, associations, ministries, academia and private companies. The group’s main function was to select and assess the 15 proposals. • An Advisory Board: the work group involved 20 representatives from the following categories: armed forces, magistrates, academia, health authorities and certification bodies. The Advisory Board’s main task was to guide the analysis and validate the 15 proposals. The results • The work was tied up to produce the following results: A general overview of the phenomenon in the Italian health service and the difficulties in detecting corruption (ch. 7). • A criminological analysis describing the main corruption opportunities and vulnerabilities in the National Health Service (ch. 8). • 15 operating proposals to reduce the opportunities for corruption in the health service (ch. 9).

• In-depth interviews: with NHS officials, representatives of the armed forces and magistrates, academics and private companies. The first

The early warnings are drawn up on the basis of a set of qualitative and/or quantitative indicators of the level of corruption risk. In the literature, these indicators are also called red flags when they indicate a greater probability of corruption. The definition of corruption as “abuse of power for private gain” is quite widespread. For example, it has been adopted by the European Commission since 2003. See the Communication on a Comprehensive EU Policy against Corruption (COM(2003) 317 final), p.6 and the Communication on Fighting Corruption in the EU (COM(2011) 308 final), p.3, note. In the international literature, the concept of corruption is often combined with that of fraud, because the first is a subcategory of the second (PWC, 2013, p. 58). The analysis considers cases of corruption and fraud committed by state employees to the detriment of the public administration, because in both cases there is an abuse of power for the purpose of private gain, while cases of fraud or scams to the detriment of the health service are not considered when there is no illicit exchange between power and private interest. 26 See the State Employees’ Code of Conduct, issued with presidential decree no. 62 dated 16 April 2013 27 Jain, A., 2001, “Corruption, a Review”, Journal of Economics Surveys, Vol 15, No. 1: 73-75. 24 25

18 // 06. THE CORRUPTION PHENOMENON

06.

THE CORRUPTION PHENOMENON

The reasons for the corruption On 17 February 1992 the president of a historic care institute for the elderly in Milan was caught in the act of pocketing a backhander of seven million lire paid by the owner of a small cleaning company (5 per cent out of a tender of 140 million for supplies to the rest home)28. This was the start of Mani Pulite, or the Clean Hands operation. During the interrogations, he confessed that he had taken the first bribe in 1974, aged 30, when he was head of the technical office of a hospital in Lombardy. After serving his sentence and returning to the world of work, in 2009 he was arrested again (as “Mister 10%”) for corruption in the waste disposal sector29 and in 2012 he was again involved in an inquest for corruption in the health sector30. Why would a person with a promising political career, prestigious position and a high level of well-being stoop to commit a series of acts of corruption and repeat them even after he had been sentenced for those crimes? Different methods can be applied to explain corruption in the health sector: the rational choice, sociological-cultural and neoinstitutionalist approaches31. Rational choice theory upholds that a potentially criminal person32 decides to commit a crime based on a choice in which they balance the interest/benefit and risks/costs connected to their criminal action. If the risk of being identified, sanctioned and condemned is lower than the expected benefit, it is more probable that the crime will come to pass. On the contrary, if the perceived risks outweigh the possible earnings, this becomes a deterrent. The rational approach includes the psychological factor but leaves out personal motivations (why one breaks the rules or ethics) because they are less influential on the final choice than the perceived risk factor. Rational choice can explain both grand and bureaucratic corruption as well as potential systemic risk, that is, the possibility that among the same people or different people participating in the same environment

many more episodes of corruption will follow on from a first occurrence. This is because the corruption is based on an agreement among several actors in whose interest it is, having embarked upon the corruption, to keep it up in order to minimise their own risks. Game theory explains that this illicit cooperation, in which individual interests are put before collective ones, can become structural in the absence of preventive forms of moral or ethical reprobation or in the absence of tools to keep check on it, because it strikes a strategic balance for the participants (Massarenti, 2012).33 Going back over the Tangentopoli experience, up to some recent scandals, corruption systems emerge that have solidified in time. They are systems which everyone had to adapt to, to obtain results that would otherwise have been denied.34 The Court of Bari speaks of systematic reiteration of crimes based on a “systematic logic of distortion in choosing the contracting party for supplies to the public administration and in the appointment of top managers and head physicians.”35 But the decision to subscribe to, reject, or report the corruptive setup pivots around the single person, who chooses on the basis of their own principles and values. The socio-cultural approach can give a better explanation as to why in the occasions and cases of vulnerability described in this report, some subjects decided to corrupt (or be corrupted) and others did not, but almost no one reported the fact. In this case, we can speak of the moral costs of corruption, that is, the price that a person has to pay to breach the ethical, social, professional and cultural values of their social and community context. There are numerous pieces of empirical evidence on the slightness of this cost in Italy: above all is the need to run special advocacy campaign36 or make regulatory provisions so that people condemned for corruption are not included in the electoral rolls, and people who might even be condemned for crimes against the public administration can peacefully reside in parliament. During this research, for example, it emerged how the figure of whistleblower, translated into Italian

06. THE CORRUPTION PHENOMENON // 19

as “vedetta civica”, literally “community lookout”, by Transparency International, is seen as an “informer”, that is a betrayer, a spy, by public administration officials. The lack of moral price, or weakness of ethical inclinations, is the second conceptual back-up as to why corruption takes place in the health sector. A witness who works in a health organisation tells that over the years he has experienced the effects of medical malpractice on his own neck and that of patients. After reporting the anomalies to his health authority, and asking them, in vain, to intervene, he turned to the courts. As a result, he was subjected to a series of disciplinary measures, and was suspended with threats of sacking, accompanied by continuous invitations to resign or move to avoid being fired.37 But his is probably not an isolated case. Pinpointing corruption The main problem for analyses such as this one is how to collect reliable and precise information on corruption, a crime particularly affected by a hidden side. Corruption is an “evidently invisible” crime. On one hand, its negative effects can be evidently seen in the increase of costs, reduction of quality and lack of competition. On the other hand, it is very difficult to pinpoint corruption for five main reasons:

The main factor disguising this phenomenon derives from its consensual nature and the lack of coercion among the parties involved, in whose interest it is to keep it hidden. It is not in the interest of those involved to report the illicit act, which takes place to the mutual satisfaction of the participants in the agreement while its harmful effects become evident at a distance, often spread over a widespread platform of persons amongst whom there may be the final victims of the corruption. The nature of the crime, therefore, implies that it is in no one’s interest to report the matter, hence it becomes more difficult to pinpoint the corruption. As a consequence, corruption is defined as a “victimless” crime, or rather as resulting in widespread victimisation, because the criminal act results in no immediate negative consequences for anyone. The lack of close victims or immediate damage means that no news comes to light of a crime, because there is no evidence to start criminal proceedings (e.g. the body of a murder victim, the absence of a stolen item, signs of a break-in). For example, the victims of the collapse of a building constructed using materials revealed to be inadequate during the inspection but not disputed by the control bodies because they were corrupt are not able to uncover the illicit agreement when it is concluded, but they suffer its evil consequences in time. Another obstacle is the causal distance between the criminal event and its negative effects. For example, think of a case of over-prescription of pediatric hormones generated by bribes to GPs. The negative effects of the medical conduct may come to light after several years, and it will probably be impossible to demonstrate that some future illnesses can be traced back to that act of corruption. Or the case of

• • • • •

The consensual nature of the crime The lack of direct victims The distance between the agreement and the victimisation caused The sophistication of the criminal arrangements Its mixing with other phenomena of bad administration

30 31 32 33 34 35 36 37

Source: http://cinquantamila.corriere.it/storyTellerThread.php?threadId=ChiesaMario. Source: http://www.ilgiornale.it/news/arrestato-chiesa-ancora-tangenti.html. Source: http://espresso.repubblica.it/googlenews/2012/06/27/news/tangenti-torna-mario-chiesa-1.44512. For a detailed analysis of the three approaches, see Vannucci, 2013, p. 111 et seq. A potentially criminal person is someone with an inclination or predisoposition to commit a crime should the opportunity arise. It can be someone who has never committed a crime, or a repeat offender. For a simple explanation of game theory applied to corruption, see A. Massarenti, 2012, Perché pagare le tangenti è razionale, ma non vi conviene, Guanda ed.. The term “dazione ambientale” is used to explain an organised context of bribes calculated as percentages to pay to the political parties depending on their importance. Recently, there has been talk of “corruzione gelatinosa”, a “sticky” system of apparently disconnected persons who, however, on the basis of a hidden corruptive agreement, exchange favours in a context in which they are all linked together. Court of Bari, sentence rejecting the motion for precautionary measures for various people under investigation. The text is available on http://inchieste.repubblica.it/it/repubblica/rep-it/2012/06/21/foto/tedesco-37643087/1/#10 The recent “Get Corruption out of Parliament” campaign promoted by the Libera and Avviso Pubblico associations. The witness asked to remain anonymous.

28 29

20 // 06. THE CORRUPTION PHENOMENON

indirect bribery, that is, committed by way of actions carried out as part of official duties, for example in the case of corruption to win a tender. In these cases, not only is it difficult to quantify the harm caused (in this case to the public who have not received the most efficient service), but it is also complicated to demonstrate that the damage to the public derives – in full or in part – from distant causes of episodes of corruption. The phenomenon also cannot be detected owing to the sophistication of the criminal arrangements behind the corruption, which has abandoned the old service-for-bribe model to instead involve several people and circular circuits of services, which makes it difficult to come to the criminal agreement at the basis. With corruption, the illicit act is no longer bought, the credit-debit is “securitised” and transferred to the participants in the arrangement in different forms (e.g. works, services in kind, hirings, insurance policies, holidays, services...). The old Tangentopoli system had created a network of all-pervasive corruption (“corruzione ambientale”, see note 34) which aimed to fund the political parties while overlapping with normal public procedures. Once this system had been rooted out by the courts, the corruption phenomenon became more sophisticated. According to Davigo, leading magistrate in the fight against corruption, this evolution led to a natural selection among the corruptors, leaving only the most skilled on the playing field. The figure of the corruptor with the “backhander” now belongs to the past or to specific situations of little importance, such as the case of the public official given the odd bank note by members of the public appearing in his office to deal with their procedures. These days corruption takes place through large collusive arrangements, with structured groups that follow shared codes of conduct, to breach or bend the rules for their illicit gain. What might take place in these complex mechanisms is that the entrepreneur provides a service to a person (the so-called fixer) who uses his good relations with a politician so that the latter can orientate the work of the public officials to the advantage of the subject who began the process. It can be the politician, or the fixer, or the official who begins the process, and it always ends in a shared advantage for all the parties, so that no one is driven to break the criminal pact or

reveal the set-up. In some contexts, the corruption becomes a real and proper criminal system, a systematic method of violating the law that concerns several subjects, some directly involved in committing illicit acts and others instead who take part in the system by accepting the “widespread mentality” or through activities of “support, favouring and acceptance”.38 The impact of such a criminal system is much greater than the sum of the consequences of the single crimes. Lastly, by its nature, corruption mixes with other phenomena which go to characterise the iniquitous action, both criminal activities and the bad performance of public administration, deriving from scarce management skills and situations of the wastage of public resources. The cost of a public tender does not always depend on corruption, but we also need to consider other costs that are neither justifiable nor illicit, such as the cost of bureaucracy, the cost of supplies, the cost of unfair competition. Furthermore, the outlines of the corruption phenomenon are blurred compared to other types of bad management, inefficiency or waste, which cannot be sentenced as a crime, but damage the public and the good performance of the public administration. Inefficiency in procurement amounts to around 18%, 13% of which is corruption (PWC 2013). “Making a systematic assessment of the evolution of corruption processes or crimes against public administration, we go from pervasive bribery and corruption [dazione e corruzione ambientale, see note 34] to systemic corruption, as the corruption mechanism has progressively evolved. The model of interference in the health sector has progressively expanded to various mechanisms: first spending, then supplies, then accreditations, and so on. The overall system also involves ‘Farmatruffa’ [false prescriptions of drugs in exchange for personal benefits], another enormous expense that weighs on the system, and funding to support the health deficit.”39 Mr Antonio Laudati, public prosecutor’s hearing at the Court of Bari, in the Parliamentary Inquest Commission on the effectiveness and efficacy of the National Health Service (Commissione parlamentare di inchiesta sugli errori in campo sanitario e sulle cause dei disavanzi sanitari regionali), 85th session. Stenographic report no. 82, p. 11. 39 Mr Laudati, public prosecutor’s hearing, p. 13

06. THE CORRUPTION PHENOMENON // 21

Measuring corruption Pinpointing corruption is difficult, but quantifying it with any precision is impossible as the official data available on corruption is not sufficient to explain nor to outline the phenomenon. As a result, the measures against corruption40 are based on estimates and are subject to certain levels of indeterminacy (tab. 1). In 2011, basing its findings solely on official data, SAET, the Department for Public Administration’s anti-corruption and transparency office, presented the image of a totally marginal phenomenon: “of every 1,000 crimes recorded in Italy, one is against the Public Administration” and “for every 1,000 state employees, there is one crime reported against the Public Administration”. But the official figure does not account for either the difficulty in detecting and reporting episodes of corruption, nor does it consider the problems connected to the present regime of time limits41 which cause the winding up of criminal procedures, with most of the guilty parties going unpunished. Therefore, the so-called hidden side to the crime is ignored, making the official statistics42 lacking and unrepresentative of the phenomenon (Vannucci, 2012). In addition to the official statistics, corruption is generally measured in an indirect form through information collected from stakeholders (perception or victimisation surveys) or proxy indicators which measure the risk of corruption (or the rate of integrity).43 Examples of the first type are the Eurobarometer, the World Bank Worldwide Governance Indicator - Control of Corruption (CoC), or the Transparency International (TI) Corruption Perception Index (CPI), as well as national

studies: a recent survey by Censis found that 87% of Italians, against the EU average of 74%, are convinced that corruption is a serious problem and 43% single it out, together with the moral crisis of politics, as the main cause of the current economic recession (Censis 2012). The second type of indicators are, for example, the TI National Integrity System, or the Global Integrity Report, by Global Integrity. These surveys on corruption phenomena produce values that do not indicate the quantity of corruption in a country, but enable us either to compare countries or identify, among sectors of the public administration, those which are most corrupt,44 as well as analyse changes in time. Recent analyses (Pippidi 2013) have found that these indices are very consistent, as they show significant correlations despite coming from different sources and using different methods. A study published by PWC for OLAF, the European Anti-Fraud Office45 in 2013 underlined that the public money wasted in corrupt or suspect public tenders (cases of suspected corruption) accounts for 18% of the overall tender budget, 13% of which derives from the direct cost of corruption. These costs derive from: overblown expenses, delays in completion and loss of efficiency. In all, the direct costs of corruption in the eight countries and the five sectors analysed are estimated at between 1.4 and 2.2 billion euros for 2010.

For an analysis of the mechanisms to estimate corruption, see Vannucci A., 2102, Atlante della Corruzione, Gruppo Abele edizioni. A critical analysis can be found in: Servizio Anticorruzione e Trasparenza, 2011, Relazione al Parlamento. Anno 2010, pp. 76-77. See also the very recent Mungiu-Pippidi (ed.), 2013, Controlling Corruption in Europe – The Anticorruption Report, Vol. 1, pp. 9-13. 41 According to current regulations, the time limits for sentencing the crime of corruption commence from the date when the act was committed, for the whole term of the procedure in the three instances of judicial review, creating the conditions to make it almost impossible to sentence for corruption. The reduction in the prescribed penalties for corruption crimes contained in law 190/2012 has decreased these limits further, also for ongoing cases, raising significant protests from the magistrates. For more information on the time limits, see Transparency International, 2010, Conto alla rovescia verso l’impunità. Available on http://issuu.com/nisitalia/docs/sol_completo/1. 42 The quantity of certain corruption depends on the number of sentences awarded in court or on the number of reports of crimes according to laws no. 318 et seq. of the Criminal Code, published in the annual official statistics reports. 43 Some international indices focusing on corruption are based on collecting opinions (perception indices) or assessing objective elements (integrity indices), which can only indirectly be traced to the risk of corruption, such as: the relationship between state powers, government autonomy, electoral system, party funding system, media freedom of speech, and the possibility to do business. Among these are Global Integrity (by Global Integrity) and the National Integrity System (by Transparency International). Other international indices take corruption into consideration in a less direct way. Among these is the Quality of Governance survey drawn up by the University of Gothenburg. 44 The perception surveys cannot measure a phenomenon in quantitative terms, but they are sufficiently accurate to draw up historical series, make comparisons between countries, and to single out which sectors are most affected by the phenomenon. Comparative studies have demonstrated that the results of citizens’ perception correspond with the results of the experts’ evaluations and with the results emerging from the victimisation surveys (Mungiu-Pippidi, 2013, 11). Therefore, despite being perception surveys, their results need to be taken into consideration. 45 PricewaterHouseCooper, 2013, Public Procurement: costs we pay for corruption - Identifying and Reducing Corruption in Public Procurement in the EU. 40

22 // 06. THE CORRUPTION PHENOMENON

Corruption in the public sector CRIMES OF CORRUPTION AND BRIBERY COMMITTED

from 311 cases in 2009 to 223 cases in 2010

PEOPLE REPORTED FOR CRIMES OF CORRUPTION AND BRIBERY

from 1,821 in 2009 to 1,226 in 2010

PEOPLE SENTENCED FOR CRIMES OF CORRUPTION AND BRIBERY

from 341 in 2007 to 295 in 2008

NUMBER OF PEOPLE INVOLVED AND CRIMES REPORTED FOR CORRUPTION AND BRIBERY

Increasing since 1992, reaching a peak of 2,000 crimes and over 3,000 people reported in 1995; went down by around one third for crimes and one half for people involved

NUMBER OF SENTENCES FOR CRIMES OF CORRUPTION

from over 1,700 in 1996 to just 239 in 2006

PERCEIVED FIGURES TI CORRUPTION PERCEPTION INDEX

Italy in 69th place, worsening trend

EXCESS PERCEIVED CORRUPTION INDEX, SSPA

Italy in penultimate place

WORLD BANK RATING OF CONTROL OF CORRUPTION

Italy among the last in Europe, worsening trend

EMPIRICAL DATA EUROBAROMETER

from 17% in 2009 to 12% in 2011 (EU average 8%)

Table 1: Source: Garofalo Report, pp. 193-194

DETAILS

CASE HISTORY

06. THE CORRUPTION PHENOMENON // 23

24 // 07. CORRUPTION IN THE HEALTH SECTOR

07.

CORRUPTION IN THE HEALTH SECTOR

The simplicity with which inefficiency, bad administration, waste and corruption prosper in the health sector may come as a surprise.

Corruption prospers when a “moral issue” and “criminal opportunities” combine. And distinctive aspects of the health sector in particular increase these opportunities and make it easy to commit this crime, or at least reduce the system’s capacity to control the problem. The problem of corruption in the health sector is well-known both in Italy and at global level. According to WHO, the World Health Organisation, “many, if not all [countries] do not manage to completely make use of the available resources, owing to badly executed tenders/purchases, the irrational use of drugs, bad management or allocation of technical and human resources, or owing to fragmented administrative and financial management” (WHO 2010, 61). In Italy, the State Auditors’ Department certifies that in the health sector, “episodes of disreputable dealings combine with aspects of bad management, at times favoured by the lack of control systems, with surprising ease” (Ristuccia 2011, 128-129). Numerous investigations have ascertained the diffusion of corruption and fraud at every level of the health system, through criminal set-ups of varying degrees of complexity and sophistication. Above all, these pathological phenomena concern the outsourcing – and therefore tendering – of services, external consultancy, and the phenomena of economic settlements.46 Furthermore, “the health sector presents unacceptable levels of inappropriate organisation and management that foster the already negative consequences caused to the general public by the frequent episodes of corruption” (State Auditors’ Department 2012, 265).

According to some research coordinated by CORIPE Piemonte, “unclearness, inefficiencies and illegality permeate all the health care systems, including the National Health Service, albeit with significant differences between the various areas and sectors”. The health sector is a genuine goldmine for those who live off fraud and corruption (CORIPE Piemonte 2013, 70). The Garofalo Report on corruption highlighted the high levels of corruption risk rampant in the health sector, mentioning the many situations that give rise to attempts of illicit conditioning: pointless spending, contracts concluded without a tender, competitions carried out in an illegal manner, illegitimate hirings and promotions, false and irregular prescriptions of drugs and the likes, breaches and irregularities in works and the supply of goods (Garofalo Report 2012). Owing to the lack of direct victims, it is difficult to measure the impact of corruption on available resources, quality and quantity of services, costs of tenders and the services provided, competition between companies, worthiness of careers, and the public administration’s impartiality and best practice towards citizens (Vian, 2008). And it is equally as difficult to measure the indirect impact, that is, the end consequences on the health of the citizens using the health sector. Estimates of corruption in the health sector The cases recently analysed range from a handful of notes paid to a doctor, to million-euro bribes paid by private companies to top regional managers. Beyond the amounts emerging in single episodes, the overall extent of the phenomenon is not known. In the health sector, it

07. CORRUPTION IN THE HEALTH SECTOR // 25

is not possible to isolate - operating with a surgeon’s precision – the phenomenon of corruption from bad management and waste. That share of health spending which does not contribute to fully achieving the right to health all gets mixed up in the general inefficiency,47 the public resources allotted to the health sector are limited, and every act of inefficiency takes away resources that otherwise would fund a service.48 It is the empirical evidence deriving from numerous judicial investigations, followed by court sentences, that confirms the existence of this extra spending, a dead weight hidden among the health sector’s costs.49 Piacenza and Turati have estimated that the average inefficiency of Italian health spending amounts to 3% (EUR 3.5 billion a year), with extremes at regional levels going from 0.7% to 25.7% (Piacenza and Turati, 2013). Recent restrictive tax policies have borne further proof of the existence of this extra cost, since in many cases the spending review managed to cut back spending without affecting the services.50 Piacenza and Turati showed that in Italy fiscal tightening only affects the inefficiency (extra cost) and has no real impact on the citizens’ well-being. Nevertheless, this experiment also allowed us to measure corruption by separating it from waste, inefficiency, thefts and other forms of bad administration. The difficulty of quantifying corruption in the health sector also depends on factors such as medical confidentiality, the economic and structural dimension of the public service, the number and type of actors involved, the quantity and nature of the services provided, and the difficulties in carrying out systemic checks.

According to the most recent estimates on corruption in health,51 the average estimated rate52 of corruption and fraud in the health system is 5.59% with an interval that varies between 3.29 and 10% (Leys and Button 2013). For the Italian health system, which is worth around 110 billion euros a year, this translates into around 6 billion euros a year taken away from care for the ill. It is not known how frequently corruption occurs in the various NHS spending departments, but all the sources agree in singling out the sector of procurement as the one most at risk. For example, the risk of corruption in the purchase of devices for mechanical, radiological, electrical and physical therapy amounts to 11-14%, according to a study by PriceWaterHouseCooper (PWC 2013).53 The public view is that health (in particular services resulting from tenders and bids) is a corrupt sector. 40% of the Italians interviewed – against the EU average of 30% - consider corruption to be widespread among those who work in the public health sector, a percentage that then rises to 59% for officials awarding contracts (EU average 47%), only exceeded by national politicians (67% Italy, 57% EU).54 According to the Bribe Payers Index 201155 health ranks seventh, but it is probably the sector in which citizens, especially the weakest, pay the highest costs for corruption, even paying with their lives. In 2005 Golden and Picci tried to draw up a proxy measurement of corruption in Italy from the difference between the quantity of public infrastructures and the interest rate applied to public loans (Golden and Picci 2005). In 2012 Avviso Pubblico, the association of local institutions against the

Hearing of the State Auditors’ Court regional prosecutor for Apulia, Mr Francesco Lorusso, at the Parliamentary Inquest Commission on the efficacy and effectiveness of the National Health Service, 77th session. Stenographic report no. 74, p. 4. The extent of inefficiency in economic terms depends on degenerative phenomena in the system, such as corruption, fraud, waste, bad administration, etc.. A minority line of thought upholds that corruption can bring benefits to the economy because it can speed up procedures, and overcome bureaucratic or regulatory problems. Therefore, corruption would increase efficiency. In effect, some studies have shown some positive outfall from corruption, but only in countries with a very weak institutional framework and corrupt and inefficient bureaucracy. This hypothesis is not applicable to Italy, as shown in recent studies (Castro, Guccio and Rizzo 2013). 48 According to Kumbhakar and Hjalmarsson, inefficiency in the output production process equates to excessive use of resources (input) compared to the optimal (minimum) need defined by a best-practice frontier (quoted in Piacenza and Turati 2013). A more simple definition identifies inefficiency as the part of the cost which can be taken away without affecting the service. 49 Even though it is not possible to make out corruption as an entry among the components of extra cost to the health system, it needs to be specified that a strategy capable of reducing this cost, without affecting the level and quality of the health services, necessarily leads to a reduction in corruption. This is because it eliminates the very presupposition for the criminal exchange, namely the availability of resources – those outside the efficient cost structure of the health services – for illicit gain. Better use of the resources in the health sector can therefore help to fight corruption phenomena, without threatening the citizens’ health, because it reduces wastage of public resources without affecting the quantity and quality of the services offered. 50 Some recent experiences in the Piedmont and Campania local health authorities seem to demonstrate how it is possible to reduce costs – at least for current expenditure – without necessarily having to cut services in proportion. 51 Button M. and Ley C., 2013. Healthcare Fraud in the new NHS market - a threat to patient care, the Centre for health and the Public Interest 52 The authors found a fraud frequency rate (FFR - i.e. frequency of fraud and error) of between 3% and 8% in 97% of the cases analysed. PKF and University of Portsmouth, 2011, “The Financial Cost of Healthcare Fraud”. 53 The study was carried out on the public tenders published in 2010 in five sectors (Urban/Utility Construction, Road & Rail, Water & Waste, Training, Research & Development) in eight countries in Europe (France, Hungary, Italy, Lithuania, the Netherlands, Poland, Romania and Spain). Public Procurement: costs we pay for corruption identifying and reducing corruption in public procurement in the EU. 54 EEurobarometer 76.1 – Attitudes of Europeans to Corruption, data for Italy. 55 The Bribe Payers Index measures the likelihood that company executives will accept the payment of bribes abroad. More information on the Bribe Payers Index 2011 can be found at the link http://bpi.transparency.org/bpi2011/. The sectors most vulnerable to corruption are public tenders and construction works, followed by the utilities, building, mining, energy production and health, seventh out of the 19 sectors analysed. 46 47

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Cases of corruption in the health sector 2012 ILLUSTRATION 5: Diffusion of corruption cases in 2012 – newspaper analyses. RiSSC elaboration of Avviso Pubblico data

> 10 8 - 10 6-8 4-6 2-4 0-2

mafia and corruption, partner of Libera, collected the cases of corruption that appeared in the national and local headlines to try to map out the phenomenon. From the result, shown in image 5, we can see how corruption in the health sector is not just common to some regions, but is widespread. Factors of corruption in the health sector The risk of corruption depends on some factors – defined as facilitators or drivers - which make it more favourable to commit the crime. These factors are general if characteristic of corruption, or specific if linked to the health sector. The general factors that favour corruption are the consensual nature of the crime, absence of direct victims, distance between the agreement

and victimisation caused, sophistication of the criminal organisation and combination with other underhand administration phenomena.56 The topic of the specific drivers is more complex. In the “Global Corruption Report 2006”, Transparency International pinpoints three specific factors in the health sector: 1) the information gap, both between health service staff and patients, and between medical device production companies and public officials responsible for health spending; 2) the complexity of the health system which makes it difficult to collect and analyse information, promote transparency, pinpoint and prevent corruption; 3) the uncertainty of the health market, meaning the difficulty on the

07. CORRUPTION IN THE HEALTH SECTOR // 27

part of the policy makers to foresee the diffusion of illnesses in order to allocate resources, in addition to the costs and effectiveness of the cures.57 According to CORIPE, the specific facilitating factors in the health system arise from a combination of the information gap and conflicts of interest, which occurs when primary health interests – that is patients’ health and the truthfulness of the research results – tend to be influenced by secondary interests such as economic gain and personal advantage. Corruption is facilitated when the information gap exceeds the “physiological” information discrepancy, becoming a conflict of interest. CORIPE outlines five spheres in which conflict of interest frequently harms the virtuous working of the health system (2013):

the supply and demand for services; 2) scientific information, which uses enormous amounts of capital for research, mainly from companies that produce medical technology or drugs; 3) intra-moenia, with the supply of professional services outside normal hours but inside the public place of work; 4) scientific societies, which define their members’ care standards and ethical codes of conduct; 5) the patient associations called upon to take part in public decisions, with structures, make-up and funding that are not always clear.

1) the health services market, in which professionals can influence both Consensual nature of the arrangement GENERAL CORRUPTION FACTORS

Distance between the criminal act and the negative effects it causes Sophistication of the criminal arrangements Connection with other phenomena

SPECIFIC FACTORS IN THE HEALTH SECTOR

GENERAL

Uncertain or weak regulatory framework

HEALTH SERVICE DEMAND

Information gap between user and the Health Service High degree of apportionment of the demand for health services Fragility in the demand for care services Great political interference in technical-administrative choices Great complexity of the system Wide powers and level of discretion in company and hospital choices

HEALTH SERVICE SUPPLY

State personnel’s low level of accountability Low ethical standards among state workers Information gap between Health Service and private suppliers Growth in private health Lack of transparency in use of resources

Table 2: The drivers behind corruption in the health sector

See the paragraph “Pinpointing Corruption” in ch. 6. The latter factor of corruption risk is not very applicable to developed countries such as Italy

56 57

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OPPORTUNITIES FOR CRIME The factors favouring the emergence of corruption in the health sector can be divided into opportunities or vulnerabilities, depending on whether we are dealing with “physiologies” or “pathologies” of the system: By opportunities for crime, we mean factors of the health system that, owing to their characteristics (what they are like, and how they work), increase the benefits or reduce the risks for the corruptor. Falling into the category of opportunities is, for example, the quantity of public money at stake, the complexity of the organisations providing the health services, woolly bureaucracy and an inadequate regulatory framework By vulnerability to crime, we mean factors of the health system whose degenerate nature or theoretical functioning increases the benefits or reduces the risks for the corruptor. Examples of vulnerability are a lack of skills and qualifications among the personnel, the moral issue, inefficiency of the control systems and connivance with organised crime. The distinction serves to define the proposals for improvements, because in the case of opportunities something needs to be changed, while for the vulnerabilities it is necessary to restore or implement what is already ideally provided for in the regulations.

OPPORTUNITIES Uncertain or weak regulatory framework Complex organisation Information gap Privatisation

Uncertainty/ weakness of the regulatory framework A regulatory system composed of a pointless and continuous inundation of contradictory regulations worsens the country’s general situation, often leading companies into a state of paralysis, forcing them to renounce their functions as tools of economic development.58 The set of rules regulating the NHS is complex and split into constitutional, state, regional and municipal regulations, plus planning acts and “private law” provisions adopted by the health authorities. The opportunities for corruption arise from regulations that are inadequate or not fully implemented, that do not clarify functions and powers, that allocate resources in a non-meritocratic way, or that use complex or ambiguous language.

VULNERABILITIES Political spoils system Moral issue/civic sense De-responsibilisation Ineffective controls Lack of transparency

Over the years, the National Health Service (NHS) has undergone three large reforms. Some also motivated by the need to fight the diffusion of disreputable dealings, they have been outlined by a never-ending series of acts to integrate, correct, fund, derogate, replan and rectif.59 Not one of these can be said to have been completed in a satisfactory manner. There is confusion as to which department holds sway with regard to protecting the right to health, especially in terms of equality among the regions. The basic levels of care, which should be the benchmark for the services provided, are applied unevenly in the regions as there are no shared quantitative parameters and no reliable data. Legally,

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the Health Authorities have public law status and are regarded as independent enterprises based on their effectiveness, efficiency and economy, while their organisation and operations are regulated by a “corporate deed under private law”. They are run by director generals appointed by the regional councils following vague criteria, with broad but undefined powers, as highlighted in the Garofalo Report. There are immense differences in regulations at regional level. Some regions give a forced interpretation of the regulations in order to favour some subjects, as has happened in the case of the “type B” social cooperatives provided for in law no. 381/91 (translator’s note: cooperatives which enable disadvantaged people to find work.60 In other regions in particular, the lack of health planning and programmes has led to a freedom of action to make agreements for marginal contracts, generating unbalanced situations which have discriminated suppliers, to the at times long-term advantage of the most unscrupulous. A lack of programming and original needs forecasting causes the instrumental use of so-called urgent provisions, which allow existing rules to be circumvented, or contracts to be extended, at times really stretching the rules. Furthermore, where there is most confusion, we see an explosion of lawsuits, which increases the costs for the public, and slows down the achievement of targets. At times, in situations of uncertainty, lawsuits are nevertheless used as a tool to force the result of a tender, especially in cases of renewal. Situations have been seen of reckless appeals which simply aim to suspend the outcome of the tender, so that the current company can provide the service and therefore claim payment. From the financial point of view, the rules have been written and amended time and again, often penalising the most virtuous management where the risk of corruption is lower. For example, in 2000 restrictions were adopted on the allocation of health expenditure

in the regional budgets only to be revoked in the space of just a few months, while the federal system implemented that year was partially repealed in 2001 in view of balancing the consolidated regional deficits. In recent years, regulations have come into being that reduce the risk of default by those less virtuous players (for example, by setting up a temporary fund that the regions can dip into in critical situations), or ad hoc provisions that discreetly settle situations of out-of-control debt. The region of Abruzzo securitised its debt with a British bank, through its controlled finance company, exploiting a loophole in the regulations, since derivatives signed by regions are banned in other countries, but not in Italy. The rules recently imposed to reduce health spending have resulted in cuts to national state spending. However, they often start from uncertain spending figures (especially for some regions), based on their spending history, rewarding those which spent most in the past. It is only in 2013 that it seems we are able to go beyond spending history to instead adopt standard costs as a criterion. However, the problem of a confused regulatory picture remains, generating uncertainties and therefore leaving room for corruption phenomena. Authoritative voices maintain that standard cost is useful, but it does not resolve the problem.61 Also in terms of repression, the weak regulatory framework increases the opportunities for corruption. The recent reform (law no. 190/2012) weakened the repressive system, reducing the prescribed penalties for some crimes (as well as shortening the time limits for lawsuits), increasing the types of crime (and as a consequence the risk that owing to this redefinition, the legal proceedings would have to start from scratch while the time limit remains the same), and leaving some forms uncovered, such as the unfair presentation of financial statements and self-laundering. Protecting whistleblowing is not sufficient to adequately guarantee those who want to denounce episodes of corruption.

G. Rossi, Il capitalismo malato non si cura in tribunale, Il Sole 24 Ore, 21 July 2013¬¬, http://www.ilsole24ore.com/art/commenti-e-idee/2013-07-21/capitalismo-malato-cura-tribunale-151742.shtml. The National Health Service was founded in 1978. It was soon to reveal problems of bureaucratisation, political interference and financial de-responsibilisation of the local health authorities (formerly USL). In 1992-93 the Italian NHS was reorganised, and the government was allocated the task of drawing up the National Health Plan (PSN) and basic levels of care (LEA); the regions were tasked with outlining the organisational and funding methods for the USLs and hospitals, as well as having a surveillance, assessment and control function. The last big reform, implemented through legislative decree no. 229/1999, better known as the “Bindi Decree”, aimed to make the various centres of power and local government levels responsible for meeting common targets. It introduced a tendentially regional and local health authority-based model, informed by the principle of vertical subsidiarity. The picture is complicated by the reform of Title V of the Constitution (November 2001) and has been subject to rulings from the Constitutional Court. See Lamberti L., Diritto sanitario, Ipsoa, Milan, 2012, p. 26. 60 Hearing of the chairman of the Public Contracts Supervisory Authority, Mr Giuseppe Brienza, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 108th session. Stenographic report no. 103, p. 4.. 61 PWC, 2012, and Quattrone M., 2013, A colloquio con Robert Kaplan: “Le prestazioni sanitarie è meglio pagarle in base agli esiti”. E i costi standard? “In sanità non esistono”, in QuotidianoSanità.it. 58 59

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Complex organisation The NHS reforms have led to reorganisation of the system at various governance levels. Health issues are the competence of various parties: the government for spending management, regions for organising the services, and local health authorities (ASL) for their internal organisation. The ASL, where citizens come into contact with the health network, are highly complex institutions owing to the great variety of services on offer, as well as the large number of users, employees and suppliers involved. This complexity can be seen in the number of health centres and structures in the local areas, which multiply the centres where the decisions are made - or centres of power - thereby reducing efficiency and increasing corruption opportunities, as numerous past studies have shown. Administration of the health sector takes place through a series of administrative acts made by the decentralised bodies, which escape all control, especially if we consider the widespread power enjoyed by the director generals. The “red tape” in public administration generates opportunities for corruption, but added to this complexity outside the health authorities is the complexity within, linked to the administration processes and internal organisation. The structure of the health authorities, in terms of budgets and size of the organisation, lends itself to a physiological degree of disorganisation. However, in some corporate contexts we also come across culpable disorganisation, linked to the lack of resources, skills and perhaps also the desire to make the system more efficient. Lastly, in other cases, we can see wilful disorganisation, aimed at creating an uncontrollable context in which illicit gain can be had. The greater the internal disorganisation, the easier it becomes to conceal the deeds resulting from collusive agreements, or simply from negligence. Corruption blooms in health authorities where disorganisation and bureaucracy live side by side. Regionalisation of the health service has increased the centres of power, while decentralising the management of resources and decision-making. The regions that - correctly - invested resources for more efficient management tend to increase their control over the public spending, and to centralise the control and purchasing systems,62 also by promoting comparative competitions, therefore reducing the opportunities for corruption. The region of Emilia-Romagna, for

example, has adopted protocols for health procurement for years, preparing tenders that guarantee real competition, and is organising vast logistical centres that replace the warehouses scattered around the regional territory. In Trentino, the intra-moenia system is subject to computerised monitoring that cross-checks information on bookings (through the central booking system), services, invoices and payments, and highlights any anomalies. In other regions, bad organisation of this complex situation has led to the multiplication of decision-making centres, an inefficient system and lack of control over spending and services. Recent studies show that decentralisation increases corruption when the division of decision-making power is accompanied by an overall increase in discretionary power, excessive bureaucracy, and low levels of transparency, accountability and social control.63 This happened with the reform of Title V of the Constitution, which transferred competence for the health service to the regions. As proof of this, the biggest corruption scandals in the health sector in recent years concerned the top - political and administrative - management of the regions of Abruzzo, Lombardy and Apulia.64 Information gap The information gap concerns the National Health Service’s relationship with the citizen-patient on one hand, and with the companies in the sector on the other. Citizens who have to satisfy their health requirements do not have sufficient information to do so. Therefore, they have to ask their doctor, who decides the appropriate services to protect their right to health. So far as possible, the doctors act using their own skills and, where necessary, request other health services in the capacity of the ill person’s agent, generating the demand for health service65 on their behalf through prescriptions. The doctors also distribute health services, especially through prescriptions for drugs, and are subject to attempted corruption by the pharmaceutical representatives. The information gap between the health system and the private companies that sell services and goods (above all medical devices and drugs) generates opportunities for corruption when the choice of a particular product or service is driven by the prospect of private gain. Choosing a particular product or service, made thanks to

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notable investments in research and development, means profit for the private company supplying it. Therefore, the doctor’s choice is fundamental in the sale of the product and corruption becomes a tool of persuasion. The gap causes serious problems to companies when it depends on the incompetence or ignorance of the public officials involved in the decision-making process. In some cases, the Public Administration does not have sufficient skills (experience and training) to deal with the companies and their innovations, therefore their choices are limited by inadequate, insufficient, obsolete or useless criteria, according to the case. In some cases, the incompetence is wilful, in order to permit the corruption scheme to take place. This is the case of the contract in English signed by a manager who does not know the language, or the appointment to a commission of “trusted” people who nevertheless lack suitable training. In this field, we need to cite infungibility, that is, when there are no diagnostic, therapeutic or technical alternatives for drugs, medical devices, health equipment or other health material, which can therefore be acquired by way of a procedure negotiated with a particular producer without publishing a tender beforehand.66 This procedure, provided for by the Tenders Code, implies a high risk of corruption, therefore infungibility should be verified by technical commissions, not just to avoid possible episodes of corruption, but also to verify - for the same services or prices – which choice can be better for the public health system.

Privatisation The proliferation of the corruption phenomenon is caused by the weak points in the public administration’s contractual activity. These concern the regulatory picture (excessive regulations in the sector) and structure (linked to the market characteristics), as well as the vulnerabilities in the various phases of the administration’s contractual activity (Garofalo Report 2012, 86). The Inquest Commission on the efficiency of the health secto67 has underlined the lack of controls, both in the procedures to purchase goods and services, and in the services provided by the accredited health structures. The responsibility for this lies above all with politics, as it reduces the “health administration’s autonomy” and is a “joint cause of bad management”. In Abruzzo “the members of the commissioner’s office needed to work hard (sic!) to outline legally clear and solid procedures (which exist in almost all the regions of central-northern Italy, but which unfortunately exist in hardly any of the central-southern regions) to define the picture of financial compatibility and contracts which the operators had to sign so that the relationship would not be terminated. This was in order to avoid that dramatic process which we are all too familiar with: urgent acts by the regional councils, the definition of spending ceilings, and appeals to the Regional Administrative Court [TAR] and the State Council; which would, in the great majority of cases (not just in Abruzzo, but in the whole of southern Italy), perhaps three years later, declare the provisions null and void owing to a fault in the procedure or to the lack of grounds, and then lumber the regional budgets with the previous years’ deficits, which are enormous”.68

Hearing of the directors of the Emilia-Romagna Regional Council at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 162th session. Stenographic report no. 156. For example, Various Authors, 2008, Political decentralization and corruption: Evidence from aroud the world, and Gugur, T. and Shah, A., 2005, Localization and Corruption: Panacea or Pandora’s Box?, World Bank Policy Research Working Paper Other studies (e.g. Shah, 2006) maintain that in the long term decentralisation reduces corruption because the decision-making centres are closer to the people’s control. But this happens in contexts where the social control over the phenomenon starts from the citizens, when there is a high level of transparency in the administrative action and accountability of the public officials, and therefore against the background of a highly structured and organised decentralisation programme. Shah, A., 2006, Corruption and Decentralized Public Governance, World Bank Policy Research Working Paper. 65 So-called defensive medicine is a public waste phenomenon caused by the tendency of GPs to request appointments and services that are not appropriate or not necessary for the patient’s care, generating a significant cost for the health service. AGENAS, the national agency for regional health services, estimates the cost of defensive medicine as 10% of the national health budget. Defensive medicine does not fall into the category of corruption, except in cases when the doctor receives personal advantages from prescribing services, for example, in the case of services provided by private clinics operating within the NHS. 66 Arts. 1 and 2 of the Molise regional health authority regulation for buying drugs, medical devices, other health material and devices declared infungible and/or exclusive. 67 Conclusions of the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, pp. 40-41. 68 Remark by Senator Cosentino during the hearing of Mr Ottaviano Del Turco, former chairman of the Abruzzo regional council, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 107th session. Stenographic report no. 102, p. 8. 62 63 64

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VULNERABILITY The Italian health system displays various situations of vulnerability to corruption. These derive from actions that aim to circumvent or avoid the best-practice principles set out in the regulations, or render existing strategies to control or fight corruption ineffective. Political spoils system69 The political spoils system in the health sector is so evident that no one can deny it. The same commission of parliamentarians that analysed the phenomenon of corruption in the health sector highlights this anomaly: “The lack of autonomy on the part of the health administration, in the face of pressure that may at times come from politics, in a sector where a large part of the public resources is spent at regional level, is without doubt another cause of bad management, both of purchases and relations with the private suppliers working within the NHS. From the Commission’s proceedings the necessity has emerged to introduce regulations to boost the autonomy of health authorities from politics, to that end identifying criteria to select the director general on merit, in other words, on the basis of suitable technical and professional qualifications for the job. Similarly, with regard to the appointments of other management figures, such as Health Authority department executives, it emerged that the director general had too much discretionary power. This needs to be reduced by introducing regulations that place more attention on professional skills, which are even more important for figures who must not enter relations of trust or closeness with the political directive bodies.” With regard to appointments, the situation has recently changed: the “Balduzzi” decree has amended the regulations for appointing director generals of the Regional Health Service authorities and institutions by creating regional lists which are only open to those with (at least) a degree and minimum management experience of five years in the health sector, or seven years in other sectors. The phenomenon has by no means disappeared, but the situation, as ever, varies from region to region. In Veneto and Lazio, for example, the regional councils had already made a move by entrusting a third party – either public or private – with putting together the list of candidates to choose from for the top positions in the health sector. In Campania, instead, there is abuse of the deferment system.

According to an inquest,70 “indiscriminate and anomalous use can be seen of article 18 of the national collective agreement which regulates appointments and substitutes: the twelve months provided for by the law are often ignored. [...] The problem is that tools which are nevertheless provided for by contracts or laws are used improperly to benefit various protégés.” Devised to guarantee shortterm continuity in the management of complex health activities, “this tool is no longer used as such but has in fact given the director general the authority to make appointments.” And, at this point, the management becomes “inventive: changerounds every two months at will, annual changerounds, indefinite stays in the role of substitute, and so on.” In Apulia, over 10 years, phone tapping has revealed a complex spoils system which always involves the political camp: secret agreements to condition the top brass in some hospitals to buy products marketed by a particular firm, pressure on GPs to prescribe these products, channelling of public resources towards the budget items devoted to these purchases, pressure to reopen completed tenders in order to allow particular persons to take part, meetings between fixers and politicians to define the allocation of tenders or executive appointments, and the endorsement of illegitimate accreditations. Equally as serious situations have occurred in Lazio, Abruzzo, Campania, Piedmont and Lombardy. All the main investigations into corruption in the health sector involve the top regional politicians, and the proof collected highlights the diffusion of political interference, which goes from the most remunerative tenders up to hiring a stretcher-bearer or warehouse man. Even when this evidence does not have sufficient support to constitute a crime – and therefore begin criminal proceedings – we have nevertheless uncovered a system of widespread and naturalised disreputable dealings. The District Anti-mafia Directorate (DDA) speaks of an invasion of politics in the health sector, having scrutinised a presumed network for management of the public health sector able to influence the appointment of health executives, the attribution of consultancy services, and the tender and accreditation procedures.71 In an ongoing procedure72 the former regional board chairman is under investigation for abuse of office for giving a local health authority director numerous recommendations of people to hire.

07. CORRUPTION IN THE HEALTH SECTOR // 33

They are requests on the regional chair’s headed paper which are protocolled, give the recommended people’s names and even include a list of requests. Some examples: “I recommend Mr [omissis] for the competition at your ASL for ambulance drivers” (December 2002); “Dr [omissis] whose CV is attached, employee of the ASL in..., will take part in the selection for the directorship of the district departments ... and his preferences are: - primary care, - child protection, - specialist practice” (May 2003); “The printers ... presently supply rubber-stamps to the.... ASL Please allow the printers... to supply the printed material while awaiting the official tender” (May 2003); “Please deal with Dr ....’s request for appointment at the Paediatric Unit... with the following experience: from... to... in the position of full-time substitute Assistant Doctor; from... to... in the section ... in the role of full-time assistant doctor; from... to... in the same position at the hospital of ...; since... in the position of full-time staff consultant, at the hospital of...” (June 2003); “please allocate the local health authority office ..., to another person. In his place, I would recommend Mr...”. As if this weren’t enough, by hand he adds “Dear..., it’s important” (May 2003). It is “very difficult” to resist, and the consequences of not obeying can even go so far as “being replaced or having to go, as you’re no longer to the political contact’s liking”73 Moral issue/civic sense The problem “does not concern the rules, which do exist, but the people”.74 The analysis of corruption in the health sector confirms what emerged from the “National Integrity Systems – Italy 2011” research conducted by TI-Italia and RiSSC (2012), according to which Italian society as a whole is not brought up to perceive and 71 72 73 74 75 76 77 69 70

reject corruption, in the same way as its sense of lawfulness is weak.75 This is shown by the results of the investigations into the perception of corruption, both among citizens and experts or companies, the lack of success of the whistleblowing tool, that is, of reporting illicit or suspect situations in order to prevent corruption in the Public Administration. During the research it emerged how this practice, regulated by law no. 190/12, is considered by the interviewees from the health sector as snitching rather than as a prevention tool, and is a source of tension among the personnel. The moral question also emerges from the lack of attention that the public administration and the world of training devote to ethics – meant as integrity and honesty – in particular with regard to the health system. For example, the word ethics is not quoted in the National Health Plan nor in the electoral programmes of the coalitions that in recent years have been in the running to govern the state and the regions. The lack of ethics emerges in the Garofalo Report: “From structural analysis of regional health spending [...] it becomes evident that careful promotion of the culture of lawfulness and public ethics is needed in this sector too.”76 The deputy public prosecutor Belelli refers thus to a case in Abruzzo: “the situation in Chieti was plain for all, the inspection bodies and the political authorities, to see […] the figures from the clinic were evident and visible and available to the regional council and regional health authority, but they were hidden, precisely because they were self-explanatory and they alone would have allowed anyone to cry scandal and corruption”.77 The consequence? The public officials, politicians and corrupt fixers run the public health sector as if it were a big cake to divide among them, with total disregard for the procedures, and the world of health, with very rare exceptions, prefers to remain silent or look the other way.

The paragraph is taken from the conclusions of the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, pp. 40-41. Fraschetti V. and Saviano, C., 2012, Sanità, dove per fare carriera non conta l’abilità ma il giro giusto. L’Espresso. Available at http://inchieste.repubblica.it/it/repubblica/rep-it/2012/02/28/news/meritocrazia_sanit-30646709/. Hearing of the Bari District Antimafia Prosecutor prosecutor, Ms Desirée Digeronimo, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 132th session. Stenographic report no. 126, p. 7. Source: http://www.ilfattoquotidiano.it/2013/10/11/commissione-antimafia-arriva-fazzone-lex-autista-di-mancino-che-blocco-scioglimento/740927/; http://www.ilfattoquotidiano.it/2013/10/25/antimafia-fazzone-sfida-su-raccomandazioni-fuori-prove- eccole/755801/. The letters can be seen on the web site: http://www.slideshare.net/ilfattoquotidiano/lettere-fazzoneadirettoreasllt2003ridotto. Accessed on 17/11/2013. Ibid, p. 10. Hearing of the public prosecutor Mr Nicola Trifuoggi at the Court of Pescara, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 130th session. Stenographic report no. 124, p. 9. According to Lorenzo Segato “integrity, responsibility and transparency are not inherent elements of citizenship or underlying characteristics of an employee, but they must be obtained by the law and its coercive strength. In a virtuous system there are not the conditions for the virus to take hold, because the anti-bodies are sufficiently strong to prevent the organism (the country) from falling ill.” National Integrity Systems presentation report - Italy 2011, Rome, 5 October 2012. Garofalo Report, p. 109. Quotes taken from the hearing of the deputy prosecutor Mr Giuseppe Bellelli at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 130th session. Stenographic report no. 124, p. 15.

34 // 07. CORRUPTION IN THE HEALTH SECTOR

Low Accountability At top levels, the quality of governance is rarely subject to assessment, as there are no independent and effective assessment systems to evaluate both the institutions’ performance and the quality of the actors’ conduct (TI-Italia and RiSSC 2012). The assessment and control systems are rarely entrusted to bodies outside the structure under evaluation; at times the controllers and those under examination may even be formally connected by economic or hierarchical relations. The control function that the officials in charge of the procedures should perform on the services provided by a private entity in a public contract is generally lacking.

Internal appraisal systems suffer from a corporatism and self-protection that in actual fact reduces control capacities. Director appraisals are almost always very positive, regardless of the quality of the services provided or the institution’s economic and financial management results. Despite the spread of voluntary codes of conduct and ethical standards, these rarely contain effective measures in terms of investigatory and sanctionary powers, or protection for those who report illegal activities. An emblematic incident is the case of the director of the Apulia regional council who in 2003 signed a contract with the Merrill Lynch bank to issue

“Anomalous” dealings regarding tender specifications to withdraw and re-publish after amendment

Entrepreneur :

But can’t you just quickly give “Gino” an external role [within the Public Administration]?

ASL director :

I can’t until we’ve finished the specifications.

Entrepreneur :

You can let me have it on a floppy disk let’s say, can’t you? Because if it needs tweaking... [...] I’ll get it ready for you and obviously I also have to prepare it based on the requirements that XXX or whoever... that’s obvious, because if not, I risk putting down different turnovers that maybe you don’t have and you don’t even have the requirements to take part”

Entrepreneur :

Here’s what you have to say: there are three lots, and these three lots still need to be redrawn... you’ve got to say: one XXX, one you and one YYY.

Fixer :

You do it all, then I’ll get the specifications, we’ll pick Enrico up, then we’ll come here to Rome (where no one’ll see us) again and you’ll say to, “Enrico, this, that... can you give me your specs? This is yours” and that’s it.

ASL director :

OK, let’s do it like that

Entrepreneur :

We’ll make three lots, we’ll make one bigger and we’ll bring ... with us and we’ll run it together. That is, I’m not that desperate for work

Fixer :

Whether we make an appeal or not, we’ll talk about that later, because it can be a good strategy to make an appeal then we don’t show that we’ve withdrawn it [the tender].

Entrepreneur :

I don’t think this division is going to work [...] For me the best solution was to spread it over other spending departments and come up with a bit more of a serious picture.

ASL director :

Yeah, we were just talking of doing something about this to spread...

DETAILS

Table 3: Source: full transcription of the tapped conversation between those present, held on 21.01.2009

07. CORRUPTION IN THE HEALTH SECTOR // 35

bonds to fund the health debt77 without having any skills or capabilities, and without making any controls. The director is given the task of “fulfilling all the necessary obligations with regard to issuing the bonds described above, completing the ISDA Master Agreement with Merrill Lynch Capital Markets Bank, completing the potential swap or loan sinking fund, while drawing up the contract documents, laying down the final conditions for issuing the bonds and the swap as part of the provisions in this resolution, and signing the relative contracts”. A director is tasked with concluding the operation. Despite knowing he is not up to the task, he signs in the knowledge that he can count on political coverage to avoid his responsibilities. The director does not know any English and he signs even before he has received all the documents (“you know how it is: a lot of times we decide on the documents before and they only get drawn up later. I don’t know if these things happen in some municipalities too”), he asks for a translation into Italian of the documents that he has already signed, but he doesn’t read it when it arrives, he signs “based on the reassurances from his colleagues”, despite having had “the impression that the regional council’s resolution [...] hasn’t been drawn up by the accounts personnel; I think – I want to be wicked – that it was the Merrill Lynch lot who did it”. Taking no responsibility, just obeying the token politician. The investigations would reveal ties between the political bodies and members of the banks that generated the transaction, which caused great damage to the regional revenue.80 Ineffective controls The fact that no checks are made, or that they do not work, or that they are only done ex post to fight the corruption phenomenon, belongs to the same system logic. In Italy, we prefer forms of control after the event and possibility outside the system, rather than internal prevention strategies. This involves high costs, because ex-post control mechanisms are a remedial approach that come into play after the system has always borne the direct costs

(bribe) and indirect costs (lower quality and higher costs in the Public Administration) of corruption. The control mechanism is the third cost of corruption, in the same way as a drug is the cost for care. It may happen that the controller and the person under examination may be one and the same, or that they find themselves in situations of conflicts of interest. In Abruzzo, for example, the official in charge of checking the services provided by a private clinic was married to an employee from the same structure. But there are countless cases, and no one feels the need to keep from the conflict. The health system’s vulnerability, created owing to the absence of effective prevention policies, allows the corruption to easily wheedle its way in, creating damage to the public system and at the same time private gain. The task of fighting corruption is therefore dumped onto whoever has the function of checking that the law is observed, that is, the armed forces, public ministers and the legal sector. This generates “a deformation in the relationship between the legal and Public Administration structures”,81 which tips the system of balance between the state powers and means that the demand for justice has now assumed disproportionate dimensions to the legal system’s capacities. “In the total continuing ineptitude of other powers of the state, that is, of ineffectual executive powers and the discouraging conduct of the legislative powers, the magistrates, judges or prosecutors are increasingly assuming an unjustly central role as effective substitutes for an easily criticisable, absent politics”.82 The regional prosecutor Tommaso Cottone has also spoken out on the subject, speaking of “an old pan-criminalistic culture that favours rigorous penalties over prevention and controls”.83 In Campania, to quote just one example, there are “significant factors of crisis at the level of system organisation. The Health Authorities still do not have regulatory and reliable accounting systems; moreover, they do not indicate analytical accounting parameters that enable accurate cost appraisals.”84 Again in Campania, the State Auditors’ Department has criticised the appointment of numerous external

The text of the transcription is available on http://inchieste.repubblica.it/it/repubblica/rep-it/2012/06/20/foto/hotel_de_rusie-37589270/1/#1. Apulia, regional council resolution no. 1129 dated 8 August 2002. 80 Quotes taken from the hearing of Mr Salvatore Sansò, former director of the Puglia regional council, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 104th session.Stenographic report no. 99. 81 Hearing of the prosecutor Mr Laudati, p. 17. 78 79

36 // 07. CORRUPTION IN THE HEALTH SECTOR

consultants to create the analytical programming and control accounting system, stripping the internal structure of its tasks.85 The reduced capacity of the legal system also damages the rights of those who want to act to really protect their harmed rights. This is the case of those patients who have to wait years for a sentence, but also the private companies operating in the sector now have to decide whether to act or not to obtain justice, or to renounce it, for example when they come across anomalies in a tender procedure. It is becoming so expensive to make an administrative appeal, what with the appeal and the additional instances of review, that it is becoming uneconomical to demand justice. Lack of transparency For decades, public administration procedures have taken place in the shade, away from the public view. The situation changed with law no.241/90, which made it possible for citizens having the subjective right and legitimate interest to access the information. In 2013 the government approved a series of regulations to increase transparency in the Public Administration. In fulfilment of the anticorruption law, implementation decree no. 33 was approved on the subject of the exposure, transparency and diffusion of information. The Public Administration has to publish on-line, in an open and reuseable format, all the data concerning the organisation, processes and costs (CVs, salaries and posts, tenders, budget forecasts and final budgets, etc.). This provision has two ends: on one hand, to shed light on what to date had been kept hidden and discover any corruption arrangements there may be; on the other, it acts as a deterrent to prevent any underhand behaviour. As far as the health sector is concerned, implementation of the provision can finally improve accessibility to data, which is too often denied in the name of privacy and confidentiality. In the past, it has happened that inconvenient data has suddenly disappeared. This is what happened for example in Abruzzo in the famous “Sanitopoli” case. In his hearing before the NHS Parliamentary Inquest Commission, Mr Pierangeli declared that not only did the region make a report disappear in an opportune moment, but that it also ceased to publish the data of the hospital performances on the official site when the Italian Private Hospitals Association, chaired by Mr Pierangeli, began

to point out some suspicious anomalies perpetrated over the years (Pierangeli hearing 2012, 8-12). Today we run a different risk:86 the quantity of information available to the public is even too great, nevertheless there are few doubts as to the lack of quality of this information and the difficulty in accessing the information needed for monitoring and assessment. The data is often obsolete (on the subjects of health and crime in particular, the official statistics arrive years late), imprecise, partial or even, in some pivotal cases, totally lacking. This prevents citizens, NGOs and the mass media from finding, discovering and making information on the factors that reduce the country’s integrity known to the wider public. Internet can play a fundamental role in filling this gap – at least in part, the “digital divide” afflicting Italy becomes a structural limit to this function. Furthermore, on the subject of health, in Italy we see the phenomenon of “lovers of privacy”: allegedly in the name of protecting privacy, the health system keeps confidential a great mass of data which has nothing sensitive about it, except for revealing how money is spent. The health authorities have analytical accounting systems divided into cost centres and responsibility centres, with data flows that are dealt with by the management control unit. The reality – as ever differing from region to region – is that the data is not used or diffused by the Directorate General to check organisational and individual performances, and therefore it is no use in underlining waste or anomalies.

07. CORRUPTION IN THE HEALTH SECTOR // 37

84 85 86 82 83

Rossi G., Il capitalismo malato non si cura in tribunale, il Sole 24 Ore, 21 July 2013,http://www.ilsole24ore.com/art/commenti-e-idee/2013-07-21/capitalismo-malato-cura-tribunale-151742.shtml. Speech by the regional prosecutor Mr Tommaso Cottone â&#x20AC;&#x201C; Inauguration of the legal year 2013, meeting of 2 March 2013 Speech by the regional prosecutor Mr Tommaso Cottone, p. 49. Conclusions of the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, pp. 40-41. The text is freely taken from Transparency International, 2011, National Itegrity System Assessment - Corruzione e Sistemi di IntegritĂ in Italia, p. 5

38 // 08. THE RECURRENT CRIMINAL PATTERNS

08.

THE RECURRENT

CRIMINAL PATTERNS

area

topic

problems

area

political interference

SELECTION

APPOINTMENTS

revolving doors

WAITING LISTS

NEGLIGENCE INTRA-MOENIA

spoils system

POWERS TRAINING PRICE

DRUGS

conflict of interest

PRESCRIPTIONS

REIMBURSEMENTS AND DISTRIBUTION

topic

unquestionableness

bogey increases patents bribes false scientific research fake prescriptions unnecessary prescriptions fake reimbursements

advancement of waiting lists diverting to the private sector false declarations non-payment of taxes lack of competition

WORK FOR NHS lack of qualification checks

discretionary power lack of skills

problems

hindrances to entry and lack of turnover

PRIVATE HEALTH

pointless examinations

REIMBURSEMENTS

false drg registrations false documentation

The public employees who work in the health sector have countless opportunities to be corrupted. An emblematic case is that of the “corpse market” that emerged in Lombardy in 2008 in which numerous nurses were corrupted by local funeral parlours to share out the deceased: backhanders in exchange for (lucrative) burials. 87

unnecessary tenders

PROCEDURES

incorrect procedures prejudicial tenders or cartels infiltration of organised crime

PROCUREMENT

lack of controls

SUPPLIES

false supply certificates breaches- undetected irregularities

In this chapter, we will examine five spheres of the health system that are often subject to corruption: appointments, drug management, procurement, negligence and private health. By analysing legal cases relating to investigations into corruption in the health sector, we have been able to pinpoint some recurrent critical issues in the corruption schemes. We then put these issues into context with regard to the sphere that they happen in and – where possible – to the economic damage caused in order to create a precise framework to slot the deviant phenomena into.

08. THE RECURRENT CRIMINAL PATTERNS // 39

appointments “Regardless of hypocritical assertions of independence, everyone knows that in every region, the main appointments in the Health Service at management level are made on the back of political choices. In the best of cases, there has been some sifting of the available human resources, even though the position is then offered to particular persons rather than others, by the government bodies, to the comfort of the political groups present in the various regional councils” (Mr. Tedesco, Member of the Senate) The Italian health system employs88 around 650,00 staff, of whom around 40,000 are managers and heads of department.89 In appointing them, there is a wide degree of discretionary power.90 Director general - They are appointed by the regional council with a contract of three-five years. They can only be removed if the budget is not balanced or for other serious reasons. Authority Administrative Director and Health Director - They are appointed by the director general and are invited directly, upon trust. The first deals with the economic management of the authority, keeps the budget balanced, and makes sure its actions are legitimate. The second is responsible for drawing up the authority health policy and manages the technical and organisational, hygiene and health sides of the authority’s activity. Head physician - The director general appoints the board that will select the group of candidates and chooses the doctor to allocate the position to from among the proposed names. Head physicians are top managers who do both medical-surgical work and plans and direct the activities of the unit or department which they oversee.

89 90 91 92 93 87 88

RECURRENT CRIMINAL PATTERNS The regional political authority has great discretionary power over the selection of director generals seeing as the requirements for the appointment, such as qualifications and experience, are not particularly restrictive. From the data collected, it emerges that this discretionary power is used to make choices based on political loyalty rather than competence, in order to give the directors “a more political than administrative mandate”.91 The appointment of ASL and hospital director generals is linked to the outcome of the regional elections, with jobs allocated to persons belonging to particular political areas on the basis of the votes obtained by the parties sitting on the council.92 The statement by Maurizio Ferrara is particularly eloquent: “The selection and appointment procedures respond to exquisitely political logics, everyone knows the director generals’ direct and indirect affiliations [...] the newspapers can quite easily publish regional maps with the parties’ symbols, and no one will deny it, it would not surprise anyone.93 It is the director general who holds the wide discretionary power in selecting both health and administrative directors. Relationships of trust with the political principal can cancel out that power of discretion, which is instead acquired by the politician in exchange for the appointment. Therefore, the independence of the figures in question is seriously compromised, in the same way as their capacity for reciprocal control. When the top figures are not longer to the politicians’ liking, owing to their “hijacking of the health sector”, the political parties use the failure to balance the budget to get around the spoils system ban and remove the people who are no longer “in line”.94 On the contrary, in other cases abuse is made of the extension procedure in order to allocate positions without having to go through

Consani M., Racket del caro estinto: i ras rischiano 4 anni, Il Giorno Milano, 2 July 2012, http://www.ilgiorno.it/milano/cronaca/2012/07/02/737812-cimitero-racket-caro-estinto-milano-processo.shtml. Ministry of Health, Directorate General of the health IT and statistics system, Statistics Office, 2010, Personale delle ASL e degli Istituti di cura pubblici - Anno 2010. In detail: 180 ASL director generals; 102 hospital director generals; 1,800 hospital department directors (chosen from among the department managers); 9,851 department managing physicians; 18,545 sub-department managing physicians; 5,606 “non-medical” department and sub-department managers (vets, pharmacists, biologists, chemists, physicists, psychologists and health profession managers); 2,702 department and sub-department administrative managers; 767 department and sub-department professional managers (lawyers, engineers, architects and geologists); 535 department and sub-department technical managers (analysts, statisticians and sociologists). HC Magazine, Chi sono e come sono nominati i 38 mila managers e responsabili di struttura del Servizio Sanitario Nazionale, 17 November 2009, http://www.hcmagazine.it/news/politica-sanitaria/chi-sono-e-come-sono-nominati-i-38-mila-managers-e-responsabili-di-struttura. The regulations for appointments in the health sector are set out in articles 3 et seq. of legislative decree no. 502/92 and subsequent amendments. AHearing of the deputy public prosecutor, Mr Paolo Toso, at the Court of Turin at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 151th session. Stenographic report no. 145, p.11. Statement by the Lombard doctor Luciano Bresciani contained in F. Pinotti (2012). Statement by Maurizio Ferrera taken from E. D’Annunzio (2010, 35).

40 // 08. THE RECURRENT CRIMINAL PATTERNS

public procedures. The Bari District Anti-Mafia Directorate has denounced the regional system in which the political bodies appointed the director generals and gave them (bribery by inducement) – at times demanded – the names of the administrative and health directors to appoint, precisely owing to the bond of association created with the appointments. This caused a “chain reaction” because, if you control the health and administrative directors, you also control the tenders and appointments of head physicians. All of this, according to the Public Prosecutor’s Office, with “the sole intent of guaranteeing votes in return, clients and funding during the election campaigns” for the politician, and illicit gain for the private party.95 The distorted system goes so far as to control the appointments at the lowest levels of the structure. Suffice it to think of the case mentioned of the recommendations for the position of driver. The entire mechanism seems to form a system at the service of politics, which enjoys wide-ranging powers, is immune from any responsibility and is not subject to effective forms of control. All elements which offer fertile ground for possible episodes of high-level corruption, and indeed the investigations from 2011-2013 involving the top figures in the health sector in some regions seem to go to prove this. In the regions where there is a public order to select the managers from, the criteria adopted for registration on the order seem to favour those with tested experience in budget management, but they display significant shortcomings in managerial training. The Balduzzi Reform changed this set-up by codifying the qualifications and experience needed and implementing regional registers. The problem of evaluating directors and managers is slightly different, albeit connected: the yearly planning is begun late so that it is not possible to set clear objectives; with no objectives, it is not possible to dispute any manager for their lack of work. Lastly, we need to highlight the revolving doors problem. The Garofalo Report highlights the need to “provide the complete picture of incompatibilities with top health authority positions, in particular for the phase subsequent to employment with the authority: they should

at least avoid, for one or more years after expiry, taking on roles and collaborating with companies that have business relations with the health authority and with entities, such as drug company or doctor associations, which held a large stake in their work as official”.96

The “spoils system” practice was declared unconstitutional by Constitutional Court sentence no. 224 on 21 June 2010. Hearing of the Bari District Anti-Mafia Directorate public prosecutor, Ms Desirée Digeronimo, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 132nd session. Stenographic report no. 126, p. 9. 96 Garofalo Report, p. 97.

08. THE RECURRENT CRIMINAL PATTERNS // 41

DRUGS The Italian regulatory system puts the following at the expense of the NHS: drugs purchased from the pharmacy network, except for the amount charged to the patient; direct distribution of category A drugs [translator’s note: non-payment essential drugs or drugs for chronic illness] for the purpose of reimbursement; and distribution on behalf of hospitals and for patients released from hospital. In 2012, over 591 million prescriptions were made out, with over 1 billion, 88 million packets of medicine paid for by the NHS. Every citizen received on average just under 10 prescriptions, and picked up 18 packets of drugs paid for by the NHS at the chemist’s (Federfarma 2013, 1). In Italy there is a widespread network of pharmacies. According to Federfarma (National Federation of Italian Chemist Owners) data, there are 18,039 pharmacies in Italy, with at least one in each of the 8,000+ Italian municipalities.97 At national level, a chemist’s serves on average 3,364 inhabitants, a figure in line with the European average (3,323 inhabitants). The number of pharmacies in Italy is nevertheless set to rise thanks to the provisions to encourage competition set out in art. 11 of Law Decree no. 1/2012.98 RECURRENT CRIMINAL PATTERNS In the pharmaceutical sector, there is a risk of corruption in every link of the so-called “drug supply chain” (World Health Organisation 2009, 1-2). The reason lies in the fact that, in their lives, the drug companies constantly have to do with the public powers. They depend on them for the emission of the permits needed to carry out numerous preliminary functions (e.g., building plants and starting experimentation), as well as in the indispensible steps for operating in

the drug market (e.g., checks on observance of the sector regulations, registration and calculation of drug sale prices).99 Drug research and development: In this phase, the main risks are linked to the scientific community that carries out the drug research. At the basis of this is its loss of independence because it is conditioned by drug company funding. In this sphere, payments have been uncovered of bribes to doctors and researchers so that they would falsify information in order create alarms about a particular problem, phenomenon or pandemic. Furthermore, at times researchers manipulate the figures: for example, they might only select the outcome indicators, or leave out the research results in order to only show a new drug’s benefits. Drug prices: The cost of a drug has to guarantee both a return on the investment and a profit for the company that develops it. Hence, new products are protected with a patent that enables them to be sold by the production companies only for the duration of 20 years. Upon expiry, other companies can market the same product as a “generic drug”, usually at a price of around 30% less.100 The legal cases have highlighted collusive agreements between drug companies and politicians to adopt laws regulating drugs. In particular, the corrupt politicians have tried to prevent or restrict the approval of laws in favour of the use of generic drugs because it would have led to a decrease in the sale of those covered by a patent, with a consequent drop in profits for the production companies.101 In another criminal scheme, false steps were created in the buying and selling of raw materials for drugs in order to inflate prices. False

Data from March 2013: http://www.federfarma.it/Farmaci-e-farmacie/Farmacie-e-farmacisti-in-Italia/La-presenza-delle-farmacie-sul-territorio.aspx. AArt. 11 “Strengthening the drug distribution service, access to pharmacy ownership and amendment to the discipline for the administration of drugs and other health provisions”: http://www.camera.it/_dati/leg16/lavori/stampati/html/decretolegge%5Carticoli%5Ccomponiarticoli.asp?CodiceBarre=16PDL0057500&NomeFile=16PDL0057500_Capo_III_Articolo_11_.html. 99 For more information on the topic, see Arena (2011). 100 Saluter, the Emilia-Romagna regional health service portal, http://www.saluter.it/servizi/farmaci/farmaci-equivalenti-o-generici. 101 Additional art. no. 30.0.4 to parliamentary bill no. S.1195. art. 30-bis. “Provisions to protect competition in the pharmaceutical sector” 1. The following has been added to art. 6 of law decree 347/2001, converted, with amendments by law no. 405/2001, and subsequent amendments, after clause 2-bis: ‘’2-ter. In order to guarantee competition and the correct functioning of the market, without prejudice to the regions and autonomous provinces’ competences in issuing guidelines on drug prescriptions, those regional acts and provisions are made null that guide or orientate the health service with indications of drug consumption targets to achieve, or limits to prescriptions by health service personnel, whose contents discriminate against drugs covered by patent.” Amendment not approved.. 97 98

42 // 08. THE RECURRENT CRIMINAL PATTERNS

invoices from offshore companies were used to place an additional barrier between the companies owning the patents and the drug companies. With this trick, the drug companies benefit from a reduction in taxable income, and consequently do not pay income tax. These set-ups create slush funds that can be used to corrupt public officials. Drug prescriptions: In the drug market, the figure of pharmaceutical rep links the drug industry to doctors and pharmacists.102 Their role is to illustrate the features of the drug that their drug company wants to market. The professional category of pharmaceutical rep has frequently been involved in legal inquests regarding cases of the corruption of tens of doctors all over Italy. The pattern followed is usually as follows: the rep offers the doctor gifts in exchange for prescriptions to their patients of the drug that they represent. At times, the opposite process can also happen, namely it is the doctor who asks to receive goods in exchange for prescriptions. It has been seen that the object of the exchange varies depending on the doctorâ&#x20AC;&#x2122;s professional profile. GPs and specialists are given goods that they can use directly, such as electronic products, dinners, holidays, etc.. Instead, head physicians are interested in asserting their position inside the department, hence they prefer contributions for the purchase of new machinery. Formally, the system works thanks to a service company that procures the goods for the doctor and then sends the invoices to the drug company, each time making them appear as expenses for the purchase of medical devices (Francese 2011).

proof that the medicine has been dispensed to the patient. The prescription will be sent to the ASL to obtain the reimbursement. In this sphere, the criminal scheme comes into being thanks to the compliance of doctors and pharmacists who use their office of public service to certify the false distribution of drugs. The doctors, unbeknownst to their patients, prescribe them drugs compatible with the illnesses that they suffer from. The prescriptions are delivered directly to the pharmacist who asks for reimbursement from the ASL. The pharmacist therefore obtains the payment for a drug that has not been sold which at this point, without the bar code, can be sold under the counter, thus obtaining twice the earnings, or, even if still useable, it is thrown away amongst the expired drugs.

Drug distribution: The procedure for the NHS to reimburse pharmacies takes place using the bar code on the drug packet. When the drug is sold, the pharmacist removes the code and puts it on the prescription as

Although there is no special order of pharmaceutical representatives, the professional figure is regulated by legislative decree no. 219/2006 which requires a degree in one of the following disciplines: pharmacy, chemistry and pharmaceutical technologies, biology and veterinary studies.

102

08. THE RECURRENT CRIMINAL PATTERNS // 43

TENDERS TO SUPPLY DRUGS

DETAILS

Authority for the Supervision of Public Works, Services and Supply Contracts (AVCP), Annual Report 2011, pp. 202-203

The careful analysis made by the supervisory authority on various tender procedures carried out by the administrations in question highlighted the following important issues: Little competition in a large number of lots concerning active substances protected by an exclusive right, consequently awarded at the initial tender price or through direct renegotiation with the company owning the patent if no tenders are received for a lot; A great deal of competition over a smaller group of lots, associated with active substances no longer covered by patents, on which sizeable reductions can be obtained, at times even in excess of 99%; Different ways of determining the initial price for the single tenders, at times calculated from the price of the active substance agreed between the production company and the Italian Drug Agency (AIFA) minus the obligatory discounts set out by the law, and, at other times, fixed on the basis of the prices at which previous tenders were won; Inclusion of specific clauses in various tenders which give the commissioning body the authority to extend/renew the contract for one or more years, with the consequent possible extension of the effective term of the contract and increase in the quantities bought under the same procedure; Renegotiation of the drug price carried out during the term of the supply agreement following expiry of the relative patent, often done with the winner alone, and without being reopened to competition according to the provisions set out in the code.

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PROCUREMENT “I saw that this system had degenerated to such a point that there was no longer any room for legality.” Mr Digeronimo, deputy prosecutor for the Bari District Anti-Mafia Directorate (DDA) Tenders are the biggest expense in the health sector, after personnel, but with a higher degree of elasticity and discretionality. In recent years, spending for the purchase of goods and services in the health sector settled at around 32-34 billion euros a year, that is, around 30% of the state’s overall spending on the NHS (Amatucci and Mele 2011).103 In percentage terms, it ranks second after spending on employees. The figure becomes even more significant when we consider that it grew by a rate of 8.4% in the period from 20012011.104 Following the amendments introduced by the Stability Law of 2013, the figures of tenders stipulated by NHS institutions for the supply of goods and services, with the exception of drugs, were reduced by 10% as of 1 January 2013. The most appetising illicit gain is concentrated in this sector which, in addition to displaying the “normal” risks of corruption linked to public tenders, has some specific features. Above all linked to the specific characteristics required by the products or services, they make corruption in health procurement particularly interesting.105 The main problems arise in both the phase of choosing the contractor and during execution of the contract. In the first (selection procedures), the corruption takes place: through violation of the normal selection procedures; through abuse of the infungibility of a product or service, or of accelerated procedures; by illegitimately extending existent situations; due to conflict of interest. In the second (provision of the goods/services), the corruption helps to avoid checks both on what is being provided, in order to obtain undue payments, or come to non-contractual agreements, including dispute settlements.

RECURRENT CRIMINAL PATTERNS Selection procedures: Recently, in the name of transparency, competition and simplification, the relationship between private companies and administrations has evolved through centralised buying and computerised tenders, such as the Public Administration’s Electronic Market for all purchases below the EU threshold.107 Countless criminal mechanisms are adopted by companies to win goods and service supply contracts to the detriment of competing companies, but generally they can be grouped into four main patterns. Access to information - The official is corrupted in order to obtain information in the public administration’s possession and gain an advantage over the other competitors. Customisation - The aim of the corruption is to influence the public administration’s selection procedure in order to give a private entity an advantage over the others. Often the illicit deeds are done by modifying the requirements (e.g. technical characteristics and performances of the devices and machines) of the goods and services that the health service needs. The topic of infungibility falls into this category. In this case, contracts are established with a private party for the supply of something with characteristics that cannot be found in any other competitor. Circumvention of the procedures - The aim of the corruption is to avoid tender procedures owing to the urgency of the purchase; by dividing the supply into several tenders below the threshold levels; or by including the agreement in other wider-ranging contracts and masking it under a different form.108 Among the various forms of circumventing the procedures, conflict of interest is insidious because it is difficult to trace. In some of the cases under analysis, it emerged that the same expert was first consultant for a company and then a member of the examining board. As a result, the assessor assessed his own work. Also falling into this sector is abuse of the disciplines of direct negotiation and in-house purchases for the sole reason of circumventing publicly visible procedures. Indeed, in a wellorganised scheme, they manage to provide the service - acquired in a non-transparent way - before the flaw is detected. Thus they generate the right to payment of the service on one hand, while all the harmed companies can hope for is that they might receive compensation.

08. THE RECURRENT CRIMINAL PATTERNS // 45

The studies carried out by AVCP highlighted situations of mis-administration that could hide acts of corruption.109 For example, when the base price is not shown in the tender, a substantial uncertainty is created over the charge that the administration will have to pay out. Global service contracts create a case unto themselves. In these contracts a series of services not inherent to the health sector – for example canteen services, management and supply of IT equipment, cleaning and maintenance, etc. – are entrusted to a single bidder for several years. In this case, it is more likely that fraudulent acts will take place: over time the controls on observance of all the specifications in the tender contract are decreased and often the companies make the most of this situation by gradually reducing the quality of the materials used and the number of employees allocated to the services, thus creating savings that transform into illicit earnings. “Global service contracts at times seem to come into being with the sole intent of preventing any comparisons or assessments of the spending and the different fields.110 In some bribery cases, a buying technician proposed that the company got supplies from a supplier with a discount, while invoicing the ASL for the full price. This way – the technician explains – the company can create a 5% margin at the ASL’s expense, which then has to be turned round as a bribe. In other cases, the technician obliged the company to use a subcontractor, from which the technician demanded kickbacks in the range of 7-10%.111 The analysis by PWC reveals that, “Most of the cases analysed (71%) displayed situations in which the tender procedure was distorted; the percentage was the highest among the sectors analysed. 24% of cases involved bribes paid subsequently (kickbacks) and 12% of cases were affected by conflict of interest, the lowest percentage among the sectors

analysed. Mismanagement is present in 6% of cases. The data shows a high level of active corruption by the contractor, with frequent episodes of bribery”.112 The risk of corruption in the sector of research and development in the therapy field (radiotherapy, electrotherapy, magnetotherapy, etc.) goes from 10% to 23%. The direct costs of corruption in this sphere – referring to eight countries and one year, 2010 – are estimated at between 99 and 228 million euros (interval 1.7% - 3.9%). Supplies: Once the supply company has been identified, the next step is the actual supply of the materials and provision of the services. The issue that emerges in this phase is the lack of correspondence between the services received and what was agreed on. Recurrent criminal patterns At times we see the corruption of doctors and public officials who falsely certify the receipt of materials and performance of services which in reality were never provided, thus enabling the health authorities to obtain payment for the issued invoices. In these cases, the illegal act committed falls into the category of misrepresentation. Fabrication also comes into play when the administrative documentation needed for the payment of services and works – never carried out – is completely false. The falsification mechanism is also widespread in the provision of lowtechnology services: works are certified that are not carried out or are carried out in a non-compliant way, counting on the difficulty to verify – and therefore to dispute – that they were not performed. This happens, for example, for the supply of meals, cleaning and laundry services.

According to AVCP, in the supplies sector, the National Health Service authorities are the most significant of all the public administrations for the number of procedures activated (46.8%) http://www.avcp.it/portal/rest/jcr/repository/collaboration/Digital%20Assets/Pdf/Relazione2011/AvcpRelaz2011_04.07.12.pdf. 104 “Beni e servizi sanitari. Boom della spesa: +8,4% annuo”, Quotidianosanita.it, 16 June 2011, http://www.quotidianosanita.it/studi-e-analisi/articolo.php?articolo_id=4431. 105 The purchase of drugs and services through agreements with the private health sector is dealt with in separate chapters. 106 The aim of Consip is to provide consultancy and planning, and organisational and technological assistance services for the public administrations in the field of the purchase of goods and services. Furthermore, Consip operates as a national commissioning centre and manages the programme for streamlining buying in the public administration. 107 The Public Administration Electronic Market is a virtual platform where private companies and the commissioning body meet to reach the best buying conditions. 108 An emblematic case of disguising an agreement in a different form is that of the supply of new equipment not by way of tenders but through a fake maintenance service that, in reality, piece after piece, replaces obsolete machinery with a new device. 109 To view the studies conducted by AVCP, please visit the link: www.autoritalavoripubblici.it/portal/public/classic/. 110 Hearing of the chairman of the Authority for the Supervision of Public Contracts, Mr Giuseppe Brienza, at the Parliamentary Inquest Commission on the effectiveness and efficacy of the National Health Service, 108th session. Stenographic report no. 103, p. 9. 111 Source: Parliamentary Inquest Commission on the effectiveness and efficacy of the National Health Service, 151th session. Stenographic report no. 145, pp. 22-23. 112 PWC, 2013, pp. 209-210. Back translation. 103

46 // 08. THE RECURRENT CRIMINAL PATTERNS

A second type of crime happens when criminal schemes aim to increase earnings through the instrumental use of lawsuits. In these cases – which happen above all where there are the greatest organisational shortcomings – the private party tries to make settlement agreements or changes to contracts to avoid the health authority sustaining the legal costs of potential appeals or requests for seizure. In other cases the disputes are “caused on purpose to obtain the extension of a service.113

The 27 red flags of corruption in procurement The recent publication of the report by PriceWaterhouseCooper, on behalf of OLAF, opened a new front in the research on corruption in public procurement. We deem it opportune to include the list of the 27 red flags indicating corruption risk included in the report, while reserving more time for more in-depth analysis.

DETAILS

Allocation of services by the local health authorities pursuant to art. 5 of law 381/1991381/1991 AVCP – Annual report 2011, pp. 205-206

On the basis of this provision, “regardless of the regulations on the subject of public administration contracts”, public institutions and government-controlled companies can stipulate special agreements with social cooperatives for the supply of other “goods or services” to social, health and educational ones, so long as the estimated amount is lower than the EU threshold and that the aim of said agreements is to create work opportunities for the disadvantaged. If these specific conditions are not met, it is not permitted to use said agreements; in the same way, this provision cannot be applied in the event of fake fractioning of contract amounts. [...]

As a result of our in-depth investigations, we were able to see that various social services for an amount exceeding the threshold were allocated by way of direct agreement and without performing a public procedure, in application of regional sector legislation which, in various cases, permits this for the abovementioned services and amounts. In particular, following the investigation we discovered that: Only in very few cases were the assignments made in clear violation of the legal limits on totals; while in various other cases, despite the apparent compliance with the regulatory diktat, the legal limits were avoided thanks to artificially breaking down the amounts of the stipulated contracts; The same service is often assigned through direct allocation to the same cooperative for several years and without any form of rotation. This discretion cannot be deemed permissible even with the conditions, object and amount indicated in art. 5; In addition to services instrumental to administration, the agreements often concern services to the public (e.g. management of bars or car parks), which cannot be deemed permissible pursuant to the aforesaid art. 5, as also recently highlighted in administrative case law, with specific reference to local public services. Furthermore, specific problems were also found concerning the laws on the subject of social cooperatives in some regions, amongst which Veneto and Apulia, which permit direct agreements to be extended beyond those cases indicated by the state regulations, or reserve participation in tenders to social cooperatives registered on the relative orders only, even in absence of the preconditions as per art. 52 of the Code of Contracts relating to reserved tenders. Lastly, further issues also emerged from the investigation that are not strictly correlated with the application of special legislation on the subject of social cooperatives. Indeed, in one case the tender documents were found not to specify the criteria for giving a score to the technical bid. In numerous other cases widespread use was seen of recourse to extensions or even renewals that were not considered in calculating the total figure for the assignment, made in the interim period before a new contract was awarded.

Hearing of the chairman of the Authority for the Supervision of Public Contracts, Mr Giuseppe Brienza, at the Parliamentary Inquest Commission on the effectiveness and efficacy of the National Health Service, 108th session. Stenographic report no. 103, p. 14.

113

08. THE RECURRENT CRIMINAL PATTERNS // 47

OVERVIEW OF RED FLAGS IDENTIFIED - INCLUDING ASSUMPTIONS ABOUT PATTERNS OF CORRUPTION

ASSUMPTION

SHORTER NAME

Strong inertia in the composition of the evaluation team of the tender supplier

Strong inertia in composition of evaluation team

Any evidence for conflict of interest for members of the evaluation committee (for instance because the public official holds shares in any of the bidding companies)

Conflict of interest for members of evaluation team

Multiple contact offices/ persons

Multiple contact points

Contact office is not directly subordinated to the tender provider

Contact office not subordinated to tender provider

Contact person not employed by the tender provider

Contact person not subordinated to tender provider

Any elements in the terms of reference that point at a preferred supplier (e.g. unusual evaluation criteria or explicit mentioning of the brand name of the good instead of general product characteristics)?

Preferred supplier indications

Shortened time span for bidding process (e.g. request on a Friday for a bid to be sent the following Monday)

Shortened time span for bidding process

Procedure for an accelerated tender has been applied

Accelerated tender

Size of the tender exceptionally large (average value plus two times the standard deviation)

Tender exceptionally large

Time-to-bid allowed to the bidders not in conformity with the legal provisions

Time-to-bid non-compliant

Bids submitted after the admission deadline still accepted

Bids after the deadline accepted

Few offers received

Number of offers

Any artificial bids (e.g. bids from non-existing firms)

Artificial bids

Any (formal or informal) complaints from non-winning bidders

Complaints from non-winning bidders

Awarded contract includes items not previously contained in the bid specifications

Award contract has new bid specifications

Substantial changes in the scope of the project or the project costs after award

Substantial changes in project scope/costs after award

Any connections between bidders that would undermine effective competition

Connections between bidders undermines competition

All bids higher than the projected overall costs

All bids higher than projected overall costs

Not all/no bidders informed of the contract award and on the reasons for this choice

Not all/no bidders informed of the award and its reasons

Contract award and the selection justification documents not publicly available

Award contract and selection documents not public

Inconsistencies in reported turnover or number of staff

Inconsistencies in reported turnover/number of staff

Winning company not listed in the local Chamber of Commerce

Winning company not listed in Chamber of Commerce

No EU funding involved (as % of total contract value)

% of EU funding (= 0)

Share of public funding from the MS is involved (as % of total contract value)

% of public funding from MS

Awarding authority not filled in all fields in TED/CAN

Audit certificates issued by unknown/local auditor with no credentials (cross-check reveals external auditor is not registered, not active or registered in a different field of activity)

Audit certificates by auditor without credentials

Any negative media coverage about the project (e.g. failing implementation)

Negative media coverage

Table 4: Red Flags for corruption in public tenders. Source: PWC, 2013, pp. 22-23

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Delays in payments and factoring companies

A [further] problem that can easily generate corruption is that of health authorities’ payments. Owing to the financial imbalances in many regional health systems and the reduction in resources, a lot of authorities often find it impossible to pay suppliers, private facilities working under the NHS, and pharmacies on time. The payment times of the public administration in the health sector are even longer than in other sectors.[...] In this context we must also remark how in order to meet the obligations connected to their activity, the private operators are frequently forced to cash in on their receivables by turning to factoring companies that – owing to the often great amounts owed to them – manage to make conspicuous earnings. Apart from the – of course marginal – risk that behind companies of this type, which are not direct branches of banking institutions, there may lie operations to launder money of illegal origin, the very management of receivables itself can be a source of unclear relations with the public administration.[...] And nevertheless, entities that are particularly strong in financial terms can create preferential relationships with single officials or employees allocated with distributing resources, and manage to get paid in a shorter time. As a result, they can profit in terms of pre-deducted interest and create a preferential channel that allows them, in future, to monopolise the sector – if you want to get paid quick, you have to turn to them – to the detriment of the single private entrepreneurs. To sum up, factoring risks becoming a sort of necessary mediation that chips into the private companies’ returns – and it can also indirectly influence the level of services provided. It gives entities outside those which should be the parties in a bilateral relationship a determining role of interlocutor with the public administration. In this picture, there need to be clear and transparent rules to reconcile the various operating requirements. These should identify the payments to be made first and the rules for the others: for example, payment in proportion, based on the size of the debt and the time that has passed, potential protection of employment, possible exceptions. The rules in question should not necessarily be set down by the law, and the single health authorities could be left a certain degree of autonomy in defining them. But similar rules should be established in general, they should be applied in a transparent way, and the payments made public.

DETAILS

White Book on Corruption, pp. 102-105

08. THE RECURRENT CRIMINAL PATTERNS // 49

NEGLIGENCE In this section, we analyse two spheres of the health sector, waiting lists and intra-moenia, in which cases of negligence have been seen that involve abuse of office and private gain to the detriment of the taxpaying citizen. RECURRENT CRIMINAL PATTERNS Waiting lists: The National Plan for Limiting Waiting Lists was established in 2006. This tool established what the maximum waiting times should be for the provision of services: for specialist appointments 30 days, 60 for diagnostic appointments. The context remains critical: every year the PiT Health Report collects notifications from patients on the greatest inefficiencies encountered in the NHS. The 2012 edition, based on over 26,000 reports, puts waiting lists in second place (Cittadinanza Attiva 2012, 10-11). Magistrates’ inquests have pinpointed two criminal patterns based on the excessive length of waiting lists. The first mechanism is implemented by asking for money to skip ahead in the waiting list inside a public hospital. In the second mechanism, the doctors do not propose simply getting ahead in the lists, but instead invite the ill people to go to private clinics. In this case, the doctors, often head physicians, are guaranteed enormous earnings by using the public facility as a source of clients to send to the private clinic where they practise when they are not working in the public hospital.

they work for the NHS, but in this case the patients have to pay a fee that the doctors have to issue an invoice for. The hospital receives around 25% of the fee. The legal cases collected show how some doctors illegitimately used the possibilities granted by the intra-moenia regime. Basically, three criminal schemes came to light. In the first, the doctors work at the private facilities while issuing tax receipts with the header of the studio and not of the hospital where they work, so that they do not have to pay part of their dues to the health system’s coffers. In the second, the doctors perform their activities without issuing any receipts in order to avoid paying tax. In the third, the doctors exploit the lack of checks to carry out their private practice during hospital hours when they should be working at the public hospital.114

Intra-moenia: The term intra-moenia refers to the activity of around 40,000 hospital doctors out of a total of 107,500, who have decided to provide services as freelances, outside the normal working hours, using the hospital’s facilities and diagnostic equipment (Health Ministry 2010). The services are generally the same that the doctors provide when

The “Parliamentary Inquest Commission on errors in the health field and causes of regional health deficits” remarked on the topic of intra-moenia that “it can lead to the evident paradox according to which the structures are not encouraged to increase their efficiency in providing NHS services since this can reduce the amount of services offered upon payment, and therefore it can translate into loss of income for the professionals involved as well as for the facilities themselves.” (2013, 28).

114

50 // 08. THE RECURRENT CRIMINAL PATTERNS

PRIVATE HEALTH In Italy, out of a total of 1,200 hospitals, around 550 are accredited private care facilities,115 They account for almost 48,178 beds, out of a total of around 251,023, in which every year around 1 million 400 thousand Italians are hospitalised.116 The number of accredited private hospital admissions corresponds to 23% of the national total, with significant differences from region to region: going from 48% in Lazio to 2% in Basilicata. These organisations employ over 83,277 staff, amongst whom 20,596 doctors and 24,632 nurses, with overall spending that amounts to 19% of the total expenditure on health117 The relationship between public and NHS-accredited private health changes from region to region. Its aim should be to guarantee the best efficiency in the health services provided (by the private organisations), under strict public control. The logic of profit (private) has to balance out with limiting costs and the provision of appropriate services. The main moments governing the public-private relationship are: a) the prior political choice of whether make more or less use of NHSaccredited private health services (calculating needs); b) the moment of accreditation (pursuant to tenders or requirements) and the service provision contract (with relative fees table); c) the reimbursement phase, substantially based on DRGs and quantifying services with no fixed fee. RECURRENT CRIMINAL PATTERNS Accreditation and contracts: Accreditation is an obligatory recognition without which the private facilities cannot provide services on behalf of the NHS and cannot obtain reimbursements from the state for the services provided. It is issued by the region and bound to the regional health policy, observance of some structural and organisational parameters, and the existence of an internal quality control system, as well as accepting external monitoring. In some regions, the accreditation takes place after verifying the requirements, in others by way of a tender. Then the region makes agreements – either by way of direct agreements or tenders – with the private facilities to provide NHS services, while fixing the quantities and budgets available each year. Therefore, there is a filter to entry either in the accreditation phase or in the agreement stipulation phase. In any case, the minimum requirements should always be subject to checks.

In this sphere, the adopted criminal pattern is payment of money or distribution of goods to the political authority, in general a regional councillor or president, so that accreditation or agreements are favoured with a particular clinic to the detriment of others. In some cases, this mechanism is also applied to the public officials who have the task of checking the facilities’ characteristics. This happens frequently in the cases in which the facilities do not have the minimum requirements in order to be able to operate on behalf of the NHS. Therefore, they request the officials’ compliance so that they do not point out the shortcomings that would lead to a negative outcome of the inspection procedure. A further problem is the lack of accreditation turnover: those which have managed to obtain it, especially if with the methods described above, have established a link with the institution that is unlikely to be dissolved, hence those which have not obtained it risk remaining excluded for a long time.118 Some cases have occurred in which single private operators (especially foundations) have benefitted – to the detriment of other competitors – from extraordinary regional contributions, distorting the competition. It has been hypothesised that collusive agreements and bribes are at the basis of these payments in favour of exponents of the regions involved. In one region, the topic of accredited private health care was not programmed or regionally regulated for over 20 years. The decisionmaking power was shifted to the marginal negotiations, during which long-term collusive agreements were completed. This not only generated great misrepresentations, such as abusive accreditations of organisations that did not have the requirements, but also discriminatory treatment in the contractual clauses that the region proposed to the various operators. In the same region, the data on hospital admission rates were concealed: these showed that some of the private clinics had reduced their rates, while at others (which ended up under trial) they had increased by up to 80%.119 Reimbursements: The Diagnosis Related Groups (DRG) system classifies the patients released from hospitals in uniform groups in terms of the consumption of resources, duration of the hospital stay and clinical profile. The DRG system is used as a base to calculate the hospital funding for the welfare and care services provided. In Italy, the DRG system was introduced in 1995 and is still in force.

08. THE RECURRENT CRIMINAL PATTERNS // 51

Each class is associated with a fee that reflects an estimate of the average cost of each case of hospital admission and the hospital is remunerated on the basis of this. At present, the system counts more than 530 groups and around 40% of these concern surgery. The DRG tool is applied both for public and private accredited health facilities. From analysis of the legal cases, we can see three distinct criminal patterns implemented to obtain greater profits from DRG reimbursements. In the first case, an increase was seen in the services that guarantee greater profits, putting different operations and examinations on the hospital release forms than the ones that the patients effectively underwent. They even extended hospital stays to guarantee maximum occupation of the available beds. In the second case, considering that surgeons are paid on the basis of the number of operations performed, patients unjustly underwent futile operations, causing pointless suffering (D’Amato 2008). Another aspect to consider in assessing how the DRGs work is the fact that compensation is given every time that a patient is admitted to hospital. In these cases, the patients were released as quickly as possible in order to terminate the stay and accommodate a new patient. Since the DRGs were introduced, we have seen increases of 53.3% in short-term hospital stays (2-3 days) in private hospitals. At times, however, the releases risk being too early and causing serious risks for the patients’ health (Francese 2011). The third mechanism comes into play by requesting reimbursements for the same patients in several DRGs: a seriously ill patient is admitted to hospital and in the shortest time possible they try to close this first DRG (therefore obtaining a first reimbursement) by transferring the patient to the rehabilitation ward and thus opening a new admission procedure. Should the patient experience a relapse, as is frequent in more elderly patients, the patient is transferred back to the ward

for the seriously ill, therefore a reimbursement can be collected for rehabilitation, and a new admission case is opened in the first ward. It is a mechanism that can be repeated several times and that leads to false patient transfers: the patient continues to occupy the same bed, and only the formal reason that they are there changes. In one region a criminal system emerged that saw the involvement of entrepreneurs, officials and politicians (2012, 145-146). The health authorities over-invoice for their services, then they return part of the price hike to the hospital officials who, thanks to the consultants’ help, use them to create slush funds abroad. The latter are then used to corrupt politicians in order to obtain reimbursements and funding that is strategic to the functioning of the accredited facility, or as a payment for the conspiracy.120 In another case, the region authorised the liquidation, in a clinic’s favour, of an extra budget item deriving from services provided outside the programme, on the basis of a reference to non-pertinent laws. The (specialist) non-contracted services were classified as “general” disciplines, and therefore could be reimbursed by making reference to the decrees that establish the equivalence of disciplines in public competitions. A special case: securitisation of the debt121 The case of securitisation of the health debt in Abruzzo is worthy of attention, not so much for its financial creativity, but for the illicit agreement funded through that operation. To reconstruct the mechanism: “there were numerous amounts owed to the owners of private clinics relating, before the first securitisation, to quite a long period of time, from 1995 to 2003 [...]. The Abruzzo regional finance company (FIRA) acquired the amounts owed by the Abruzzo ASLs from the private parties. At that point FIRA became the ASLs’ creditor and then, owing to a proxy issued by the ASLs to the region,

In addition to the private hospitals (both accredited and not), in Italy private hospital services are also provided by scientific hospital and care institutions, private university general hospitals, classified hospitals and ASL-controlled qualified institutions.“Paolini (Aiop): Troppi sprechi nel Ssn”, Quotidianosanita.it, 14 May 2010, http://www.sanita.it/regioni-e-asl/articolo.php?articolo_id=404. 116 Parliamentary Inquest Commission on the errors in the health field and causes of regional health deficits 2013, 30.0. 117 Source: CERGAS report, Università Bocconi. Elaboration by RiSSC on the National Health Service database. 118 An institution’s accreditation is valid for 5 years and can be renewed, upon the party’s request, by sending an application to the regional council at least 90 days before expiry. The procedure is the same as the first time the accreditation is issued. 119 Hearing of the chairman of AIOP (Italian Association of Private Hospitals), Mr Luigi Pietrangeli, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 142nd session. Stenographic report no. 136. 120 See Pinotti, La sanità di Dio. 115

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it became creditor of the region itself. In substance, a regional body, a mainly government-controlled company, with the region as main shareholder and minority shareholders the local Abruzzo banks, became creditor of the region. These receivables were then transferred to a special purpose entity, whose corporate purpose was to proceed with the securitisation. [...] This company, in turn due receivables from the ASLs, issued securities, bonds. [...] After which, they had the money paid in advance, and in turn transferred this receivable to some banks.” The problem that arises derives from the fact that the receivables were “both so-called performing, that is, for services already certified and that nevertheless fitted into the spending ceiling set for the health sector, and so-called non-performing, which had not been ascertained and exceeded the maximum ceiling provided for health spending in the year in question and/or nevertheless referred to services deemed inappropriate.” A first problem arises from the fact that, in order to conclude the operation, the amounts owed are self-certified by the private clinics. And no one checks: “no checks or inspections were made. That was also because [...] the regional council made the ASL managers certify those receivables within three days and make the variations to the relative budgets, threatening, quote, [...] to dismiss those who had not certified and modified the budget within that interval of time.” In the figures provided by the region itself, a clinic emerges that boasts – for the performing services – a bed occupation rate of 315%, obtaining triple reimbursements for every bed. “We managed to count up to 17 medical records for the same person admitted to the clinic for one week,” the magistrate states. With the securitisation, the same company gets paid for inappropriate (non-performing) services, by classifying a series of specialist operations – not under the NHS – as “general medicine” and “general surgery”. And again, no one seems to check. The region pays 65% of undue receivables (by presenting the operation as a saving of 35%), for uncertain and unchecked operations, with a return of around 13 million euros.

The information in this paragraph is taken from: the hearing of the public prosecutor, Mr Nicola Trifuoggi, at the Court of Pescara, at the Parliamentary Inquest Commission on the effectiveness and efficiency of the National Health Service, 130th session. Stenographic report no. 124.

121

Topping off the operation,“at a certain point an ASL official was made head of the regional private clinics inspection office. According to our investigations, he was directly connected to the owner of a clinic. Moreover, he had links with the clinic, also when he worked at the ASL, because his wife was employed there”.

08. THE RECURRENT CRIMINAL PATTERNS // 53

RISK of CORRUPTION

appointments

drugs

negligence

tenders

private health

uncertain regulatory framework

medium

high

complex organisation

low

high

medium

information gap

low

high

low

high

low

privatisation

low

medium

low

high

spoils system

high

low

medium

high

moral issue

high

medium

high

medium

low

lack of responsibility

high

ineffective controls

low

medium

high

lack of transparency

low

high

medium

high

Table 5: Risk corruption levels per problem in the five sectors analysed. Elab. RiSSC

54 // 09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR

THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR 09.

Table 4 reconstructs the presumed burden of the critical issues on the corruption risk present within the five sectors under analysis. In order to combat corruption in the health system, improve services, award good performances, increase competition and reduce costs, it is necessary to seek measures to lower these risks.

Following the analysis of the episodes of corruption that have afflicted the Italian health system, TI-Italia and RiSSC, with the support of a group of experts, singled out 15 effective and easily implementable proposals to help the “unhealthy health system”. Fifteen proposals to apply straight away to reduce the risk of corruption in the health sector, freeing up resources and lowering costs without affecting the services provided. The proposals touch on all the sensitive issues in the health system: medical negligence, transparency of information, management of tenders and purchases, spending control, private health, executive appointments and the risk of the infiltration of organised crime. The proposals contained in this section are not completely developed in this report because they are just a starting point. In the future, their expansion will lead to the implementation of good practices to reduce corruption in the Italian health system. Methodological note: The 15 proposals have been selected by a group of 15 experts in different areas, from among 40 possible options. Each expert was asked to single out the 10 most important proposals, put them in order, and give each position a score (10 points for first place, 9 for second, and so on). The 15 selected proposals derive from the sum of the total results.

Straighten out the relationship between politics and health Disclose how public resources are used Increase doctors’ efficiency and intensify checks on their activities Change spending control procedures Promote ethical practices among doctors to prevent every form of corruption Increase checks on how tenders are carried out in the health system Publish indicators and outcomes of doctors’ activities Accredit private health facilities on the basis of their effective capacities Increase competitive comparisons among drug companies Promote whistleblowing Publicise the payments made in the health system Outline relations between the public and private health systems more strictly Make more data on health spending open to the public Amend the rules for funding health expenditure Prevent the risk of organised crime infiltrating tenders

09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR// 55

Table 6: Scores. Elab. RiSSC

CRITICAL ISSUES PROPOSALS UNCERTAIN REGULATORY FRAMEWORK Review rules for funding health expenditure Outline relations between public and private health systems more clearly

COMPLEX ORGANISATION PRIVATISATION SPOILS SYSTEM MORAL ISSUE LACK OF RESPONSIBILITY LACK OF TRANSPARENCY INEFFICACY OF CONTROLS

Prevent risk of infiltration by organised crime and use of non-certified supply channels Increase competitive comparisons among drug companies Accredit facilities on the basis of effective capacities Straighten out politics—health relationship Promote ethical conduct among doctors and staff Promote role of whistleblowers Increase efficiency and intensify checks on doctors’ and staff’s activities Publish activity and result indicators for doctors and managers Re-examine and change spending control procedures Increase checks on how tenders carried out Disclose how public resources used

LACK OF TRANSPARENCY

Make more data on health spending open to public Publicise payments made in health system

Table 7: Critical issues and proposals to reduce corruption in the health sector

56 // 09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR

THE PROPOSALS PER SECTOR LESS POLITICS IN HEALTH122 Under the reform of Title V of the Constitution the regional governing bodies define health policy and have the power to appoint the director generals, who in turn choose the health and administration directors and outline the commissions to select the medical staff. Therefore, regional politics decides the fate, as well as the level of integrity, transparency and efficiency of the public health service in its area, by selecting the top brass. NON-PARTY POLITICS That politics has a role in managing the health service is not under question. Politicians represent the citizenry and it is therefore legitimate that they should choose the health policy. If there were no politics in the health service, this would create a dangerous void which could be occupied by strong powers or private economic interests. The problems arise from the upper hand of the parties in politics. Indeed, the big cases of corruption that have occurred in the past are linked to the excessive influence of political parties in the health system, rather than just in the appointment procedures. THE DIRECTOR GENERALS The Garofoli Report clearly highlighted the existence of some dysfunctional dynamics involving the health sector’s director generals and the deriving risk of corruption (2012). Specifically, the white book on corruption is particularly critical of choosing director generals on political rather than technical bases and of the extent of their powers. The Constitutional Court recently stressed that a link between the governing (political) bodies and the executive bodies (director generals and health authorities) is legitimate because it is vitally important for there to be a relationship of trust between the entities outlining the health policy and the persons called upon to implement it. On this basis, we have to exclude competition procedures for selecting the directors, but at the

The graphs show the list of proposals per sector put to the experts for evaluation and the distribution of their relative preferences

122

same time the element of trust must not be abused in favour of choices based on party logics and spoils systems. As it is opportune that there be a relationship of trust, this also justifies the spoils system, on condition that it does not become a tool for political colonisation of the health sector. Other problems linked to the director generals derive not so much from a lack of skills, which is nevertheless sometimes the case, but their presumed untouchability, which makes them irresponsible – except before their political principal, towards whom they retain an attitude of subjugation – in the work carried out as part of their position. Bad politics in the health sector also emerges when assessment of the director generals’ performance is either lacking or extremely complicated. PROPOSALS: • Appoint external assessment bodies to make the initial selection of the set of candidates. Some regions have already experimented this device: AGENAS (the National Agency for Regional Health Services) was involved in the appointment procedure for director generals in the Lazio region, while in Veneto the regional council appointed a head hunting agency. • Introduce regulations that preclude the appointment of those with previous experiences of mismanagement, or who have failed to fulfil past targets, or who do not have the minimum skills requirements. • Insert an intermediate – possibly independent – element between the political power and health administration to help the first choose the health policy and assess the second on target achievements. •

Set up top independent commissions to assess health facility quality and the performance of their top management, as already is the case in other EU countries. In the event of a negative assessment owing to the failure to achieve targets, the director general may be fired.

09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR// 57

40%

40% Eliminate relationship between politics and health 10% Improve directors’ skills 10% Introduce preclusion regulations for quasi-bankruptcy

9% Adopt specific codes of conduct 9% Improve DG selection procedures 8% Periodically check observance of programmes and target achievements

7% Reduce spoils system

6% Reduce DG’s powers

10%

1% Increase pay

The proposals of the “Study Commission for Proposals on the Topic of Transparency and Prevention of Corruption in the Public Administration” Selection – A solution that needs to be assessed is that of an order or list, initially provided for in legislative decree no. 502 from 1992, which some bills before parliament aim to reintroduce. This would enable the regional authorities’ choice to be restricted to persons whose qualifications have been checked beforehand, and whose professionalism in the sector has been proven. The list could be national, as was originally envisaged, and be held by the Ministry of Health, were it deemed necessary for the role to be carried out in a uniform manner at national level. Alternatively, it could be held by another national authority, such as AGENAS, which also enables a certain degree of involvement by the regions. Or the list could be regional (as is already the case in some regions), on condition that qualification checks are guaranteed by an independent body which, in turn, gives a guarantee of professionalism. If the selection were restricted to persons registered on the order, among other things, this would lessen the duty to motivate choices which, instead, as things stand – as already observed – very much needs to be strengthened. The government has also embarked upon the route outlined above since, with the recent “Balduzzi” decree law, the appointments of director generals of the NHS authorities and institutions are subject to a new set of rules that favour merit and tend to rebalance the relationship between political inclinations and health authority management. Indeed, the regions will have to appoint the director generals by drawing from a regional list of suitable candidates compiled prior to the selection procedure, which will be performed by a commission comprising independent experts. Only those who provide documentation, not only of the required qualifications, but also of adequate managerial experience in the sector, will be able to gain access to the procedure. The competition details, appointments and CVs will be suitably disclosed, also on the web, and there will be transparency in the assessment of aspiring candidates. Powers – , in order to limit the director general’s powers, the administrative director or health director could be given the power to make proposals, either in general, or for particular categories of actions under their competence. Furthermore, committees such as the health council and board of directors could be given a stronger role, by specifying their composition and credentials, as well as details of when they should be consulted and the effects of their opinions. With regard to the director general’s legal status, the national law-making body and above all the regional bodies could evaluate the issue of the term of office. The choice by some regions to impose a limit could compromise the benefits of an ongoing management, but it can also prevent the risks deriving from excessive familiarity with interested parties both inside and outside the health authority. Hence, we could hypothesise a top limit of two terms of office, the first short (eighteen months) and a second “ordinary” term of four more years, at the end of which their role of director general in the same ASL could not be renewed.

DETAILS

White Book on Corruption, pp. 93-94/96-97

58 // 09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR

more TRANSPARENCY TOWARDS CITIZENS In the name of transparency in public administration, more and more data on administrative activities is required for public consultation. It is an issue that has been updated, or rather bolstered, by recent regulatory reforms, the most recent example being legislative decree no. 33/2013 derived from anti-corruption law no. 190/2012. Three of the 15 proposals to fight corruption in the health sector – 1) disclose how public resources are used (2); 2) promote whistleblowing (10); and 3) make more data on health spending open to the public (13) – go in this direction. Despite the new obligations for transparency and access to information, some issues still need to be solved, such as the quality, quantity and amount of detail of the data on corruption in the health sector. First of all, the lack of data is linked to an infrastructural problem. Corruption is fought with transparency (disclosure to the public). To do so, however, we need information (what is shown) that is accessible and comprehensible. Uncollected data remains hidden and makes it easy to conceal inefficiency and corruption. A second problem concerns the difficulties in accessing the data itself. There are limits, placed by the regulations themselves, that hinder access to data and conflict with the need for transparency. Considering the limits just described, the need emerges for widespread control of the health system with easy access to information (open data), especially the data concerning the use of economic resources. It is equally as important to promote whistleblowing because it is an additional form of control by the same officials who operate in the health sector. The proposal to disclose data on the top management’s assets ranks low on the classification. This suggest two types of reflection: the first is that it is pointless to disclose to the public information on people’s wealth because it is unlikely that they will declare income from illegal activities; second, more in general, corruption of an official inevitably leads to a misrepresentation of the management of public resources. Public control requires certain assessment parameters, but there are problematic issues on this point too. Often it is difficult to assess administrative performances because the institutions set themselves low targets that are difficult to measure using common indicators.

PROPOSALS: • Reduce limits on access to data • Improve public administration performance indicators • Educate people on control systems

36%

14%

20%

22%

36% Disclose how public resources are used 22% Promote whistleblowing 20% Make more data on health spending open to the public 14% Regulate lobbying 8% Disclose figures on directors’ income and assets, CVs and selection procedures

09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR// 59

The proposals of the “Study Commission for Proposals on the Topic of Transparency and Prevention of Corruption in the Public Administration”

Controls – A system of controls on the health authorities is obviously crucial in order to prevent corruption. In this connection, a form of control that certainly deserves evaluation and that among other things derives from recent legislative provisions is that of transparency, which enables widespread control by citizens and users, either as individuals or associations, on the use of public resources and the results of the activity carried out. This principle is particularly important in a sector, such as health, in which there are services that can be measured with relative ease, and similar or identical spending, made by different administrations, that can be compared equally as easily.[...] The state and regions in turn also need to make surveys and comparisons in order to inform the citizens about the management of public resources and the results achieved within the various regional systems and the single health authorities. This task could be performed by AGENAS which at present already performs survey activities in this sphere. Its role could be boosted both in terms of greater diffusion (communication) of the results to citizens, and highlighting best practices, also in order to prompt competition between the health facilities and improve regional planning itself. Beyond this, detailed regulations for checks on the health authorities are under the regions’ sphere of competence. Some indications could be given on how to perform them. Greater power could be given to the board of auditors and auditing companies with regard to compliant and legitimate accounting. Checks, by the regional bodies, on the achievement of the director general’s targets, could be regulated so as to make them less subjective and therefore less likely to be influenced by political parties or clientelism. In some regions, a very complex system of result inspections has been effectively put into practice, set out around particular specific and system goals. In this way, a 360° assessment can be made of the single ASLs, and, as a consequence, of the work of the director generals and their managers, also with the participation of local institutions. Furthermore, transparency and motivation mechanisms could be introduced to the procedure in question and it could be considered whether to establish an independent technical structure which could assess management results and achievement of targets. The question of controls is closely connected to the completeness of the computerised process to track the purchasing cycle and all of the health authority’s administrative action. At present this process is widely incomplete in many places (in particular in the centre-south of Italy) and this favours unclear administration, leaving room for corruption phenomena.

DETAILS

from the White Book on Corruption, pp. 98-101

60 // 09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR

ETHICS AND DILIGENCE IN THE MEDICAL PROFESSION Doctors hold wide discretionary power which - if used badly - exposes the health system to risks of corruption and fraud. The demand for health services largely depends on the doctors’ autonomy, who have full legitimacy, but also responsibility, to request services, order analyses, prescribe treatments and admission to hospital, and request the purchase of drugs and medical devices. This is the case both with regard to the patient and the health facility, which calculates most of its purchase requirements on the basis of the medical personnel’s requests. It is unlikely that the patients can restrict inappropriate use of doctors’ discretionary power since they are not able to keep check on the service performed by these state employees, as instead happens in other sectors of public administration. The doctors can abuse their discretionary powers for reasons of personal economic gain, career advancement, or also to protect themselves against liability. The latter phenomenon is known as defensive medicine or defensive medical practice and is estimated to have an incidence of around 10% on national health spending (Barresi et al. 2012, 25). A lack of care protocols and assessment mechanisms for the medical activity – above all with regard to appropriacy and timing – contributes to giving doctors, as well as suppliers, including the pharmaceutical industry, excessive discretionary powers. Owing to this freedom, a lack of ethics among medical staff is often a cause of corruption. Another risk of abuse derives from the law that allows every doctor to perform both their work as a state employee and freelance in the same place, according to the intra-moenia regime. In order to reduce corruption in the health service, it is deemed a priority to increase the efficiency of the medical activities, intensify checks on it (3), and request the publication of activity indicators and results for every doctor. These measures can without doubt limit the doctors’ discretionary powers. However, these power cannot be either restricted or removed because they are an integral part of their profession. Therefore, every doctor should apply them in full respect of the deontological principles.

PROPOSALS: Promote ethics • Form a new culture, starting from schools • Create special courses in universities • Fight counter-ethics, namely negative values and degenerative elements • Effectively implement the new Code of Conduct for state employees Increase mechanisms to check appropriacy and timing • Set up top independent commissions that can assess the quality of the action by the health facilities and their top management, as already happens abroad. If director generals do not achieve their targets, they are given a negative appraisal and dismissed. • Shift the assessment system from the service to the clinical result, by way of checks on procedures and results. • Set up a system to inspect and assess conduct in order to implement performance-related pay, apply disciplinary measures, managerial liability and administrative and accounting liability for harm to image.

2% 35%

31% 32% 35% Increase efficiency and intensify checks 32% Promote ethics to fight unperceived forms of corruption 31% Publish activity indicators and outcomes of facilities 2% Focus attention on chronic illness 0% Review doctor’s role in diagnosis and treatment decision

09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR// 61

CHECKING COSts Corruption is fought above all through better control of health spending, both in terms of budgeting and control of monetary flows, especially with regard to services received. The experts think it is important to radically change both the rules for funding health expenditure, and the monitoring procedures, by increasing checks above all on the execution of tenders and disclosing payments made. The proposals aim to link funding to results in terms of health, rather than to spending history or the quantity of services provided by the health facilities. Funding priorities and spending programming procedures are not considered urgent aspects for intervention. Therefore, we have to bear in mind technological development and the relative costs, and boost doctorsâ&#x20AC;&#x2122; responsibility in terms of considering the cost-efficacy ratio when choosing a treatment. The quality of the data used for control functions needs to be improved. One of the most important proposals is to improve the control procedures, not so much of the single clinical files, but of spending as a whole, and the rules for funding expenditure.

0% 4% 7%

30%

11%

13%

21% 14%

30% Change control procedures 21% Amend rules for funding health expenditure 14% Change medical prescription procedures 13% Set up and extend checks on clinical records 11% Change health servicesâ&#x20AC;&#x2122; funding priorities

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CLEAN TENDERS AND buying With regard to tenders, both concerning health and other sectors, three actions prove to be particularly important: to 1) define tenders and standard costs while restricting accelerated procedures, in order to identify anomalies; 2) clearly establish the need to avoid waste and abuse; and 3) apply control tools during the tender execution phase with relative responsibilities in the event of omissions. The risk of corruption in low-tech tenders (e.g. catering and cleaning) can be reduced above all by intensifying checks following the award of the contract. In this type of tender, the requested services are standard, therefore it is difficult to favour one bidder over another. Instead, hi-tech tenders (e.g. health equipment) are different. In this case, the specifications of the requested product are the main factors in determining which company will win the contract. In these cases, there needs to be an increase in competitive comparison, improvement in tools to assess appropriateness and necessity, as well as technical characteristics (for example through Health Technology Assessment worktables). Not least, it must be guaranteed that the public officials have sufficient skills, in order to avoid, as far as possible, the use of external experts who are often also involved by private entities. CONTROL PROBLEMS Corruption in tenders and supply orders is hidden in the gap between what is formally set down in writing and what is in actual fact done. There are many problems with the controls: 1) expense; 2) lack of controls on the execution of contracts; 3) unsuitability (e.g. preventive legitimacy checks and management checks are not suitable because they are programmed). PROPOSALS: â&#x20AC;˘ Arrange surprise inspections, on site and random, especially with regard to the execution of contracts. â&#x20AC;˘ Aim at centralised buying

8% 42% 17%

33% 42% Increase checks on how tenders carried out 33% Publicise payments made 17% Review tender participation methods 8% Review criteria for drawing up tenders for health contracts 0% Review criteria for drawing up tenders for non-health contracts

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private ENTITIES IN THE HEALTH SECTOR The NHS uses support from the private sector in terms of works, goods and services. In particular, this is the case for construction and maintenance tenders; supplies of devices, equipment and drugs; and supplies of low and high medical intensity services. Falling into the latter category are private rehabilitation, diagnostic and admission services up to surgery; examples of the other type of services are cleaning, laundry and security. The public and private health services work together, but with different ends. The aim and necessity of the first is to guarantee the people’s well-being and provide universal health care; the second has the legitimate - aim to generate profits. The public-private partnership is based mainly on accreditation and the provision of services at agreed prices. One witness, who has requested to remain anonymous, recounts: “Pointless [services] may be performed (which cause biological harm to the patient and economic damage to the state), as well as improper services (which cause harm to the patient because they do not discover the illness and at the same time damage to the doctor who gets the diagnosis “wrong” by looking at an examination that cannot “uncover” the illness). As well as creating a potential increase in radio-induced tumours (additional future health expenditure), failure to observe this procedure generates an increase in the number of services (and health spending). As a consequence, the waiting lists get “jammed” which makes it “legitimate” to have to use services under the NHS-backed private or simply private regime”. There is a high risk of corruption both in the phase in which resources are allocated for the provision of services by way of public contracts, and when the public entity makes checks to guarantee the quality and price of the services provided by the private entities. In the case of private health, we can rule out inefficiency, therefore the cases of corruption serve for the individuals’ illicit financial gain. Considering that health expenditure is based on the DRGs, certainty is needed over the care procedure first of all, because a lack of certainty over protocols means that doctors abuse services while also prescribing unnecessary and expensive treatment. Lack of competition, which depends on facilities maintaining their

accreditation regardless of their efficiency and efficacy, is correlated to corruption. Competition among facilities has a large influence on reducing costs and in fact cuts that margin – often created through slush funds and unfair presentation of the financial statements – which the private institutions use to “pay back” the public officials or politicians. In order to reduce the risks of corruption it is necessary to outline the relations between public and private health better (11), improve the accreditation systems and above all extensions to private facilities’ accreditations so that they are based on their effective capacities (8). PROPOSALS: • Make the payment of services dependent on the clinical outcome: il SSN non ha l’obiettivo di comprare un prodotto, ma procurare beneficio clinico (outcomes). Clearly outline the tender requirements in terms of appropriacy and timing. • Promote competition through comparative evaluation strategies (e.g. health technology assessment).

36%

11%

12% 34% 36% Accredit / maintain accreditation of facilities based on effective capacities 34% Outline relations between public and private more strictly 12% Review requirements and credentials attributed to private healthcare facilities 11% Prevent selective access 7% Impose agreed prices

64 // 09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR

PHARMACEUTICAL companies The corruption risk linked to pharmaceutical companies - which develop drugs covered by patents and fund research and medical training in order that their drugs are adopted in the treatment of illnesses - is different and probably more dangerous for health. In order to fight these phenomena we suggest increasing competitive comparisons between the pharmaceutical companies. In addition to this, we need to point out that it is opportune for the drugs to be distributed directly by the health authorities, which should purchase them through tender procedures and not from resellers (e.g. pharmacies). In those cases when health authorities have fully taken on direct distribution, great savings have been seen for regional health. For example, Friuli Venezia Giulia is the leading region in Italy for the direct distribution of drugs.

54% 18%

28% 54% Increase competitive comparisons between drug companies 28% Improve checks on drugs purchase and distribution circuits 18% Regulate relations between doctor, pharmaceutical rep and pharmacist

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THE THREAT OF ORGANISED CRIME The research highlighted an additional critical issue that deserves attention. Organised crime, with its great capacities, solid local roots and enormous sums of money to launder, is a risk element for the national economy, including the health sector, which is one of the richest in terms of allocated public resources and expenditure. The risks are greater in those sectors where it is easy for criminal organisation to find a role in carrying out works or managing authorities. They are sectors with a low level of medical specialisation, such as cleaning, laundry, catering, transport and custodian services, or building tenders, especially those involving subcontractors. Criminal infiltration usually takes place by obtaining and performing contracts, normally to much lower standards than set out in the contracts, or by placing controlled personnel inside healthy authorities, or by making available huge sums of laundered money, with consequent control over the authority. In these cases, the corruption is an instrumental crime because it serves to prevent the public officials responsible for making checks from making reports of anomalies; beat any competition; and even determine - as part of a mafia - the health policies of the private actors controlled by the criminal organisations. Criminal groups have also shown their interest in private health and the reasons are essentially linked to the large quantities of public money available and the assured yields from the sector. Furthermore, we need to mention that the risk of infiltration in the legal economy increases in periods of crisis, when the credit pinch, delay in payments and consequent lack of liquidity exposes the authorities to situations of need. In Italy, organised crime benefits from a weak repressive system: the penal system is so ineffective that it inflicts hardly any sentences for corruption. The most evident problems derive from the legislation on unfair presentation of financial statements, a necessary practice to form slush funds for paying bribes, and by time limits on lawsuits. The new regulation 190/2012 also causes perplexity especially due to the fact that the victim of extortion can be punished.

PROPOSALS: • Increase attention to the problem of money laundering • Increase checks on the source of private actors’ funds • Improve flow traceability • Oblige the beneficiaries of public payments and their suppliers to set up special accounts

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EFFICACY AND REALISABILITY After selecting the 15 most important proposals (Tab. 4), initially singled out by the experts from a set of 40, we assessed their efficacy and realisability. By efficacy, we mean the expected impact of the measure with regard to reducing corruption in the health sector. By realisability, we mean the real possibility to implement the measure, in light of the health system’s characteristics and the present economic, regulatory and social situation. The experts were asked to give a score to each proposal, from 0 to 5 depending on whether it was more or less realisable or effective. The results show that the 15 proposed measures are easy to realise (65.64%) and very effective (78.21%) in fighting corruption in health. The results are presented in illustrations 4 and 5. The proposal that aims to rectify the relationship between politics and health, starting from appointments to the role of director general, and that obtained the highest score and the highest number of votes in terms of importance (Tab. 4), is considered the most effective in order to eliminate corruption in the health sector, together with the proposal that aspires to fight organised crime. -3

-2

-1

The proposals for greater transparency – both in terms of fund allocation choices (2 with 69%) and on the actual payments made (12 with 41%) – can benefit from new regulations on the matter: Publicise the payments made in the health system Outline relations between the public and private health systems more strictly Make more data on health spending open to the public Amend the rules for funding health spending Prevent the risk of organised crime infiltrating tenders. The analysis shows how the relationship between realisability and efficacy is not linear. For example, the proposals on tenders are the most simple to implement, but their efficacy in fighting corruption is more limited than other measures, which, however, are more difficult to realise. It emerges with a certain degree of clarity that the political proposals are considered among the most effective but at the same time the least feasible precisely because the actors who should adopt them are often those involved in the corruption phenomena.

0 Eliminate/reduce the relationship between politics and health Prevent the risk of organised crime infiltrating tenders Amend the rules for funding health expenditure Promote ethics as an action to fight forms of unperceived corruption Change control procedures Make more data on health spending open to the public Increase competitive comparisons between drug companies Accredit / maintain accreditation of facilities based on effective capacities Publish activity indicators and outcomes Promote whistleblowing Increase efficiency and intensify checks Outline relations between the public and private health systems more strictly Disclose how public resources are used Increase checks on how tenders carried out Publicise the payments made in the health system

Illustration 8: Relationship between realisability and efficacy against corruption. Elab RiSSC

09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR// 67

Illustration 7: Importance, realisability and efficacy of the 15 selected measures. Elab. RiSSC

Illustration 6: Realisability and efficacy of the 15 selected measures. Elab. RiSSC

3 40

Efficacy

Realisability 0

1 APPOINTMENTS

Realisability 2

TRANSPARENCY

procurement PRIVATE HEALTH

NEGLIGENCE

DRUGS

COSTS

ORGANISED CRIME

In order of efficacy, the proposals are to: 01 Publicise the payments made in the health system 02 Disclose how public resources are used 03 Make more data on health spending open to the public 04 Outline relations between the public and private health systems more strictly 05 Increase checks on how tenders are carried out in the health system 06 Publish indicators and outcomes of doctors’ activities 07 Increase doctors’ efficiency and intensify checks on their activities 08 Change spending control procedures 09 Promote whistleblowing 10 Accredit private health facilities on the basis of their effective capacities 11 Amend the rules for funding health expenditure 12 Prevent the risk of organised crime infiltrating tenders 13 Promote ethical practices among doctors to prevent every form of corruption 14 Increase competitive comparisons among drug companies 15 Straighten out the relationship between politics and health

20 APPOINTMENTS

25 TRANSPARENCY

30 NEGLIGENCE

35 COSTS

procurement PRIVATE HEALTH

In order of realisability, the proposals are to: 01 Increase competitive comparisons among drug companies 02 Increase checks on how tenders are carried out in the health system 03 Promote whistleblowing 04 Accredit private health facilities on the basis of their effective capacities 05 Increase doctors’ efficiency and intensify checks on their activities 06 Outline relations between the public and private health systems more strictly 07 Publish indicators and outcomes of doctors’ activities 08 Change spending control procedures 09 Promote ethical practices among doctors to prevent every form of corruption 10 Disclose how public resources are used 11 Publicise the payments made in the health system 12 Amend the rules for funding health expenditure 13 Make more data on health spending open to the public 14 Straighten out the relationship between politics and health 15 Prevent the risk of organised crime infiltrating tenders

68 // 09. THE PROPOSALS TO REDUCE CORRUPTION IN THE HEALTH SECTOR

1. Eliminate/reduce the relationship between politics and health Realisability: Realisation of this measure requires the politicians to be willing to accept a reduction in their influence, thus enabling a full separation between the administration and political leanings. In order to facilitate the implementation of this proposal, we might evaluate applying independent and external control mechanisms. Efficacy: This proposal would reduce collusive agreements and create conditions of independence between controller and the controlled. Timescale for realisation: long 2. Disclose how public resources are used Realisability: This measure can be easily realised by implementing the existing regulations in favour of transparency. Of help to this proposal is recent legislative decree no. 33/2013 which revolves around on-line publication of the information possessed by the public administrations. Efficacy: It would make the top figures aware of the fact that their managerial choices will be made public and that they will, therefore, have to respond for them. Timescale for realisation: short 3. . Increase efficiency and intensify checks Realisability: The health authorities have a mountain of data in their possession and this facilitates the realisation of this proposal since it is sufficient to manage this information in an efficient manner. The best results can be obtained by highlighting irregularities in performance rather than in management procedures. The difficulties are linked to the lack of human and financial resources to extend checks as well as the lack of power in the hands of the State Auditorsâ&#x20AC;&#x2122; Department and the Independent Commission for the Assessment, Transparency and Integrity of the Public Administrations. Efficacy: Checks reduce corruption especially if suitable sanctions are also laid down for incorrect behaviour. Timescale for realisation: medium 4. Change control procedures Realisability: This measure can easily be realised thanks to the use of IT tools that can increase the frequency of controls without a great expenditure of resources. The difficulty lies in the fact that in order to be really effective, the controls must involve inspection of the results achieved by linking NHS reimbursements to clinical results rather than to the services performed. The law gives inspection authorities to the State Auditorsâ&#x20AC;&#x2122; Department. Efficacy: Controls would uncover corruption phenomena, especially if monitoring and automatic anomaly alert systems are developed. Timescale for realisation: long 5. Ethics to fight unperceived forms of corruption Realisability: The greatest difficulty in realising this proposal is to get institutions, sector organisations and trade unions to work together and set up programmes to raise awareness on ethical issues and values. If various actors work together, their action can have a greater impact than that of single players. A further element functional to realising the proposal is to include training modules on ethics in degree courses. It may be difficult to partially reorganise the study programmes.

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Efficacy: Ethical awareness-raising programmes create a widespread feeling of condemnation and social disapproval of those responsible for crimes of corruption. Timescale for realisation: very long 6. Increase checks on how tenders are carried out Realisability: The realisability of this proposal is relatively high seeing that numerous forms of control are already in force. The complexity lies in getting the various control bodies to work together, while ensuring their independence. It may help to achieve goals if the director generals’ liability for full or partial failure to perform them is increased. Efficacy: Greater control over how tenders are carried out eliminates the risk of violations, which are planned from the start by the contractors. Timescale for realisation: medium 7. Publish indicators and outcomes of activities Realisability: Legislative decree no. 33/2013 sets out important new factors in favour of transparency and the online publication of information in the public administration’s possession. Any difficulties reside in the officials’ lack of desire to implement the regulations. Efficacy: The diffusion of information is an effective instrument because it creates awareness that the incorrect management of resources can immediately be highlighted; hence, the officials are made responsible. The efficacy of this proposal could be undermined by the publication of grouped data or data that is difficult to interpret. Timescale for realisation: medium 8. Accredit/maintain accreditation of facilities on the basis of their effective capacities Realisability: In order to realise this proposal, qualified and independent assessors are needed. It is complex in that it is not sufficient to base the inspections on the services provided alone; it is necessary to make an overall assessment that first of all takes into consideration the patient’s health in the mid- to long-term. The strong point of this proposal is the possibility to create large savings without damaging the services. Furthermore, the savings for the public purse amply outweigh the costs of making the checks. Efficacy: The administrations are forced to aim to provide efficient services and fight waste: in addition to preventing corruption, this proposal can also be an effective tool for reducing doctors’ errors. Timescale for realisation: medium 9. Increase competitive comparisons among drug companies Realisability: This proposal can be implemented if strongly driven by the public contractor towards the drug multinationals. An implementation tool could be a mechanism to award those companies that make most investments in research. It is necessary to promote the use of generic drugs. Efficacy: Corruption in the pharmaceutical industry is rife, but each single case has a low economic impact. Greater efficacy would be obtained by working on doctors’ integrity and ethics. Timescale for realisation: medium

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10. Promote whistleblowing Realisability: Promoting whistleblowing encounters some difficulties, especially of a cultural nature, owing to the negative view that we have of colleagues reporting a negative event. Furthermore, we dread the risk that cases may emerge of improper use of the tool to harm colleagues. Efficacy: The measure is deemed quite effective. Timescale for realisation: medium 11. Outline relations between the public and private health systems more strictly Realisability: This proposal can only be realised if there is the political will to allow fair distribution of the different types of services between the public and private sectors. At present, the private health authorities that benefit from public funding perform those services and operations that are less remunerative and risky. Efficacy: A new outline of the relations between public and private would limit waste and promote the creation of more effective and efficient services. These conditions would lead to a reduction in the risk of corruption. Timescale for realisation: medium 12. Publicise the payments made Realisability: It is easy to realise this proposal considering the obligations on transparency and online diffusion of information imposed by legislative decree no. 33/2013. At the time of publishing this report, the obligation has not yet come into force, hence it is not possible to assess the complete implementation of the decree and potential imposition of sanctions.123 Efficacy: The openness to the public generated by publishing payments increases managers’ liability as they have to account for the choices made. Timescale for realisation: short 13. Make more data on health spending open to the public Realisability: The public administrations possess open data on health expenditure. In order to be able to analyse the data in comparative terms, standardisation and central publication are required. Thanks to the wide use of technology, it is possible to realise this proposal without extravagant additional costs. However, a lack of IT culture among public officials may be a hindering factor. Efficacy: If there is greater access to open data, this can lead to more analysis of health spending data, with regard to past or intended choices. The accessibility of the data enables the expenditure to be monitored almost constantly, thus facilitating cross-checks and the exposure of any anomalies in tenders and contracts. It is useful to consider making checks on the congruity of the data published by the institutions. Timescale for realisation: short

“Art. 49 paragraph 1: The obligation to publish data as per article 24 begins six months after this decree comes into force.” The decree was published in Official Gazette no. 80 dated 5-4-2013 and came into force on 20/04/2013. Therefore, the start date for publishing information will be 20/10/2013.

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14. Amend the rules for funding health expenditure Realisability: In order to realise this proposal, there needs to be the political will to review the regulations that discipline health funding, with particular attention to the role of DRGs. It may be easier to realise using methods that have already been tried out in other sectors, such as the universities’ ordinary funding allocation123 which permits outcome checks to be performed. At present, this is not applicable in the health sector?. Efficacy: If funding depended on goals and health outcomes, this would oblige the regions and ASLs to manage their activities more prudently. If the rules were updated to oblige the use of standard costs and merge the spending departments, this would also lead to a reduction in the corruption phenomenon, because the margins for illicit gain are wider in local spending departments. Timescale for realisation: medium 15. Prevent the risk of organised crime infiltrating tenders Realisability: This proposal can only be realised by constantly updating the prevention tools, since organised crime uses systems that change over time. The main tools are to reduce the commissioning bodies, standardise costs, make checks on expenditure and strengthen the partnership between magistrates and the armed forces. Efficacy: Encouraging people to report illicit conduct through special and safe channels may eliminate the obstacle of omertà present in some regions, and thereby greatly reduce attempts at infiltration. If this proposal is implemented, it would have a great impact on the quality of the services and reduction of the public debt. Timescale for realisation: medium

Established in art. 5 of law no. 537/93, it consists of two parts: a “basic quota” and an “adjustment quota “. The universities automatically receive the basic quota, whereas the adjustment should instead be allocated on the basis of quantitative parameters.

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GETTING RID OF THE EXCUSES The 15 proposals put forward in this report are concrete provisions aimed at reducing inefficiency and limiting the risks of corruption in the health sector. Nevertheless, these initiatives are affected by a vagueness that risks making them but empty words. Therefore, in the immediate future it is necessary to develop them further to make them more operative. Hence we want to draw up a set of easily realisable, low-cost proposals, to put forward to the regional authorities and health authorities so that they can be put into practice straight away to fight corruption. This way, there won’t be any more excuses: those who really want to fight corruption will have the chance to actually DO something REAL to change things. A first draft, made with the Advisory Board, led to the following result: APPOINTMENTS: Appoint representatives of institutions/third-party interests at the Regional Health Authorities Outline the director generals’ goals in good time and link their appointment to achieving targets (best-practice: region of Tuscany) TRANSPARENCY: Give access to existent tools for transparency Draw up procedure manuals for officials Set up positive whistleblowing schemes (e.linked to a separate body such as the board of auditors, or the regional inspection squad NEGLIGENCE: Implement a real information system to make it possible to track choices Put the nosology code on doctor’s certificates to validate them Take intra-moenia bookings through the public booking system, and link it to payment and invoice checks (best practice: APSS Trento) COSTS: Monitor implementation of the State-Regions Conference resolutions Bring forward adoption of the budget document to the year start PROCUREMENT: Give more functions to the tender assessment commissions – increase publicity of the technical appraisal sessions. Optimise and disclose the criteria for awarding contracts (mixed contracts, PPP, central buying offices, electronic market, procedure implementation method) Comparison between prices paid by the public sector and managers of private clinics ORGANISED CRIME : Introduce the crime of self-laundering Raise awareness of the risks among commissioning bodies and provide them with suitable tools to avoid them

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10. APPENDICES 10.1 THE REGULATORY FRAMEWORK (by Fabrizio Sardella) Legislative decree no. 229/99 Albeit with subsequent integrations and amendments, the legislative decree currently in force is no. 229/1999, better known as the “Bindi decree”. Its main characteristics will be set out below. The decree is part of the programme to put a greater onus on the authorities and regions. First inaugurated by legislative decree no. 502/1992, its ultimate aim is to increase the responsibility of the various decisionmaking offices and the local government levels in view of achieving common obliged targets. Basic Levels of Care (LEA) The aim of the NHS activities is to provide basic and standard levels of care. These are the minimum levels of the right to health protected by art. 32 of the Constitution and they outline the set of services guaranteed to all citizens, free of charge or in part payment, with equal access opportunities, following the identification criteria set out in the National Health Plan (PSN).125 The National Health Service, that is, “the set of functions and care activities provided by the regional health services, and the other functions and activities provided by national bodies and institutions (…) as well as the functions reserved for the state”, guarantees uniform distribution of the basic services. The basic levels of health care (LEA) were first defined in the prime minister’s decree dated 29 November 2011, which divides the services into three areas: • Public health care in everyday life and work • District health care • Hospital care The regions can offer additional levels of care so long as they ensure economic and financial coverage of the relative costs. They are also called upon to specify the conditions in order to provide appropriate basic levels of care, so as to protect urgent/complex requirements, fragile sectors of society and local accessibility. In addition, they promote extra forms of health care, in order to raise the levels of the right to health.126

Health care planning Legislative decree no. 229/1999 introduces a tendentially federal model, based on the principle of vertical subsidiarity.127 The Bindi decree invests in strategic and participative planning. While it is bound to the ultimate goal of limiting public spending, based on the capacity to build a dialogue between regions, health authorities and independent local entities, it provides suitable tools for effective talks. The regions, acting as spokespeople for their area’s requirements, work together to draw up the National Health Plan (PSN), while the single regional plans are put to the Ministry of Health to judge whether they follow the national guidelines.128 In order to ensure that the regions and single or associated municipalities come together and carry out useful talks, with respect to the structure of state—regional relations, art. 2, paragraph 2-bis of legislative decree no. 502/1992, amended into legislative decree no. 229/1999, sets out the establishment by regional law of the permanent Conference for Regional Health and Welfare Planning. Regionalisation and the creation of “corporate” health authorities The process to make the USLs (local health units) into “corporate” authorities, which began started in 1992 in parallel to the so-called privatisation of the public sector, clearly accelerated following the Bassanini reform in 1998 and the Bindi decree from 1999, with full regionalisation of the National Health Service. Under these provisions, the shape of the USLs changed: they effectively became companies with public law status and entrepreneurial autonomy, their activities responding to criteria of efficacy, efficiency and economy, in observance of budget restrictions. The special authorities’ organisation and operations were regulated by a “private law corporate deed”, which sets out which operating structures have managerial or technical-professional autonomy and are subject to analytical accounting. The ASLs were therefore given the power to organise themselves using common law tools and forms, following the principles and directive criteria issued by the region.

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Tax federalism In light of the mis-spending generated by the health funding system, with the reorganisation decrees of 1992 and 1999, the law-making body remodelled the ways of funding the NHS in order to streamline and limit public spending. Legislative decree no. 56/2000 marks the first overall reform of the regional tax system: it is a legislative act that goes in the direction of federalising taxation. It goes beyond the tax transfer system so that the regions share the tax return. Therefore, the regions reassume responsibility for the administration of the economic resources. Therefore, the derived funding system, which legislative decree no. 56/2000 intended to progressively dismantle, was surreptitiously reintroduced. Law no. 311/2004 (the 2005 Finance Act) thus introduced the so-called recovery plans (PdR). Set out over three years, they aimed to rebalance the economic and financial situation in the regions in question. The agreement has the appearance of an industrial reorganisation plan and acts selectively on the spending factors that had led to the structural management deficit.129 Access to the funding award was given on condition that the fulfilments were observed. Law no. 296/2006 established an interim fund that regions in difficulty could dip into after stipulating an agreement, including a recovery plan, to achieve an economic balance. It is only with law no. 42/2009, entitled “Mandate to the government on the subject of tax federalism, in implementation of article 119 of the Constitution”, that the reform of the regional tax system would go a step further. In application of the solidarity principle, in 2013 an equal distribution provision was set up. This is to ensure coverage of all the expenses correlated to providing basic service levels (LEP), in order to achieve a standard level of treatment throughout Italy.130 Ultimately, instead of following the choices made in 1992, the

mandate decree substantially made no changes to the regulatory situation that had resulted from the consolidation of the health reform. Law no. 190 dated 6 November 2012 In addition to reinforcing the repressive remedies, it was also necessary to introduce or strengthen the prevention tools; measures which needed to be associated with promoting legality in administrative activities and public ethics. The response was the approval, in the session of the Chamber on 31 October 2012, of law no. 190 dated 6 November 2012 which dictates “measures for the prevention and repression of corruption and illegality in public administration” and subsequent implementation decrees. This change in regulations was an effort to improve the fight against corruption. Indeed, for the first time in Italy, it imposed governance over all the public institutions that was explicitly orientated towards preventing and limiting corruption phenomena. Connected to the same law no. 190/2012, there have also been the more recent legislative decrees: no. 33/2013 (transparency of the public administration), no. 39/2013 (ineligibility and incompatibility of roles) and presidential decree no. 62/2013 (public sector workers’ code of conduct). On this point, it is necessary to highlight that on 17 September of the same year, CIVIT (the Commission for the Assessment, Transparency and Integrity of the Public Administrations - hereinafter also CIVIT) approved the proposed National Anti-Corruption Plan (PNA) drawn up by the Department for Public Administration based on law no. 190/2012. This plan gives the public administrations guidelines for drawing up the Three-Year Corruption Prevention Plan (PTPC) which each administration must adopt by 31 January 2014.

Castelli G. M., Il ruolo delle forme integrative di assistenza sanitaria, in Relaz. industriali 2000, 03, 365. Ministry of Health, loc. cit. sub. 1. 127 LAMBERTI L., Diritto sanitario, Ipsoa, Milan, 2012, p. 26. 128 Bindi R., La salute impaziente, Jaca Book, Milan, 2005, p. 43 129 Ministry of Economy and Finance, Relazione unificata sull’economia e la finanza pubblica 2009, p. 180 (http://www.mef.gov.it/doc-finanza-pubblica/ruef/). 130 CIncotti F., Bussone M. C., Il federalismo sanitario: la gestione del SSN nel nuovo assetto di federalismo fiscale, Centro Studi Assobiomedica, Analisi, 13, April 2012. 125 126

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The repressive measures Law no. 190/2012 innovates the criminal code as follows: • It introduces the crime of influence peddling as per art. 346 bis of the Criminal Code, extending the area subject to sentencing to the conduct leading up to stipulation of the corruption agreement. The same penalty is applied to both those who lend and promise influence, and is increased if they hold a public position; • It rewrites art. 318 of the Criminal Code which punishes corruption in performing one’s office. However, in order for the illicit agreement to be punished, it is no longer necessary to precisely identify a particular official act performed by the public official; • It reviews the regulations of private corruption, by rewriting art. 2635 of the Civil Code, which extends those actively involved in the crime and increases the prescribed penalties. The commission or omission of acts which violates duties of office or loyalty, involving giving or promising money or other gain and causing harm to the company, is punished with one to three years’ imprisonment; • It redefines the crime of bribery, so that art. 317 of the Criminal Code punishes coercive bribery with six to twelve years’ imprisonment • Introduce l’induzione indebita a dare o promettere utilità all’art. 319-quater c.p., • It introduces undue inducement to give or promise advantages as per art. 319-quater of the Criminal Code it extends the range of crimes for which, if condemned, the perpetuator receives a lifetime ban from public office, adding direct bribery and judicial corruption to peculation and bribery; • It increases the prescribed penalties for peculation (from four to ten years), direct bribery (from four to eight years), judicial corruption (from four to ten years), and abuse of office (from one to four years). The prevention measures The law-making body has prepared a series of “internal barriers” which consist of the obligatory adoption, by every public administration, of corruption prevention plans inspired by risk management models. They should follow the lines of the organisation and control models for companies and private bodies – legislative decree no. 231 dated 8 June 2001 – whose minimum contents are outlined by the law.

Among other things, to give more detail of what has been indicated in brief above, the 2012 law sets out further barriers against corruption, for example: • Approval of the National Anti-Corruption Plan by CIVIT, identified as the national anti-corruption authority by the Merida Convention, for coordination purposes; • Introduction of and rulings for the figure of corruption prevention official. They work as the institutional representative, giving citizens news concerning corruption prevention measures, and they are authorised to control and check the efficacy and suitability of the plan (accountability). The administration and the institution under supervision then organise a suitable IT system to monitor the measures indicated above. If a corruption crime is committed in a public administration, and ascertained by final judgement, this leads to the managerial responsibility and disciplinary action,as well as damage to the public administration’s purse and image, unless it can be proven that every legal provision was fulfilled; • Mandate to the government to dictate the regulations on the subject of ineligibility and incompatibility of managerial roles, in the presence of conflicts of interest or court convictions, even without a final judgement, for crimes against the public administration (exercised with legislative decree no. 33/2013); • Mandate to the government to adopt a consolidated text of provisions with bans from and ineligibility to run for appointment to decision-making and governing roles (exercised with legislative decree no. 33/2013); • Definition of a code of conduct for public administration employees, violation of which will lead to liability to disciplinary action, even dismissal, in addition to potential third-party, administrative and accounting liability; • High levels of obligatory transparency and disclosure; all public economic institutions, government-controlled companies, as well as those under their control pursuant to art. 2359 of the Civil Code, and private law institutions under government control are held to take up all useful and necessary initiatives, promptly and without delay, in order to implement the regulations on transparency. Then a mandate to the government to reorganise the regulations on advertising and

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information for the public administrations (exercised in the month of February 2013); • Codification of the obligation for public employees in a position of conflict of interest to abstain and provision of obligations to communicate all useful data relating to those subjects given external appointments; establishment of a white list at every prefecture that identifies those operators not subject to attempts at infiltration by the mafia in those sectors deemed at greatest risk of this phenomenon; • Protection of so-called whistleblowers, through a ban on making sanctions or discriminatory measures or dismissing those public employees who report illicit conduct that has come to their attention in their work. Indeed, every administration must provide separate and reserved internal channels to receive notifications; in second place a code needs to be used in place of the whistleblower’s personal details and there needs to be a model for receiving useful information to single out the authors of the illicit conduct. Then those who are involved in the notification and those who come to know of it in any way must be bound to confidentiality. Lastly, whistleblowers must be protected by effective awareness-raising activities and there must be communication of the right and obligation to divulge illicit conduct; • Implementation of training courses on respect for the rules and public ethics at the College for Public Administration, aimed solely at public employees. These courses must be organised on two levels: a general level aimed at all employees concerning the spheres and topics of ethics and legality; and a specific level aimed at the head of prevention, representatives, members of the control bodies, managers and officials of risk areas on the prevention policies and their role with respect to the administration. Alongside the appreciable effort to stem the corruption phenomenon and maladministration in general, scholars have highlighted some difficulties in implementing the mechanisms set out by the law. Adoption of the prevention plan, first of all, implies a notable financial and organisational effort and does not account for the significant diversities among the public administrations involved. The law sets out a very complex programme of training and implementation of the plans, which could result in excessive fragmentation of the administrative action and a consequent dispersion

of resources. In particular, it will be necessary to coordinate it with the programmes set out in legislative decree no. 150/2009 on the subject of transparency and integrity. It will also be opportune to carry out periodical monitoring of the results achieved in order to make any amendments. As for protecting whistleblowers, it will be opportune, as suggested by authoritative scholars, to provide protected, easyaccess channels for reporting facts, in addition to potentially allotting a body to receive and examine retaliation reports and/or improper investigations. The control bodies Without doubt, controls are of central significance in preventing the risk. Legislative decree no. 502/1992 introduced a new system to control the health authorities’ acts, bodies and activities. In particular: • External or outsourced controls, carried out mainly by the regions and the State Auditors’ Department; • Internal or in-house controls, carried out mainly by the director general and Board of Auditors. All the control bodies act as an additional barrier against the corruption phenomenon and are set up in order to provide a system of constant and continuing controls.

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10.2 convergence model of public spending in the European Union before and after the Maastricht Treaty (Ratio of the analysis of health spending convergence and the role of corruption). by FS Mennini131 and L Gitto132 1. Introduction The expression “welfare state” sums up the role played by the public sector in reducing or eliminating social and economic inequalities between citizens. Welfare policies have the goal of providing a basic level of public services (health, education, unemployment benefit, pensions, etc.), able to guarantee the population a dignified standard of living. In recent decades the notion of welfare has been closely examined by economic literature and scholars have concentrated on implementing a European socio-political model. Nevertheless, the more complex the institutional framework, the more structured the welfare model has to be to respond to the emerging challenges: amongst which, exposure to international economic trends, demographic transition, social risks linked to new health needs as well as the ever more widespread risk of corruption. Comparison between similar realities led to the hypothesis of a convergence trend of welfare at European level (Iversen and Cusack, 2000; Paetzold, 2012). Nevertheless, in contrast to the convergence scenarios, some studies describe the effect of existent institutional models, and propose that there is dependence on these models. In this view, the various welfare regimes will last and continue to pursue national objectives (Pierson 1996; Paetzold, 2012). This study is the first step in a wider project that aims to examine the effects of welfare policies drawn up at supranational level and, in particular, correlated to health care and the deriving risk of corruption. Its main objective consists of analysing the process of convergence between social policies before and after the establishment of the European Union in 1992. The empirical analysis is based on the β convergence model of Barro and Sala-i-Martin and examines the convergence of welfare expenditure by groups of and single countries in the period between 1980 and 2001.

The study is set out as follows: in the following section, there is a brief description of the characteristics of the welfare systems, classified in different types as suggested by the literature. The β convergence model is presented in section 3 and the empirical analysis made. The study will be rounded off by some comments concerning the results of the estimates, together with further considerations on possible furtherance of the analysis. 2. Economic literature on welfare systems The economic literature on welfare systems dates from the beginning of the 1970s. In his essay “Social Policy”, Titmuss (1974) identifies three categories of welfare: a “residual” type of welfare, in which families and workers take on the costs of health and social services; in which case public intervention is residual and takes place every time that private intervention is not effective. Instead, the “industrial” model is characterised by a free market and, as a consequence, the public sector plays a complementary role in implementing the social policies. The “redistribution” model envisages widespread responsibility for the whole of society: the state only intervenes when necessary. A similar classification of the welfare systems is adopted by Esping Andersen (1990 and 1999). The “liberal state” includes those countries where market presence is dominant (such as the United States or United Kingdom). Instead, the “corporatist state”, present in countries such as Germany, Belgium and France, features a hierarchical welfare scheme. Lastly, there is a “social democratic” type of welfare model implemented in Sweden, Denmark and Norway, which guarantees a high level of social protection for all citizens. This type of system, based on social security payments, is only sustainable if there is full employment.133 Ferrera (1998) and Bertola et al. (2001) have proposed another type of classification, making a distinction between the “Nordic” countries (such as Denmark, Finland, Sweden and Holland), in which a large share of public spending is set aside for social protection and the state plays an important role in the labour market; the “Anglo-Saxon” countries (such as Ireland and the United Kingdom) in which a high amount of the tax revenue is set aside for the population, despite the trade unions having a marginal role; the “continental” countries (such as Austria, Belgium, France, Germany and Luxembourg), characterised by social security,

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policies in favour of workers and pensions for the elderly, according to a traditional Bismarckian welfare model; the “Mediterranean” countries (such as Greece, Italy, Spain and Portugal), which have a high level of spending for workers, pensions for the elderly and exemptions for the working-age population. In the latter, the trade union presence is strong. One of the European Union’s objectives is to achieve a common social policy. The implementation of measures aimed at the convergence of social public spending among the different countries can be seen in this light. Nevertheless, institutional, demographic and economic factors can condition the process of convergence between welfare policies. In other words, the differences between the various countries can hinder the creation of a “transnational social policy model” (Hay et al., 1999). There are numerous studies that have dealt with the problem of convergence between the various welfare systems. Two main lines of investigation can be seen: the first deems that there can be convergence in the long term; instead, the second recognises how it is impossible to eliminate the divergence of welfare services. In general, the notion of convergence and the ways to achieve this objective are often too generic. A question raised in the literature is if the convergence should be interpreted as societies’ tendency to become standardised, in terms of structures, processes and services (Bouget, 2002; Kerr et al.,1973), or if it should be assessed on the basis of results. Indeed, the aim of the welfare “convergence” policies is to reduce the differences in the distribution of income, guarantee the protection of workers against risks that cannot be foreseen134 and create incentives for employment. Together with studies aiming to identify the main features of the welfare systems, statistical and econometric analyses also have be performed. While only a few quantitative studies concentrate exclusively on the convergence trend between the European Union member states since its foundation, others (Montanari et al., 2008; Corrado et al., 2003) take a wider sample of European countries into consideration. The empirical studies have often led to contrasting results (Mauro and

Rodriguez-Pose, 2007). Among the methodological problems that have emerged is the availability of data and choice of a suitable method for comparison between the countries (Fingleton, 1999; Magrini, 1999). The main indicators used in the quantitative analyses of convergence between the welfare systems (Alonso et al., 1998; Cornelisse and Goudswaard, 2001; Overbye, 2003) have been social public spending per capita (considering equal purchasing power when comparing several countries) and the percentage of GDP set aside for social spending.135 The econometric studies have more frequently used β convergence and σ convergence models, while others have concentrated on time series and co-integration analysis, panel data or cluster analysis. La σ is defined as the measure of an indicator of inequality between various factors and their development in time. The most frequently used indicator is the coefficient of variation (CV) which consists of the standard deviation of a variable divided by the value of the average of the corresponding variable. A convergent trend is seen when the CV goes down, which indicates a decrease in the difference between the variables considered. The concept of absolute β convergence is used to detect the convergence trends in social services. This concept is used in the studies of Barro and Sala-i-Martin (1992) and Barro (1992) who developed it in the sphere of neoclassical models of growth. On the basis of their theory, welfare convergence analyses carried out subsequently (Corrado et al., 2003; Caminada et al., 2010) have hypothesised a constant level of welfare services towards which all the countries converge, regardless of their specific economic, social and institutional conditions. This concept of convergence implies an inverse relationship between the initial level of social services and their consequent increase. In other words, the further a country is from a uniform level of social public spending at a time zero, the more growth is required in future to

Professor of Health Economic and Director of Research, Economic Evaluation and HTA (EEHTA), CEIS, Faculty of Economics, Tor Vergata University, Rome. Kingston University, London, United Kingdom. Researcher, Economic Evaluation and HTA (EEHTA), CEIS, Faculty of Economics, Tor Vergata University, Rome 133 A common characteristic of “liberal” states compared to the nations where the other two models have been used is the presence of greater inequality in the distribution and final level of income, together with a greater percentage of the population under the poverty threshold. 134 While in the first case, the measures are applied to those persons already in employment to protect them against unjust dismissal, in the second case the level of protection is higher and can be directed at specific social groups (Boeri, 2008). 135 Nevertheless, as a deflator GDP can be sensitive to economic shocks. Furthermore, in smaller countries the GDP can include factors that are not exclusively correlated to that country. Hence problems could arise of distortion between welfare spending and GDP. 131

132

80 // 10. APPENDICES

approach the economic conditions of other countries. An analysis based on β convergence makes it possible to check various factors that influence the social services, and takes account of potential differences in the existent social security systems. These factors can derive both from national characteristics that reflect a specific socio-economic situation in the country (for example, unemployment rate, elderly persons index, public debt) and external factors, such as the degree of openness to business and international transactions. Barro and Sala-i-Martin have assessed the results of the β convergence analysis of 90 European regions in the period from the 1960s to the 1980s. If the β convergenceis true for all countries i (i = 1, 2,...M), then the welfare dynamics can be expressed using the following equation: ln wi,t = α + (1 + β) ln wi,0 + εi,t where wi,t is the social spending per capita for nation i at time t with t = 1,…, T. As already said, this study intends to examine the effect of the different welfare regimes on the dynamics of social spending per capita. The countries included in the analysis have been grouped together on the basis of the welfare systems classification drawn up by Esping Andersen and shown in section 2. Hence, we estimate the following model: w*i,t = α + kr + β w*i,0 + εi,t where w*i,t equals (ln wi,t – ln wi,0) and measures the real change in terms of social spending per capita in the time between t and zero, while w*i,0 w equals in w i,0. We analysed the convergence dynamics in the period prior to and after the Maastricht Treaty. In the estimated model, kr ris the classification of the following welfare models: 1) liberal; 2) social democratic; 3) corporativist; 4) southern European. In addition to these groups, a fifth has also been considered which includes the countries that have not yet joined the European Union, hence that are not directly involved in the convergence objectives: 5) other countries. Another estimated model has the objective of explaining the interaction between welfare policies and the specific characteristics of the single

countries. This way it is possible to observe the trend of every specific institutional context of convergence towards (or divergence from) a European welfare state. Should all the β estimated in the panel have a minus sign, we can conclude that there is convergence since the growth rate at time t is inversely correlated to the initial level; a higher coefficient indicates a more rapid trend towards convergence (Corrado et al., 2003). The convergence process has been analysed by various studies that have taken into examination the period between the 1960s and the end of the last century (that is, from the foundation of the European Union to the introduction of European Monetary Union). We can make out three phases.136 In the first period, which goes from the 1960s to the beginning of the 1970s, a slow process of convergence can be seen, influenced by the migration of workers from less productive to more productive industrial sectors. In the second period, the international crisis of the 1970s and the decrease in the migration process, on the contrary, led to a divergence trend. In the last period, which goes from the 1980s to the end of the 1990s, therefore in the interval of time when the European Monetary Union came into being, we see a progressive stabilisation of the local differences: the trend goes from convergence to divergence and then from divergence to convergence. The extension of the European Union eastwards led to an increase in the number of member states with less favourable socio-economic conditions. There are 10 new member states (12 after 2007) whose GDP, on average, is -7% less than the European GDP, the population +20% and GDP per capita -12.5%. Since there are greater differences between countries, instead of concentrating on their differences and similarities, in recent years the most important problem to resolve has been relative to planning a social policy model that can take account of such a varied institutional and social picture. 3. Data, comments on the results and conclusions In the β convergence analysis, the fundamental variable consists of the share of GDP set aside for welfare spending. The data used is taken from the OECD Health Data 2006 database. The analysis took into consideration 23 European countries in the period between 1980 and 2001.

10. APPENDICES // 81

Table 1: Convergence-divergence between OECD countries in the last two decades of the 20th century - Source: OECD data.

Countries

1980-1990

1990-1993

1993-1998

Belgium

-1,56

-0,13

-0,59

Denmark

-2,57

0,15

-1,84

Finland

1,44

7,33

-7,45

France

1,45

-0,01

0,84

Germany

-1,08

1,45

1,06

Greece

-3,40

0,67

-0,68

Ireland

0,32

0,81

2,77

Italy

1,04

-0,39

0,05

Luxembourg

-1,68

0,04

0,01

The countries considered in the analysis are as follows: Austria, Belgium, Czech Republic, France, Germany, Greece, Holland, Hungary, Iceland, Ireland, Italy, Luxembourg, Norway, Poland, Portugal, Slovakia, Spain, Sweden, Switzerland, Turkey and the United Kingdom. We separated them into five groups of countries: 1) Liberal countries: United Kingdom and Ireland. 2) Corporativist countries: Denmark, Finland, Norway, Sweden. 3) Social democratic countries: Austria, Belgium, Luxembourg, Holland, France. 4) Mediterranean countries: Italy, Greece, Portugal, Spain. 5) Other countries: Czech Republic, Hungary, Iceland, Poland, Slovakia, Switzerland, Turkey. Before 2001, not all the countries considered in the analysis had yet joined the European Union. The Czech Republic, Hungary, Poland and Slovakia joined in 2004; Turkey and Iceland began negotiations to become member states in 2005 and 2010 respectively. Switzerland has adopted a neutral position, even though it had asked to join the European Community in 1992. In December 1992, the Swiss voters refused to ratify the agreement, thus freezing the request to join the European Community. The dependent variable is the increase in social public spending per capita: it can be divided into spending to pay pensions, inherited pensions, family spending and other expenditure items. We estimated two specifications of the model. The first is:

Netherlands

-1,18

-2,03

-2,52

Portugal

0,38

-0,33

-1,76

United Kingdom

-0,17

0,77

-0,40

Spain

-0,25

0,14

0,48

Sweden

-1,03

8,21

-8,46

Australia

-0,31

0,47

-2,41

Canada

-1,29

-0,03

1,31

Japan

2,58

2,49

-5,16

New Zealand

0,10

0,50

-0,30

United States

2,02

1,03

0,03

Switzerland

0,01

-0,03

1,78

Turkey

1,30

4,83

-10,69

-3,89

25,96

-33,92

Convergence

Divergence

Convergence

in which lytit represents the growth in welfare spending per capita, lyti0 is the initial level of welfare spending, β measures the speed of the convergence. kr identifies different welfare regimes (liberal model, corporativist model, social democratic model, Mediterrean countries and other countries). The second specification of the model, instead, analyses the effect of each country on the growth of welfare spending, through interaction between the country-effect and the initial level of spending for welfare.

Variance

(1)

lyt it = α + β lyti0 * country + εit (2)

Barro and Sala-i-Martin describe the convergence during the 1960s (2.3% convergence rate). The process slows down during the 1970s and 80s (2% and 1% less per year respectively). When larger intervals are examined, the rate of convergence is low and, therefore, not significant. Croci-Angelini (2002) estimates a 1.02% annual rate of convergence in the 1982-1996 period; Rombaldoni (1998) estimate a rate of 1.03% in the 1981-1994 period; Rodriguez-Pose (1998) obtains a 0.9% rate of convergence, with the GDP calculated according to equal purchasing powers.

136

lytit = a + kr + β lyt i0 + εit

82 // 10. APPENDICES

A coefficient of β<0 would imply a common tendency towards convergence. Models (1) and (2) have been estimated by taking account of the data before and after 1992 (Maastricht Treaty on the European Union that states “convergence criteria”). The results of the first estimated model are shown in the following table. The benchmark group is that of the liberal systems such as the United Kingdom and Ireland. The coefficient associated with welfare spending before the Maastricht deals is negative, albeit slightly significant. On the contrary, all the coefficients relative to the classification based on the different institutional set-ups are not significant. The social democratic welfare models (Austria, Belgium, Germany, Luxembourg, Holland and France) feature higher levels of welfare spending compared to the benchmark. The welfare spending is lower in countries undergoing a transition phase. We can see a growing convergence process after the Maastricht Treaty. Indeed, in the second estimate, the value of all the coefficients rises and they are almost all significant. The Mediterranean countries are seen to be making a great commitment towards social policies. Except for the corporativist group (including the northern European countries), the coefficients estimated using other dummy variables are significant. The second specification accounts for the interaction between the countryeffects and initial welfare spending per capita. The estimates have been repeated both for the period before and after the Maastricht Treaty. The benchmark country is Austria. Nevertheless, various countries have not been considered in the analysis owing to problems of co-linearity. The coefficient β relating to the initial welfare spending level shows a negative value, albeit not significant. In the estimate relating to the period prior to the Maastricht Treaty, the convergence coefficient is significantly different from 0, thus showing a tendency towards convergence. The estimated coefficients relating to each country show both positive and negative values: this means that not all the countries converge on social issues. In some cases the estimated coefficients become significant in the second period under examination (this is the case, for example, of France and Luxembourg, whose – negative – coefficients tend to increase in absolute value in the second period).

The coefficient is positive for Denmark, Finland and Italy. Ireland, Norway and Switzerland record a variation (from negative to positive) between the first and second periods. The specific effect due to each country is significant, especially in the second period. A problem to consider for further analysis concerns the differences between countries which can result in the presence of heteroskedasticity within each panel and auto-correlation. On the whole, from the analysis conducted, we can see how in the last two decades of the twentieth century the European countries did not achieve convergence between social policies. The results obtained for countries such as Belgium, Germany, Greece, Spain and Switzerland indicate that the welfare policies remained the same. We can see a slight increase in the convergence process after the Maastricht Treaty, measured by the coefficient β. Nevertheless, convergence of social spending does not necessarily have to be considered a primary objective for all countries. As Boeri (2000) underlined “superimposing a single European social model would jeopardise the European countries’ efforts at reform. Rather the supranational European institutions should introduce common standards in developing social protection policies as a mechanism to coordinate between the national welfare systems.”

10. APPENDICES // 83

Table 2: Î˛ convergence model Increase in welfare spending

Table 3: Î˛ convergence model Increase in welfare spending (hypothesis with specific country-effects)

Coefficients estimated before 1992 (standard errors in brackets)

Coefficients estimated after 1992 (standard errors in brackets)

Corporativist model

0.013 (0.039)

0.023 (0.077)

Social democratic model

0.089 (0.082)

0.026** (0.114)

Mediterranean countries

0.021 (0.067)

0.195* (0.110)

Other countries

-0.272 (0.214)

-0.815*** (0.183)

Welfare spending

-0.144* (0.084)

-0.529*** (0.090)

Constant

1.511*** (0.603)

4.939*** (0.601)

Number of observations Verisimilitude Deviance/Degrees of freedom

202 -29.443 0.080

178 74.107 0.026

Dependent variable: variation in welfare spending

*** significant at 99%; ** significant at 95%; * significant at 90%

Coefficients estimated before 1992 (standard errors in brackets)

Coefficients estimated after 1992 (standard errors in brackets)

Belgium

-0.042 (0.166)

-0.022(0.061)

Czech Republic

-0.112 (0.175)

-0.421(0.063)

Denmark

0.112 (0.153)

0.194*** (0.058)

Finland

0.031 (0.160)

0.120** (0.059)

France

-0.099 (0.169)

-0.115* (0.061)

Germany

0.128 (0.130)

0.075 (0.054)

Greece

0.009 (0.136)

0.027 (0.054)

Iceland

0.021 (0.154)

0.044 (0.058)

Ireland

-0.024 (0.169)

0.179*** (0.061)

Italy

0.237 (0.174)

0.297*** (0.058)

Luxembourg

-0.113 (0.171)

-0.229*** (0.062)

Norway

-0.039 (0.119)

0.242*** (0.053)

Poland

0.009 (0.150)

0.040 (0.057)

Spain

-0.007 (0.137)

0.031 (0.055)

Sweden

-0.054 (0.175)

-0.075 (0.063)

Switzerland

-0.062 (0.158)

0.179*** (0.059)

Initial welfare spending

-0.035 (0.053)

-0.211*** (0.020)

0.733*** (0.295)

2.652*** (0.135)

Dependent variable: variation in welfare spending

Constant

*** significant at 99%; ** significant at 95%; * significant at 90%

84 // 10. APPENDICES

4. Convergence and health spending More recent developments in this sphere of analysis have concerned specific sectors, such as health spending. There is widespread consent over the “European health spending model” that emerges from the reforms that have taken place in many European countries since the 1990s (Taroni, 2008). The common topics referred to in the reforms were: the implementation of “quasi markets”; the increase in financial incentives determined by the use of reimbursement methods based on tariffs; and hospital privatisation. Health spending has increased significantly in the last two decades, in many countries leading to the adoption of measures aimed at limiting costs. As indicated in Table 4, Latvia, Portugal, the Czech Republic, Belgium and Luxembourg recorded the greatest increases in the percentage share of GDP set aside for health spending. Only Finland showed a decrease in the share of GDP in the period between 1992 and 2004. Even though the share of GDP set aside for health spending increased in all the member states in the period 1992-2004, in the European countries that joined the European Community when it was established, the increase was quicker than in the new member states (Kerem et al., 2008). In the period 1992-2004 the biggest increase in health spending per capita took place in Latvia, while the lowest increase was in Finland. Kerem et al. analysed convergence in health spending while considering both the increase in the percentage share of GDP set aside for health expenditure, and the rate of increase in health care spending per capita. Table 5 shows the results of the absolut β convergence, while taking into account the annual rate of increase in health spending per capita in the European countries in the period 1992-2004. The estimated value of the beta coefficient is -0.027 with a confidence interval of -0.03 < β < -0.016. Two countries are excluded, Slovenia and Luxembourg. Without them, the β coefficient would have gone down to -0.038 in the group that includes 15 member states and to -0.053 in the group comprising the other 8 member states.

Indicators of this type are calculated by specialised agencies such as the Political Risk Services Group

137

The presence of the absolut β convergence in the groups that include 23, 15 and 8 member states respectively satisfies the conditions for the convergence of health spending per capita in the European countries in the period 1992-2004. In order to estimate the efficiency of the public expenditure and assess the presence of convergence patterns, health spending can be examined together with public spending for welfare. In this perspective, the corruption present in the health sector can be considered a factor that limits growth and convergence (Attila, 2008). Corruption affects economic growth by reducing the resources available for the public sector and reducing productive investments in sectors such as health and education. In order to estimate the cost of corruption and failed economic growth, it would be necessary to add some governance indicators to the empirical analyses, such as quantity of corruption present in each country and bureaucratic quality.137 Corruption present within the political system reduces governance efficacy. The index of bureaucratic quality instead measures the solidity of the institutions and quality of state administration, as well as the bureaucrats’ power and competence. The corruption rate cannot easily be changed in the short term, in particular in the areas historically characterised by this phenomenon. Governments should implement anti-corruption policies to obtain greater transparency in health policies.

10. APPENDICES // 85 Table 4: Percentage share of GDP set aside for health spending in European countries in the period 1992-2004

Country

Total health care expenditure as % of GDP

Relative order based on data of 2004

1992

2004

Germany France Portugal Greece Belgium Austria Sweden Denmark Netherlands Italy Slovenia United Kingdom Hungary Spain Luxemburg Finland Czech Republic Ireland Poland Cyprus Latvia Lithuania Estonia EU-12 EU-15

9.7 8.9 7 7.9 7.7 7.4 8.3 8.3 8.1 8 7.4 6.9 7.6 7.1 5.4 9 5.1 7 6.2 4.6 2.8 4.2 4.5 5.32 8.21

10.7 10.5 10 9.8 9.8 9.6 9.3 8.9 8.9 8.7 8.6 8.3 8.3 8.1 7.7 7.5 7.3 7.1 6.5 6.3 6.3 6 5.3 6.01 9.43

Country

Change 1992-2004 (%points) 1.0 1.6 3.0 1.9 2.1 2.2 1.0 1.6 0.8 0.7 1.2 1.4 0.7 1.0 2.2 -1.5 2.2 0.1 0.3 1.7 3.5 1.8 0.8 0.69 1.22

Total health care expenditure, PPP$ per capita

Relative order based on data of 2004

1992

2004

Luxemburg France Belgium Austria Germany Netherlands Denmark Sweden Ireland United Kingdom Italy Finland Greece Spain Portugal Slovenia Czech Republic Hungary Poland Lithuania Estonia Latvia EU-12 EU15

1758 1752 1557 1541 1961 1632 1641 1604 1007 1181 1550 1552 963 1030 852 448.5 570 633 378 155.4 301.1 169.7 353.7 1524

5809 3159 3145 3124 3056 3041 2881 2825 2596 2546 2392 2235 2162 2094 1813 1801 1361 1323 805 786.4 771.4 734.1 782.8 2694

Change 1992-2004 (%points) 289.5 180.3 201.9 202.7 155.8 186.3 175.6 176.1 257.8 215.6 154.3 144.0 224.5 203.3 212.8 401.6 238.8 209.0 213.0 506.0 256.2 432.6 221.3 176.8

EU-8

EU-15

EU-23

Table 5: Convergence of health spending in the period 1992-2004, annual rate of increase per capita based on PPP

Coef.

StdErr

P>t

B A r2 annual convergence rate (%) Thalf (in years)

-0.027 0.246 0.56 3.2 22

0.005 0.035

-5-180 7.064

0.000 0.000

-0.037 0.173

(95% CI) -0.016 0.318

0.7 4

4.7

0.000

1.9 14

4.5 29

β α r2 annual convergence rate (%) Thalf (in years)

-0.027 0.252 0.20 3.3 21

0.015 0.110

-1.790 2.300

0.097 0.039

-0.600 0.015

0.006 0.488

1.8 8

1.8

0.1

-0.3 6

6.9 36

β α r2 annual convergence rate (%) Thalf (in years)

-0.047 0.365 0.58 7.0 10

0.017 0.098

-2.850 3.730

0.029 0.010

-0.088 0.125

-0.007 0.604

1.6 2

0.000

3.8 6

10.2 14

86 // 10. APPENDICES

Appendices: The perceived rate of corruption (Transparency International) and its correlation with the rate of increase in public spending per capita, social public spending per capita and public health care spending per capita. In the literature, corruption and other institutional variables are generally considered to be endogenous (Mauro, 1995; Dreher and Schneider, 2006). Indeed, they can influence growth; nevertheless, a higher rate of economic growth can help to form better institutions and, as a result, reduce corruption. Table 6 shows the correlation between perceived corruption, the rate of increase in public spending per capita, social public spending per capita, public revenue per capita and public health care spending per capita. The data used to calculate these correlations is OECD data from 2003 to 2010, referring to a group of 25 European states (including some countries that have not yet joined the European Union, such as Turkey, Iceland and Switzerland).

Table 6: Correlation between perceived corruption, rate of increase in public spending per capita, social public spending per capita, public revenue per capita and public health care spending per capita.

Perceived corruption

Increase in public Social public spending spending per capita per capita

Public revenue per capita

Perceived corruption

Increase in social public spending per capita

-0.32*

Social public spending per capita

0.64*

-0.31*

Public revenue per capita

0.73*

-0.34*

0.90*

Public health care spending per capita

0.75*

-0.32*

0.89*

0.91*

Public health care spending per capita

The increase in social public spending per capita is correlated in an inversely proportionate manner to the corruption perception rate (however, one needs to bear in mind that a higher level of the Corruption Perceptions Index â&#x20AC;&#x201C; CPI â&#x20AC;&#x201C; represents a better level of governance). We can also observe a significant correlation between this variable and public health care spending per capita. The index shows the level of corruption present in the public sector as perceived by entrepreneurs and analysts. It oscillates between 0 (high level of corruption) and 10 (best governance).

10. APPENDICES // 87

Figure 1: Results of the Transparency International Corruption Perception Index (average values 2003-2010) 10 9 8 7 6 5 4 3 2 1

United Kingdom

Trukey

Switzerland

Spain

Sweden

Slovenia

Slovakia

Poland

Portugal

Holland

Norway

Italy

Luxembourg

Ireland

Iceland

Greece

Hungary

Germany

France

Finland

Estonia

Denmark

Belgium

Czech Republic

Austria

Figure 2 â&#x20AC;&#x201C; Percentage increase in social public spending per capita and perceived corruption.

4 % Growth per capita social public spending 2

88 // 10. APPENDICES

Figure 3 â&#x20AC;&#x201C; Social public spending per capita and perceived corruption

4 Per capita social public spending 2

5000

10000

15000

20000

Figure 4 â&#x20AC;&#x201C;Public health care spending per capita and perceived corruption

4 Per capita public health expenditure 2

1000

2000

3000

4000

5000

10. APPENDICES // 89

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ABBREVIATIONS Agenas: National Agency for Regional Health Services Art.: article Arts.: articles AVCP: Authority for Supervision of Public Works, Services and Supply Contracts ASL: Local Health Authority CPI: Corruption Perception Index Const.: Constitution DRG: Diagnosis Related Groups e.g.: for example etc.: et cetera IMU: single municipal tax OCSE: Organisation for Security and Cooperation in Europe TI: Transparency International EU: European Union Tab.: table CAT: computerised axial tomography RiSSC: Research Centre on Security and Crime NMR: nuclear magnetic resonance

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