Additional funding mechanisms for Public Hospitals in Greece: the case of Chania Mental Health Hospital

We performed a financial analysis of the official 2008 data of a case - study hospital (Mental Health Hospital of Chania). We used a capital budgeting approach to investigate whether value is created for the public hospital by engaging its assets in a project for the development of a private renal dialysis Unit.The development of the private unit in hospital owned land is a good investment decision, as it generates high project Net Present Value and Internal Rate of Return. When the project commences generating operating cash flows, nearly €400.000 will be paid annually to the Mental Health Hospital of Chania as rent, thereby gradually decreasing the annual deficit of the hospital.Revenue generated from the long term lease of public hospital land is crucial to gradually eliminate hospital deficit. The Ministry of Health should encourage similar forms of Public Private Partnerships in order to ensure the sustainability of public (mental) hospitals.Greek NHS Hospitals are financed through taxation via the state budget (primarily for infrastructure, salaries and equipment) and social security funds (for the reimbursement of services provided to their insureds). Current hospital debt for the 137 hospitals of the public sector amounts to €6 billion and the current fiscal crisis [1] puts even greater strain on public hospital sector financing, with forced budget cuts and increasingly irregular reimbursement by sickness funds [2]. This is expected to have an effect on hospital financial statements, with deficits increasing. It is clear that there is a need for a different financing paradigm for the Greek NHS hospitals.More specifically, Public Mental Health Hospitals face a deficit of over €12 million in their annual budgets. Over the past 30 years, Public Mental Health Services in Greece have undergone a significant reform to modernize service provision according to WHO standards [3], with emphasis on de-institutionalization and community mental health care provision [4].