Should hospitals be required to pass on discounts to health insurers? — Answers to five questions on law and public policy
Swiss health-care law requires all service providers in Switzerland, including hospitals, to pass on discounts and other material benefits received in connection with the supply of medicinal products.
Passing on of discounts, however, is at odds with the economic situation of many hospitals, and deficits with public hospitals are ultimately financed by the taxpayer. According to the financial consultancy KPMG, two-thirds of all hospitals in Switzerland registered a deficit in 2023 with the Inselspital in Berne leading the way with a deficit of CHF 120 million. Given the growing deficits of Switzerland's public hospitals, critics have argued that the obligation to pass on discounts should no longer apply to hospitals, especially if they are publicly owned. In light of this conflict, we comment on five issues related to passing on discounts and other material benefits in the hospital sector.
Under the Swiss Health Care Act (SHCA), hospitals and outpatient service providers are obliged to pass on any direct or indirect benefits received from suppliers of medicinal products (Art. 56 para. 3 let. b SHCA). With the revision of the Swiss Therapeutic Products Act, the legislator has confirmed this obligation and added the obligation of transparency.
The primary focus is on discounts and reimbursements granted for the purchase of medicinal products. The purpose of passing on discounts and other material benefits is to alleviate the financial burden on the payer.
In order to incentivise the service provider to negotiate favourable purchasing conditions with their suppliers, the law gives them the right to pass on discounts in part and to reinvest the remainder into enhancing the quality of care, thus ultimately ensuring that the patient benefits.
The following article lists five pertinent questions at the heart of this policy.
1. What is a discount?
The passing on obligation applies to direct or indirect benefits that service providers receive from suppliers of medicinal products. This includes discounts and rebates, but also other forms of material benefit. The law defines the discount as a price lower than the ex factory price set by the competent authority, the Swiss Federal Office of Public Health (FOPH), and published on the list of pharmaceutical specialities (Art. 8 para. 1 of the Ordinance on Integrity and Transparency in relation to Therapeutic Products).
According to FOPH practices, a discount can also be found if the price paid is higher than the ex factory price. Whether this is the case should be determined by the division of tasks with the supplier.
FOPH practice differs from the wording of the regulation. This makes it difficult to determine whether a discount has been granted, which is regrettable for reasons of legal certainty.
2. Who is entitled to the discount?
Swiss health legislation stipulates that discounts must be passed on to the payer (Art. 56 Para. 3 and 3bis SHCA). This is the premium payer, unless the insurer and the service provider have agreed otherwise. In the case of in-patient treatment, the insurer is the payer by law (see Art. 42 para. 2 sentence 2 SHCA).
It is questionable whether this result corresponds to the legislator's intention. The SHCA does not mention the cantons, which operate public hospitals. Moreover, the cantons are legally obliged to bear at least 55% of the costs of in-patient treatment (see Art. 49a para. 2ter SHCA). Any deficits resulting from the operation of the hospitals must also be borne by the cantons. It therefore seems incongruous that the discounts only go to the health insurers, while the deficits resulting from the operation of the hospitals must be borne by the cantons and thus by the taxpayers.
3. Why is the pass-on obligation limited to the outpatient sector?
Discounts that are already included in the calculation of tariffs and prices due to lower costs are excluded from the pass-on obligation and do not have to be shown separately on the invoice. This is the case for cost-based flat rates such as DRGs. As a result, the obligation to pass on rebates is limited to medicinal products used in the outpatient sector.
The challenge, however, is that many medicinal products can be used in both outpatient and in-patient settings. When these medicinal products are purchased, their subsequent use is not yet known.
4. How will the recent changes to the unified financing of health services affect the obligation to pass on discounts?
With the entry into force of the SHCA amendment on the uniform financing of services (EFAS), the cantons will be obliged to pay a flat-rate contribution of at least 26.9% of costs for all services reimbursed under the Swiss health-care system, irrespective of whether the services are provided on an out-patient, in-patient or long-term care basis (Art. 60 para. 4 SHCA).
In view of the cantonal cost sharing required by law, the question of the appropriateness of the current regulation, according to which discounts are to be passed on exclusively to the payer (to the exclusion of the cantons) becomes even more pressing. The current system is unsatisfactory.
5. What are the implications of an agreement with health insurers on the partial passing on of discounts?
Swiss law allows service providers to enter into an agreement with health insurers on the partial passing on of discounts. The obligation to pass on discounts, however, applies regardless of whether the service provider has entered into such an agreement or not. It only changes the extent of the passing on. On the basis of such an agreement, the service provider is entitled to retain less than half of the discount, but the service provider is not free to decide how to use this share. It must be used for a specific purpose (i.e. to improve of the quality of treatment).
The conclusion of an agreement to pass on part of the discount does not release the service provider from the obligation to account for the discount and its use. On the contrary, Swiss health insurers are legally obliged to monitor the partial passing on and to inform the FOPH periodically of how they fulfil this obligation, including the use of the remaining funds that have not been passed on.
For more information on the impact of a Swiss hospital's obligation to pass on discounts like rebates and other material benefits to health insurers, contact your CMS client partner or the local CMS experts.
