Dangerous prescription

A new study indicates that corruption has infected Latin America’s public hospitals

By Paul Constance

Can corruption be harmful to your health? Consider the following scenario. A woman arrives at the emergency room of a large public hospital complaining of acute abdominal pain. She spends four hours in the waiting room because two of the physicians who are supposed to be on duty are actually working at private clinics. By the time she is finally examined, her condition has become life threatening and requires a potent antibiotic and several specialized tests. The hospital’s pharmacy records indicate that the antibiotic is in stock, but the doctor in charge is told that supplies have inexplicably disappeared. The woman’s relatives are informed that they must pay a special fee to obtain the medication from another source. They are also told that the diagnostic tests she requires can only be performed at a private hospital in another part of town.

Absentee doctors, stolen medications, special fees, questionable referrals—each of these practices can have dangerous and potentially tragic consequences. And each of them is due to failure to control theft, fraud and abuse of public resources. In other words, they are due to corruption.

Latin Americans have long suspected that corruption is bad for politics, that it weakens democracy and can even inhibit economic growth. But Diagnosis Corruption, a collection of country studies recently published by the IDB’s Latin American Research Network, provides detailed evidence of the effect of corruption in an a sector that many people consider to be immune to such abuses. While corruption is often associated with political campaign financing, customs procedures and public works contracts, it is not typically believed to show up in hospital rooms. Indeed, in surveys conducted as part of research reported in Diagnosis Corruption, people in several Latin American countries ranked public hospitals as among the least corrupt institutions in their society—much less corrupt than the presidency or the police, for example.

But when IDB-sponsored research teams interviewed patients, doctors and nurses in half a dozen regional countries, they found that corrupt activities are widespread in public hospitals. Theft of medical supplies, illegal or excessive fees for goods and services, absenteeism by doctors and nurses and unauthorized use of public facilities for private medical practice were among the most frequent abuses reported by survey respondents. The respondents also described abuses such as favoritism in appointments and promotions of hospital staff, unnecessary referrals to private medical practices, and inducements to receive unnecessary medical interventions.

These abuses “siphon off government resources and compromise the health system’s ability to provide needed care,” Rafael Di Tella and William D. Savedoff, the book’s editors, write in the introduction (see related article at right). They also threaten the health and well-being of millions of people who cannot afford private health services.

Perceptions vs. hard data. Diagnosis Corruption offers an antidote to the subjectivity that has characterized much of the public debate over corruption. Although concern over corruption has moved to center stage in recent years, anti-corruption efforts have suffered from the impression that they are based on anecdotal or even biased information. For example, the widely discussed Corruption Perception Index, published once a year by Transparency International, a nonprofit advocacy group based in Germany, has been dismissed by some critics as an imprecise indicator because it is based on the opinions of international business people and research firms.

To improve upon this, data collected for Diagnosis Corruption is based on the daily experience of people who frequent or work in public hospitals and work with hospital procurement records. The IDB commissioned studies from teams of researchers in Argentina, Bolivia, Colombia, Costa Rica, Nicaragua, Peru and Venezuela. Researchers were asked to identify the principal kinds of corruption taking place in public hospitals, to estimate the cost of corrupt activities, and to test various hypotheses as to how such abuses might be controlled. In addition to interviewing thousands of doctors, nurses, and patients, researchers in Argentina, Venezuela, Bolivia, and Colombia also obtained and analyzed data on the prices hospitals pay for various supplies.

The result is a detailed and alarming picture of fraud and abuse. The severity of each kind of abuse varies considerably from one country to another, but all the studied countries were found to suffer from the following kinds of corruption:

In just 32 public hospitals in Bogotá, Colombia, overpayments for a few specific medications and supplies were estimated to total $2 million per year—enough to extend basic medical care to thousands of additional patients. Multiplied across the whole range of products purchased by hospitals, the impact of these surcharges must be measured in the hundreds of millions of dollars—a devastating loss in countries where a significant percentage of the population still lacks adequate medical care.

The price of honesty. Why are such abuses taking place among nurses and doctors who presumably are motivated by idealism and empathy for others? Instead of assuming that corruption is due to a general decline in ethical standards, the IDB-sponsored researchers set out to learn what factors might encourage or discourage honest behavior in a hospital setting. They worked on the assumption that people tend to weigh the costs and benefits of dishonesty and then, depending on their own integrity and the surrounding attitudes toward corruption, take the action that gives them the most benefit for the least risk.

For example, if an orderly concludes that the risk of being caught stealing medications is high, and that he will certainly lose his job if caught, then he is less likely to consider stealing. But what researchers found in almost every country study was that this “probability of detection” was relatively low in most hospitals. Worse yet, they found that the likelihood of being punished tended to be low. “Impunity may be the principal factor contributing to corruption in public hospitals,” Di Tella and Savedoff conclude.

Indeed, impunity can encourage corruption even in cases where the probability of detection is increased by audits and other types of controls. In Argentina, for example, health officials attempted to control excessive payments for hospital supplies by publishing a list of lowest available prices for standard hospital goods. When these “reference prices” were announced, “procurement prices dropped dramatically” according to Di Tella and Savedoff, because hospital officials were possibly concerned that they were at greater risk of getting caught if they overpaid. “Yet six months later the wide range of procurement prices had reappeared,” the authors add, “presumably because the procurement officers saw that, in practice, the price information was not being used to penalize or sanction anyone.”

In a similar way, higher salaries are traditionally assumed to inhibit corruption in public bureaucracies because they diminish officials’ urge to increase their income through illegal means. But if the probability of detection and punishment are low, this assumption is no longer valid. In Venezuela, one study found that higher salaries for hospital procurement officers were actually associated with higher levels of corruption.

From cause to cure. There are many ways to increase the risk of detection and diminish impunity, of course. Basic accounting controls and external audits can cut down on financial fraud. Professional medical associations and unions can establish ethical standards and impose sanctions. Community hospital boards designed to represent patients can channel complaints and exert pressure for improvements.

Diagnosis Corruption provides preliminary evidence that these types of controls can effectively curb corruption in Latin America’s public hospitals, but it does not speculate as to why such basic measures have not already been widely adopted. One possible answer—indicated by the comparatively favorable reputation that public health services continue to enjoy—is that citizens and politicians are simply not aware of the devastating extent of fraud and abuse in the health care system.

As Di Tella and Savedoff conclude in the introduction to Diagnosis Corruption, “politicians and policymakers must have access to the information they need to focus attention on the grossest violations of the public trust and design policies and mechanisms that will discourage corrupt behavior.” By providing an objective and detailed portrait of the problem, Diagnosis Corruption could help to arm those who fight for better and more equitable health care in Latin America.

Date posted: January 2002