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Cablegate: Vietnam Outgrows Hcmc's Healthcare System

VZCZCXRO0664
OO RUEHDT RUEHPB
DE RUEHHM #0656/01 2001013
ZNR UUUUU ZZH
O P 181013Z JUL 08
FM AMCONSUL HO CHI MINH CITY
TO RUEHC/SECSTATE WASHDC IMMEDIATE 4661
INFO RUCPDOC/USDOC WASHDC PRIORITY 0074
RUEAUSA/DEPT OF HHS WASHINGTON DC
RUEHHI/AMEMBASSY HANOI PRIORITY 3143
RUCNARF/ASEAN REGIONAL FORUM COLLECTIVE
RUEHHM/AMCONSUL HO CHI MINH CITY 4889

UNCLAS SECTION 01 OF 03 HO CHI MINH CITY 000656

SENSITIVE
SIPDIS

STATE FOR EAP/MLS, EAP/EP, INR, OES/IHA
STATE PASS TO USAID FOR ANE AND GH
HHS/OSSI/DSI PASS TO FIC/NIH (RGLASS) AND OGHA
(WSTIEGER/LVALDEZ/MABDOO)
CDC FOR COGH (SBLOUNT)

E.O. 12958: N/A
TAGS: ECON EIND TBIO
SUBJECT: VIETNAM OUTGROWS HCMC'S HEALTHCARE SYSTEM

REF: A) HANOI 370, B) 07 HANOI 1810

HO CHI MIN 00000656 001.2 OF 003


1. (U) Summary: Ho Chi Minh City's (HCMC) healthcare system
today faces rapid growth in demand and underdeveloped
institutional capacity. A shortage of human resources, unduly
restrictive government regulation, lack of investment and
pervasive corruption constitute the main challenges currently
affecting the city's healthcare system. Each is symptomatic of
Vietnam's ongoing transition to a market economy, making the
health sector an interesting barometer for overall reform in
Vietnam. More broadly, the principal challenge for health
sector reform is the pace and quality of legal and regulatory
reform relative to economic reform (ref A). End summary.

2. (U) This is the first in a series of cables analyzing the
health care industry in southern Vietnam. Further reporting
will examine specific aspect of health in southern Vietnam: how
human resources shortages are affecting health care, equality of
access and trade/investment challenges and opportunities.

Growing Demand Overwhelms Existing Services
-------------------------------------------
3. (U) Economic development and rapid reforms, especially those
adopted in the run up to WTO accession, have fundamentally
changed health care in Vietnam. Economic growth has allowed
ordinary Vietnamese to spend more money on health care. In some
cases, Vietnam's developing prosperity has perversely created
new demand for medical care. For example, many Vietnamese with
money opt to spend it on motorbikes. Sadly, few spend money on
driving lessons -- every day, Vietnam suffers an average of 35
motorbike fatalities and 70 serious injuries, overwhelming
emergency rooms in major cities, particularly Ho Chi Minh City,
and straining Vietnam's underdeveloped healthcare system (ref
B). The combination of rapid economic growth and Vietnam's
stove-piped bureaucratic system (whereby Ministries and
subordinate divisions cannot efficiently work together) result
in fragmented planning and hinder the development of equitable
healthcare delivery system.

4. (U) Vietnamese with money are looking for new options. One
local health sector investment fund manager estimated that
Vietnamese spent over USD 2 billion on health care overseas last
year, USD 1 billion in Singapore alone. In Ho Chi Minh City,
foreign or privately-owned hospitals have become the primary
service provider for the urban wealthy, in contrast to the poor,
who rely on traditional remedies, self-medicate (at times
seeking advice from local pharmacies), or visit public hospitals
for more urgent treatment. The majority of hospitals, both
public and private, are located in urban areas, forcing the
majority of Vietnamese who still live in rural areas to travel
long distances, a great expense, for medical attention for
severe illnesses.

5. (U) As a result, HCMC doctors say that patients from
throughout southern Vietnam, and significant number from Hanoi,
come long distances to enjoy the relatively better quality of
treatment on offer in HCMC. Knowing that health care in HCMC is
considered to be relatively better than in other parts of the
country sheds some light on the magnitude of the problem in the
country as a whole. In HCMC at present, two of the cities best
public hospitals face severe overcrowding -- in one 700 patients
occupy just 500 beds while 600 patients occupy 400 beds in the
other. Overcrowding leads to situations where two nurses care
for 100 patients during some night shifts. Staffing shortages,
in turn, exacerbate the problem since for every patient there is
usually at least one, and often two to four, relatives sleeping
in the halls and on the floors so that they can be nearby to
provide care.

Shifting Burden: Decentralization and Private Investment
--------------------------------------------- ------------
6. (U) As incomes rise, however, the average Vietnamese is
increasingly demanding higher quality and affordable healthcare
services, challenging the ability of the government to meet
social demand. Vietnam's 1980 constitution guarantees health
care as an inalienable human right. Unable to continue
sustaining a centrally planned healthcare system, however, the
Government of Vietnam (GVN) has sought to implement a series of
reforms to shift part of healthcare cost to users.
Decentralizing responsibility for health care from the central
to local governments has allowed, and even encouraged, private
hospitals and pharmaceutical companies to develop, resulting in
competition between health care providers. With additional
health care options available and variable government oversight,

HO CHI MIN 00000656 002.2 OF 003


there is increasing pressure on the government to improve
national standards, for example regarding drug-quality. By
2013, the Ministry of Health plans to ensure that all pharmacies
in Vietnam meet Good Pharmacy Practice (GPP) requirements.
Despite these efforts, regulatory progress is slow and
healthcare reform is urgently needed.

7. (U) To some extent, market forces are clearly working already
and are serving to mitigate the shortcomings in the public
health care system. Vietnamese with the economic means to do so
already go to private clinics rather than traditional public
hospitals and clinics. A growing number of private firms offer
private health care, often including on-site clinics since it is
more cost effective to treat sick employees than to suffer gaps
while they wait in queues at public clinics and hospitals. As
noted above, more affluent Vietnamese leave the country
entirely, opting for health care in Singapore, Bangkok, Taipei
or elsewhere.

Education and Human Resources Shortage
--------------------------------------
8. (U) Addressing Vietnam's human resource shortage is one of
the most difficult short-term challenges facing the healthcare
system in the country. Lack of healthcare workers not only
affects quality of treatment, but also the ability to address
severe illnesses or prevent the emergence of endemic diseases.
In a 2008 report on healthcare workers, the Ministry of Health
estimated that Vietnam will need a total of 6,000 new doctors,
1,500 pharmacists and 17,000 medical workers each year from now
until 2010, meaning that Vietnam faces an urgent need to augment
the number of training schools, particularly for nurses.
Unfortunately, the educational system trains too few workers and
recent budget cuts (in response to high inflation) mean that
projects to expand medical training have been postponed. The
health system also lacks adequate incentives to attract doctors
to work in public hospitals or even to practice in Vietnam.
Public health care system salaries are discouragingly low,
causing health care professionals to enter into side
arrangements, divert patients to their private clinics or go
into private practice.

9. (SBU) Vietnam's shortage of health care capacity extends
beyond doctors or nurses to include people who can effectively
manage hospitals. Currently under GVN law, the CEO of public
hospitals must be a doctor appointed by the government. As a
local fund-management company told the Consul General, "doctors
are not CEO's...we have the money to build hospitals, but not
the people to effectively manage them." Without changes in
legal regulation or academic institutions to develop these
skills, filling this gap presents a substantial challenge (ref
A). Clearly, bringing better business practices to health care
management will be central to improving Vietnam's hospitals.

Administrative Barriers Discourage Investors
--------------------------------------------
10. (U) Current GVN investment in healthcare is less than 6.1
percent of the total state budget. Since many analysts consider
7 to 9 percent of GDP more appropriate for Vietnam's current
state of development, there are opportunities for private-sector
development. Various private health projects across the
country, however, are progressing very slowly if at all. Slow
land clearance of hospital construction sites and limited
capital have stalled construction plans for many healthcare
projects, such as the 44 high-tech medical center in Binh Tan
District which began in 1999 and is still "under construction"
nine years later.

11. (U) High-taxes levied on private hospitals (up to 28
percent) along with high-import costs (especially tariffs on
pharmaceuticals and medical equipment) represent significant
challenges for current managers and future investors. In
particular, interlocutors tell us that stringent government
regulations limiting the importation of refurbished medical
equipment and restrictions on increasing pharmaceutical prices
without government approval create disincentives for investors
to enter the sector.

Corruption Asphyxiates Plans for Better Healthcare
--------------------------------------------- -----
12. (SBU) Many contacts state that corruption at every level
cripples efforts to improve health care. Programs aimed to
provide health insurance for the poor, such as the 1998 National
Hunger Eradication and Poverty-Reduction plan presented by the

HO CHI MIN 00000656 003.2 OF 003


Ministry of Labor, Invalids, and Social Affairs (MOLISA) have
contributed instead to the "disappearance" of numerous funds and
"over-expenditure" of projected services. Today approximately
70 to 80 percent of healthcare financing is through
out-of-pocket cash payments, creating opportunities for
providers to demand informal payments. At hospitals and clinics
throughout Vietnam, doctors demand informal payments for
treatment, and prescribe inappropriate medication or unnecessary
testing based on pressure from administrators or in exchange for
incentives from suppliers. For example, a Scandinavian project
that provided free hand sanitizer to health care professionals
ran into resistance because it cut down on prescription of
antibiotics. A hospital administrator in HCMC described to the
CG how doctors collude with patients and pharmacies to defraud
the national health care system and drain the hospital's budget.
Under the scam, doctors write unnecessary prescriptions for
covered drugs, patients fill them at the official hospital
pharmacy, and then patients hand the prescription back in
exchange for a small kick-back while the doctor and pharmacy
split the bulk of the revenue.

13. (U) Rigid, and increasingly misaligned, government
regulation, with neither adequate monitoring nor transparency,
weakens the public health care system and creates further
opportunities for corruption. Under the current set of
incentives, it is more lucrative for healthcare staff to earn
fees privately for curative services than to treat even simple
maladies in public health care facilities. Low-wages for
healthcare workers encourage doctors to perform "unnecessary
procedures," in pursuit of additional earnings.

Comment:
--------
14. (U) The litany of problems facing HCMC's health care system
in the setting of health sector reform reflects the challenges
facing Vietnamese society as a whole -- inadequate human
resources, poor infrastructure, inappropriate incentives,
questionable resource allocation and, above all, corruption.
Establishing more training facilities, creating administration
management programs and further liberalization of trade and
investment rules for the health care industry could all help.
Broader efforts aimed at the economic sector, such as working
with GVN to rewrite legislation governing trade and investment,
can contribute to the health reform; however, more targeted
intervention is desperately needed. The GVN needs to show the
willpower to address the structural problems facing the health
care sector, including the rampant corruption and the many
factors that contribute to an environment in which such
corruption flourishes. Without this commitment, Vietnam's
health care woes will continue. We must be realistic, however,
and recognize that even with the best management and most
transparent systems, meeting the growing health care needs of
any developing country facing severe resource constraints is a
very difficult task. End comment.

15. (U) This cable was drafted by intern/Pickering Fellow Mayra
Alvarado and coordinated with Embassy Hanoi.
FAIRFAX

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