(BN) Spain Rescue Seen Worse Than Cure as Hospitals Make Cuts

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For some cancer patients, Spain's debt crisis means living on borrowed medicine.

Virgen de la Luz hospital in the rural province of Cuenca turned away two women with lung and breast cancer in May after Roche Holding AG (ROG) stopped supplying tumor fighter Herceptin, according to documents obtained by Bloomberg News. The women got the drug after a 24-hour wait thanks to a hastily-brokered deal to borrow it from another clinic.

To rescue Cuenca and the rest of Spain's health system, which sank into debt alongside the regional governments that operate it, the state arranged an infusion of guaranteed loans and demanded 7 billion euros ($8.8 billion) in cost cuts. Yet doctors and patients warn the prescription for cutbacks may cause more pain than the budgetary malaise it was meant to cure.

"The situation is not going to change," said Jose Andres Guijarro, a gynecologist at Virgen de la Luz who helped found a citizens group protesting cuts at the hospital. "If we didn't have money to pay before, we won't have it now."

Patients and hospitals across Spain are wrestling with the same dilemma. Even as old debts get paid off -- the country's 17 regions ran up some 12 billion euros in unpaid health bills through last year -- new ones are piling up. As a result, the need to break the cycle with spending cuts threatens to redefine the very notion of Europe's tradition of socialized medicine: how best to treat patients, not how to make ends meet.

"As long as it is state-funded, the health system will always run a deficit," said Miguel Llorens, financial director for Hospital Provincial de Castellon. Roche stopped taking his IOUs as well, and he says he pays the Swiss drug giant in cash.

Solar Panels

Tangled in a debt crisis that left him requesting a 100 billion-euro European Union bailout to help banks reeling from a real-estate collapse in its fifth year, Prime Minister Mariano Rajoy sliced 7 billion euros out of the health system as part of about 45 billion euros of cost cuts and tax hikes.

The spending cuts come in exchange for 35 billion euros in syndicated bank loans the central government arranged on behalf of town halls and regions, which pay for health care.

The hope is that the bailout will help get the flow of drugs moving again. Roche says its Spanish creditors paid their debts last week. That put medicine distribution "back to normal throughout the country," including in Castellon and Cuenca, the Basel, Switzerland-based company said in an e-mailed statement.

Still, Llorens says things aren't back to normal on the ground. When a patient needs Herceptin or another Roche medicine, he sends the company a pre-order. Roche bills him. Only after the bank transfer clears does he get the product.

One Solution

The square-bearded former nurse says he expects the credit agreement with Roche to resume in September. That will only solve one of his many worries, though: he must find about 3 million euros of cost cuts this year to meet his 85 million-euro budget. So he has mounted solar panels on the roof to save on electricity, endorsed salary reductions -- including a 20 percent pay cut for himself -- and left retired doctors' positions open to trim his payroll.

Llorens, who started working at Castellon as a nurse when he was 18, says while hospitals need more funds, they must learn to become more efficient. Before the loans, the average hospital was paying bills almost a year and a half late, industry group Farmaindustria estimates.

The spending cuts are the only way forward, or else unpaid bills will start to pile up again, according to Gloria Rodriguez, the regional government liaison for the Spanish Federation of Healthcare Technology Companies.

The debt crisis helped put one in 10 members of her organization out of business, she said in an interview. Spain's regions "were spending happily," according to Rodriguez. "Now they have seen they can't finance it."

Band-Aid

Rajoy's measures will mean longer hours and less pay for doctors and nurses, and higher costs for patients accustomed to spending little to nothing to visit a physician. It's fair to call the regional bailout a band-aid for bigger structural wounds in the health system, said Kaushal Shah, an analyst for Business Monitor International in London.

"The situation is far from over," she said.

Despite its debt, Spain spent less per capita on health in 2010 than France, Italy, Germany, or the U.K., according to the World Health Organization. The budget demands may erode the fundamentals of the system, said Carmen Torralba, mayor of Sotorribas, a 900-resident cluster of villages outside the city of Cuenca.

"We're actually talking about something very basic, which is that someone who makes 1,000 euros a month can have free, quality care," she said.

Pregnant and Worried

The spending cuts, especially in this rural area at the eastern edge of Don Quixote's tilting ground on the Spanish high central plain, risk leaving some people in isolated areas without any access to health facilities and have sapped confidence in the system.

Nine months pregnant and waiting in the hot sun outside Virgen de la Luz hospital, Trini Romero says she's afraid doctors might put their finances ahead of her baby's health.

She and her husband, Manuel Rabadan, rushed the 100 kilometers from their village on the other side of the hills to the hospital in an ambulance, after her doctor had warned that her water might be slowly leaking out. When the same thing happened with her son four years ago, the hospital induced labor, she said.

This time, with no sign of leakage and a day to go before her due date, Romero said the hospital told her to find her way back to the village. Her husband lit cigarette after cigarette as the couple waited for a friend to take them home.

"They've gone too far," he said. "The situation is really bad."

Life-Saver

Guijarro, the gynecologist, says budget cuts have left him unable to get a drug used in cesarean sections to avoid haemorrhage and special vacuum pumps for difficult births.

Virgin de la Luz also ran out of Roche's cancer drug Herceptin for five patients scheduled to receive the treatment, according to an internal letter from the chief of oncology dated June 6 and obtained by Bloomberg News. With Roche refusing to deliver the drug, the hospital turned to other facilities for a loan, according to the letter. Two refused. A third agreed, resulting in a 24-hour delay because the medicine had to be transported a long distance, the letter said.

A lung cancer patient and a breast cancer patient made written complaints after being turned away by the hospital on May 29. Though the delays were not life threatening, both patients need the drug at regular intervals to stay alive, their doctor said.

700 Days Late

Roche stopped shipments because the hospital was more than 700 days late in its payments, according to an oncologist who treated some of the patients and declined to be named, citing fear of retaliation by local authorities. The hospital has also encouraged staff to use cheaper drugs for cancer patients or send them to other facilities, the oncologist said.

The Castille-La Mancha health services acknowledged "an isolated short delay" in cancer treatments at Virgen de La Luz in an emailed response to questions. The cost cutting measures "are only aimed at improving efficiency and don't affect health care quality," they said.

Roche may not have been the only drugmaker to clamp down on deliveries. AstraZeneca Plc (AZN) and Johnson & Johnson (JNJ)'s Janssen unit have also required cash payment from at least one hospital, according to an official who declined to be named. Spokespeople at both drugmakers said the companies don't have a policy of requiring cash payments in Spain.

Boom and Bust

About an hour's ride from Madrid by high-speed train, Virgen de la Luz is the only hospital in a province a little smaller than the state of New Jersey. At the peak of the Spanish real estate boom in 2007, the regional government of Castille-La Mancha promised to build a second hospital in Cuenca. Last year, as hospital drug debts spiked 89 percent to 408 million euros, regional President Maria Dolores Cospedal said the project would need private funds to proceed.

Now, not only is there no new hospital. The existing one has had to close one of its floors, cut staff and add beds to rooms. And services to patients in the province's far-flung villages are being curtailed, which may increase their reliance on Cuenca's sole facility.

The regional government wants to cut the traveling doctor and pharmacist who visit the eight villages that make up Sotorribas once a week to give checkups and prescriptions to the largely elderly population, mayor Torralba said. Only one of the villages has a pharmacy, and the sole bus connecting the hamlets to Cuenca runs three times a week.

'Cutting the Essential'

In Madrid, the latest round of cost cuts come on top of earlier efforts to pare services, said Jose Soto, general manager of Madrid's Hospital Clinico San Carlos. Soto's hospital employs more than 5,000 people and accounts for about a tenth of the region's health services.

Clinico San Carlos already suffered a 10 percent budget cut in the past two years, said Soto, who has seen the hospital shrink to about 1,000 beds from 1,650 during his 18-year tenure. In July, he'll be forced to scale back by as much as another 20 percent.

"So far we've managed to weather budget cuts with some adjustments," Soto said in an interview. "Now we are going to feel those austerity measures much more deeply."

Ghost Airport

Last year, almost 40 percent of patients in Spain waited more than 60 days to consult a specialist, according to data published on June 28 by the Health Ministry. The number of patients waiting for surgery increased 17 percent in December from a year ago and the average delay rose to 73 days from 65.

If Cuenca shows what balancing the budget may mean for patients, the train ride east to the coastal region of Valencia shows how the overspending came to be in the first place. A brand new airport that cost about 150 million euros to build in Castellon and was completed at the start of 2011 has yet to see a single passenger or airplane.

"They spent what they didn't have on what was superfluous," Spanish novelist Elvira Lindo wrote in Madrid's El Pais newspaper on June 20. "Now all they can think about is cutting what is essential."

To contact the reporters on this story: Naomi Kresge in Berlin at nkresge@bloomberg.net; Angeline Benoit in Madrid at abenoit4@bloomberg.net

To contact the editor responsible for this story: Phil Serafino at pserafino@bloomberg.net

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