Inpatient healthcare: the goal in itself is to maintain a fragmented hospital network, not the interests of patient

17.09.2025.

Patients are hospitalised who have serious health problems and can no longer be treated on an outpatient basis. Patients require complicated, urgent or even emergency care, so skilled personnel are essential. The State Audit Office of Latvia has found during the audit that, unfortunately, more than 700 million euros allocated to hospitals annually, that is almost 40% of the healthcare budget, are spent to maintain the historically fragmented hospital network, rather than to provide patients with equal and high-quality healthcare. To change this, clear political decisions and changes in the hospital network and financing system are needed.

IN BRIEF:

  • More than 700 million euros, or 40% of the healthcare budget, are allocated to hospitals annually, but the funding primarily maintains a fragmented hospital network, rather than ensuring equal and high-quality care for patients.
  • The number of hospitals has not decreased, but has even increased to 41, the division into levels does not work in practice, and the content and quality of services differ significantly.
  • More than half of the required on-call shifts are not provided in admission departments; they are often performed by uncertified doctors, and individual doctors are shown impossible workloads, that is, up to 452 hours per month.
  • Admission departments of lower-tier hospitals each cost an average of 850,000 euros per year, although only 6% of patients are admitted to them; almost 57 million euros have been spent on maintaining the admission departments of the two lowest-tier hospitals since 2020, which could otherwise be directed to real patient needs.
  • The hospital payment system is fragmented and internally unfair: top-tier hospitals, which have the most patients, have seen the biggest cuts in funding while lower-tier hospitals are provided with a fixed fee that provides stable income regardless of patients. There are cross-subsidization and unclear redistribution of funds.
  • Recommendations have been made to the Ministry of Health to optimise the hospital network and determine hospital tiers in accordance with the services actually provided, as well as to organise the payment system for hospital services by linking available funding to the quality of services and the complexity of patient treatment cases in order to ensure fair and transparent use of funds for patient needs.

“A purposefully established hospital network is the basis of effective hospital healthcare, in which the number of residents, travel distance, staff capacity and sufficient practice opportunities are balanced, including healthcare plans in critical situations and, finally, cost efficiency,” stated Ms Maija Āboliņa, Council Member of the State Audit Office of Latvia.

A set of such proposals was developed in cooperation with the World Bank back in 2016, with a view to gradual optimisation by 2025. However, the plans have not been implemented, as the reform in 2018 did not reduce the number of hospitals, and currently there are 41 hospitals operating in Latvia, not 39. The formal division into tiers I–V does not work, as there are countless exceptions in practice by adapting to the actual capabilities of each hospital. As a result, a patient in an acute situation may end up in a hospital where the relevant service is not provided, although it is available in another equivalent hospital. Despite the fact that the reform also envisaged setting binding requirements for hospitals to be allowed to provide certain services at all, this has not been done yet, and therefore the quality of services varies. Similarly, the assessment of quality indicators, which was planned to be linked to financing, has not yet been introduced.

The audit has discovered that hospitals of all tiers combined are unable to provide more than half of the specialist on-call hours required in admission departments. Although this is assessed over a period of one month, the trend is alarming. A large part of the on-call time is provided by residents and interns, while the shortage of certified specialists persists. The auditors also discovered impossible situations, for example, an uncertified surgeon was listed in the documents as being on-call for 452 hours per month in four hospitals, a resuscitator – 424 hours, of which 96 hours were continuous, while a neonatologist was listed as being on-call at two locations in Latvia at the same time. Such data indicate formal compliance with norms that do not improve patient safety.

There is also no justification for the extensive network of admission departments whose total annual funding reaches around 100 million euros but for creation of which an actual flow of patients is not taken into account. The existence of the two lowest-tier hospitals depends on this fixed payment, constituting 45–48% of the funding that the hospital receives from the state. Meanwhile, only 6% of all admitted patients end up in the admission departments of those hospitals. Namely, while emergency teams in tier IV hospitals bring in 16 to 36 patients per day, in some lower-tier hospitals this is as much as one patient in 20 days. Despite this, the admission department of one lower-tier hospital costs the state an average of 850,000 euros annually. The audit has found that urgent medical aid points, which existed in lower-tier hospitals until 2019 and continue to operate elsewhere, provide an even wider range of services but they cost less, that is, an average of 350,000 euros per year. This comparison clearly shows that by changing the name and status, costs have increased by 2.5 million euros per year, without changing the content of the service.

Already in 2019, the Health Inspectorate discovered that almost ten hospitals did not meet the required tier. For instance, if the tier of the second top-tier hospital were lowered, the funding of its admission department would decrease by 40% and the state could redirect almost 2 million euros annually to real patient needs. If admission departments had not been maintained in the two lowest tier hospitals since 2020, almost 57 million euros would have been channelled for other needs, but the funding of these departments has increased significantly over the years instead.

The hospital financing system is complicated and internally unfair. Since 2011, Latvia has been implementing the internationally recognized DRG service payment system, where payment is determined depending on the complexity of a patient’s treatment case. However, the audit confirms that it still works only partially because hospitals receive payment from the state in 16 different ways and a large part of the tariffs are outdated or mathematically adjusted to the available funding. This system most unfairly affects two top-tier hospitals, where 40% of patients are hospitalised and provide complicated services. Namely, the funding has been reduced by 12.7 million euros for the Riga Eastern Clinical University Hospital and by 6.8 million euros for the Pauls Stradiņš Clinical University Hospital in 2025. In its turn, the fixed funding for admission departments provides stable income for hospitals with a small flow of patients. It creates internal injustice in the system and hinders the development of healthcare and services where the patients are located. The result is cross-subsidization when basic hospital services are actually covered by the financing of outpatient services. In addition, hospitals work in a state of constant uncertainty where contracts for the current year’s funding are amended even every month, and it is also impossible to track whether unused funds are being directed to patient needs that are recognised as priorities on a national scale or to services that the hospital is simply able to provide.

“The system of payment for hospital services is very complicated, but there is no benefit from it because hospitals use money differently than the state pays for it. Moreover, the disorganisation of the system is a very convenient argument for not changing anything, as no issue can be resolved until all the others are resolved. In its turn, opacity opens up the possibility of distributing limited funding without unnecessary questions, giving it to some and not giving to others,” Ms Maija Āboliņa, Council Member of the State Audit Office of Latvia.

Recommendations of the State Audit Office of Latvia #PēcRevīzijas

Five recommendations have been made to the Ministry of Health, which will be implemented no later than 2029:

  • Patients will receive high-quality services in an organised hospital network,
  • A full team of specialists providing medical assistance will be available in all locations in a revised network of admission departments,
  • Hospital services will be planned by linking available funding to the quality of services,
  • Hospitals will receive fair payment taking into account the complexity of patient treatment cases.

More information: audit report.

About the State Audit Office of Latvia

The State Audit Office of the Republic of Latvia is an independent, collegial supreme audit institution. The purpose of its activity is to find out whether the actions with the financial means and property of a public entity are legal, correct, useful and in line with public interests, as well as to provide recommendations for the elimination of discovered irregularities. The State Audit Office conducts audits in accordance with International Standards of Supreme Audit Institutions of the International Organization of Supreme Audit Institutions INTOSAI (ISSAI), whose recognition in Latvia is determined by the Auditor General. Upon discovering deficiencies, the State Audit Office of Latvia provides recommendations for their elimination, but it informs law enforcement authorities about potential infringements of the law.

Additional information

Ms Gunta Krevica

Head of Communication Division

Ph. 23282332 | E-mail: Gunta.Krevica@lrvk.gov.lv