Latvian Healthcare System Faces Funding Discrepancies and Calls for Reform
A recent audit by the State Audit Office of Latvia has revealed significant issues within the nation’s hospital funding and service payment systems, despite a reported EUR 57 million in potential inefficiencies. Contrary to expectations, funding for healthcare departments has actually increased over time, even as problems persist.
The audit highlights a fragmented payment system. While Latvia adopted internationally recognized Diagnosis-Related Groups (DRG) – a method of payment based on treatment complexity – in 2011, it’s only partially implemented. Hospitals currently receive funding through 16 different methods, many utilizing outdated or adjusted tariffs based on available funds, rather than actual treatment costs.
This system disproportionately impacts two major hospitals: Riga eastern Clinical University Hospital and Pauls stradins Clinical University Hospital, which handle 40% of hospitalizations and provide complex care. These institutions experienced funding reductions of EUR 12.7 million and EUR 6.8 million respectively in 2025. Conversely, smaller hospitals with lower patient volumes benefit from stable, fixed funding for admissions departments, creating an internal inequity that hinders healthcare advancement and service accessibility.
The current structure fosters “cross-subsidization,” where funding intended for outpatient services effectively covers basic hospital operations.Moreover, hospitals operate under constant financial uncertainty, with funding contracts amended monthly, and a lack of transparency regarding the reallocation of unused funds to prioritize patient needs or available services.
According to a member of the State Audit Office Council, the complex system serves as a convenient excuse to avoid necessary changes. “System disorder is a very convenient argument not to change anything, because no issue can be arranged until everyone else is resolved,” she stated, adding that opacity allows for the distribution of limited funds without scrutiny.
The State audit Office has issued five recommendations to the ministry of Health, aiming for a well-organized hospital network capable of delivering quality services by 2029. These recommendations include a revised admissions department network with a complete specialist team, planned hospital services, and fair payment based on the complexity of patient cases.
Health Minister Hosam Abu Meri acknowledged the shortcomings, admitting that some hospitals struggle to provide adequate emergency assistance, notably in areas like childbirth and traumatology. He supports reforming the hospital network, proposing a three-tiered system to clarify service provision at each hospital. Though, he faces resistance from hospitals and municipalities concerned about potential closures, describing their opposition as “aggressive.” The Minister insists the goal is not to close hospitals, but to redefine their roles and specializations. Further discussions with hospitals are ongoing, with work on the reforms continuing.
