EKIP– Expert Club for Economics and Politics A Different Opinion
It is not private hospitals that need the reins of the Public Health Act, but public hospitals that need the freedom of the market.
"The more the state 'plans',
the more difficult it becomes to plan
on the part of the individual.”
Friedrich Hayek
The Court of Justice of the European Union (CJEU) has now definitively ruled on the scope of the Public Procurement Directive and the definition of a “body governed by public law.” With their decision, the European magistrates confirmed Bulgaria’s right to exclude private hospitals from the scope of the Public Procurement Act (PPA).
There is no more legal dispute - the case is closed. And the logical (sarcastic) question is: since we already have a black and white decision from the CJEU, why are various "experts" and politicians still pretending that it is not so, and continuing to argue whether the European Commission is right? The absurdity is complete - an already resolved issue keeps being waved around to generate politically profitable smoke and new regulatory uncertainty. But this is not a precedent - after all, we are talking about the same European Commission that, in the midst of wars, inflation and economic uncertainty, wants Bulgaria to close its coal-fired power plants in order to demonstrate a green conscience... and empty batteries.
Interestingly, the initial problem - the differences in drug prices between public and private hospitals - was resolved legislatively as early as January 2024. However, the push for the nationalization of private hospitals through public procurement continues, which raises doubts about its true purpose. Does this regulation not lead to limiting competition between drug suppliers and serving someone's interests?
The reaction of the European Commission, which has probably been misled for years by reports from local unhealthy interests, is further perplexing. When my colleagues in the ECT formally asked me questions on the subject, it bureaucratically replied that it needed more time to collect the requested documents, thus delaying the final result, which will probably not be in the interest of the criminal procedure that has been initiated. When the European Commission does not comply with its own transparency rules and delays access to information, what moral right does it have to expect the Member States to comply with its instructions?
Public law organization or independent market player?
European legislation defines a "public law body" as a legal entity established to meet needs in the general interest without a commercial purpose, over which the public authority exercises control or main funding.
However, private hospitals in Bulgaria do not meet these criteria:
- They are entirely commercial in nature - they operate as profit-seeking companies.
- Their funds from the National Health Insurance Fund are payment for activities performed, not a state subsidy or assistance.
- The financial risk is borne by them themselves - if they perform poorly, they can accumulate losses or go bankrupt without the state rescuing them.
A clear conclusion follows from this: Bulgarian private medical institutions are not "public law organizations". They are independent economic entities in the competitive market and logically remain outside the scope of Directive 2014/24/EU - just as our law correctly provides.
National context, legal traditions and populist paradoxes
Each member state integrates the common European rules according to its legal traditions and context. Bulgaria is no exception - our legislator has exempted private hospitals from the Public Procurement Act precisely because of the commercial nature of their activities. The idea is that although health services are socially significant, they are also a matter of personal right (the right to health) and private interest of the patient. Therefore, in our country, these medical institutions are treated as businesses, and not as state performers of public functions.
Here a paradox appears, reinforced by populist rhetoric. For years, various politicians have been simplifying and even oversimplifying the debate - according to some, private hospitals should be placed under strict state control, while according to others, since they use public funds, they are obliged to comply with requirements, vaguely set by someone. And why then should other private entities using public resources, for example, pharmaceutical companies, drug dealers and pharmacies, not be perceived as public law organizations and start awarding public contracts? It is precisely these misconceptions that put the Bulgarian position in collision with the European one. On the one hand, in our country, private hospitals are recognized as economically independent entities, complying with the conditions in the directive; on the other, someone is misleading the administration in Brussels into treating them as part of the public sector. This discrepancy leads to today's clash.
Pressure from Brussels: the criminal procedure against Bulgaria
For now, the criminal procedure is at the administrative stage - an exchange of official letters. If Sofia and Brussels do not reach an agreement, the Commission may eventually refer the matter to the Court of Justice of the EU. However, such procedures rarely lead to final sanctions - in about 5% of cases. In most cases, controversial issues are settled before the court after dialogue and convincing arguments from the state, one of which is the aforementioned decision of the EU court. The claim in the public space that the state will be sanctioned is absolutely false, since there is not even a case filed and a decision issued.
In the case of Bulgaria, however, dialogue gives way to pressure. The initial letter of formal notice in 2019 did not explicitly mention private hospitals, but the reasoned opinion in 2024 suddenly claims that Bulgaria is violating the law precisely because it has excluded them from the Public Procurement Act. This change of position on the fly contradicts good practices and raises doubts about the correctness of Brussels' approach.
Lessons from Germany, Austria and the Netherlands
Three examples from Europe are indicative:
- Germany: Private hospitals there are not considered public law organizations. Payments to them by health insurance funds are treated as payment for a service, not as a state subsidy.
- Austria: Austrian rules also do not force private hospitals to hold tenders. The special public procurement regime in some sectors does not include them - they are considered as market entities, not state institutions.
- Netherlands: The Supreme Court of the Netherlands has ruled that even a hospital created by the merger of three church clinics is not a public law organization. While it has a public mission, it carries commercial risk and must operate efficiently and profitably - traits of a private, not a state, entity.
Obviously, the status of private hospitals is a challenge in many countries, not only in our country. But when such a situation is considered normal for some countries, and claims are made about Bulgaria, we are talking about a double standard on the part of European institutions.
The search for a balance between private and public interest
Meanwhile, private hospitals are hanging in uncertainty, trying to balance the needs of patients, their own business, and unclear future EU requirements.
Equating entirely private entities to a "public law organization" would open Pandora's box. Other private structures operating with public funds (pharmaceutical companies, drug distributors, pharmacies, pension funds) will also be hit by the Public Health Act, especially in these uncertain times. Such a prospect is worrying - any ill-considered move carries the risk of long waiting lists and difficult access for Bulgarian patients to timely treatment and therapy.
The balance here is delicate: on the one hand, the public interest and public resources must be protected, on the other - the freedom and efficiency of private medical institutions must be preserved. The hope is that common sense and the principles of law will prevail over populism and bureaucratic formalism, in order to reach a fair solution in favor of society.
The irony is that some economists - otherwise supposedly defenders of the free market - have today become apologists for the bureaucratic and inefficient procedures under the Public Procurement Act. Instead of defending competition and the free market, they support mechanisms of the Public Procurement Act that are not applicable to medical institutions (private and public), thereby practically harming competition and depriving patients of timely access to treatment. Therefore, we would take another step forward in the interpretation and equality, namely, that neither state nor municipal medical institutions meet the criteria for "public law organizations" and should not be obliged to conduct public procurement.
Moreover, all hospitals - regardless of their ownership - are commercial companies that operate in a competitive environment, bear market risk and receive payments for activities already performed from the NHIF on a commercial, not a subsidy basis. Forcing them to apply the Public Procurement Act means creating inequality, imposing a bureaucratic burden, delaying the supply of medicines, consumables and devices and shifting personal administrative responsibility onto their managers. It is time for common sense, legal logic and market efficiency to finally prevail over populism and pseudo-expert clichés.
This article was originally published in " 24 Hours ".
