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