Saludcoop: Colombian-style confusion

Hospital in Colombia. Wikimedia Commons.

Alejandro Gaviria, current Minister of Health and Social Protection of Colombia, will have an extraordinary case to study in depth with his students when he eventually resumes teaching at university: Saludcoop. It is a perfect case for PhD or Master theses and for - at least - one semester-long workshop. Issues involved include regulation, operation and financing of the healthcare system, cooperative property, State intervention mechanisms and, of course, the functioning of the supervisory bodies.

The Colombian government took control of the main healthcare provider in the country after allegations were made that funds had been diverted for the benefit of some of the managers of the Entidad Prestadora de Salud (Health Provider Entity – EPS). Four years later, it has ordered its liquidation.

Despite widespread media coverage of the case, there are still some basic questions that the authorities are unable to answer.

The first and most obvious one is the question of whether the Saludcoop managers misused and unduly appropriated public funds. The answer seems to be yes, though they took advantage of existing legal loopholes which leave some gray areas uncovered, not only in the case of healthcare but in the many cases in which management of public resources is in private hands. We have had similar discussions, for example, with the resources managed by the Chambers of Commerce and the Federation of Coffee Growers.

There is a problem of regulation here: it is unclear what individuals can do with the money resulting from a business that is authorized by law. Much has been said to the effect that health has become a business and is no longer a right, and that this should indeed be reversed, but that, for now, there is no doubt that it is a business. There are private companies providing public services and obtaining financial benefits for it. What percentage do they get? It is not known and I guess it depends on how efficient they are. The problem is that, in this case, efficiency goes against the quality of the service.

Saludcoop’s manager Carlos Palacino, who certainly used legal loopholes, or pushed the limits, was sanctioned by the Attorney General and the State Comptroller but has not been held criminally responsible. The easiest explanation for it is thatas long as Luis Eduardo Montealegre is Attorney General, Palacino will not be prosecuted, for the simple reason that Montealegre used to be counselor at Saludcoop. Four years later, though, this explanation is not enough. Montealegre alleged a conflict of interest and I do not think that the other officials would readily accept the risk of covering such a felony. The question is, then, whether there was actually a crime, because all that Palacino did was to take advantage of the existing regulatory shortcomings in order to carry out operations and reap profits that were not prohibited by the law. This is the version that some are choosing to espouse.

The State Comptroller, who began this process together with the government, announced that there had been a detrimental expense of 1.4 billion pesos, and the government filed a suit against this decision! The State Auditor, who is a government officer, asked the Administrative Court to annul the decision of the Comptroller. This means that the government does not believe that there has been a detriment for that amount. But at the same time that the decision to order the liquidation of Saludcoop was taken, it became known that in the process that is underway as a result of the government's suit filed against the Comptroller, expert advice requested by the government established that the alleged sum was not 1.4 billion but 75,000 million pesos!

The mess is such that the government has decided that Saludcoop affiliates, who number over four million, be serviced now by another EPS, Cafesalud. I asked who the owner of Cafesalud is, and the answer was Saludcoop!

When, a few years from now, the Minister will explain the case to his students, he will have to tell them that the taking control by the State of an entity that provides a public service, as does Saludcoop or the San Martín University, just to mention another example, is a decision aimed at saving the entity that is at risk. Once it is saved, the State is obliged to return its management to its rightful owners. This means that if the intervention is successful, the EPS has to be handed back to its owners, in the same way as it would have to return the San Martín University to the Alvear family, except if they were found guilty of crimes by a law court.

In this case, where it was politically unacceptable to hand Saludcoop back to its owners, State intervention was – luckily - a disaster and liquidation seemed inevitable. But liquidation means that the entity’s assets are to be sold, so that the government cannot use the clinics, or the equipment, and has to monetize them in order to pay creditors, or reach an agreement with them so that they accept the amount obtained from the sale of these assets as part of the payment due. It is absurd that the intervention mechanisms that are used in health or education are not designed to ensure the continuity of the service, but rather to save the "company". The government is thus faced with the huge dilemma of fixing the company and hand it back to those who allegedly mishandled it, or close it down and thus being unable to continue providing the service.

The Minister says that he thinks the money will cover the debt and that, if this were indeed the case, nobody would be defrauded. This would then make it a strange case of victimless fraud.

Another question that deserves some analysis is who owns Saludcoop, a cooperative organization made up of several other cooperatives. In Colombia we are used to thinking that things are owned by someone, and so it was understood that the owner of such an undertaking was Palacino. But no: Saludcoop’s owners are a group of cooperatives, among which, for example, one formed by National University professors.

The cooperative model of property is a desirable one, simply because it does seem preferable that things be owned by many rather than a few. So much so, in fact, that there is even a specific article in the Colombian constitution devoted to it, and that this form of ownership is mentioned in the Havana agreements and in all the recommendations for rural development with the aim of boosting the profitability and sustainability of rural economies. But, of course, it is a form of ownership that creates a problem of dilution the responsibility which, in the case of Saludcoop, adds up to the confusion.

Kafka could not have imagined such an absurd story: a guy who became rich by abusing his position as manager of private and public funds and, yet, is not being required by justice; a company that people thought belonged to the guy in question but its owners say it belongs to three million five hundred thousand people; millions of users who were attended by an EPS that is to be liquidated and who are told that they will be attended by another EPS which is owned by is the one that is being wound up; a fraud that leaves just enough money to pay the defrauded, but it is uncertain whether its detriment amounts to 1.4 billion or 75,000 million.

Let us hope that the Minister will go back to Academia, where he will have both the time and the peace of mind to find out and tell us then what really happened.

This article was published previously by La Silla Vacía.