Healthcare System

The establishment of market relations in the health care system, the formation of the non-governmental sector of medical services, and the development of entrepreneurship in medicine are not only changes in the forms and relations of ownership and purchase and sale of health products on the markets.

At the same time, the forms, methods, organizational and legal structures for managing all parts of the healthcare system and the processes taking place in it are being significantly transformed.

Organizational-administrative management and directive centralized planning of the sector are being replaced by softer economic management of the public sector and state regulation of the functioning of the nongovernmental sector through restrictions, licenses, taxes, fees, benefits, credits and economic incentives.

Along with the management of economic processes by state and municipal authorities, the establishment of the legislative framework for the functioning of the economy in general and the health economy in particular, market self-regulation based on mechanisms of demand, supply, prices and competition is beginning to play a significant role.

The organizational forms of management have undergone significant changes, economic institutions have changed, which are understood as elements of the social structure of society, characterizing the structure, forms of organization and regulation of industrial, economic and social processes (ownership, labor, financial, legal, social and other institutions of the state).

In health care, medical activity management is focused on production, distribution, circulation, consumption of medical goods and services, participants of these processes (personnel and organizations carrying out health care activity) and to some extent – on patients – consumers of services.

The general objective of health management in the country and the region is to maintain and improve the health of the population, reduce morbidity and increase life expectancy. In this sense, health care is involved in the implementation of the mission of public health promotion, which can be considered one of the main objectives of the state and society.

Conditioned by the general objective of management, the objectives of the management of state and non-state sectors of the health economy still have a pronounced specificity. The purpose of public sector management is to provide the population with health services on the basis of their public availability.

The purpose of management of the non-governmental sector is to meet the needs of the solvent part of the population, reducing the burden on the public sector while achieving break-even and normative profitability of business organizations.

The main functions of managing the health care economy:

  • Economic analysis, i.e. study of expenditures of different types of resources for health care needs, study of the existing demand for medical services, phenomenon of problems and trends that manifest themselves in the health care economy, analysis of the medical goods and services market.
  • Prediction of the state of health and the level of morbidity, needs and market demand for medical goods and services, price situation at the markets, scientific and technical achievements in the field of means and methods of treatment, possibilities of allocation of resources for the needs of health protection, as a result of implementation of planned projects and programs of health care.
  • State planning and budgeting, non-governmental business planning, i.e. elaboration of projects and programmes in the field of health care support and development, procurement of pharmaceutical preparations and medical equipment abroad, commissioning of new health care facilities.
  • Operational regulation of the activities of medical organizations of state and non-state sectors in accordance with the emerging external situation, in conditions of environmental disasters, epidemics and other force majeure.
  • Organization of economic processes in health care, on the one hand, ordering the course of these processes in space and time, achieving coherence in the actions of their participants, and on the other – the formation and transformation of organizational and legal structures of organizations engaged in medical production activities.
  • Stimulation of purposeful, effective, efficient activity of the state and nonngovernmental organizations rendering medical services, private enterprise in the sphere of public health services.
  • Accounting for economic activities in the sphere of health care and control over the implementation of these activities by state bodies and revision bodies of organizations engaged in providing medical services.


An area of economic management that spreads its influence on the management of organizations, personnel, production processes at the scale of an organization, company, firm, project. It should also be kept in mind that the terms “management” and “management” refer to the category of “vague”, which cannot be precisely defined.

As far as medical and production activities are concerned, the terms “management” and “manager” (manager) should be legally extended to the following processes and persons managing these processes:

  • management of industrial and economic activities of public health organizations directly providing medical services;
  • management of industrial and market business activity of commercial organizations of public health services from the side of hired managers attracted by their owners. In some cases the owner, the proprietor, can also act as a manager;
  • direct management of medical, auxiliary personnel performing health care services.

In these areas of activity the role of management and managers is very important, the economic efficiency, effectiveness of organizations and production teams providing medical services depend largely on the quality of their work.

The nature of management of medical and medical-production organizations is influenced by the interaction of :

Internal One

The internal one is the management, in which the managing influences are formed in the most managed system, inside it. Management body, which produces managerial impacts, forms, together with the system under management, a single economic complex. Management bodies, as well as persons performing management, are part of the managed organization and its staff under internal management.

External One

The external one is the management, at which the managing influences enter the managed system from outside. In this case, the management system is not a part of the managed system, i.e. it is separated into an independent external body. Persons performing external management are not included in the staff of the managed organization and are not its employees.

It should be noted that with respect to organizations, institutions, their subdivisions (departments, divisions, laboratories) the division into internal and external is to a certain extent conditional.

External management is more common in the management system of public sector organizations of the health economy, and internal management is more common in the management system of organizations of the non-governmental sector. However, in any case, there is a combination of internal and external governance elements.

A type of internal management is self-governance – internal management of an organization, firm, or company by its management bodies, which plays a major role in management.

In the conditions of self-governance, external management is limited to a relatively narrow range of problems of a general nature and is embodied in the form of laws, government regulations, national programs that are binding on a wide range of organizations and individuals and require strict enforcement by all those subject to laws and other regulations.

Given these limitations, self-governing organizations are free to make and implement management decisions based on their own internal management.