Hospitals receive over 700 million euros annually — about 40% of the healthcare budget — but this money primarily maintains a fragmented hospital network rather than ensuring equal and high-quality care. The hospital tier system is not functioning, tariffs are outdated and are mathematically adjusted to available funding, and internal funding inequalities particularly harm top-level hospitals, the audit concludes.
Maija Āboliņa, a member of the State Audit Council, stated that effective hospital care must be based on a well-planned network that balances population size, travel distance, staff capacity, sufficient training opportunities, crisis preparedness, and cost-effectiveness.
Auditors noted that such a plan was developed in 2016 with the World Bank, aiming for gradual optimization by 2025, but it has not been implemented. The 2018 reform did not reduce the number of hospitals — there are now 41 instead of 39.
The formal classification system of levels I–V does not work in practice, with countless exceptions based on each hospital’s actual capabilities. This means a patient in an acute situation may be taken to a hospital that cannot provide the needed service, even though a comparable hospital elsewhere can.
The reform also envisioned binding requirements for hospitals to be allowed to provide certain services,
but these have not been introduced, so service quality varies. Similarly, quality indicators have still not been implemented or linked to funding.
The audit found that hospitals collectively cannot provide more than half of the specialists needed in emergency departments. Many shifts are covered by residents and trainees while certified specialists are lacking. Some records even showed impossible schedules, such as a non-certified surgeon listed as on duty for 452 hours a month in four hospitals, a resuscitation doctor for 424 hours (96 continuously), and a neonatologist listed as working in two places at once. The auditors said this shows only formal compliance, not actual patient safety.
There is also no justification for the extensive emergency department network, which receives about 100 million euros annually but does not reflect actual patient flows. These fixed payments make up 45–48% of the funding received by the lowest-level hospitals, even though only 6% of all emergency patients arrive there. Level IV hospitals handle 16–36 emergency patients daily, while some lower-level hospitals see only one patient in 20 days, yet each such department costs the state about 850,000 euros per year.
By contrast,
urgent medical care points (which existed in lower-level hospitals until 2019 and still operate elsewhere) provide broader services for less money
— around 350,000 eurosper year. The audit concludes that renaming them as emergency departments increased costs by 2.5 million euros annually without changing the services.
The Health Inspectorate already found in 2019 that almost ten hospitals did not meet their designated level. If one second-highest-level hospital were downgraded, its emergency funding would drop by 40%, freeing nearly 2 million euros annually. Closing emergency departments in two lowest-level hospitals since 2020 could have freed about 57 million euros, but their funding has instead significantly increased.
Latvia has been introducing the internationally recognized Diagnosis-Related Groups (DRG) payment system since 2011, where payment is based on the complexity of treatment cases, but it still functions only partially. Hospitals receive payments in 16 different ways, and many tariffs are outdated or simply adjusted to available funding.
This system unfairly harms the two highest-level hospitals, which treat 40% of all patients and handle the most complex cases: in 2025, Riga East University Hospital’s funding was cut by 12.7 million euros and Pauls Stradiņš University Hospital’s by 6.8 million euros. Meanwhile, small hospitals with low patient numbers get stable income from fixed emergency funding. This creates internal injustice and blocks the development of care and services where the patients actually are.
There is also cross-subsidization —
hospital basic services are essentially covered using outpatient funding.
Hospitals operate in constant uncertainty, as annual funding contracts are often amended monthly. It is unclear whether unused funds go to nationally prioritized patient needs or just to services a hospital happens to provide.
According to Āboliņa, the hospital funding system is extremely complicated but brings no benefit because hospitals use the money differently than the state allocates it. This lack of transparency allows limited funds to be distributed arbitrarily, giving to some and not others, she added.
The State Audit Office has given the Ministry of Health five recommendations to implement by 2029. These include creating a streamlined hospital network to provide quality services, revising the emergency department network so each has a full specialist team, linking funding to service quality, and ensuring fair payment based on treatment complexity.
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