Challenges of Hospitalization in “Active Geriatrics” Departments: An Examination of Inefficiencies and Market Failures


There is a shortage of beds in the active geriatrics departments (rehabilitative geriatrics, complex long-term care, subacute geriatrics, and prolonged respiration) in geriatric institutions in Israel, which is lowering the quality of care and increasing the burden on the internal medicine departments in the general hospitals. Accordingly, and given the expected aging of the population and the growing burden on active geriatrics institutions, the Financial and Strategic Planning Administration and the Geriatrics Division in the Ministry of Health asked  the Myers-JDC-Brookdale Institute to carry out a study that analyzes market failures and barriers faced by the patients and the  organizations involved in the area of active geriatrics.


  1. To describe the structure of the market in active geriatrics, the changes that have occurred over time and characterize the relationships between the various players in the market
  2. To identify the reasons for the closure of departments and the reduction in scope of activity in active geriatrics and characterize the market failure
  3. To assist in formulating possible measures to improve quality and efficiency in this area.


The study combined quantitative and qualitative methodologies and was based on three sources of information: (1) administrative data received from the Information Systems Branch Division in the Ministry of Health on activity in the various departments of the active geriatrics institutions during the past decade; (2) in-depth interviews with directors of geriatric institutions, senior employees in the HMOs, professionals in the general hospitals and key figures in the Ministry of Health; and (3) a survey among directors of geriatric institutions.

Main Findings

The administrative data point to a moderate increase of 1.6% in the number of beds per thousand residents aged 75+ in the various departments of active geriatrics during the period 2011–2020. However, the increase was not uniform across types of departments and districts.  Furthermore, a low level of competition was found in the field of active geriatrics. On the one hand, there are only a few service providers in most of the districts (oligopoly), while on the other hand the Clalit Health Services is the main consumer of the services (monopsony).

One of the main problems that emerged from the study is the list of maximum prices set by the Ministry of Health and the Ministry of Finance which serves as the basis for discounts provided to the HMOs. The survey carried out among directors of the institutions indicated that the discounts provided to the HMOs cause the activity in all the departments in all the institutions to be unprofitable. The large discounts are the result of the monopsony power of the HMOs in the active geriatrics market and the fact that the patients are not free to be hospitalized in an institution of their choice.  To compensate for these losses, the institutions respond in three ways: business measures to reduce losses; using profits from other departments and services measures to compensate for the losses; and reducing expenses through operational savings. An examination of the hospitalization price list, which is determined by the Ministry of Health and the Ministry of Finance, shows that there are differences of tens of percent between the active geriatrics departments in the institutions and the identical departments or similar non-geriatric departments in the general hospitals.

The study found three additional market failures that affect the situation of active geriatrics in Israel:

  1. Patients have very limited options when choosing an institution.
  2. There are economic incentives to reduce the quality of care, which conflict with the patient’s interests. For example, the institutions have no economic interest to wean patients off respiration and to accept complex patients; the hospitals have no incentive to prevent bedsores; the HMOs have no economic incentive to prevent physical, functional, cognitive or mental deterioration of patients because the cost of treating these patients is paid by the Ministry of Health (in the case of patients who are in institutions) or by the National Insurance Institute (in the case of patients in the community).
  3. The shortage of manpower in the geriatric medical professions makes it difficult to hire employees, particularly highly skilled ones.
  4. Rigid regulation leads to economic costs that the institutions are unable to bear. At the same time, institutions that do not comply with the regulations are not closed due to the acute shortage of beds.

Main Recommendations

The findings indicate the need for a multi-dimensional approach that will change the situation in the field of active geriatrics:

  1. Changing the system of hospitalization price lists and HMO discounts: It is recommended to examine the list of per diem rates in the institutions be examined, especially in comparison to similar departments in general hospitals; to establish a minimum price list; to monitor the discounts granted to the HMOs; and to compensate the HMOs for the reduction in their discounts.
  2. Providing economic support for the geriatric institutions: It is recommended that the criteria for supporting geriatric institutions be expanded, including assistance in the budgeting of infrastructure and development, and a system of incentives should be put in place that will encourage the provision of higher-quality service.
  3. Encouraging competition between service providers: It is recommended that regional competition between service providers be encouraged, particularly in Jerusalem, the North, and the South, and the choices available to patients should be expanded.
  4. Examining of regulatory requirements: It is recommended that regulatory requirements be tailored to the care objectives, including requirements regarding the composition of the work force.
  5. Encouraging the use of quality indicators: It is recommended that quality indicators be developed for geriatric institutions based on patient opinion surveys.



Citing suggestion: Resnizky, S., Ostrovsky-Berman, E., & Dar, O. (2023). Challenges of Hospitalization in “Active Geriatrics” Departments: An Examination of Inefficiencies and Market Failures. RR-970-23. Myers-JDC-Brookdale Institute. (Hebrew)