The government on Wednesday pledged that it would cover the state health services organisation (Okypy)’s financial deficits until the end of next year, with the deficits expected to reach around €70 million.

After the day’s cabinet meeting, Health Minister Michael Damianos explained that Okypy is expected to run a €40m deficit this year and a €30m deficit next year, with “necessary capital expenditures for the upgrade of state hospitals” also in the pipeline.

He added that if parliament approves the government’s pledge to cover Okypy’s losses in 2025 and 2026, “future decisions will be left to parliament”.

In addition, he said, the government will also renegotiate Okypy’s “action plan”, so that “actions which are not feasible will be replaced with other actions, which will also help the organisation financially”.

In November, the health ministry and Okypy had signed a memorandum of understanding which they said at the time would ensure Okypy’s financial and administrative autonomy.

Damianos said the deal has “five thematic axes”, all of which are planned to be implemented by the end of next year.

Okypy, he said, will be legally obliged to implement the plan’s stipulations, which include an increase in revenue, a reduction of costs, the reimbursement of services provided by the health insurers’ organisation (HIO), capital investments, and structural changes.

Okypy spokesman Charalambos Charilaou told the Cyprus Mail at the time that while detailed plans have been devised to achieve these aims, they cannot be disclosed.

Parliament had last year approved the government’s plan to continue covering Okypy’s financial deficits until May 31, 2025, though with that date now fast approaching and Okypy still operating at a loss, the government’s new bid to cover Okypy’s losses is a move they hope will allow their “action plan” to work.

“At the same time, a study will be carried out by an independent foreign organisation on best practices within the European Union, particularly with regard to the distortions of the system in Cyprus, with the aim of achieving financial and administrative autonomy for Okypy,” Damianos said on Wednesday.

He also said he acknowledged the challenges Okypy has faced over the last five years, overcoming hurdles such as the Covid-19 pandemic. This, he said, “delayed its path towards autonomy”.

However, he said, there are more avoidable issues which have caused Okypy to operate at a financial loss.

These, he said, included salary increases for civil servants and the payment of the cost-of-living allowance (CoLA).

He was then asked why doctors’ salaries have “increased significantly” given the circumstances, and said these increases came as a result of “the acquired and institutionalised rights of public employees” and added that this is a “legal issue”.

He was also eager to stress that benefits offered to doctors do not constitute “the majority of the organisation’s costs”.

“The majority of the increase in the payroll has to do with wage increases in the broader public sector and with CoLA, which we cannot change,” he said.

He was then asked whether there is “concern” over Okypy’s long-term sustainability, given its financial troubles, but stressed that the organisation needs more time to stand on its own two feet.

“The five years which were given were not enough. Obviously, in a difficult environment, with competition from the private sector within the health system, there will be problems. Our goal is for Okypy to be able to cope,” he said.

He then added that the government’s aim is for state hospitals to “be profitable” and said that they “must provide better health services and manage to be autonomous”.

“We believe that with the action plan and its update, things will be better, and that is why there is this timetable which runs to the end of 2026. The timetable stipulates autonomy at the end of 2026, with the end of the action plan,” he said.

Then asked if the government will cover Okypy’s deficits in 2027, he said “this is not our intention, since the deficits will be covered until the end of 2026”.

He was then asked about concerns raised regarding the increasing number of private hospitals on the island, with it being argued by some that they provide undue competition to state hospitals.

In response, he said “new hospitals can exist”, but that “the issue is whether they will be included within Gesy”.

“At the moment, the health insurers’ organisation (HIO) is finishing its own capacity planning regarding pharmacies and hospitals with the aim of determining how much more the system can handle in terms of integrating additional hospitals,” he said.