Abstract
This paper provides a comprehensive analysis of the privatization process within Georgia’s healthcare system, with a primary focus on the hospital sector from the early post-Soviet transition period through the present. Drawing on the conceptual taxonomies of Richard Saltman and Hans Maarse, the study examines the trajectory of reform in Georgia by categorizing privatization into financing, service delivery, management, and investment dimensions. It seeks to critically assess how these dimensions unfolded over time and how they reshaped the state's role in healthcare governance.
Following the collapse of the Soviet Union, Georgia inherited a fragmented and inefficient healthcare system characterized by overcapacity, underfunding, and deteriorating infrastructure. Beginning in the mid-1990s, with support and pressure from international financial institutions such as the World Bank, the Georgian government embarked on a series of neoliberal reforms designed to shift the burden of healthcare provision from the state to the private sector. The initial stage of this transition saw the decentralization of hospital management and the legal transformation of public facilities into limited liability or joint-stock companies. These reforms culminated in the 2007 launch of the "100 Hospitals" initiative, a master plan that aimed for the rapid privatization and complete reconstruction of the hospital infrastructure nationwide.
By 2009, over 80% of hospitals had been privatized. However, many of these transactions were marked by insufficient oversight, weak contractual enforcement, and speculative use of hospital real estate, particularly in urban centers such as Tbilisi. In an effort to accelerate reforms and attract private investment, the government later allowed insurance and pharmaceutical companies to own and operate hospitals. This led to vertical integration within the healthcare market, undermining the separation between financing, service provision, and regulatory functions. As a result, conflicts of interest emerged, and regulatory capacity remained underdeveloped.
The paper argues that, while privatization introduced market competition, enhanced infrastructure in some areas, and reduced public expenditure, it also contributed to significant inequities in access, especially in rural regions. Patients often faced high out-of-pocket payments and limited coverage from private insurance plans, while essential but non-profitable services—such as mental health care, oncology, and rare disease treatment—were deprioritized or discontinued altogether. In many cases, privatization led to the formalization of pre-existing informal payments, rather than their elimination.
The introduction of Georgia’s Universal Healthcare Program in 2013 signaled a partial reversal of this trajectory. The program restored the state’s role as a central healthcare funder and aimed to ensure baseline service coverage for the entire population, regardless of income. However, the delivery of care remains predominantly in private hands, creating a structural tension between public financing and private provision. This hybrid arrangement complicates state oversight, dilutes accountability, and poses ongoing challenges in achieving quality, efficiency, and equity.
The Georgian case illustrates the complexities and contradictions inherent in health sector privatization in transitional economies. The paper concludes that privatization, if not carefully designed and regulated, risks undermining public health objectives. A more balanced model—combining private-sector innovation with strong public-sector stewardship—is essential to achieving sustainable, equitable healthcare reform. Future policy must prioritize the development of regulatory institutions, investment in health workforce capacity, and the protection of vulnerable populations from catastrophic health expenditures.