Pension funds need to be more efficient

echo interview with Pius Bernet, financial director of the Swiss Paraplegic Foundation, Nottwil

Mr Bernet, the Swiss Paraplegic Centre (SPZ) is regarded as the leader in the field of the holistic rehabilitation of people with spinal paralysis or paraplegia. Who are SPZ's main commercial competitors?

Pius Bernet: SPZ is a wholly-owned subsidiary of the Swiss Paraplegic Foundation (SPS) and a specialist clinic for the treatment of spinal paralysis as a result of an accident or illness. The Foundation has charged the clinic with ensuring the best possible rehabilitation of paraplegics in Switzerland. So our mandate is of a public-service, non-profit nature. Besides our organisation, there are only three other paraplegia treatment centres, namely Balgrist Zurich, REHAB Basel and Suva Klinik Sion. We see these centres as regional care providers, whose activities complement our own and with whom we collaborate very closely. Since all of us want to achieve the best possible treatment for paraplegics in Switzerland, any commercial competition that exists between us is only limited.

How does the SPZ differ from the other centres?

We’re the largest acute and rehabilitation clinic for spinal injury patients in Switzerland. This means that we admit the most serious and complex cases. In other words, we attract all acute-care and rehabilitation patients who cannot be treated elsewhere, whether this be for medical or economic reasons. Our credo at SPZ is not the maximisation of profit but rather the provision of patient care. Having said that, in order to make the best possible use of the donations entrusted to us, we do attach great importance to a high degree of business efficiency.

Does SPZ receive subsidies from the public purse?

No. Our clinic is on the so-called hospital list. That is to say, we admit all patients covered by medical and accident insurance. Under the Health Insurance Act, the cantons fund a portion of our clinic’s costs as they do with all other hospitals. So this funding constitutes payment for services, not a subsidy.

What role does the Swiss Paraplegic Foundation play in funding SPZ?

The value proposition of the Foundation is: “Our commitment to paraplegics lasts a lifetime." The Foundation puts this into practice by accompanying patients throughout the various stages of their illness and life. For this purpose, it has established several subsidiaries and outsourced portions of its overall mandate to them. For example, the clinic takes on the primary care immediately following the accident, is responsible for annual check-ups and provides the life-long acute medical care necessary in the case of complications. Other parts of our organisation, for example our Othotec Garage, which converts around 300 vehicles annually so they can be driven by paraplegics, takes on other aspects of our mandate. The service mandate these subsidiaries receive from the Foundation is secondary in nature. This means that, as a rule, their capability only comes into play if a third party isn’t able to deliver the same service equally as well or within the deadline set. Just like any other clinic, SPZ receives payments for the medical services it provides based on tariff agreements from the health and accident insurers. SPZ also delivers additional services that are either not reimbursed at all, or only partially. A case in point is what it does to help patients re-integrate vocationally. The operating deficit so incurred is absorbed by the Foundation. To offset this expenditure, it receives funds from donors and other benefactors.

Who actually decides whether an accident victim is taken to the SPZ in Nottwill or to another clinic?

In reality, everything is dealt with in a very pragmatic way. Based on the nature of the injury, the emergency doctor decides where the patient should be taken to receive immediate medical care. So that the necessary life-saving and stabilisation measures can be taken as rapidly as possible, the crucial factor is to take the shortest and most suitable route to the nearest emergency room. If the accident happens, say, in the Bündner mountains, the rescue helicopter will in all probability fly to the canton hospital in Chur. This is where primary care takes place. Between six and 36 hours later, depending on the extent of the patient’s injuries and his fitness to travel, he will then be brought to us. It’s the patient or his family that have the last word on which rehabilitation centre is selected.

How many patients does SPZ care for annually?

We look after approximately 1,100 patients over the course of a year, which amounts to 50,000 days of nursing care. We achieve this with 150 beds and an occupancy rate of 97%. The high occupancy rate is explained by the fact our care for patients is a life-long commitment. The result is that many return to us at regular intervals. They do this because people with spinal injuries can suffer from recurring acute illnesses, complications associated with their disability, functional impairments and chronic diseases. Our philosophy of caring for our patients throughout their whole lives means that we feel responsible for treating these subsequent illnesses as well. For example, if after spending 30 years in a wheelchair, a person suffers problems in the wrist or shoulder, he or she can come back to for surgical or rehabilitative treatment.

How do SPZ’s activities in respect to rehabilitation differ from those of Suva?

Suva operates two rehabilitation clinics for patients with all kinds of accident injuries. In its rehabilitation centre in Sion, there’s also a department for patients with spinal injuries. In contrast, we specialise exclusively in paraplegia or in similar conditions. This is in line with our acute-care and rehabilitation mandate from the canton of Lucerne. Suva is an important partner for us, since a large number of our accident patients are insured with Suva.

The proportion of your patients with general insurance cover is at 75%. This is a high number for a private clinic. How do you explain this?

The mandate from the canton of Lucerne, the associated hospital list I’ve already mentioned, means that we’re not an exclusive clinic. Rather we’re a medical facility specialising in paraplegia firmly integrated into Switzerland’s healthcare system. Hence we’re an acute illness and rehabilitation clinic that admits all patients with spinal injuries, irrespective of their health insurance class. Because everyone in Switzerland can choose the hospital in which they wish to be treated, every paraplegic patient can opt for rehabilitation with us, if he or she so wishes. Against this background, the fact that 75% of our patients have general healthcare coverage more or less corresponds with the Swiss average, which is around 80%.

Questions around provisioning, naturally have a special significance in your field. Do issues in connection with the AHV or the pension fund crop up often?

The average age of our employees is 40 years. At this point in your life, you begin to think about old-age provisioning. For a 25 year-old, this topic is still a long way off. Because of the shortage of trained professionals, we as employers are very keen to offer an excellent fringe benefits package, for example for female care-givers wishing to return to their profession after a break. These people often work with us as part-timers. Like many other employers, the current situation has compelled us to lower the conversion rate. Admittedly, this will lead to a slight reduction in pension payments. However the additional savings contribution necessary rests disproportionately on the shoulders of the employer. Moreover, we have attempted to compensate for the increased deductions from employees’ pay though once-off wage premiums, especially at the lower wage levels.

SPS (incuding SPZ) employs approximately 1,600 people. Is old-age provisioning a topic during recruitment interviews?

No, it doesn’t come up. This is because in the care sector, especially, it’s mostly younger people that we train and seek to employ. And as I said, at a young age, retirement benefits are just not front of mind. On the other hand, for our highly trained professionals such as doctors, we need to offer attractive third-pillar packages if we’re to stay attractive as employers.

Switzerland has a well-developed system of retirement benefits, whose three pillars combine state and private old-age provisioning. Will this three-pillar system survive into the future?

Given how our federal structures work and the well balanced nature of the system, I don’t see any alternative to what we have at present. To keep the overall product in kilter, we can count ourselves lucky we can make adjustments to the overall system at three different points. As far as the lower income groups are concerned, I believe the government should do its part on the AHV side. In the middle-income bracket, it’s up to the employer to shoulder more of the burden in regard to the second pillar. And as far as the upper income groups are concerned, we need to inject more momentum into the third pillar. This way I believe we can achieve a degree of social balance.

In September, we’re going to vote on parliament’s planned revamp of old-age provisioning, the Altersvorsorge 2020. Is this on your company’s agenda?

As employers, we are politically neutral. If discussions about the Altersvorsorge 2020 are happening at all, then only among colleagues over lunch or coffee – and even in these cases, just among older staff for whom old-age provisioning has greater relevance. In addition, one should also bear in mind that 22% of our professionals are non-Swiss nationals. This high proportion is perhaps another reason why the upcoming vote is less of a discussion topic here than in other companies.

Do you think retirees should be obliged to help recapitalise the pension system – or are already acquired pension rights taboo?

If you want to forge solidarity between the generations, you're going to have to drop this taboo. It's not fair to expect the younger generation to pay for maintaining historic entitlements that were granted during good times under quite different conditions. This would mean penalising young people in favour of those who were quite simply fortunate enough to have earned their money in an economically more favourable period. So in my view, reducing already acquired pension rights can't be a no-go topic but rather something we need to consider in an unbiased way.

What are the most serious challenges facing the second pillar in your view?

The biggest issue, undoubtedly, is the low interest rate level and the impact this is having on earnings. This is all the more serious because the problem can't be solved just by one country – it's a global challenge. The low interest rate level also encourages a flight into real estate and stocks, which can generate bubble effects. And all this can end in a rude awakening for investment business. The pressure on investments is without doubt one of the major reasons for falling conversion rates and, in turn, a decline in pensions.

Our ageing society, combined with low interest rates, is putting pressure on the pension funds. Do you think the reform project Altersvorsorge 2020 can straighten out these imbalances?

Personally, I would have welcomed a bolder solution. But this is a political process of course. And at the end of the day, it will turn out as things always do in Switzerland: the lowest common denominator always wins out, not the best solution. It isn't that we haven't made any progress at all, the package proposed is definitely a step in the right direction. But in my eyes, this is not how a satisfactory solution should look, at least not in the longer term.

If you could give the pension funds some advice, what would it be?

They need to become more efficient. In my opinion, the extremely heterogeneous network of pension funds in Switzerland is overly burdened with laws, regulations and wholly unnecessary administrative costs. The system needs to be revamped, and in a way that significantly reduces costs. This is because it's these costs that ultimately come into play when cuts in pension payments are on the agenda. In respect to earnings, we're dependent on the world economic situation and there's not very much we can do to change that. So the only leverage we have is going to be in respect to restructuring of costs and processes.

So are we talking about large pension funds by mergers?
It's about efficiency gains. Large pension funds wouldn't mean bundling everything in one location. Even with large units, the actual provision of services can remain decentralised. In fact, currently, there are only a few pension funds that really utilise the possibilities of digitisation. Legislative complexity must also be reduced: a whole industry has sprung up around the Occupational Pensions Act; countless experts are necessary to make sure everything runs properly. Legislators need to strive for more efficiency in this field.