Landspítali warns budget could force service cuts

Iceland’s Landspítali hospital says the government’s 2027 budget proposal leaves it seriously underfunded and could lead to cuts in services if unchanged, mbl.is reports. The hospital says it needs about 2 billion Icelandic krónur more than the proposal provides just to maintain current services.

In a submission to Alþingi’s budget committee, chief executive Runólfur Pálsson highlighted Landspítali’s role as Iceland’s national hospital, a regional hospital for the capital area, a university hospital and one of the country’s leading health research institutions.

Runólfur said the hospital faces painful efficiency measures for the second year in a row, largely because salary funding has not been adequately adjusted to reflect collective agreements negotiated by the Ministry of Finance and Economic Affairs on the hospital’s behalf. He also cited insufficient payment for services covered by the service-based funding agreement.

Investment funding for equipment and buildings is also inadequate, he said. It has not increased in nominal terms or kept pace with inflation for a decade. Runólfur also questioned flat efficiency requirements, saying they do not appear to be based on a review of operations or scope for savings.

He urged the committee to examine how funding has changed since hospitals in Reykjavík were merged in 2000. The merger was intended in part to establish a university hospital that could support research and the education of health professionals. Runólfur said cuts and efficiency demands over the past quarter-century had weakened Landspítali’s development as a university hospital.

Demand for services at Landspítali and other healthcare institutions has grown alongside population growth and changes in the population’s composition, particularly the increase in older people. Iceland’s population rose by nearly 13% between 1 January 2019 and 1 January 2026, an average of almost 2% a year. Forecasts project continued growth at a similar pace.

Over the same period, the number of people receiving care at Landspítali increased by 25%, with the largest rise in outpatient services, as has been the case at hospitals in comparison countries. Demand is expected to keep increasing as the population ages. The hospital says cancer incidence is expected to rise by more than 60% between 2024 and 2045 because of the ageing population.

Landspítali says funding needs to grow by 2.3% in real terms each year to keep pace with demand, or by 12% over the next five years. The 2027 budget proposal provides for real growth in operating funding of 1.8%.