VHI is to seek to pay public hospitals for procedures rather than the number of days its subscribers stay in their beds.

As part of a new cost-containment strategy, the company is also expected to enter into talks on an agreement on costs with private hospitals which would come into effect following the expiry of arrangements at the year’s end.

Minister for Health James Reilly has argued a priority for the VHI this year and into the future is cost reduction and containment.

VHI announced price increases of 6 per cent on average in January – the fifth subscription hike by the company in the last two or so years.

Savings targets
In correspondence seen by The Irish Times , the Minister said VHI "must put in place a challenging plan with ambitious savings targets, which identify key individuals who will deliver on these". Dr Reilly said he wanted a full plan detailing the VHI's proposal to address costs to be submitted to him by early this year.

In February, a senior Department of Health official told VHI chairman Martin Sisk that Dr Reilly was expecting additional details.

The department official said the Minister was "firmly of the view that cost containment is fundamental to ensuring the sustainability of the private health insurance system and to the proposed authorisation of the VHI" (by the Central Bank, a key element of an agreement with the European Commission) in 2013.

Informed sources said the introduction of a system of paying public hospitals for procedures was one element of the c ost-containment plan. Such arrangements are in place in private hospitals.

The rates the VHI must pay public hospitals per day are set by the department.

Sources said the fee for inserting a cardiac stent has been cut from €1,100 to €220.

Informed sources said the VHI also planned to re-negotiate its arrangements with private hospitals later in the year.