Eastern Europe's public hospitals are in dire need of cash. As the region's countries have made the transition to a market economy, health care spending has plummeted despite a long-standing tradition of free, universal health care coverage (Exhibit 1). Hospitals, frequently the first victims of state budget cuts, are struggling to ease their financial crunch.

These hospitals have two powerful—though potentially controversial—means of generating new revenues while raising both the volume and the quality of their public care. The first is to make patients pay for certain elective services, the second to capture a share of the increasingly global market for clinical trials that multinational pharmaceutical companies sponsor.

We studied the potential advantages from taking this pragmatic approach in Serbia (including Montenegro), where per capita health care spending in 2000 had dropped to barely a fifth of the level it was in 1990. In particular, we looked at the treatment of cancer, a rather expensive area of health care. Numerous flyers in the areas near Serbia's public cancer-care centers advertise the wide range of diagnostic services, such as mammography and computerized-axial-tomography (CAT) scans, being offered at private clinics...