Private investment gains ground in Hungary’s hospitals

Bloomberg

A $62 million construction project on the banks of the Danube River is the biggest bet to date that Hungary’s crumbling public health-care system guarantees a bright future for private hospitals.
Deteriorating conditions at state hospitals, where patients routinely need to bring their own toilet paper, have pushed people to pay for care outside the communist-era relic.
Private health spending in the past two decades more than doubled, according to data from the Organization for Economic Cooperation and Development.
Ukrainian entrepreneur Igor Iankovskyi is building the Duna Medical Center in Budapest, an eight-floor, 130-bed hospital with seven operating suites that’s set to open in 2018. Hungary’s biggest lender, OTP Bank Nyrt., is also planning to invest in a hospital.
Doctor Exodus
An exodus of underpaid doctors and nurses, who’ve emigrated by the thousands to richer western European countries in recent years, has left behind overworked and underpaid colleagues at state hospitals. Hungarian governments have chipped away at health care spending, bringing public financing to 10 percent of budget spending by 2013, the lowest level among 34 OECD members.
Partly as a result, Hungary has the highest mortality rate from cancer, and the lowest number of CT and MRI scanners among the group, according to OECD. Local health authorities spent this year tamping down media reports that a lack of sterilizers contributed to the spread of viruses in state hospitals. The lack of government investment has forced Hungarians — accustomed to universal health-care coverage since communist times — to dig deeper into their pockets. Private spending made up 35% of total health spending by 2013, the highest level in central Europe. Much of that has been so-called “gratitude payments,” money slipped by patients to doctors and nurses at state hospitals in hopes of getting better treatment.
Potential Investors
That willingness to pay more is piquing investors’ interest. Czech-Slovak private-equity group Penta is considering investing in Hungary, spokesman Gabriel Toth said in an e-mail, without elaborating. Penta already operates 14 hospitals in Slovakia and is the majority owner of EMC, the largest corporate owner of hospitals in Poland.
OTP Bank is planning financing to “show how a modern hospital should be run,” Chairman SandorCsanyi told shareholders on April 15.
Some private facilities, like Robert Karoly hospital in Budapest, are already making a profit. The hospital’s revenue will probably reach 1.4 billion forint ($5 million) in 2016, 10% more than last year, according to director Gabriella Lantos. The 55-bed hospital will add another 15 beds this year to meet growing demand.

Regional Laggard
Hungary has been a regional laggard when it comes to private care. The Czech Republic has the highest share of private hospital beds in central Europe at 20 percent. Politics is partly to blame, with a history of government interference in the private economy scaring off investors.