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Nursing a profit

Prague takes first step in privatizing retirement homes

By Michael Heitmann
Staff Writer, The Prague Post
November 14th, 2007 issue

VLADIMÍR WEISS/THE PRAGUE POST
Residents Soňa Jaklová and Aleš Patzelt talk in the restaurant of Residence Classis, a new senior citizen's home outside Prague.
In the first step of a plan to privatize its homes for the elderly, the city of Prague has announced that its nursing home in the Bohnice district will be rented to a private contractor for a span of 10 years.
“We are taking this step to improve and expand services,” said Jiří Janeček (Civic Democrats), Prague’s councilman for social affairs. “In addition, we want to improve the financial situation of these institutions and the wages of the staff.”
“We expect to choose an operator for the nursing home in Bohnice first,” he said. “We will then evaluate its work and decide on further private-sector projects based on the results.”
The decision is still pending city council approval, but Janeček is confident that the tender will be put out by the end of this month and a contract will be signed as early as January. Should the project be a success, the city hopes to further its cooperation with private companies providing social services, Janeček added.
“We hope to cooperate further with private-sector companies on the construction of new nursing homes, in which case the city would provide the properties,” he said.
Critics of the program question whether Prague’s nursing homes, designed to operate on state support, will be able to effectively balance their drive to profit with the care of their charges once run by private companies.
“You have profits on one hand, and on the other you have operation of existing old peoples’ homes,” said Jaroslav Němec, who heads the Archdiocese of Prague’s Caritas organization. “The two don’t go well together.”
Němec would like the city to work with nongovernmental organizations that are not under pressure to realize profits. It is common practice in Europe to entrust Catholic and Protestant agencies, such as Caritas or Diakonie, as well as secular NGOs with the care for the elderly, he said.
“This has a number of advantages,” he said. “Active engagement of volunteers, transparent review of the budget, standardization of services and, very often, they raise donations when state subsidies do not suffice.”
The amount of the rental fee paid to the city by the Bohnice home’s future operator is still subject to discussion, Janeček said, as is the matter of how the operator would then reap profits. The ultimate financial impact on pensioners at Bohnice remains unclear.
Private experience
While the city council moves forward with its plans, the experience of one private retirement community throws doubt on how easy it would be for the city to find a qualified operator for the Bohnice nursing home.
In 2005, the development company Acred opened a posh senior citizens’ residence in Průhonice on the outskirts of Prague called Residence Classis. The community is currently home to 31 seniors, their apartments and an integrated care facility.
When planning Residence Classis, Acred was unable to find a suitable operator that could cover the demands of round-the-clock care at their medical facility, prompting the development company to take the unusual step of administering the retirement home itself, bringing in Swiss consultants to help with the task.
With this expertise now developed, the company has held talks with the Labor and Social Affairs Ministry and town representatives on possible public-private partnerships, said Petra Caineová, Acred’s marketing, sales and leasing manager.
No hidden numbers
One reason Acred would like to see the public sector involved is that prices at a private residence tend to be very high, Caineová said. At 40,000 Kč ($2,181) to 50,000 Kč a month, prices at Residence Classic are as much as five times higher than fees paid at state institutions.
“There are no hidden numbers,” Caineová said. “The prices are determined by the need to pay for the investment, the credit facility and operating expenses.”
Acred’s investors, which include a Scandinavian investment fund, expect a reasonable return on their investments within 10 years or so, once the facility is fully occupied.
But luxury retirement homes cannot replace homes provided by the state, they can only supplement them, said Caritas’ Němec.
“A huge number of seniors are glad to pay for above-standard services,” he said. “It’s an important addition to the existing social services.”

Michael Heitmann can be reached at mheitmann@praguepost.com


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