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Steel tycoon expands into health care

Reforms luring investors into largely untapped sector

By Victor Velek
Staff Writer, The Prague Post
April 9th, 2008 issue

After years focusing on the steel industry, Tomáš Chrenek has decided to invest his ferrous earnings into one of the country’s largely untapped sectors. The Slovakia-born entrepreneur is expanding rapidly into health care.
Chrenek’s hospital chain, Agel, has quickly grown into one of the largest private healthcare providers in post-communist Europe. The company owns or operates 17 hospitals, mostly across central and north Moravia.
Chrenek expanded his burgeoning empire April 1, when Agel launched a health insurance company, a move that gives Chrenek sway over two essential areas of healthcare spending.
While he may be the most prominent businessman investing in health care, Chrenek is not alone in his investments. With the business-friendly government’s reform agenda intending to inject more entrepreneurship — and profits — into the healthcare system, a fleet of investors have focused their interest on the sector.
Several private hospital chains have emerged across the country in the wake of privatizations of hospitals owned by municipalities and regional governments. Last year, the central Bohemia Region alone sold nine hospitals, netting more than 440 million Kč ($27.4 million).
Entrepreneur Sotiorios Zavalianis and companies like Mediterra and PP Hospitals all control several hospitals and are seeking new opportunities to enlarge their portfolios. And, recently, the Czech-Slovak private equity group Penta Investments said it would invest in a chain of doctors’ practices.
The project is based on buying out private practices and grouping them under one roof with central administration. “We will free our doctors of the paperwork burden,” said Penta spokeswoman Jana Studničková.
The concept was pioneered by Marek Potysz, a former chief executive of Agel, who started a small chain of general practitioner practices in Moravia last year.
Reforming insurers
On the eve of its official opening, Agel’s insurance division already had 1,000 clients, with the shareholders and directors of Agel’s hospitals being among the first who signed up, according to spokesman Tomáš Želazko.
“We are appealing mainly to people who have some experience with Agel’s hospitals,” Želazko said, adding that the company will focus on Moravia, where it has a strong presence. Expansion nationwide is a possibility in the future.
With Agel’s arrival, there are 10 companies providing health insurance, which is mandatory for all the country’s permanent residents. Insurers manage an annual budget of more than 200 billion Kč collected from mandatory premiums. They are not allowed to make profit.  
According to Health Minister Tomáš Julínek, up to 20 percent of funds earmarked for the public medical care are squandered. His reform package is intended to make the system more effective, competitive and patient-oriented.
“No real reform will be made without transforming insurers,” said Tomáš Cikrt, spokesman for the ministry. Currently, health insurers have unclear legal status and there are no well-defined standard services they must grant their clients, he added.
After the reform, insurers will have clear-cut obligations to patients and will also operate as companies entitled to generate profit, which most of the entrepreneurs investing in health care are banking on.
The new rules should also better regulate groups like Agel, which control both insurers and healthcare providers, Cikrt said.     
Julínek’s vision has raised an outcry from the opposition Social Democrats as well as some doctors.
“This is large-scale fraud and, once the reform is completed, the damages will be irreversible,” said Martin Engel, chairman of the Trade Union of Doctors-Union of Czech Doctors.
A system with profit-based insurers would mean rerouting part of people’s premiums outside the healthcare system into the pockets of private enterprises, Engel added.

Victor Velek can be reached at vvelek@praguepost.com


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