Hospinvest, the company which dominated hospital privatisation in Hungary, looks set to hand back its five hospitals to the public sector. It is talking to external investors.
Debts stand at around 2bn-3bn HUF, but the real killer is that the company has said it can not meet its ongoing commitments and so is in breech of contract with the councils who signed 20-30 year leases giving control of the hospitals to Hospinvest.
Hatvan council has decided to take back control of Hatvan hospital and press reports suggest that the city of Kistkunhalas is set to follow suit. Heves County which owns Eger hospital, the largest facility in the Hospinvest empire is also considering action. Insiders say they fear a domino effect.
Hospinvest has said it is in talks with an international hospital chain, but, given the political hostility within Hungary to privatisation it is hard to see anyone being brave enough to take the group on.
The handover will leave another gaping hole in the failing Hungarian public sector, and spells the end to attempts to privatise up to 40 hospitals.
Insiders say that Hospinvest was unable to handle the acute resistance from the medical profession it faced when it took over public sector hospitals in the Eger region.
Attempts to introduce reforms were stymied at every step, with the opposition Fidesz party whipping up resistance from doctors and nurses.
Public hospital administration in Hungary is known to be extremely corrupt; Professor Peter Gaal, the leading academic in the field, confirmed estimates given to Healthcare Europa that a hospital director and other high ranking medics would typically make 5-10 times their salary in bribes and informal payments.
As one source put it: "There was huge resistance from the medical profession, as Hospinvest reforms would wipe out their earnings."
The European Bank of Reconstruction and Development gave up its $4m stake in Hospinvest a couple of months ago.
Hospinvest operates five hospitals in Kiskunhalas, Hatvan, Parádfürdő, Gyöngyös and Eger, as well as four outpatient clinics - in Százhalombatta, Jánoshalama, Kecel and Kiskőrös.
Hospinvest hospital sales came to 9.78bn HUF in 2008, with pharmacy sales of another 9.4bn HUF.
A few months ago, Professor Gaal said he expected 30-40 Hungarian hospitals to be functionally privatised, with the authorities awarding 20-30 year contracts to operators such as Hospinvest. With the death of Hospinvest, this movement now looks certain to cease.
Its vocal opposition to privatisation leaves Fidesz, the conservative party which looks certain to win the election in April 2010, with a huge problem – how to reform the deeply corrupt healthcare sector.
Many speculate that, on coming to power (note that Fidesz recently won 56% of the vote in the European elections), Fidesz will do a smart turnabout.
But, given the collapse of Hospinvest and the earlier failed attempts to introduce private healthcare insurance, their job will be far from easy; no investor is likely to want to invest in the Hungarian healthcare sector for quite some time.
