Czech spas on the ropes

Czech spas are crying foul as cuts to public insurance payments threaten to put them out of business. The Health Ministry has reduced both the number of conditions eligible for treatment and the number of days patients can stay at a spa. On top of budget cuts implemented by health insurers, this has had a dramatic impact on many of the Czech Republic’s 37 spa facilities. I discussed the situation with Martin Plachý of the Czech Spa Association.

Photo: CzechTourism

“Spending on spa and rehabilitation treatment from public health insurance amounted to around three billion crowns in 2011; we don’t have the overall numbers for last year but according to the figures from the first six months, spending drop to around two billion. That’s before the new regulation by the Health Ministry came into effect. A further decrease in spending will continue this year which is when we will the full effect of the ministry’s regulation.

“Also, we estimate that we will lose an additional 20 percent of the funds provided by health insurers. That means that over the period of two years – 2012 and 2013 – we will get an estimated 50 percent less funds from public health insurance budget. That’s a dramatic decrease and it means huge problems for the spa and rehabilitation clinics in the Czech Republic.”

But the Health Ministry says the cuts were necessary because for historic reasons, spa care in the Czech Republic was oversized because around one percent of the health care budget was spent on spa treatments which, according to the ministry, was unusual among European countries.

“I don’t think so. This is the argument of the ministry which keeps saying the Czech Republic spends more on rehabilitation and spa treatment than other European countries. Austria is a good example because it’s about the same size as the Czech Republic, and they annual spend over one billon euros, which is ten times as much as we do here. So I don’t know where the ministry got its figures.

Martin Plachý, photo: Czech Television

“Germany is another example; they have a system under which spa and rehabilitation treatment is covered not only by public insurance but also by pension funds which invest into the improvement of their clients’ health. So the models are different in different country but we can’t say that the Czech Republic spends more than anyone else in Europe. That’s not true.”

What do you think the effect of this government cuts will be for Czech spa resorts and for the whole industry? You were talking about big problems – but do you think it could threaten spa care as such?

“In the long-term, it definitely could. If you look at some of the clinic which lost around 30 percent of revenues in one year – that’s a dramatic change for each of the firms. Some clinics, for instance those in West Bohemia, have many self-paying clients which is what we call those who come and pay from their own pockets, they can balance it and survive without difficulties.

“But for other clinics, especially those which from 90 percent depended on health insurance payments, this is a big change and they will have to cut expenses, employ fewer people, and so on. But if the situation continues, as we predict it will, they will quickly reach the borderline and go bankrupt, or the owners will have to subsidy their companies somehow. But that’s something not everyone can afford.”

We can’t really expect the current government to change its mind and put the money back into the system – so what are you plans? What are you going to do about the situation?

Photo: CzechTourism

“The short-term plan is to survive. I can really put it in any other way. The clinics will have to restructure their operations, and slowly find new clients. But it will be difficult: if you look at the number of Czech self-payers in 2001, there were about 26,000 of them. Ten years later, we have about 126,000. So it took a decade to attract 100,000 Czechs to come and pay for the care themselves.

“But some of the regions where these clinics are located are not really attractive enough for people to go on holiday there; we are not talking about places like Karlovy Vary or Mariánské Lázně. Many small spas only have limited potential in bringing in more people, and it will take years before they become more popular. And that’s the Czech market; I’m not talking about foreign markets where you need to spend a lot to attract people to an unknown place in the Czech Republic.”

But you could look at it from a different point of view: only those spa resorts that can offer competitive services will survive. Do you see any positive side of the development?

“As far as quality is concerned, I don’t really see any positive developments. Those who lost most of their clients are now coming up with cheap products and packages to attract more clients. But if you sell your product at very low prices, you can’t keep up the quality. I don’t want to use the word ‘cheat’ but you can’t do the same thing for half the money. So the quality will suffer in the short term.

Photo: CzechTourism

“What I think could be positive over the long run is that it might limit the number of new investors coming into the spa and rehabilitation industry. I had a feeling in the last couple of years that because of the industry’s stability, new investors and developers came and put their money into the spas and hotels, and there were simply too many players on the market. So the current austerity might in fact slow down the inflow of investment and somehow stabilize the situation in the industry which, hopefully, will return to the good results we had in the past.”