Interview – SwissMed Hospital, Gdansk, Poland

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Mr. Czeslaw Pospieszynski
Dyrektor ds. inwestycyjno – kapitałowych
Swissmed Centrum Zdrowia S.A
Gdansk, Poland

Mr. Pospiezynski is the Director for Investor Relations for Swissmed, the leading private hospital in Poland

Swissmed Hospital opened its doors as an outpatient clinic in 1996 and opened its hospital in 2003.  Today, Swissmed has a full range of inpatient services and outpatient clinics.  Hank Kearney, president of PHM International, conducted this interview via telephone.

HK: Czelaw, I reviewed the investor presentation dated March 2007 and I have a few questions.  These questions won’t be of the usual metrics, but rather we’ll talk about where Swissmed sees opportunities for the near term.

HK: ISH Polska, the software subsidiary is 65% owned by Swissmed. How are sales to outside companies progressing? Has ISH Polska made software sales to other hospitals?

CP: ISH Polska is an investment Swissmed made two years ago.  We were looking for a medical IT programme for our hospital, both inpatient and outpatient, and had a difficult time locating such capabilities.  We found ISH Hungary and worked with them to develop the software for our needs.   We were able to progress through our investment and today it is up and running. 

Currently the software is an integrated patient-medical programme with doctors capable of downloading patient records, lab results, etc.  Input is done at the time of the patient visit.  This is all within a secure hospital intranet.

ISH Polska is now ready to bring this capability to market and we currently have 2 tenders out, waiting to hear.  One if for a hospital, the other is for a clinic.

HK: Of the various drivers of growth, Swissmed is targeting inpatient growth. Can you let us know what high value inpatient procedures are being targeted and why?

CP: Our main inpatient growth will come from a targeted effort to increase the following procedures: gynecology, orthopedics, neurosurgery, and general surgery. 

HK: Well, you have two of the three classic targets, but not cardiology.  Why not

CP: Cardiology is one of the areas where the state doctors and hospitals have good expertise and resources.  It just wouldn’t make sense to try to compete on cardiology.

HK: We see 49% of revenue is from the state health fund. Is this all outpatient? If not, what percentage is out patient and what is inpatient and will this increase?

CP: Our total contract with the health fund for 2007 is 8 million zloty (approximately $2.9 million USD), a 2 million zloty increase from 2006.  60% is inpatient and 40% is outpatient.

HK:  2% of revenue is from private health insurance. This is about the same percentage of private insurance pay to total health spending in Poland. What is Swissmed doing to increase this percentage and does it have insurance contracts with insurance companies outside Poland? E.g. the Baltic countries.

CP: Our growth is certainly tied to private pay and private health insurance.  We’re challenged with the political situation and regulations in regards to how private insurance companies operate within Poland.  We’re confident the insurance situation will change within the next 2-3 years.  But yes, we do have some private insurance contracts.  However, we have taken this waiting period to focus on our data and capacity building in medical management. 

For instance, our average length of stay (LOS) is 3 days and we are currently at 50% of capacity for inpatient procedures at 3,000 per year.  Our max is 6,000 procedures and we can easily ramp up with no increase in our physical plant.

In addition, our pricing data has enabled us negotiate positively with the insurance companies.

HK: You have an average length of stay of 3 days and several years of medical management data.  You must be feeling confident when dealing with insurance companies and their efforts to push down your pricing.

CP: Yes, and we are prepared for significant growth in this sector.

HK: Swissmed has plans to build 3 hospitals or 4 hospitals? Can Swissmed tell us what size? E.g. number of beds.

CP: Our plans are to build 4 hospitals, 1-2 immediately in the near future.  The sizes will be like our Gdansk hospital, less than 100 beds.  It’s important to know these new hospitals will benefit from the experiences of Gdansk and will have the same quality and pricing structure. 

The goal is to develop a network of hospitals to better position ourselves in negotiations with insurance companies.  We want to be the leading hospital network for contracting within Poland.

HK:  Also, Swissmed is targeting medical rehabilitation as a new market. Will these new hospitals have a different physical design from Gdansk hospital?

CP: Our rehabilitation programmes are in development, but will focus on outpatient mostly.  These will be contract driven and will work within the existing infrastructure of our hospital.  This is the same expectation for our new hospitals.

HK:  Thank you Czeslaw.  Good luck with the expansion and growth plans.

For additional information on Swissmed, please contact:

Czeslaw Pospieszynski
Dyrektor ds. inwestycyjno – kapitałowych Swissmed Centrum Zdrowia S.A.
tel: +48 0 58 524 15 1

Disclaimer: The interviewer, Hank Kearney, has met previously with the Swissmed managing director in 2006 and 2005.

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On May 15, 2007
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