LATVIA. Interview: healthcare firm grows despite uncertain times

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LATVIA: news2biz talked to Maris Revalds, owner and board chairman of Veselibas Centrs 4, one of the largest private health care companies in Latvia.

There is a number of ways how to deal with the recession and a shrinking market. Some businesses say you have to cut back, while others believe that you have to expand in order to keep up with the changing market. Veselibas Centrs 4 is definitely among the latter: it has just opened a new clinic, which aims to provide low prices while maintaining high quality.

Could you describe the company in a nutshell?

Actually, Veselibas Centrs 4 is more of a group consisting of numerous branches and daughter companies. We provide a wide variety of ambulatory care services, but we also have companies that are focusing on importing medical equipment and technologies, both for our use and further sale. We have been in business since 1994.

1994? So this is not the first time you face an economic crisis?

Yes, but we barely noticed the first crisis (1998 Russian crisis – Ed.). We have noticed this one, albeit with some delay: our turnover was still growing up to November 2009, and we saw the first drop at the end of the year. The main reason for this is not that we are getting fewer patients; rather, 2009 saw a sharp drop in health care price, and we had to keep up, although the health care prices in Latvia already are ridiculously low.

Moreover, we have to compete with state health care, and this is not a fair competition: state-run clinics have no rent to pay and receive government handouts, so they can afford to slash prices indiscriminately. For example, one clinic cuts their prices by 30%, and another replies by cutting their prices by 40% – just so, because they do not have to count their money, and we do. Of course, our patients enjoy a bargain, but we have to pay free market prices for medical technologies and equipment, so this is not an easy business.

But you still decided to open a new clinic with even lower prices. How come?

We cannot afford to cut the prices much further in our full-service health care centres, but the new clinic allows us to do just that: we reduce some of the service level while still maintaining quality. We are renting out the facilities from a state-run clinic and we have completely replaced their old equipment with modern technologies, but we have not refurbished the facilities, just cleaned them up and given them a few fixes where needed to bring them up to an acceptable level. We also have less auxiliary staff and we have not invested in a modern IT-structure. Basically, we have dropped the things we can do without, while still offering a considerably higher quality than the previous state-run clinic.

When we planned the clinic, our estimated price range was among the lowest in the marketplace, but now some clinics or doctors offer prices even below that level. Our advantage, however, is that we clearly explain how we achieve those low prices, so our customers know what to expect.

Your full prices may be high for Latvians, but they are considerably lower than Western European prices. Have you thought about attracting medical tourists?

Of course we are working on it, but we have just started. The thing is, during the "fat years" (the rapid economic growth during 2005–2008 – Ed.) there was little need for medical tourism, as we had trouble keeping up with the local demand. Latvia is a small country, and people learn very quickly which doctors are the best experts in their field. During the "fat years", people paid more attention to quality rather than the price, so the demand for the best doctors, which has always been limited by default, greatly exceeded our ability to cope with it, and patients had to wait for up to three months to see them.

Things have changed, and medical tourism is now a very topical issue. In fact, we have joined forces with other Latvian private health care companies, creating a united brand Baltic Care and using it in our cross- and group-marketing activities. So we are working on it, and we already have learned quite a few things. We also have our first success stories.

For example, our company specialises in blood vessel laser surgery, which basically means that we know how to operate blood vessels from inside out. In fact, we were among the first in the whole world who introduced this technology, so we have gained massive experience, our equipment is top-notch, and we are not only Baltic or Scandinavian leaders in this field — we are a very notable company by European standards as well.

So how do you tell your prospective foreign customers about your advantages?

Well, this is something we should work on. We do have marketing activities aimed at foreign customers, but we are just starting out and there is still room for much improvement. We are translating our web pages in English and trying to advertise abroad, but this is yet to bring any results.

Interestingly enough, the thing that does bring in new clients is the word-of-mouth marketing: our customers are so satisfied with the service we can offer at a very affordable price that they recommend us to others. Another unpaid marketing channel is Latvians who work abroad: not only do they come back for health care themselves, but they also recommend us to their foreign friends and colleagues.

You mentioned that there was a shortage of doctors during the "fat years." If your medical tourism activities take off, can you come to a point when you are facing the same problem again?

If we look at our technical capacity, such as equipment or facilities, then we could deal with a much larger amount of patients. What is troubling, however, is the shortage of doctors, and this is an ever-growing problem.

On one hand, many hospitals and clinics have been closed as Latvia is trying to optimise its health-care system, so there is no immediate shortage of available doctors. On the other hand, European companies are actively recruiting Latvian doctors, and they are leaving Latvia at an alarming rate. What is even more troubling, we are also losing university professors who could train new doctors. So not only do we face a probable shortage of doctors once the demand for quality medical services starts growing again — our possible solutions to the problem are limited as well.

One thing that could help to some extent could be migration: we also could start recruiting doctors abroad. Alas, practicing Latvian doctors need to speak two languages: Latvian and Russian, and the language problem remains the largest obstacle that keeps foreign doctors from working in Latvia. The only hope we have is attracting the foreign graduates of our medical schools.

Of course, another thing is offering our doctors competitive salaries so they do not leave in the first place. We as a private health care company can and do provide that; the situation is somewhat more difficult with the state-run hospitals.

What are your plans for 2010? What are the main problems you are facing right now?

Falling health care prices notwithstanding, Veselibas Centrs 4 keeps expanding, opening 2-3 new objects every year. For example, we are introducing the first mobile mammography units in Latvia. We plan to use more mobile units as a way of expanding outside Riga.

Unfortunately, the state and local government institutions seem to do everything they can to prevent us from doing our work. I am an honest businessman and I refuse to give bribes, and my honesty is punished severely.

I have also received numerous takeover offers, but I enjoy my work, and I have no immediate plans to sell the company. I believe that ultimately, private health care is the only health care model that can work in the long term.

Veselibas centrs 4 is currently a family-owned local business. Its estimated 2009 profits reached LVL 450,000 on a LVL 8.5m turnover. It also plans to stay in black in 2010.

This is the full version of the interview published in news2biz LATVIA no 293.