State-owned spas financially sound, but the Ministry of Health did not comply with its obligations as their founder

PRESS RELEASE on Audit No. 16/04 – November 14, 2016

The Supreme Audit Office (SAO) scrutinized the management of the state-owned enterprises BALMED Praha, State Medical Spas in Bludov and Janske Lazne, and Mountain Spa Karlova Studanka within the period from 2013 to 2015. Auditors aimed at the managed properties, public contracts awarded as well as thermal cure provided and also scrutinized whether the Ministry of Health fulfilled its obligations as the state enterprises’ founder. In 2015, economic performances of the audited state-owned spas were good (unlike the state enterprise BALMED Praha, which does not provide any healthcare), their indebtedness did not exceed 12 % and they were solvent. However, the audit revealed that the Ministry poorly monitored the state enterprises and failed to set proper criteria for remuneration amounts, which health insurance companies should have paid to health care providers.

As a result of the lack of criteria for remunerations, various health insurance companies made different payments for the same heath care to the same health care providers. For example, one day of health care at Bludov State Medical Spa cost from CZK 950 to CZK 1 120. The SAO recommends that the remuneration payments for the same types of care are not different at the same health care providers.

As a founder of the state-owned enterprises, the Ministry of Health failed to fulfil its obligations. For example, the Ministry did not appoint new members of the supervisory boards. When the SAO’s auditing operation was about to be concluded, none of the audited enterprises’ supervisory boards had at least three members, which was in contradiction with the law. Thus they were not effectively fulfilling their roles. During the audited period, the Ministry also failed to examine the economy of the state-owned enterprises and only performed one (!) public funds’ control in-situ.

The Ministry of Health also delayed the term when BALMED Praha had to definitely cease its activities. BALMED Praha was originally founded to manage and liquidate properties of 12 previously demised state-owned enterprises. From 2009 to 2015, the operating costs of BALMED Praha amounted to CZK 40 million. In the same period, property sales and loans earned only CZK 28 million. The SAO recommends that the Ministry quickly terminated the loss-making operation of BALMED Praha and transferred the remaining properties to the Office for Government Representation in Property Affairs.

Auditors revealed several errors in the management of audited state-owned enterprises. For example, when scrutinizing public contracts, which were awarded in the audited period, auditors revealed that BALMED Praha had spent CZK 320,000 for consulting services, which only resulted in four individual, rather general recommendations. Invoices to health insurance companies sometimes billed more expensive accommodation than actually provided by the state medical spas to the clients.

Communication Department
Supreme Audit Office

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