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Best of both worlds in hospitals

[ ] December 7, 2011

METRO Pacific, the Philippine subsidiary of Hong Kong-based First Pacific, has invested P3.2 billion in six hospitals. There is not one where the group’s equity exceeds 35 per cent.

Manuel V. Pangilinan, president and chief executive officer of the Indon-owned company, knew early enough that the success of any hospital almost entirely depends on the competence of physicians, the technology the hospitals buy for them, and efficient management.

To Pangilinan, physicians should be what they are for. Minister to the sick. They should not, because they cannot, run a hospital and make it earn a profit.

As of this year, Metro Pacific has its hands full in six hospitals, one each in Bacolod and Davao City. It is running four in Metro Manila. It does not have any equity in two in Metro Manila.

It was like a baptism of fire when Pangilinan started investing 5 per cent in Makati Medical, and eventually ended with 35 per cent. The hospital was in deep financial trouble in 2006. There was a time when management, then headed by Dr. Raul Fores, a surgeon, was borrowing money from an elderly physician, Dr. Angela Suntay, to meet payroll.

There was one area manager whose purchases were as much if not more than what the official purchasing manager was buying. The chief accountant was not a CPA.

Five monitors in the operating room were sent out for repairs. They were never returned

The management at that time wanted to construct a medical arts building but demanded that the physicians who have clinics in Makati Med cough out the cost. They refused.

(The anomalies were exposed in 2006 by this newspaper.)

Pangilinan was first elected to the board as independent director in 2007. He slowly sank his teeth into hospital problems and discovered that there could be money in it and, at the same time, perform a social commitment.

Best of both worlds he thought.

Actually, the first hospital venture of Metro Pacific was the purchase of 35 per cent of the capital stock of Davao City Hospital.

It was not exactly to her liking that Rose Montenegro, who trained for seven years in finance at the Citibank, accepted the job as president and chief executive officer of Makati Med.

She had already retired from PLDT even before First Pacific came in.

She saw the challenge and accepted the job. She has done extremely well since she took over in 2009.

Instead of asking the physicians to cough out the money for a medical arts building, her company built it for P1.2 billion and purchased P640 million worth of new equipment.

More than that, the physicians are happy they are, for the first time, given regular cash dividends. When the Metro Pacific group came into Makati Med, the book value of its shares was P800. It has since nearly doubled to P1,500.

Yet Ms. Montenegro told Malaya Business Insight in an exclusive interview that hospitals in the Philippines are laggards. By that she meant that while the physicians in Makati Med, mostly from the University of the Philippines and the University of Santos Tomas, are unquestionably competent, the technology is far from being at par with modern hospitals in the United States. She went to Singapore to study the migration of Makati Med to a new automation technology.

In 2009, Metro Pacific entered into a 20-year operating contract with Cardinal Santos Hospital owned by the Archbishopric of Manila. Metro earns a fee from the contract but committed P10 million for other needs.

Lourdes Hospital is also under an operating contract.

Just recently, the company also acquired 35 per cent of Asian Hospital founded by world famous heart surgeon Dr. Jorge Garcia.

The dream of Ms. Montenegro is to provide global access for hospitals in the Philippines, specifically Makati Med and the five others in the Metro Pacific Group.

She said the population of the developed world is aging. These retired people would need efficient medical treatment at the least cost.

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