During the 1990s, following political transformation, the Czech Republic's health care system has been experiencing profound changes. This article examines how health care institutions, hospitals, in particular, have found themselves having to undergo a transformation from budgetary organizations to free market enterprises. In addition to their daily professional tasks, medical institutions are being forced to adjust to a new environment, to work actively on solutions to their numerous economic problems, and, above all, to generate adequate financial means to support themselves. This article focuses on the challenges faced by public hospitals in the Czech Republic, including an excess of acute beds, financing system and pharmaceutical costs, and the need for effective health management to deal with these challenges.