With public-private healthcare partnerships in the spotlight, Ian Youngman warns of the dangers of dealing with financiers offering a no cost solution to medical tourisme
So far, most attempts to promote medical tourism to Malta have failed to deliver.
Traditionally Malta has relied on tourism for a living, with most tourists, and a few medical tourists, coming from Italy and the UK, but this traditional market is struggling. Attempts to attract Americans have not gone as well as hoped. The island pins much faith on attracting Russian tourists.
The government of Malta entered into a 30-year public-private partnership agreement in 2017 for capital investment and management responsibility for three hospitals with an international profit-making health care organisation, with plans to offer treatment to locals and medical tourists.
Private Finance Initiatives (PFIs) are a form of procurement where the private sector manages the delivery of public sector projects. This typically involves designing, building, financing and operating a government facility or service, such as a hospital. The private sector owns the assets and leases them to the government.
A public–private partnership agreement for capital investment and management of the hospital in Gozo, and a cluster of hospital facilities on the footprint of the old St Luke’s Hospital, including rehabilitation and geriatric care, was signed in 2017. But parts of the deal seem to have been agreed up to three years earlier.
Public-private partnerships in healthcare can work but many fail. Witness the fallout from the collapse of Carillion in the UK.
The plan is to attract medical tourists to the island, with 125 beds in Gozo Hospital and 250 in St Lukes available for medical tourists.
Limited availability of capital investment resources is one reason the government entered into a 30-year public–private partnership with a private contractor for the refurbishment, development and management of three public hospitals in Malta and the island of Gozo. Aside from transferring responsibility for capital investment, the contract anticipates an expansion of acute hospital capacity and geriatric care for Maltese residents as well as the creation of a niche medical tourism market, particularly for one of the hospitals earmarked for rehabilitation services. The reform is the subject of a debate in Malta about the transparency of the ownership of these hospitals and equity in access and coverage.
The £1.6 billion deal with Vitals Global Healthcare (VGH) was controversial, with opposition from politicians and healthcare professionals.
To bolster the attractiveness of the hospitals, St Bartholomew’s NHS hospital (Barts) in London was offered a campus there so that it could charge fees for a medical course in Malta, and give the Gozo hospital a name that Vitals could leverage, ostensibly for medical tourism business. The medical partner for the deal is Partners Healthcare International of the USA.
The contract stipulated various dates for completion of, handover, design plan, the Barts campus at the Gozo hospital, 50 additional beds at Karin Grech Hospital, 80 rehabilitation beds at St Luke’s Hospital, the completion of the new Gozo General Hospital and its renovation, and the completion of St Luke’s medical tourism beds. The public is not privy to these dates and the related financial penalties as they have been redacted in official documents. The 1,600 professionals at the three hospitals are still paid by the Maltese government and will still be paid for the 30 years of the deal. VGH will only have to pay for any additional employees. As part of the public-private partnership, the government committed to buy a number of beds to be used as part of the public healthcare system.
VGH originated from the Singaporean private equity firm of Oxley Capital. VGH is based in the tax haven of the British Virgin islands and is owned by an Oxley subsidiary. There are at least half a dozen other related companies tied in with project, with a host of ownerships in various countries.
According to the 2018 Budget estimates, the hospital concession agreements with VGH to run the Gozo and Karen Grech hospitals will cost taxpayers more than €40 million. VGH has now sold on the contract.
Now, before a single medical tourist has been treated, ownership of the contract has been sold on, at an undisclosed price to Steward Health Care, itself owned by American private equity firm, Cerberus Capital Management, which specialises in buying up distressed healthcare assets.
Until November 2017, the CEO of VGH was Armin Ernst, who, before the contract transfer, went to work for the new Maltese subsidiary of Steward Health Care. To keep the contract VGH would have had to find and spend £220 million within the first 24 months of the contract. There are no reports so far of any spending.
For the €50 million that the government passed on to VGH, little was achieved before the sale to another group. Work on the Bart’s Medical School that was intended to be built by July 2017 did not happen. Work on St Luke’s Hospital did not happen. Work on Karen Grech Hospital did not happen.
It took months for the government to admit that it was also committed to a huge buy back fee for the land that was given away to VGH. Exactly who owns Vitals and what the financial deal actually is, is shrouded in contract redactions so even Parliament has not seen the full detail.
Questions raised In Malta include:
- Did VGH ever plan to raise the money?
- How true are the rumours about some of the financiers involved?
- Did VGH have the expertise to run the hospitals?
- Did VGH ever plan to actually build and run the hospitals?
- How much has VGH made from the sale?
- Has VGH sold off hospital technology it was gifted?
- What were the contact dates and penalties?
- Who knew about the deal even before it went public?
The contract is surrounded by complex financial links. Maltese politicians and the public are raising concerns about the financial aspects and the lack of improvements to the healthcare infrastructure.
All those countries seeking to privatise or part privatise state health care should look very closely at any financial deals offered, particularly if one of the incentives is the promise of increasing inbound medical tourism or reducing outbound.