Steward freezes St Luke’s master plan as PM fails to deliver on pledge to amend tainted deal

Steward Healthcare, the American healthcare giant that took over the controversial 30-year Vitals Health Care public hospitals concession in 2018, has delayed plans to upgrade St Luke’s Hospital after negotiations with government on a potential new deal have been stalled for a year.

Prime Minister Robert Abela has so far failed to deliver on his promise to review the €2.1 billion deal struck with Vitals Global Healthcare (VGH) and passed on to Steward by his predecessor, disgraced former prime minister Joseph Muscat.

The 2015 deal, handing over the management of three public hospitals to Vitals, was described by the National Audit Office, in a report completed more than a year ago, as ‘vitiated’ and ‘illegal’.

In 2019, Steward outlined plans for the upgrading of St Luke’s Hospital. However, the architect responsible, Peter Zammit, has now informed the Planning Authority that his clients have asked for the development application process to be suspended. No reason was given.

In the meantime, no progress has been registered on a similar master plan for the Gozo General Hospital, even though the application is still under the screening process and is not considered a full application.

According to the deal signed by Muscat’s government in 2015, a new Gozo General Hospital should have been up and running by September 2018. Nothing has been built yet bar a medical school for Barts, financed by taxpayers and completed three years late.

Sources in the health industry told The Shift that there’s been no progress on the delivery of the projects covered by the 2015 agreement, and everything has stalled since the NAO’s damning report, issued more than a year ago.

“While Steward has not delivered on any of the concession milestones, except for the medical school building some three years later than agreed, nothing else is being done except for the day-to-day management of the hospitals,” the sources said.

“As Steward’s is asking for more millions to deliver, the government does not seem to know the way forward, even though it is evident that the agreement can be rescinded as all its deliverables have been breached.”

Abela dodges questions on talks’ progress

More than a year after the NAO’s damning conclusions that the deal to privatise three state hospitals was ‘vitiated’, ‘predetermined’ and should never have taken place, Prime Minister Robert Abela has yet to make any announcements about whether he’s succeeded in striking the new deal he promised.

In July 2020, Abela endorsed the NAO’s report and pledged to take any action necessary to address its conclusions, including the possibility of rescinding the 30-year contract.

The prime minister consistently refuses to answer questions on the subject, and his office has ignored requests from The Shift for information on whether the government has concluded the review of the NAO report and on details about any follow-ups.

Abela is also refusing to answer questions about any ongoing negotiations with Steward, despite having pledged to seek a new agreement on the three state hospitals.

Unconfirmed reports suggest that Steward is insisting on being paid more for the running and ‘investment’ in the Gozo Hospital, while also signalling its intention to relinquish its concession over the St Luke’s and Karin Grech Hospitals.

The OPM refused to comment on the reports.

The NAO’s condemnation

In July 2020, after three years of investigations, the NAO concluded that the government deal on the privatisation of three state hospitals was predetermined and should never have taken place. The NAO said the deal was ‘illegal’ and that the awardees, VGH, should have been disqualified and not granted a “golden” contract that commits taxpayers to pay almost €200,000 a day for 30 years.

The deal, widely seen as corrupt and highly suspicious, was designed by Muscat’s disgraced former chief of staff, Keith Schembri, now charged with an array of serious financial crimes, and negotiated by former Minister Konrad Mizzi, forced to resign in disgrace in 2019 along with Muscat himself and Schembri.

The three hospitals were handed over to Vitals Global Healthcare – an unknown company with no previous experience in operating hospitals – through a vitiated process conducted by Mizzi’s appointees, including his lawyer Aron Mifsud Bonnici, childhood friend David Galea of Beat Consultancy, and his then permanent secretary Ronald Mizzi.

Ronald Mizzi has been retained by the prime minister as permanent secretary in the Tourism Ministry.

In 2018, after VGH failed to deliver on any of its commitments and was exposed as being in financial crisis, it was forced to ‘sell’ its government concession to Steward Health Care which took over the contract under the same conditions as those granted to VGH. Former VGH CEO Armin Ernst is now president of Steward Healthcare International.

Three years down the line, Steward too has failed to honour its contractual commitments and is now reportedly demanding Prime Minister Abela increase its payments and alters its commitments.

According to Health Minister Chris Fearne, who had approved the transfer from VGH to Steward, new development plans for St Luke’s and Karin Grech Hospitals, as well as permits for a state-of-the-art Gozo Hospital, were supposed to be formally presented in early 2020. None of the three expected plans has yet materialised.

At the time, Fearne described the taking over of the concession by Steward as “the real deal.”