State Hospitals deal: Taxpayers €300 million – Steward €0

By the end of next year, taxpayers will already have paid over €300 million to Steward Health Care for the running of three state hospitals, while the American company has yet to fork out a single cent of the €200 million in investment it was contractually bound to conclude by September 2018 – more than three years ago.

While the government is currently disseminating a confused narrative through leaks in the traditional media that it is about to take some bold decision on the scandalous €2.1 billion concession agreement it signed in 2015, an exercise by The Shift shows that some €230 million have already been paid by the Government, while a further €70 million has been budgeted for 2022.

An analysis of the budget figures shows that for 2021, the government is doling out a daily payment of €138,000, amounting to a total of €50.4 million passed on to Steward’s coffers for this year alone.

Interestingly, while admitting publicly that Steward has failed to meet any of its obligations in the 2015 concession, Finance Minister Clyde Caruana already earmarked a payment of €70 million for next year, meaning that Steward will be paid almost €200,000 a day in 2022 for the concession agreement.

So far, none of the government ministers handling the Steward issue, including Prime Minister Robert Abela, have explained why, at the same time as suggesting they want to cancel the deal with Steward, they are planning to pay the concessionaire an increase of €20 million over this year’s payment.

Mixed messages and timely leaks to deflect responsibility

Following years of trying to give the impression that the 30-year hospital concession was giving results and repetitive attempts to conceal the details of the 2015 agreement, the government has lately ‘opened up’ with the traditional media that the deal has failed and is going nowhere.

Deputy Prime Minister Chris Fearne, who in 2018 famously said that the deal with Steward was “the real deal,” has now recounted to The Times of Malta how years ago he had clashed with disgraced former minister Konrad Mizzi on the way this multi-billion deal was handled behind his back.

Although at the time it was already clear that the deal was a sham and that the obligations by the concessionaire were clearly not being met, Fearne continued to defend the deal and even refused to state whether the deal had been re-negotiated.

It was only with the government’s written consent in December 2018 that VGH could ‘sell’ the concession to Steward. At the time, the Government could have taken back the concession without any consequences. However, through a letter signed by Projects Malta on December 27, 2018, it gave its go ahead for the transfer of shares to take place.

Concessionaire has been in breach of contract since January 2017

While Minister Chris Fearne, on behalf of the government, has only published a redacted version of the contract, later revealed by the media, this clearly obliged the concessionaires, both VGH and Steward, to deliver new hospital facilities by a certain date. None of these obligations have been met, which gives the government the right to rescind the concession.

According to the so called ‘concession milestones’ agreed in 2015, the concessionaire was contractually bound to invest around €200 million in new state of the art medical facilities within the first three years of the concession.

These included 50 additional beds at Karen Grech and St Luke’s Hospital by January 1, 2017; 80 new rehabilitation beds at St Luke’s by September 30, 2017, and a new Barts college and medical school by July 1, 2017.

The contractual milestones also obliged both VGH and Steward to complete a new Gozo hospital by May 31, 2018; complete the refurbishment of the current Gozo Hospital by September 30, 2018 and complete the refurbishment of St Luke’s Hospital by December 31, 2018.

None of these milestones have been delivered except for the Barts medical school, which was delivered three years late. At the same time, it was later discovered that the investment for the building of this facility was financed by Malta Enterprise – also through taxpayers’ funds.

No progress at the PA on any Steward project

While the government is planning to pay a further €70 million to Steward in 2022, the American company seems to have no intention of honouring any of its obligations.

Research conducted by The Shift shows that currently, Steward has no active development application at the Planning Authority for permits to commence the projects it should have delivered by the end of 2018.

An application filed last year for a masterplan and building of a new Gozo General Hospital was suspended on Steward’s own request shortly after its presentation and has remained in limbo since then.

With the Malta sites, an application for the refurbishment of St Luke’s hospital has been left in screening process and is currently languishing in an ongoing pending stage by the Planning Authority.

Abela has waited 16 months to act

In July 2020, following the conclusions of a National Audit Office investigation that concluded the government’s concession agreement was “predetermined” and “should have never taken place”, Prime Minister Robert Abela told the media he agreed with the NAO and would take “any necessary action,” including potentially rescinding the contract.

However, many months later, no concrete actions have been taken by Robert Abela’s government, bar the recent ‘leaks’ to the press.

The NAO had concluded that the deal, signed by disgraced Prime Minister Joseph Musca, and his Ministers, was “vitiated” and “illegal”.

The “corruption” in the deal has now also been admitted by Steward Healthcare.

In new court documents revealed by The Shift last month, Steward claimed that the deal it acquired was mired in fraud and corruption. This admission was made in an appeal which Steward has filed against a judgement involving one of the original VGH investors.