While Malta’s hospitals deteriorate, Steward Healthcare insists on renegotiation of concession terms

Steward Healthcare is insisting it will not invest in major upgrades needed due to the government’s reluctance to renegotiate the terms of the concession, even after The Shift reported complaints by patients and staff on the conditions endured.

Replying to questions by The Shift after the news portal reported the conditions at Karin Grech and Gozo hospitals through pictures sent in and interviews held with patients and staff, Steward Healthcare insisted it cannot invest in meeting the terms of the concession it accepted, insisting on a renegotiation that the government has denied so far.

The concession agreement was described by Steward Healthcare itself as “fraudulent and corrupt” and has led to a deadlock between the company and the government.

The Shift’s questions to Steward Healthcare about the conditions at Karin Grech and Gozo General Hospital were answered by a PR agent saying, “we have sustained services at Karin Grech as best we could while acknowledging that certain aspects of the facilities are no longer fit for purpose”.

None of these investments addresses the core issues being faced by patients and staff members, given that Karin Grech Hospital, in particular, was “originally scheduled for demolition when Steward Healthcare took over the concession”.

The government is blaming Steward Healthcare for failing to fulfil its end of the bargain, while Steward Healthcare is blaming the government for not wanting to renegotiate the terms of the €2 billion concession the company took over from Vitals Global Healthcare for a pittance.

When The Shift put to Steward Healthcare the problems voiced by patients and staff in the hospitals it manages, the company referred to 25 ventilators for the Gozo Hospital’s critical care unit to help safeguard against COVID-19, a 29-bed ward at Karin Grech, and an upgrade of the emergency and outpatients departments at the Gozo General Hospital, among the upgrades that cost €6 million.

He also referred to Barts Medical School (opened in 2019) and a “comprehensive staff and training development programme” as two other examples of investments the company has made.

In the last Budget, the annual government allocation to the company was €90 million, while taxpayers also cover staff costs.

While Health Minister Chris Fearne stated that the concession “is what it is” and cannot be changed, the concessionaire claims that the poorly drawn-up concession “does not fit within public-private partnership parameters under the relevant EU rules” to justify its lack of investment.

Steward Healthcare is now saying that the concession it agreed to acquire is not fit for purpose: “The concession does not fall within PPP parameters as dictated by EU rules. As a result, the concession had to be placed back onto the government’s balance sheet, meaning that Steward Malta cannot finance and build new hospital facilities within this structure. On several occasions since 2018, the government informed the EU that a negotiated solution with Steward Malta was imminent, but a conclusion has yet to be reached.”

Steward Healthcare insisted that major projects that require capital expenditure beyond its operating budget cannot be supported by external finance until the concession is removed from the government’s balance sheet. “Financial institutions will not provide us with finance until the concession is returned to our balance sheet, which requires the terms of the concession to be in accordance with EU rules.”

In real terms, the way the concession was structured meant that the whole point of the public-private partnership was defeated when considering that EU rules do not allow for such a concession.

The fact that the concession included a minimum revenue guarantee as well as a government guarantee to take over debt if defaulted on meant that the EU could not even classify it as a public-private partnership, to begin with, putting an even bigger financial onus on the public purse rather than on the private concessionaire.

But Steward Healthcare is complaining because it cannot use the assets (the actual hospitals) for loans as the government still holds them. It wants more.

Steward Healthcare took over the concession the National Audit Office (NAO) criticised as “vitiated”. The NAO report highlights the government’s failure to draw up an adequate framework for the concession and how that led to a failure to hold VGH accountable for ignoring project milestone deadlines.

Steward Healthcare has filed cases in court, with documents submitted showing its attempts to blame the problems faced by the three hospitals on the “fraudulent and corrupt” arrangements made with VGH. It has never explained its lack of due diligence or whether secret dealings with the government fell through.

What the current concessionaire consistently fails to mention is that members of its top brass, including CEO Armin Ernst and president Nadine Delicata, were at VGH before Steward Healthcare’s takeover in 2017.