Prime Minister confirms €80 million buy-back clause in Vitals hospitals deal

Prime Minister Joseph Muscat confirmed the existence of an €80 million buy-back clause in the agreement reached with Vitals Global Healthcare for the running of three of Malta’s State hospitals, Wednesday evening in Parliament.

He said that if there was no new concession after 30 years, and if the government were to take the contract back, it would have to pay the agreed upon sum.

“We will buy today’s €300 million investment with €80 million in the future, provided that the equipment purchased is still in a pristine state,” said Muscat, adding that the deal made good business sense.

He said that anyone arguing otherwise was either misinterpreting figures or seeking to deceive the public.

The buy-back option was never revealed before when the concession, which Vitals Global Healthcare is now selling on to Steward Health Care after just 21 months, was granted.

Muscat was speaking in parliament as the controversial hospitals deal was debated after last month's announcement that VGH wanted to sell the concession to American private healthcare giant Steward.

The debate, requested by the Opposition, was the first time that a whole parliamentary sitting was dedicated to the concession agreement. The Vitals contract was tabled in Parliament in October 2016 but sections of it were blanked out.

Vitals were handed the Gozo, St Luke's and Karin Grech hospitals for a 30-year period on the assumption that it would attract medical tourism. VGH had to build a new hospital in Gozo and refurbish St Luke's and Karin Grech for a total investment of €200 million.

The government was also committed to buy a number of hospital beds from VGH for use in the public health service.

However, doubts have now been cast on the true length of the concession period after it transpired that the hospitals may have been handed on a 99-year lease.

Muscat said that any discussion on health was a discussion on credibility, adding that over the last legislature, a healthcare system that was essentially good, but which lacked investment and strategic planning had been turned around.

“The system was not coping with how our country and people’s lives were developing,” he said.

The Prime Minister pointed to the problem with out of stock medicines, which has since been brought under control, he said, as evidence of the turnaround which the government had overseen in the sector. Similar results had been obtained in dealing with waiting lists for operations, Muscat added.

Turning to the subject at hand, Muscat said the government was being accused of wrongdoing simply because it had turned to the private sector for help. He said the Opposition was yet to flesh-out its vision for the sector, insisting that his government strongly believed in treating the private sector as a partner.

“We will continue to involve the private sector whenever we can,” he said.

“What we are saying is that this consortium will be investing €200 million, money we don’t have,” he said, insisting that the government preferred to use the private sector for capital investment, rather than doing it itself at a much slower rate.

Capital risk on private operators

Former Health Minister Konrad Mizzi, who negotiated and signed the deal, said that given the reality facing any government, public finances meant it could not invest as much money as was necessary in all of Malta’s hospitals.  

The concession agreement, he said, was for a 30-year period, after which point the hospitals would be returned to the government. This however, does not include St Luke’s Hospital, where VGH have an option to extend for a 99-year lease.

“That is the private component of the project. There is nothing different to other similar projects,” he said.

Mizzi also noted that the cost per bed on the government would be lower than that at Mater Dei, while VGH would also be obliged to invest in the maintenance of the hospitals and their equipment.

He insisted that with the deal, capital risk was placed on the private operators. “This is the same as with Electrogas where the project cost more than was project but did not affect the tax payer.”

Opposition against a bad deal, not the private sector

Opposition health spokesperson Stephen Spiteri said today’s discussion was about the improvement in health care in the country, including in the three hospitals granted to VGH.

“It appears however that with the public-private partnership (PPP) with VGH - who we have now found out have backed out of the contract - has not met its aims,” he said.

Spiteri said the Opposition was not against privatisation in the healthcare sector, pointing out that the PN had also used PPP to reduce waiting lists in the past, but in this case, it appears the government did not want to privatise the hospital for “any valid reason”.

“Given that we are talking about the Gozo hospital, the only hospital on the island, we need to be sure that operator’s main goal is not profit.”

He stressed that in such cases one needed to ensure that the best possible service could be provided without considering other factors.

Moreover, he said that criticism of the project was also coming from unions, including the MAM, who he said had been excluded from the negotiations prior to the concession being granted.

“There is no transparency, and this was also one of the Opposition’s main concerns,” said Spiteri, adding that the contracts had not been made public soon enough, and were heavily redacted when they were.

“This seems to have also worried the deputy prime minister, who took the contract to the Auditor General to see what it truly contained,” said Spiteri. He called on the government to publish the contract in full. “The nation has a right to know where this deal will take us.”

He said it didn’t make sense for government to pay for beds it did not need, nor did it make sense for it to pay €1 million a year for an air ambulance between Malta and Gozo.

Turning to the proposed Bart’s campus, Spiteri said, even here, VGH had not reached its targets, leading the medical school to wonder what would come of the deal it had agreed to.

All of these factors, he said, did not meant that the Opposition was against the private sector being involved but rather was against healthcare being granted to a company with no experience.

Project designed to fail

Opposition leader Adrian Delia stressed that through the deal, the nation would be paying €2 billion to VGH over a 30-year period.

“Today the country paid €190,000 and we got nothing, same as we did yesterday, and the day before,” said Delia, adding that it would be paying a further €30 million for a helicopter service, irrespective of whether it was used.

He questioned why the announcement was made in December, and only ten days before a European Directive on money laundering came into force.

“Had they waited 11 days we would have known who was behind Vitals,” said Delia, who added that project was intended to fail from the off-set.

“Whoever was meant to make money from this money was going to make money if the project fails,” he said, questioning whether the contract had been drawn up with the sole intention of seeing “someone” make money from the failure of the project.

He said the country deserved to know what had happened and pointed to Health Minister Chris Fearne as the only person that could intervene.  

“With his signature, he can either sell Malta once again, or he can give the hospitals back to the Maltese people,” said Delia.

Health ministry demanded solution from VGH

Fearne said that upon becoming minister, he had set up a unit in his ministry to evaluate whether the requirements in the agreement with VGH were being adhered to. He said that in recent months it had become apparent that work wasn’t proceeding at a fast-enough rate. This, he said, was partly due to issues related to the issuing of permits and other difficulties encountered during excavation works.

He had nonetheless demanded VGH find a solution, prompting the company to decide to sell its shares to Steward Health Care.

Fearne also used his time to announce that despite the Opposition’s rhetoric on Barts Medical School, in the coming days he would be announcing how Barts would be expanding its presence in Malta, beyond what had already been agreed.

He hit back at the Opposition’s criticism about the VGH not sticking to its timelines

“When talking about timelines and delays, we have to mention that Mater Dei was meant to take four years to be built. It took 17 instead,” he said. “It was also meant to cost Lm 40 million and ended up cost 576 million.”

Turning to the air ambulance operated by VGH, he said the helicopter was being used on a weekly basis and had saved many lives.

On the €190,000 figure the government was spending every day on the hospitals being operated by VGH, Fearne asked Delia whether he was aware how much the government spent on Mater Dei Hospital on a daily basis.

“At Mater Dei we spend €2 million a day,” said Fearne insisting that both Karin Grech and the Gozo General Hospital were offering services to patients.

Delia however replied that “every cent” spent at Mater Dei was accounted for, unlike funds granted to VGH.

Regarding the process with which VGH was chosen, Fearne said that he had asked the Auditor General to investigate the process. “As far as we are concerned the process was a correct one, but we will see what the Auditor General says.”

The minister said that once the agreement with Steward Heath Care was finalised, he would have no problem showing to Delia and Spiteri.

Read also:

Did Vitals get three State hospitals for 99 years instead of 30 years?

Liquidity problems pushed Vitals to seek concession sale

Government snubs PN call for committee hearing on Vitals hospitals sale, House debate set for 17 January

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Gozo finally seeing the investment it deserves

Gozo Minister Justyne Caruana said she was happy to hear the Opposition speaking about healthcare in Gozo, stressing that before the Labour Party had come to power, healthcare on the island had been abandoned.

She said that whereas in the past it was said that chemotherapy or CT scans could not be carried out in Gozo, the Labour government had carried out the necessary investment.

“I remember speaking to parents of children with diabetes back when we did not have a specialist in Gozo,” she said. “I can vouch for these things because I lived through them.”

She went through a list of basic medical equipment which was not available in Gozo in the past, despite increased investment in Mater Dei over the years.

Opposition MP David Stellini said that Caruana’s defence of the project meant she would have to carry political responsibility for the deal for the next 30 years. He said that simply because a good quality hospital was needed, didn’t meant the hospitals needed to be sold to “foreigners”.

“When St Luke’s wasn’t up to scratch we built a new hospital,” said the Gozitan MP, referring to the construction of Mater Dei Hospital.

He said that the transfer of the contract from VGH to Steward meant the agreement was no longer valid, ”both legally and commercially”. Given that it was no longer valid, he said the government should have no problem publishing the contract. 

Opposition MP Chris Said said VGH had clearly shown itself to be incapable of securing the financing it required to realise the project, insisting this was because it had no track-record in the healthcare sector.  Despite this, he said the government had pressed on with the project in the hope that the deal would be forgotten.

“VGH did cannot not even afford to change wipers on its ambulances”, he said. “I hope there will be someone today that can tell us what investment was made in Gozo over the past two years.”

What role did Schembri and Mizzi play in Steward negotiations?

Former Opposition leader Simon Busuttil said that yesterday he asked Mizzi whether he had any connection with the company 17 Black.

“Despite asking him on a number of occasions, he did not answer,” said Busuttil, adding that this was relevant because Mizzi was the same minister that had negotiated the VGH deal.

Moreover, he said that following parliamentary question put to the Prime Minister, it had transpired that both OPM chief of staff Keith Schembri and Konrad Mizzi were involved in the latest negotiations with Steward Health Care.

“I would like the Prime Minister to tell us what role they played in this latest transfer,” he said.

Turning to the VGH agreement, Busuttil said the deal had been agreed before a tender for the project had been issued. He said VGH CEO Ram Tumuluri was known for being a spendthrift, yet he had “not found the money” to invest in the three hospitals, as had been promised.