Joseph Muscat lobbies Robert Abela to renegotiate Steward hospitals deal

Former prime minister Joseph Muscat has taken up the mantle for Steward Healthcare, requesting a meeting with his successor on the future of the hospitals’ privatisation project.

Muscat, whose career as Malta prime minister ended on 12 January, attended a meeting together with Steward Healthcare International’s president Armin Ernst with Prime Minister Robert Abela and deputy PM and health minister Chris Fearne, as well as principal permanent secretary, at the Auberge de Castille.
Muscat was said to have communicated his wish to see that the privatisation project goes on as initially promised, this newspaper can reveal.

But the main reason for the meeting was to meet Steward Healthcare’s demand to renegotiate aspects of their multi-million euro concession, which includes running the Gozo, St Luke’s and Karin Grech hospitals.

The US-based company acquired the 30-year concession offered by the government to the hitherto-unknown Vitals Healthcare Group, for an undisclosed sum. Malta is Steward’s first international expansion.

MaltaToday is informed that Steward is interested in clinching more concessions on the deal, especially since the business VGH originally set out to achieve – such as the medical tourism objectives – has, so far, been elusive.

“The name of the game is making money of course for this private concern, so they want the government to pay more over the years of the concession,” a source with knowledge of the meeting said.

The original deal signed with VGH in 2015 was to have the new managers invest about €250 million in the first years of the concession agreement, by building state-of-the-art facilities at the three hospitals. Little of that investment was ever managed by VGH after folding in 2017, when it failed to obtain financing from international banking institutions, and selling the concession to Steward.

It is understood that ministers in Abela’s Cabinet might want no truck with a deal that was being led by former health minister Konrad Mizzi at the time, who captained the VGH privatisation up until his removal in 2016.

It would make this a proper headache for Robert Abela, having to face demands from his predecessor on the privatisation deal, as well as trying to placate a Cabinet which was not supportive of his leadership bid in the first place.

The privatisation project was led by the government’s PPP arm Projects Malta, which has now moved out of the former Mizzi ministry and into Ian Borg’s ministry for transport, infrastructure and capital projects.

At the time of VGH’s award of the contract, Armin Ernst had been recruited by VGH as its chief executive officer after having originally served at Steward as administrative officer; after VGH’s sale to Steward, Ernst was reinstated as president of Steward Healthcare Malta.

The 30-year deal binds the government to hire the facilities and medical care from the concessionaire, costing taxpayers over €2.1 billion over the period.

But the National Audit Office is still investigating the hospital project deal. The investigation is expected to confirm the reason why VGH managed to sign a memorandum of understanding with the government before it actually won the tender to run the hospitals. The request for proposals to take over the running of the three hospitals was only published in April 2015, yet VGH was searching for financing on the back of the memorandum well before the publication of the RFP. The tender was officially awarded to VGH the following September.

The memorandum, signed in October 2014, was mentioned in a presentation by Vitals which said the government would provide the hospital buildings for 99 years.

While officially the lease period is of 30 years, the government has denied the existence of a clause in the contract that gives the company the right to extend its emphyteutical grant by a further “single and additional term of sixty-nine years”.

Steward has, so far, completed the medical school at the Gozo hospital that will serve the Barts medical campus for Queen Mary University London, as well as an Orthotics and Prosthetics Unit at Karin Grech Hospital.

The Maltese government has refused to release sensitive parts of the contract even in the House of Representatives, insisting that the Malta Enterprise Act lays down confidentiality guarantees on such commercial contracts.