Do we value a short-term decrease in government spending more than the quality of our public health service? If the answer is no, then all PPP which result in private companies administering our hospitals should be opposed.
by Joseph Abela
While the saga of the controversial private-public partnership (PPP) concerning the Gozo, Karin Grech and St Luke’s hospitals is ongoing, various parties have spoken out against the concession. No official, however, has spoken out against the problematic concept of a PPP in healthcare itself. The PN has come out in favour of privatisation in healthcare; in fact, they used the PPP model on a smaller scale when they were in government. The PN claim that they want to ensure that profit is not the ulterior motive of the health care supplier. The Medical Association of Malta (MAM) has taken a similar position. Thus, the critics of the Vitals saga do not dispute the principle of PPP in healthcare.
At first glance, the idea appears to be a sensible one. The government argues that the capital required to renovate the three hospitals involved will produce a large strain on the country. This capital risk will instead be shouldered by the private partner and will therefore not appear on the country’s balance sheet. In return, the private partners can use the hospital facilities for profit while ensuring the public service retains its quality. The private partner will be repaid their debts and loans at the end of the contract, and the government is bound to hire a number of beds from them.
To better understand this policy, it is important to trace it back to its origins. Public private partnership projects in the UK can be traced back to the Major era in the 1990s (these partnership schemes were thought to improve the public service by introducing the ‘efficiency of the private sector’ to large public infrastructure developments) but were only adopted in the health sector under the New Labour governments of Blair and Brown. The impact these Private Finance Initiative contracts (known as PFI) had on the NHS was devastating. Today the NHS is in crisis with cancelled operations, staff under intolerable strain and considerable cash flow problems.
The interests to repay the private companies involved crippled the NHS. According to a report carried out by the UK’s National Audit Office, there is little evidence that the public-private projects were financially beneficial to the public. In fact the cost of the privately financed public projects can end up being 40% more than if they had been done solely through public funding. While the projects do not appear on the government’s balance sheet, citizens end up forking out more money. The PN’s position of being in favour of a PPP, if assured that profit is not the operator’s main goal, is quite baffling since no private company will enter in a partnership that is not profitable. The profit motive brings along several problems. While the contract is supposed to ensure that quality of service does not change, the key performance indicators that the private company will be judged on are all redacted.
Going back to the public health service in the United Kingdom, the hospitals that fall under the PFI scheme have produced various controversies along the years. One of these was the profiteering by corporations which included selling the contracts to other companies at huge profits. This is something that we have already seen in Malta with Vitals selling their concession to Steward Healthcare. For the time Vitals possessed the concession they were paid millions from the government, without having to justify the government’s investment, and still managed to profit even more by selling the concession.
The UK’s case demonstrates that this profiteering comes at a cost since the company buying the contract will need to get a return for its investment which can come at a loss in quality of services offered to increase profits. One of the first hospitals funded through PFI in the UK faced a bed crisis immediately on opening, shortages of clinical staff and long emergency waits. This means that the efficiency and effectiveness that the private sector is supposed to bring to the public were missing. Such problems lead to deterioration in the working environment of the medical staff and, ultimately, an inferior quality of healthcare.
While the Labour Party in the UK has learned from the mistakes of the Blair years and promised to end PFI contracts, the Labour Party in Malta seems committed to place our healthcare system under the same problematic conditions that drove the British NHS to its knees. While it is important to focus on the lack of transparency in dealings between the Maltese government and the private investors, the concept of a PPP model in our healthcare system itself should also be resisted. Financing hospital renovation through a PPP will only serve to decrease the investment capital risk but running costs in the long term will increase.
Most importantly, the involvement of a large multinational such as Steward Healthcare means that the Maltese hospitals are just a few of their responsibilities. Patients will be reduced to numbers. To maximise their profits, the private investors will do their best to reduce spending as much as the contract conditions (which are not yet public) allow. The priority of the hospitals will shift from providing the best treatment possible for the patient to spending the least amount of money possible on the patient.
Ultimately, it is a matter of priorities. Do we value a short-term decrease in government spending more than the quality of our public health service? If the answer is no, then all PPP which result in private companies administering our hospitals should be opposed.