The Health Ministry worried that scrapping the hospitals deal would cost the government €200 million, according to revelations from the recently published audit report.
An agreement engineered by former minister Konrad Mizzi had obliged government to give Steward a €100 million payout if the courts annulled the deal. In his report, issued earlier this week, the Auditor General accuses Mizzi of misleading cabinet over the deal, a claim Mizzi denies.
However, the report also reveals that the health ministry estimated the true cost of scrapping the deal could actually be double that, potentially reaching €200 million.
Aside from the €100 million payout, the government would also have to take on the lenders’ debt, which the health ministry estimated would amount to a further €100 million.
This debt includes a series of bank loans granted by Bank of Valletta to Steward as part of the deal, totalling to just over €28 million.
This BOV loan was previously believed to be of €35.9 million, however the auditor’s report reveals that the true figure is lower, with a July 2019 loan deal of €28,150,000 replacing a series of previous loan agreements.
According to a cabinet memo dated August 26, 2019, then-tourism minister Konrad Mizzi requested authorisation for the government to broaden the agreement between Steward and BOV to effectively see the government taking on the lenders’ debt in case of annulment by the courts.
This was also the cabinet meeting in which the infamous agreement for the €100 million payout was proposed.
Implications of agreement 'obscured'
Cabinet granted its approval the following day. But the auditor notes that the true implications of this agreement were “obscured”, with the “omission of key facts and the understatement of others”.
Aside from the BOV loan, the government would also have had to pay off any other liabilities that Steward may have taken on. Although the exact value of these liabilities is not quantified, ministry officials believed that they could bring the total cost of quitting the deal up to €200 million.
According to the health ministry’s version of events, internal discussions held in early 2020 between newly appointed Prime Minister Robert Abela, Health Minister Chris Fearne and then-finance minister Edward Scicluna led all three to agree that the best course of action would be to scrap the concession altogether.
It was at this point that they were made aware of the financial repercussions of doing so by the tourism ministry’s permanent secretary.
Government unable to make up shortfall
Paying the estimated €200 million default amount would have led to “possible disruption of public health services”, according to the ministry’s permanent secretary, with government finances unable to make up the shortfall.
The concession, originally signed in 2017, saw the Gozo General Hospital, St Luke’s Hospital and Karin Grech Hospital transferred to Vitals Global Healthcare, a consortium which had no previous experience in managing hospitals. The concession was later transferred to US company Steward Healthcare in 2019, after Vitals failed to live up to its contractual obligations.
The deal was eventually scrapped earlier this year, with courts declaring it “fraudulent” and annulling all signed agreements, including the €100 million payout clause signed in 2019.
Steward have since filed an appeal, describing the court’s judgment as “more of a work of fiction than a sound and proper ruling”.
In a series of revelations, Times of Malta this week reported that former prime minister Joseph Muscat is being investigated over payments from a Swiss firm linked to the hospitals, while former directors of Vitals splurged money on luxury items even as St Luke’s – a hospital they were meant to upgrade – lay abandoned.