Updated 1.05pm - Added VGH statement

Vitals Global Healthcare did not manage to keep up with all the major milestones stipulated in its contract to run three hospitals, The Sunday Times of Malta can reveal. 

Contents of the hospitals, including expensive medical equipment, were sold to VGH for just €1 when, in March 2016, the private company was awarded the controversial €2 billion concession to run Karen Grech, St Luke’s and Gozo hospitals for 30 years.

This was among important details concealed by the government when it published a heavily redacted version of the contract. The concession has now been sold on to a US company.

Under the concession service agreement signed between the government and VGH – a completely unknown healthcare company registered in the British Virgin Islands and whose ultimate beneficial owner is unknown – the firm was obliged to meet strict milestones in order to honour its commitments.

The milestones, which were included in the contract but blacked out by the government when it published it in Parliament, stipulated rigid time frames for the completion of major parts of the infrastructure to be put in place by VGH.

These included building a medical collage at the Gozo General Hospital to be used by Barts of the UK, which was to be completed by last July, the introduction of additional beds at Karen Grech and St Luke’s, which was meant to have been running for the past 12 months, and the introduction of 80 additional rehabilitation beds at St Luke’s by last September.

None of these milestones have been reached, and in most cases work has not even started, this newspaper is informed.

When the concession agreement was announced by Prime Minister Joseph Muscat it was declared that VGH was to invest some €220 million in the first few years to build and rehabilitate the three hospitals.

Part of the agreement entailed the establishment of Barts Medical College in Gozo. This project is still in the embryonic stage, however, with work moving at a snail’s pace and deadlines being missed. The government has had to find an alternative building for the college and has transformed – at its own expense – part of the Victoria Sixth Form so the first Barts’ students could start their courses last September.

According to the concession agreement, the government was to lease the new campus back from Vitals, paying €1.2 million a year, or €36 million over the concession period. This latter financial information was also kept hidden by the government in the published contract.

The Sunday Times of Malta is also informed that no other major infrastructural works are currently being carried out, apart from some cosmetic changes at St Luke’s and Karen Grech.

Health industry sources said that work on the other milestones (see table), which were all scheduled to be completed by next year, is nowhere to be seen.

This includes a total revamp of the Gozo General Hospital, which according to the milestones must be completed in 2018. But work on it has not even started.

The  sources said the fact that VGH has not kept to its obligations would provide a good legal basis for the government to rescind the whole agreement and reverse the situation to pre-VGH days, when the three public hospitals were still managed by the Health Department.

“It was evident from day one that this contract was not on and that there was no financial backing for the kind of investment the government and VGH were talking about,” one source said.

“VGH was never up to the task, and this would indicate that all the company was interested in was to make a quick buck from the public’s health assets.”

READ: Government knew of takeover bid three months ago

In a surprise announcement last week, at the start of the festive season, the government and VGH announced that the concession of the Maltese public hospitals was to be sold to an American company called Steward Healthcare. No details were given on the sale, with Health Minister Chris Fearne saying this was a “business-to-business transaction”.

Asked to provide a list of the milestones met by VGH according to the contract and to state what penalties have been imposed so far by the government for missing them, a Health Ministry spokeswoman did not answer the question directly but said: “It bears mentioning that within the old St Luke’s campus numerous projects are already under way.

“During this past year a new Stroke Unit was inaugurated at Karen Grech Hospital, a new OPU [Orthotics​​ and Prosthetics] unit is also up and running. While the refurbishing of the old medical school is ongoing.”

The spokeswoman was also asked to provide a copy of the written consent given to VGH to enable it to sell the Maltese concession to another company.

So far, the government has failed to provide a copy of this written consent.

The ministry also refused to say whether an inventory of all the contents of the three hospitals had been carried out before the government decided to sell it to VGH for just €1.

The concession agreement stipulates that, in order to sell its business before three years from the completion date – the latter has not yet been met – VGH had to obtain the written consent of the government.

The controversial concession agreement, through which VGH was to be paid more than €2.1 billion over 30 years from public coffers to run the three hospitals, was negotiated by minister Konrad Mizzi, who at the time was responsible for health.

At the time, current Health Minister Fearne distanced himself from the agreement, stating that he was only involved in the medical aspects of it.

However, since Dr Mizzi was stripped of the health portfolio following his involvement in the Panama Papers leaks, Mr Fearne assumed responsibility for the agreement.

In a statement issued on Sunday morning, the Nationalist Party said the revelations confirmed that the government had been out to hide "scandalous" aspects to the agreement with Vitals when it blackened out key sections of the 30-year deal.

The PN asked what the government whether it had imposed fines on VGH for its failure to reach targets, how it had valued hospital contents at a meagre €1 and whether it would now publish the contract in full. 

PA permit process delays invalidated deadlines - VGH

In a statement on Sunday afternoon, VGH said that claims it had missed deadlines were "highly misleading" since the initial time frames were based on VGH having permits to redevelop hospital sites by mid-2016 - as the government had initially pledged when it said it would fast-track applications.  

The concession agreement, a company spokesperson said, made it clear that if permits were not obtained by that date, "the concessionaire shall not be deemed to be in default of the milestones and the penalties shall not apply."

When, "following objections", VGH was forced to apply for planning permits in the standard manner, the initial time frames were pushed back and no longer applied. 

Works on the Gozo hospital site began 10 days after the PA permit was issued, on March 17, the spokesperson added. 

Missed concession milestones

Handover Plan 120 days from commencement date
Design plans 90 days from effective date
Barts College on Gozo Campus July 1, 2017
50 additional beds for Karen Grech and St Luke’s January 1, 2017
80 rehabilitation beds for St Luke’s September 30, 2017
Completion of new building at Gozo Hospital May 31, 2018
Completion of renovation at Gozo Hospital September 30, 2018
Completion of St Luke’s Hospital tourism beds December 31, 2018


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