Taxayers have paid at least €355 million net to Vitals and Steward Healthcare to date, according to an investigation carried out by Times of Malta.
The figure was gleaned from publicly-available statistics, contracts and sources with inside knowledge of what has turned out to be one of the biggest political scandals in recent history.
Just how much public money has been spent on the project so far has remained unclear, with several public figures and organisations citing different figures.
The Medical Association of Malta estimated the amount to be “over €500 million”, while PN MP Adrian Delia, who filed the court case, said “the total amount defrauded amounted to €300 million. Had I not filed the case, it would have amounted to €4,000 million”.
Steward Health is expected to appeal the court case, which has effectively returned St Luke’s, Gozo and Karin Grech hospitals to the government and rekindled calls for political accountability.
The deal was originally divided into two separate phases, beginning with the transition phase, before moving on to the implementation period.
What was meant to happen
The transition phase was to be the period between when VGH took over the hospitals in 2016 until they completed infrastructural improvements and met the project’s milestones. This completion date was set at December 31, 2018.
During this time, the government pledged to give VGH an annual sum of €51 million, which would rise each year in line with the increase in the health ministry’s annual budget. In practice, this meant that if the country’s healthcare budget was set to increase by 5% from one year to the next, the sum paid to VGH would also increase by 5%.
Once the transition period ended, payments were set to increase to a minimum fee of just under €73 million per year for the running of the hospitals. This delivery fee included costs related to the day-to-day management of the hospitals, such as the daily cost of occupied beds in each hospital.
Some payments were stopped for three years and certain budgetary items were removed from calculations in order to reduce the cost and for the government to pay the minimum possible
This fee could go up to €92 million per year if all services were to be used.
What happened in reality?
Since project milestones were never met, despite the government granting several extensions on the completion date, the project never moved beyond the transition period into the implementation phase.
According to sources who spoke to Times of Malta, the fees listed in the project’s implementation period never kicked in and the payment structure set out in the project’s transition phase remained in place.
This payment structure is clearly reflected in a 2021 report published by the National Audit Office. The report had found “gross negligence” and “collusion” across various instances of the deal’s award and implementation.
The report shows how payments issued to VGH and Steward between 2016 and 2018 were issued along the terms set out in the deal’s transition phase, with a baseline fee rising each year and additional services, such as the provision of an air ambulance service, being added to the cost incurred by the government.
Meanwhile, VGH and Steward were paying the government roughly €32 million each year to cover the salaries of staff working at Gozo General hospital and Karin Grech hospital.
After deducting the salaries from the government’s expenses, the NAO report shows that the total amount handed out by the government between 2016 and 2018 was just over €87 million.
Although exact figures for the following years are not available, using the same calculations suggests that this amount could have risen to a total of €381 million by 2022.
A Labour Supply Agreement, signed in January 2016 and amended in 2017 by then-Health Minister Konrad Mizzi and Ram Tumuluri on behalf of VGH, sets out the terms by which staff were to be paid.
The agreement effectively states that the government would be leasing out its employees to VGH, against payment. The conditions of staff were to remain the same as those of public officers and they were to “at all times be considered employees of the government”.
Times of Malta sent questions to the Health Ministry asking for a breakdown of staff costs at the three sites.
In reply, a ministry spokesperson said: “Human resources at Steward Health Care are paid as per the Labour Supply Agreement”.
In its report, NAO found that the true value of staff being leased was actually higher than the amount being paid and estimated that the government was “effectively forfeiting approximately €7.5m in staff costs” per year.
Steward’s financial records say that in both 2019 and 2020 “the actual number of employees provided (by the government) was less than agreed and the company directly employed a number of persons to offset the shortfall”. The government was asked to reimburse the cost of these additional employees, to the tune of €25 million across the two years.
Steward’s financial records beyond 2020 have not yet been filed so it is not possible to verify whether similar reimbursement requests were made in later years.
When asked whether Steward’s financial reports for 2021 and 2022 had been filed, a spokesperson for Steward Health Care Malta said “the reports for 2021 are being finalised and the reports for 2022 are undergoing statutory audits. Both reports will be available when complete”.
Several other additional costs
Aside from the annual fees and staff costs, several other costs need to be factored in to get a clearer account of how much taxpayer money was spent on the project.
Steward have been requested to pay a VAT bill of just under €37 million in VAT arrears, interest and penalties for the period covering May 2016 to June 2021.
A further €36 million was incurred by the government through a BOV loan to Steward that was guaranteed by government.
On the other hand, VGH/Steward paid government an annual ground rent fee of €619,500 for the three hospital sites, as well as a one-off €3 million concession fee payment.
What does this amount to?
A calculation factoring in all these costs suggests that the taxpayer may have forked out up to €448m between 2016 and 2022.
But well-informed sources who spoke to Times of Malta confirmed that “some payments” were stopped for three years and that certain budgetary items were removed from calculations in order to reduce the cost and for the government to pay the “minimum possible”.
Following these reductions, the total amount paid by government was of €355 million as of the first quarter of 2023.
What can €355 million buy?
The money spent on the hospitals deal amounts to just under €700 for every person living in Malta. This is equal to the development of almost seven oncology centres, given the cost of the Sir Anthony Mamo Oncology Centre which was built for €52 million.
Comparing this to recent NSO data suggests that this cost is the equivalent of over 1,700 residential properties.
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