Steward Health Care, the US company that took on the 30-year concession to
manage three government hospitals, must pay millions in tax and social security arrears or risk being in default of the controversial contract, according to senior government sources.
A working group set up by Prime Minister Robert Abela to “take stock” of the ailing hospitals deal recommended that the government tells Steward it would have to pay its dues, which had previously been subject to waivers.
It concluded that Steward owes between €12 and €15 million.
The recommendation by the group, made up of senior officials from the health and finance ministries as well as law firm Camilleri Preziosi, was made during a meeting with Dr Abela on February 19.
The taxes and social security contributions, sources said, had not been paid because the previous administration had granted Steward “breathing space”, pushing back tax deadlines and giving extensions on a number of project deliverables.
No more deadline extensions
During a Cabinet meeting on Tuesday, ministers unanimously agreed that no more extended deadlines would be granted to the company. That decision was then communicated to Steward in writing, the sources said.
“The decision taken by the prime minister was that from now on, Steward will have to stick to the letter of the concession agreement. Waivers were given in the past, at times in writing, allowing the company not to pay taxes when they were due. From now on, there will be no such waivers,” said a source privy to the working group.
When contacted, a spokesperson for Steward said the company will not comment for the time being.
Government sources familiar with the concession agreement told Times of Malta that to date, Steward had had more than just its tax requirements waived.
One source said these concessions given by the Muscat administration had also allowed Steward not to deposit a €9 million performance guarantee.
Another source said Health Minister Chris Fearne had always insisted that the company strictly sticks to its contract, but during the Muscat administration he was “overruled from above”.
Steward took over the concession to run the Gozo, St Luke’s and Karin Grech hospitals in 2017 after the previous concessionaire, Vitals Global Healthcare, had failed to deliver on its contractual commitments, which included investing €200 million in new medical facilities.
The original hospitals deal, signed by former minister Konrad Mizzi, is currently the subject of an in-depth review by the Auditor General.
An inquiry in the courts, sparked by NGO Repubblika, is under way despite objections by Dr Mizzi, former minister Chris Cardona and Finance Minister Edward Scicluna.
And another court case against the government instituted by Opposition leader Adrian Delia, asking for the concession agreement to be rescinded, is pending.
The future of the concession agreement has long been in doubt with Steward repeatedly calling on the government to renegotiate the terms of the deal, saying that in its current state, the project was “unbankable”.
Asked about the future of the project, sources said that if the government were to breach the contract, then the Maltese taxpayer would have to fork out €100 million.
The government, the source said, wanted to follow the letter of the contract.
Company wants to discuss the future, says problems pre-date its involvement
Sources within the hospitals operator, on the other hand, told Times of Malta that the firm had twice written to the government in recent weeks, calling for an urgent meeting to discuss the future of the project.
In their letters, seen by Times of Malta, the company argues that since taking over the project it has faced a number of claims and disputes which pre-date Steward’s involvement.
Steward says the government, specifically the Health Ministry, had “oversight obligations” in the concession agreement during the period it was run by Vitals.
The company says it has already forked out several millions of euro in costs to settle these matters.
While Steward concedes that it is its own responsibility to resolve these matters, as the concessionaire, it says the government had failed to meet its oversight obligations as set out by the agreement.