The US healthcare company tasked with running three State hospitals has spent the past two years trying to get to the bottom of its predecessor’s accounts, saying it is not here to “police” the sector.
Steward Health Care chief executive Armin Ernst told Times of Malta that, since taking over the hospitals’ concession at the end of 2017, the company had engaged in forensic accounting to establish reliable audited positions for 2015, 2016, and 2017.
He was reacting to a report in MaltaToday that Steward’s predecessors, Vitals Global Healthcare, had amassed debts of €36 million with nothing to show for it. This week, Steward submitted accounts on the project to the Malta Financial Services Authority.
It settled on losses by VGH of €3 million for 2015 and €6 million for 2016. Steward expects this to grow to €18 million for 2017, the final year of VGH’s concession. Projections show this will drop to €7 million for 2018 and eventually stand at a break-even for 2019.
While confirming the concession had registered significant losses, Mr Ernst said that defining the exact use of all funds during that period was not possible due to the convoluted nature of VGH’s organisational structure and the lack of proper financial account.
“It is not Steward’s responsibility but it was the task of the supervising health authorities to ensure the proper use of public funds by the previous entity.
“To be clear, Steward was not hired as a retroactive policing entity but to provide high quality healthcare to the people of Malta. Unfortunately, though, these losses are now part of the concession and need to be considered going forward,” he said.
Unravelling agreements had been costly
The American healthcare company, which stepped in to buy out VGH when the opaque consortium of medical investors was unable to secure private finance, has long made demands for financial assistance and a review of default clauses in the contractual mesh of the agreement.
Asked about the due diligence Steward had undertaken prior to taking over the concession, Mr Ernst, who had previously worked for VGH before moving to Steward, conceded the company had been aware of some problems but said the US operator had no idea of the extent of the difficulties facing the project.
Sources at the firm pointed to “suspicious” contractual agreements entered into by VGH that bound the hospitals to years-long procurement obligations from firms ultimately tied to the investors behind the original concessionaire.
Unravelling these agreements had been costly and time consuming, the sources said.
“Steward has been tasked with rectifying the prior failures and implementing a high quality, sustainable healthcare system. We have unwound the existing complicated and shifting structure comprising a multitude of organisations in a multitude of countries. We restructured the concession into a simple and transparent organisational structure that is 100 per cent based in Malta.
“Previous purchases of companies through the use of public funds are being unwound and the money is being returned to the operations and clinical enterprises of our health facilities,” Mr Ernst said.
Steward is meant to deliver state of the art facilities at the St Luke’s, Karin Grech and Gozo hospitals.
Mr Ernst agreed that the success of the concession would be judged by how Steward improved the infrastructure of the hospitals and the overall healthcare for Maltese citizens.
“We want it no other way. Besides the Herculean turnaround effort, Steward has invested heavily into improvement of the sites and services offered,” he said.
The most important example, he added, was the Medical School in Gozo and, with it, the retention of Barts’ Medical School in Malta.
“Make no mistake, the relationship with Queen Mary University of London was, to say the least, on the skids,” he said.
Meanwhile, Cabinet sources told Times of Malta that the government was not overly keen on renegotiating the concession in Steward’s favour, saying the firm knew what it had signed up for when it took on the task three years ago.
However, as far as Mr Ernst is concerned, the concession requires adjustments to be viable.
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