Private hospital bids represent value for money, says Harney

The Minister for Health Mary Harney has said that the National Development Finance Agency (NDFA) has advised that the tenders submitted for the first six co-located private hospital sites represented value for money.

She also confirmed in the Dáil last night that the board of the Health Service Executive (HSE) would approve the successful bidders for the co-located sites at a meeting on July 5th.

Under the plan, the Government is seeking to release 1,000 beds currently designed for fee-paying patients in public hospitals by transferring private facilities to the proposed new co-located centres.

They will be developed on land leased by the State on the grounds of public hospitals.

Initially six co-located hospitals will be developed in Sligo, Limerick and Waterford as well as at St James's, Beaumont and Tallaght in Dublin.

Ms Harney said protections had been built into the co-located hospital initiative. In financial terms it would have to be shown that the provision of the additional beds for public patients in this manner would represent better value than under traditional procurement methods.

"A public sector benchmark equivalent has been created for each site. The calculation includes, for example, the cost of tax allowances and the forgone income earned heretofore by the public hospital from private beds," Ms Harney said.

"The NDFA are the financial advisers to the Department of Health and Children for this co-location project. The NDFA wrote to the department yesterday to confirm that, in their opinion, the tenders 'provide value for money relative to the public service benchmark equivalent at the current stage of the procurement process and that the project is in a position to move to the financial close stage'," she said.

The Minister said that the capital cost to the State of the new co-located hospitals would be the value of the capital allowances used. She said that this would be less than half of the construction cost as relief would be claimed at the marginal rate.

"For every €1 million in allowable investment, the gross tax cost to the State would typically be €455,000 at current tax and PRSI rates, spread over seven years, without taking account of tax buoyancy from the activity generated," she added.

"The actual, expected capital allowance costs have been included in the financial evaluations by the HSE and the NDFA and are being submitted to the board of the HSE."

Ms Harney also said that the current costs of the project would include about €80 million per year in income forgone from private bed charges raised by six public hospitals.

She said that to offset the loss of this money, the State would receive leasehold income from the land, a profit share from the operator of the new hospitals and a share of refinancing gains over the lifetime of the project.