Mystery €2.8 million VGH concession fee nobody could explain

Among the issues flagged by the National Audit Office (NAO) relating to the hospitals’ concession deal signed between the government and Vitals Global Healthcare (VGH) in 2015, one concession payment amounting to €2.8 million remains unexplained.

In its second published report on the hospitals’ concession from 2015, now in the hands of Steward Health Care, the NAO singled out an “additional concession fee” agreement signed on 7 December of the same year – a €2.8 million payment from VGH Management Ltd to the government, over and above the €3 million fee already owed to the government.

This agreement stipulated that the government could claim the payment of an additional concession fee from VGH Management Ltd of up to €2.8 million, with the government eventually refunding the paid additional fee to VGH Management Ltd over a period of five years.

Saying the agreement failed to provide any explanation for the additional concession fee, which the government had to pay back, the NAO sought to obtain further information. “Despite numerous requests made for details pertaining to the additional concession fee, this office was not provided with sufficient information to understand the rationale behind the requirement for the additional concession fee and its subsequent refund to the VGH over a period of five years.”

The Shift has already covered the discrepancies that the NAO discovered between the final agreements and the original framework, with a focus on the three main agreements covering the deal – the services concession agreement which ceded control of three public hospitals to VGH, the hospital services delivery agreement and the labour services agreements.

While the services concession agreement stipulated that VGH would pay the government €3 million as a fee for the concession, the original agreement did not include any information on any additional payments.

The NAO’s notes “conflicting information” on the justification for the additional payment provided by different authorities.

Projects Malta claimed that the additional payment was due to additional costs for the expropriation of the land, while the negotiation committee, set up to spearhead the deal, said the agreement served as “a safeguard” for the government should it be required to “settle any unforeseen costs to access the sites”.

The tourism ministry, on the other hand, claimed that the €2.8 million fee was related to the “payment of EU-funded equipment” that fell outside the scope of these transaction agreements.

The health ministry had initially told the NAO that no claims for the payment had been made at all, only to later tell the Auditor General that “the €2.8 million had been made”, according to the report.

“In sum, the NAO’s concerns gravitate towards the lack of knowledge and understanding of this contract exhibited by key government stakeholders and the impact that this had on its execution and follow-through. These gaps cast doubt as to the intention, necessity and execution of the agreement regulating the payment of an additional concession fee,” the Auditor General’s report states.

On the same day that the €2.8 million agreement was signed between disgraced former health Minister Konrad Mizzi and VGH’s Ram Tumuluri, two other side agreements outside of the scope of the original concession framework were also signed.

One agreement increased the number of beds the government would be paying for to the tune of €10.5 million while the other resulted in a significant reduction in labour-related services provided by VGH with the government failing to revise its payment on these services.

The government has meanwhile doubled its allocation to Steward Health Care, which took over the concession, to €40 million, bringing taxpayers’ annual expenditure on the deal to €90 million.