THE HEALTH Service Executive (HSE) has for the first time confirmed that some private co-located hospitals on a number of public hospital sites will only proceed to construction phase next year "subject to satisfactory banking arrangements".
This statement, contained in the HSE's service plan for 2009, follows speculation recently about whether banks would be prepared to stump up money for the controversial initiative in the current precarious economic climate.
According to the HSE document, co-located facilities at Cork University Hospital, Limerick's Midwestern Regional and Beaumont in north Dublin should have progressed to construction phase by the second-quarter of 2009. However, "satisfactory banking arrangements" must be in place for this target to be met.
The Beacon Medical Group (BMG) announced last January that it had formally applied for planning permission to build three co-located hospitals on the sites in Cork, Limerick and Beaumont. BMG chief executive Michael Cullen said this represented a total investment of €787 million.
Last month, An Bord Pleanála approved BMG's plan for a co-located private hospital adjoining Beaumont, and Mr Cullen insisted all three projects remained "eminently bankable".
Mr Cullen said that while financing had undoubtedly become more complicated, good projects would still get funded.
"Whereas before two or three banks would have funded each facility, because each bank's appetite is now lower it may take five, six or seven banks to fund each hospital," he said. "Health and co-location in particular remain a very strong investment. The health sector has been dreadfully under-resourced in Ireland, having suffered from a lack of public and private investment over many decades," he said.
"We are playing catch-up. Our ageing, growing population requires more healthcare infrastructure. What we have now in terms of capacity is not enough to look after our population in years to come. Therefore, it's so important that resources are provided," said Mr Cullen.
A senior banking source said the co-location initiative always presented a challenge to financial institutions, even in the good times.
Unlike in traditional public-private partnership arrangements, such as those applying to schools, the source said, the private sector was taking on the responsibility for operating, developing, building and filling beds in expensive facilities.
Bidders do not get the right to the property, but rather a long-term lease to operate on State lands. The economic downturn has naturally complicated matters, as banks are less prepared to take on underwriting risks on deals. "It's not to say they are not bankable deals, but they are challenging and non-standard," the source said.
Minister for Health Mary Harney has repeatedly said she believes the co-location plan has one purpose: to free up about 1,000 beds in public hospitals for public patients.
The HSE service plan also reveals that co-located hospitals at St James's and Waterford Regional should have proceeded to design completion and applications for planning permission stage by the second quarter of 2009. Again, however, this is "subject to satisfactory banking arrangements".
Synchrony Healthcare has already signed an agreement with the HSE and St James's to build a new facility providing 195 inpatient beds, 72 outpatient beds and eight operating theatres.
Boundary Capital, the investment firm led by Niall McFadden, has a 60 per cent stake in Synchrony.
In the foreword to the HSE plan, chief executive Prof Brendan Drumm said 2009 would be "financially very demanding". This will particularly be the case if HSE income from private beds drops as a result of people letting their health insurance lapse due to rising costs.