Last week, the Beacon Clinic opened in Dublin and earlier this month the Whitfield Clinic in Waterford opened. Fiona Tyrrell looks at what's in the private hospital pipeline
At various stages over the past couple of years 10-20 new stand-alone private hospitals were proposed by property developers and private consortiums. Now it seems that the co-location programme coupled with an underestimation of the challenges involved in private hospital development could put a damper on the rush to build private hospitals.
Prior to the opening of the €183 million Beacon Clinic, and the smaller 65-bed Whitfield Clinic in Waterford, the last private hospital to open in Ireland was the €100 million Galway Clinic in 2004. Between that and the opening of the Blackrock Clinic 20 years previously, no new private hospital opened in Ireland.
Generous tax incentives to build hospitals introduced by the Government in 2001, however, changed all that and a wave of private hospitals was planned.
To qualify for these tax breaks, private hospitals must make one in five beds available to public patients. Then investors can write off their capital costs over seven years. Indecon Economic Consultants estimates that the net cost of this tax incentive in 2002-2005 was €23 million. This cost will be spread over a number of years.
The €183 million Beacon Hospital in Sandyford, Co Dublin, managed by US healthcare group Triad, has eight operating theatres as well as accident and emergency facilities, and a neurosurgery department. It was opened by Health Minister Mary Harney last Wednesday.
The Beacon Group, which was founded by cardiothoracic surgeon Prof Mark Redmond, businessmen Michael Cullen and Paddy Shovlin, is also planning a 100-bed maternity and women's hospital on an adjacent site.
Also due to open shortly is the Hermitage Clinic in Lucan. A group that includes Seán Mulryan of Ballymore, Larry Goodman and Jimmy Sheehan of the Blackrock and Galway clinics is developing the 125-bed hospital.
The Whitfield Clinic in Waterford includes a 10,000sq ft radiotherapy clinic and four operating theatres. The clinic is being developed by Carlow dentist Jim Madden and his wife Mary, who are also behind Carlow Health Park, a primary care medical campus, which is at an earlier stage of development.
Construction is due to start on the €60 million Limerick Private Hospital in a matter of weeks and former chief executive of the Galway Clinic Mary Fitzgerald has recently joined the hospital. Limerick builder Shay Sweeney is the developer behind the 95-bed hospital.
Meanwhile, a host of other private hospitals and clinics have been proposed or are at the planning stage. Property developers, lured by the generous tax incentives and looking to maximise the potential of a piece of land, led many of these projects.
One hospital developer described how anyone "with 20 acres in their back garden" was considering developing a private hospital.
Among other hospitals being planned is the 100-bed private hospital proposed by Tom Keane on the grounds of his five-star Adare Manor golf resort in Co Limerick which was given the green light by planners earlier this year. This permission, however, was appealed to An Bord Pleanála, which upheld the decision.
Keane, along with his partner BMI Healthcare, has been shortlisted for the co-location private hospital in Limerick. If this bid is successful, and An Bord Pleanála gives the green light to his Adare Manor plans, he hopes to build a dual-campus private hospital. All of this depends on the outcome of the risk-equalisation decision in the High Court. If Bupa pulls out of the Irish market "all private hospitals will be in jeopardy", according to Keane.
Elsewhere, two private facilities have been proposed for Dundalk. An Bord Pleanála refused plans for a 100-bed Dundalk Clinic recently.
Ely Property has also expressed interest in building another private hospital in Dundalk. Meanwhile there has been talk of private hospitals in Tullamore, Sligo and two more in Limerick.
While there has been an increase in the number of planning applications for private hospitals and clinics, most have not made it to construction stage, according to a review of property tax incentives compiled by Indecon Economic Consultants.
Many believe that the co-location hospital strategy will significantly slow down the tax-driven rush to build standalone private hospitals.
Among those is Joe Kelly, chief executive officer of Harlequin Healthcare, which purchased Mount Carmel Hospital in Dublin from the Sisters of the Little Company of Mary for an estimated €65 million earlier this year. He believes that the co-location programme will affect the number of private hospitals actually being built.
Harlequin Healthcare, which also owns St Joseph's Hospital in Sligo and the Aut Even Hospital in Kilkenny, has already put its plans to develop a private hospital in Waterford on ice pending a decision on the public-private partnership deal to provide an 85-bed private hospital wing and radiotherapy unit at Waterford Regional Hospital. There is no point in duplication, he explains.
Similarly, Michael Cullen, chief executive of the Beacon Medical Group, which has been shortlisted for the six co-location private hospitals that it has bid for, has put on hold any future plans for other hospitals pending the decision on co-location.
"We believe it would be foolhardy to proceed with a private hospital now that is not co-located. Co-location is a better answer for existing public hospitals, private operators and patients," he says.
He believes that many of the proposed stand-alone private hospitals will never get off the ground.
However, he insists that the co-location hospital plans will not negatively affect the Beacon Hospital. The timing of the Beacon Hospital is "fortuitous" and the hospital will have carved out its own niche in the next two to three years, he says.
"There is no doubt that there is a requirement in the market for service and we are going to provide that in coming months."
Meanwhile, the job cuts at the Galway Clinic this summer is likely to have been a cause for concern among private hospital developers.
Founder of the Galway and Blackrock clinics James Sheehan blamed the facility's financial difficulties on inadequate cover by the VHI and a shortage of referrals from the National Treatment Purchase Fund (NTPF).
Dr Christine O'Malley, president of the Irish Medical Organisation, hopes that the difficulties faced by the Galway Clinic will prompt a re-examination of the sector.
The situation, according to O'Malley, "highlights the fact that it is a very subsidised industry". Clinics are set up on expectations of subsidies from the NTPF and cover by the VHI, she explains.
Every hospital has costs, but the for-profit hospitals have extra costs that other hospitals don't have to contend with such as looking good and additional billing systems as well as having to make money for investors, she explains.
Private hospitals play many useful roles in our health service, according to O'Malley. However, she is critical of the belief that private hospitals can be substituted for public hospitals.
"There is no evidence that they will or indeed that the private sector would wish to do so."
Urgent and emergency medicine is too high in risk and cost for the private sector, according to O'Malley, who says that the private sector targets niche segments of the market where the costs are predictable and earning money is guaranteed.
The subsidisation of private hospitals through capital tax breaks and the NTPF does not represent good value for public money, O'Malley argues.