Holles Street subsidised cash flow of semi-private clinic, HSE finds

The publicly-funded National Maternity Hospital (NMH) in Holles Street subsidised the cash flow of a privately-owned body – the semi-private clinic on its campus – for a significant period of time, a Health Service Executive internal audit has found.

Auditors found there was an undocumented arrangement under which the hospital and its senior management provided financial, administrative staffing, organisational and managerial services to the semi-private clinic.

It said an arrangement under which two nurses funded by the HSE were provided on a part-time contract basis to the clinic meant essentially that the State was paying the full cost for a part-time service.

The HSE audit also concluded that the payment of additional money to four senior managers at the hospital breached health sector pay policy.

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Transactions

The audit report also set out a series of transactions involving property and loans between the NMH and the semi-private clinic.

In two reports into the hospital released on Wednesday, internal auditors said they had identified “significant issues of governance” which included a lack of transparency, the potential for conflicts of interest and public subsidisation of private entities’ cash flow.

It also queried the “provision of properties owned by the publicly-funded hospital as collateral for a loan taken out by a private entity”.

The reports’ findings have been strongly disputed by the NMH.

The auditors said the clinic was a private entity established under the hospital’s bylaws and was akin to a partnership. The clinic is run by a group of four people comprising the deputy chairman of the overall board of the hospital, the honorary secretary of the board, the master of the hospital and a nominee of the consultant staff.

The auditors found that the “many close linkages and blurred boundaries” between the NMH and the semi-private clinic were “a matter of concern” and could lead to conflicts of interest or a perception of same.

The reports said that the master, who is a governor of the NMH and a member of its executive management team, was also a member of the board of the semi-private clinic as were two other governors.

The auditors said four members of the senior management team provided financial, operational and administrative advice in relation to the day-to-day running of the clinic.

These managers had been identified in a previous HSE audit as being in receipt of additional salary payments through the hospital’s payroll system.

“The National Maternity Hospital has informed internal audit that the funds to pay the additional salary payments of three of the four managers came from ‘privately generated sources’. However the National Maternity Hospital has not provided any evidence to show that it was reimbursed for making these additional salary payments to these managers,” the auditors said.

Payment to master

The audit particularly investigated payments of €40,000 to the current master Dr Rhona Mahony and a similar amount to a previous master. The hospital argued that the the sole source of this money paid to the master was a share of the professional fees from the semi-private clinic.

The auditors argued that based on all the evidence available, it was reasonable to conclude that while the €40,000 payment to the master was sourced from fees from the semi-private clinic, the additional payment made through the hospital’s payroll “did not represent a distribution of fee income in respect of activity in the semi-private clinic”.

The audit said that delays in the clinic reimbursing the hospital for payments of €43,839 each in respect of the current and former masters and other payroll costs paid on its behalf were a matter of concern.

“Essentially a publicly-funded body, the National Maternity Hospital, subsidised the cash flow of a private entity, the semi-private clinic, for a significant period of time,” it said.

The audit also said that in 2008-2009 the semi-private clinic provided a loan of €1.4 million to the hospital to fund the development of four derelict properties which it owned on Mount Street in Dublin. It said in 2009 the hospital provided these buildings as collateral for a loan of €4.5 million taken out by the semi-private clinic to refurbish the properties.

The hospital argued the four buildings involved were bought by it prior to it receiving State funding and that as part of the deal with the clinic the hospital had use of the upgraded facility for offices and retained ownership.