Private hospitals at cost to public healthcare


An Unhealthy State: Charlie McCreevy's subsidies to private hospital builders are alarming the Department of Health, writes Maev-Ann Wren in the third part of her series

While the Government cuts back public hospital care, it is offering increased supports to private hospital developers. This substitution of private market-led care for public care is symptomatic of a health policy in utter disarray.

The Minister for Finance, Charlie McCreevy, introduced the latest tax break for private hospital developers in response to lobbying by constituents from Kildare, as he openly admitted to the Dáil in March.

Tax breaks cost State revenues and the Minister found funding for a new private day-case facility while public hospitals closed beds due to lack of funds. His initiative, specifically facilitated by an amendment to the Finance Bill, would provide 40 more day-case beds, only eight of which must be offered for public patient care. Mr McCreevy had met his constituents the preceding November, the very month when he announced that he had no plans either that year, this year or next to fund the health strategy, with its promise of thousands more public beds.

While it is no secret that the Ministers for Finance and Health are in conflict over investment in healthcare, it is less widely appreciated that they disagree about the role of the private sector in the healthcare system. Mr McCreevy first introduced tax breaks for private hospital developers in 2001, even though the potential effect on the health service of unplanned private hospitals, subsidised by the State, provoked reservations in the Department of Finance and great disquiet in the Department of Health.

This State encouragement of private medicine has been grafted on to a system in which private hospitals are primarily staffed by hospital consultants on public salaries.

Of the 790 consultants staffing private hospitals and clinics in January, 75 per cent held public contracts. Without a change in the consultants' public contract, new private hospitals will be a further drain on the staffing and expertise of the public system.

The PDs have also championed an increased role for the private sector through the Treatment Purchase Fund, which buys care for waiting list patients in private hospitals and abroad. This turning to the private sector to solve the problems of public healthcare is at odds with other objectives of healthcare policy. It has raised serious concerns in the VHI, whose members will be expected to fund the new private hospitals.

In addition, the Government appears willing to privatise the VHI so that the State's major health insurer - hitherto a not-for-profit public body - may become vulnerable to takeover by overseas for-profit corporations. US, European and Irish insurance firms have paid courtesy calls on Mr McCreevy to inform him of their interest. The emergence of a for-profit hospital and health insurance sector would threaten the caring ethos in Irish healthcare.

It would raise the cost of care to patients who would contribute to the profits of private corporations, which could come to play a powerful role in determining the kind of care on offer.

While the Government's 2001 health strategy advocated a massive investment in public healthcare and promised that public patient waiting times would fall because of the greater availability of public beds and staff, the Mr McCreevy incentives instead channel State resources into private hospitals - staffed by public consultants. These private hospitals will offer more rapid treatment for those patients who opt to pay private health insurance to avoid public queues. The schism will deepen between the care received by those who can afford insurance and those who cannot.

When he introduced the first such tax break in 2001, Mr McCreevy was responding to lobbying by the founder of the Blackrock Clinic, orthopaedic surgeon James Sheehan, who had a plan for a network of private hospitals, the first to be established in Galway. Mr Sheehan is an unapologetic promoter of private medicine, who in an interview with this author in Unhealthy State expressed the view that "health is a bit like housing. People are entitled to different levels of housing. If they want to put their effort into providing for better housing, they have to work very hard for it and people have forgotten about that in relation to their own health."

While it was "immoral" for private patients to gain preferential access to public hospitals, Mr Sheehan accepted that multiple tiers of care might exist within a private system.

Mr Sheehan first lobbied for tax breaks for hospitals to be run as charities, a relief which Mr McCreevy granted in 2001. In 2002 the relief was extended to for-profit hospitals. Mr Sheehan's Galway hospital is now to be run as a for-profit venture. Initially the tax relief was limited to acute hospitals with a minimum of 100 beds, a requirement lowered to 70 beds in 2002 and reduced this year when the tax break was custom-designed for Mr McCreevy's constituents' 40-bed day facility.

In each instance, 20 per cent of the beds must be available to public patients, at a discount from the private rate, which Mr McCreevy has advanced as a justification for the State subsidy. However, the cost per bed is high. The 20 public beds in Mr Sheehan's Galway hospital would come at a cost of between €650,000 and €1 million each, depending on varying estimates of the value of the State subsidy. In contrast the State funded 520 additional beds in public hospitals last year at an average cost of €125,000.

Documents released under the Freedom of Information Act reveal that Mr McCreevy was warned by a Department of Finance official: "Hospitals must have a significant volume of patients if they are to meet medical safety and quality standards and therefore small hospitals should not be encouraged . . . The Department of Health and Children have commented that a 100-bed acute hospital would be very small indeed.

"Of 55 acute public or voluntary hospitals in the State only 14 have 100 beds or less. The granting of capital allowances will involve a significant cost to the Exchequer . . . A discount of 10 per cent of a price that is not yet set for State-funded patients seems low considering the capital allowances will cost the State 42 per cent of the cost of construction and fitting out of the hospitals."

The department estimated in 2001 that tax reliefs for Mr Sheehan's Galway hospital would cost the Exchequer €20 million of a total construction cost of €44 million. The tax reliefs benefit investors in the hospital, wealthy individuals who thereby avoid paying tax on other income.

The Minister for Finance has never supplied a global estimate of the cost of these reliefs nor of the number of facilities which might avail of them. Before the introduction of the reliefs, the Department of Health reminded Finance that "the overall thrust of Government policy is . . . to remove or significantly reduce public subsidisation of the private health sector".

The Taoiseach allowed Mr McCreevy to steamroll through this tax incentive, even though its consequences were so at variance with the overall thrust of health policy. In March 2001, Mr McCreevy wrote to Micheál Martin instructing him on how its benefit should "be captured for the public health system". Where a private hospital brought added private beds to a particular health board area, he announced, "you will designate as public beds a similar number of beds in the public hospital system which, prior to the provision of the new beds, has been designated as private. In this way, the legislation will result in an increase in public hospital beds."

To make this tax incentive more palatable to critics of State subsidy for private medicine, the Minister for Finance was now dictating to the Minister for Health that he should reduce private practice in public hospitals. Mr McCreevy was proceeding inapparently blissful ignorance of the fact that hospital consultants had a contract, which permitted them to engage in private practice in public hospitals in proportion to the ratio of private beds.

Reducing their opportunities for private practice in the public hospital, where they were salaried to work, would make it more likely that they would work in the new private hospitals and that their public patients would be treated by juniors. Small State-aided private hospitals might now spring up, running counter to the policy of concentrating care in regional centres of excellence, advocated in the as yet unpublished report of the Hanly task force on medical staffing.

Officials in Health drafted a letter for Mr Martin to sign, pointing out that "based on experience elsewhere, relocation of private practice from the public hospital to a private hospital will reduce the availability of consultants to the public hospital". The letter was never sent.

With increasing pressures on the public finances, it now appears that the Government will welcome private beds in any form, notwithstanding adverse consequences for staffing of public hospitals or optimal regional planning of hospital services.

The alternative, that the private sector might tender to provide public hospitals for leaseback and eventual sale to the State, a model pursued in Britain, remains open to the Government as a more planned way of involving the private sector in supplying additional public beds.

However Mr McCreevy's policy is fostering something different - an alternative care system for private patients which removes them from public hospitals into an uncontrolled network of care staffed by public hospital consultants.

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Maev-Ann Wren is author of Unhealthy State - Anatomy of a Sick Society, published this week. (New Island, €17.99)