A new audit report into the troubled hospital reveals why it tried to cut the contract short and how NSW Health responded.
Hospital operator Healthscope approached NSW Health twice in 2023 to return the public component of the Northern Beaches Hospital to the state, an independent audit into the hospital’s public private partnership has revealed.
Its request was rejected by NSW Health, according to the report released today by NSW Auditor-General Bola Oyetunji.
The report said Healthscope had in November and December 2023, written to the Ministry of Health with a request to bring forward the return of the public portion of the Northern Beaches Hospital by 14 years, while retaining the private portion until 2058.
From October 2018, the Northern Beaches Hospital controversially replaced two smaller public hospitals, Mona Vale and Manly hospitals.
Healthscope was contracted to run the public hospital portion of the NBH until at least 2038, with the company also granted a concession to run a private hospital on the same site until 2058 as part of the same arrangement.
In its written requests to NSW Health to reduce the term of the public component to 2024 (instead of 2038), Healthscope noted a number of operational concerns including:
- challenging administrative and integration outlook;
- risk to viability of Northern Beaches Hospital due to insufficient funding;
- lack of integration into the wider health network;
- strained stakeholder relationships.
In January 2024, NSW Health formally declined Healthscope’s requests, noting that Healthscope “have no legal or contractual entitlement to withdraw from or vary the project in the manner proposed”, the audit report said.
“The Ministry of Health reaffirmed that Healthscope must continue to provide services under the terms of the project deed. Recent reported financial challenges for Healthscope confirm this is an ongoing risk for NSW Health to manage.”
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Healthscope, which operates 38 hospitals around Australia, is struggling under a debt of some $1.6 billion, and facing a takeover bid for some of its private hospitals.
Last month the company persuaded about 70% of its lenders to agree to a standstill agreement giving the operator until mid-May to sort out what to do with its debt. Since then, two more lenders have reportedly sold their debt off at 50c in the dollar to unnamed hedge funds.
As reported earlier this month by HSD, HMC Capital, which manages HealthCo Healthcare and Wellness REIT, one of Healthscope’s major landlords, has thrown its hat into the sale ring being overseen by Healthscope’s owners, Canadian private equity firm, Brookfield.
Healthscope confirmed last week that it had approached the NSW government to begin talks about returning the NBH to the NSW public system.
In a press conference this morning to discuss the audit’s findings and recommendations, Health Minister Ryan Park acknowledged that Healthscope had asked to hand the public hospital back early.
“I note in the report there was some commentary around them coming to the government about 12 months ago. Yes, that is right,” he said.
“Essentially, they [Healthscope] wanted the government to take all of the non-profitable parts of the hospital, things like the helipad, the mortuary, the public emergency department, the mental health service, for them to keep the highly profitable operating theatres through the private hospital.
“That’s not a model that is going to work. That would have involved us substantially increasing our payments to them, and we’ve been very transparent that we don’t think that that is the best interest of NSW taxpayers.
“Now the current letter, essentially what we got the other day, and that involves us engaging with them, which we are going to do through the task force in a discussion around a way forward.
“But the treasurer has made clear, as have myself and others, that this is not about, in any way, shape or form, handing over lots of money from the taxpayer to this private company. It is, though it is about trying to essentially untangle a bad deal that the former government put in place.
“This is not the way healthcare in NSW should have worked and should be working.”
Healthscope CEO Tino La Spina responded to this today as part of the company’s response to the release of the audit report.
“The Audit Office report released today makes clear that the current public private partnership at Northern Beaches Hospital is severely challenged,” he said.
“This is why Healthscope is offering to collaborate with the Government for the early handback of the public hospital. I want to reiterate that patient care will be put first, and we are not seeking any windfall gain from this process.”
Read the full report here.