Cullen shines light to guide Beacon group

Depending on which report on the health services you've read, and there have been a few, the Republic is going to need somewhere over 2,000 extra hospital beds by the start of the next decade.

The Department of Health and Children's own analysis, published in 2002, found that the State would need 3,000 extra beds by 2011. Since then, the Government has provided funding for 709 of these.

Despite protests from some quarters, it seems clear that the Government wants to see the private sector providing a high proportion of these beds.

Minister for Health and Children Mary Harney has said she wants to see a growing involvement from the private sector. She has "indicated" that she wants her colleague in finance, Brian Cowen, to extend tax breaks introduced in 2001 to stimulate this investment, when they run out in 2006. The idea is that the State will pay private hospital operators to treat people under the National Treatment Purchase Scheme. At the same time, they can also take patients who have health insurance (around half the population has this cover).

Michael Cullen, one of three investors behind Beacon Medical Group, which is building a 183-bed unit in Sandyford, Dublin believes that some of the critics of this idea have got the wrong end of the stick.

He stresses that the company is not building a "private" hospital in the traditional senses of the phrase, but a hospital backed by private investors that will be used to treat all patients, insured or dependent on the State.

"It will be available to everyone," he says.

Beacon Clinic is the type of facility that Harney hopes can be used to plug the yawning and well-documented gap in the nation's health service. What Cullen says will be a state-of-the-art hospital will be completed mid-way through next year. If it happens, this means that it will have taken Beacon just over four years to build a major hospital. Cullen points out that this compares very favourably with the State's ability.

"If the Government decides that it is going to be supplier, then to address the current problems, she [Ms Harney] is going to have to build new hospitals. She is going to have to expand the current hospitals, she's going to have to employ a lot of people and she's going to have to go through public procurement," he says.

"For instance, the new accident and emergency (A&E) unit opened in Cork University Hospital, nine years after it was first approved. The new maternity hospital in Cork is going to open next year, 14 years after it was first approved. So the average time it takes for a new hospital development to happen in the public sector is 14 years.

"We had our first meeting in January 2002, and we anticipate being open at the latest in June/July of next year, so it will have taken four-and-a-half years. That's for an 183-bed." He adds that Beacon is already operating a renal unit, which is providing dialysis to public patients from the eastern and southeastern regions. That took 15 months to build and get up and running.

Beacon Clinic will cost a total of €180 million. Cullen and his partners - property developer Pat Shovlin and cardiothoracic surgeon Prof Mark Redmond - have put up some of the cash. Beacon is raising €170 million from private investors. This will benefit from the tax breaks, which will operate in the same way as those which supported urban development and tourist facilities.

Goodbody Corporate Finance, part of the stockbroking firm, recently raised over €40 million of this. The minimum required for entry was €75,000 and the round was oversubscribed. Cullen argues that the tax breaks represent good value for the State. "There's €170 million qualifying [for the tax breaks]. The net cost to the taxpayer is 42 per cent of that, which is €71 million, over 10 years," he says.

"So the cost to the Government over the 10 years is €7 million a year. Now we will have 600 jobs here, mostly highly paid jobs, and we anticipate PAYE and PRSI will be €9 million a year. Add to that stamp duty, VAT, etc, and we believe the return to Exchequer will be over €120 million. So it's a net profit of €50-odd million and there's a new hospital as well."

Albeit a hospital that will be at the State's disposal rather than owned by it. Beacon will also have a clinic for minor A&E cases, but it will not be equipped for full-scale trauma.

Cullen argues that in opening this facility, which will be able to cope with common or garden accidents that need treatment, it will be taking some of the pressure off the State's overcrowded A&E clinics. These are the focus of a lot of the concern - and most of the bad publicity - around the health service.

Beacon Clinic will be providing most of the other treatments associated with hospitals. As it will be a modern facility and newly built, it will be cost-efficient. Cullen points out that the advantage of starting something like this from scratch is that it can control costs and guarantee as much efficiency as possible, and says it will charge normal economic rates.

He agrees that it will not be dealing with the "hard" cases with which the public hospitals regularly have to cope. But he argues that once operations like his are functioning and providing extra capacity, the big, State-owned teaching hospitals will have the resources to do this.

US group Triad Hospitals will run the hospital. Beacon met with the leading UK players and all those in the US before settling for Triad on the basis that the two companies found they had a lot in common. "Their management had exactly the same beliefs and values that Mark Redmond has. Everything that he wanted, they agreed with," says Cullen.

Triad is a recognised leader in its field in the US, even though it is a comparably young company. It is not a shareholder in Beacon, but will get a share of the profits in return for its services. "If the hospital makes money, they will make money; if it doesn't, they won't," he says.

Beacon Clinic has another US link - with Johns Hopkins. That hospital is one of the best-known in America and has a big reputation for excellent research and education. The Irish hospital will be an affiliate of its recently established international arm. This has affiliates in various centres around the world, and Beacon is going to fulfil that role in Ireland.

"It gives us a link right into the number-one rated medical institution in the world," he says. "Over the last 100 years, all the really serious medical discoveries have emanated out of there. That's hugely important for any surgeon or medic coming here, because even though we're not a big teaching hospital, he has access to the biggest bank of research and education in the world. "We'll have a programme of continuous medical education that Hopkins will run."

The link with Hopkins came about because Prof Redmond worked there before he returned to live in Ireland five years ago. He continues to have a role with the US hospital.

It was Prof Redmond's desire to see a Johns Hopkins-like facility in this country that provided the initial inspiration for Beacon. Shovlin and Cullen were already working on plans for the Sandyford site, but had earmarked it for offices before the professor spoke to them about his idea. The group is now looking at seven other sites around the country. Cullen expects that they will settle on two initially. Beacon is also waiting for the latest in a long line of reports on the health service. It is expected to deal with the possibility of private operators building facilities on sites already occupied by public hospitals.

However, no matter what the reports say, it looks like Beacon and other players like it, are set to become a permanent feature of Irish healthcare.