Government plans to transfer fee-paying patients from public hospitals into 10 new centres to be developed on State land by the private sector will cost more than €111 million a year in lost revenue from health insurance companies, a new Department of Health analysis has found.
Much of this shortfall in income for public hospitals will have to be made up by increased Exchequer grants.
In addition, the State will have to meet the cost of providing tax breaks to developers of the proposed new private hospitals on public land.
However, the Government has insisted that its plans will be more cost-effective than the State by itself seeking to increase bed capacity in public hospitals.
Under plans announced last year by the Minister for Health, Mary Harney, 10 private hospitals are to be developed on the grounds of public hospitals around the country. The Government hopes the initiative will make available up 1,000 beds currently designated for private patients and, in this way, generate additional capacity in public hospitals.
Last May the Health Service Executive (HSE) sought expressions of interest from the private sector to develop "co-located" hospitals on the grounds of Waterford Regional Hospital, Cork University Hospital, Limerick Regional Hospital, Galway University Hospital, Sligo General Hospital and Letterkenny General Hospital as well as at Tallaght, St James's, Beaumont and Connolly hospitals in Dublin.
A new Department of Health analysis has found that these 10 hospitals, collectively, generated €111 million in income from private health insurance companies last year.
Developers of the proposed new private hospitals are expected to be charged commercial rates for leasing the State land in question, and the department believes that this will offset, to some degree, the loss of income from insurance companies. However, sources close to the construction sector who have examined the department's proposals maintained that income generated from the leases will not come close to matching the €111 million provided by the health insurance companies.
Ms Harney told the Dáil last week in an answer to a written parliamentary question that "it has always been accepted that there will be a loss of income to the hospitals and that any net loss will have to be met by the Exchequer".
She also told the Dáil that the HSE intended to select a consortium for each of the 10 sites and to have contracts signed by the first quarter of next year - before the expected date of the general election.
The Minister has said on a number of occasions that the initiative could provide additional public bed capacity at less than half the cost of using traditional methods.
She has maintained that at present the State pays 100 per cent of the capital cost of private beds in public hospitals and also provides the staff.
However, Ms Harney's plans for private hospitals on public land has been strongly criticised by the Opposition and doctors' groups. Last month Labour leader Pat Rabbitte TD called on her not to sign any more contracts for private hospitals before the next general election.
Fine Gael has called on the Minister to publish any cost-benefit analysis undertaken by the Department of Health on the issue.
Sinn Féin has organised demonstrations around the country to protest at the plans which have also been opposed by the Irish Medical Organisation and by the Irish Congress of Trade Unions.
