The Government's plan for private hospitals in the grounds of public hospitals is a new, cost-effective way of delivering long-standing goals, and it will work, writes Mary Harney
There are nearly 13,000 beds in our public hospitals. Of these, 2,500 are for private patients. I want to move 1,000 of these beds into new private hospitals on the campuses of public hospitals. This way, we'll get 1,000 new public beds.
This is the essence of the plan that I am advancing to provide these public beds in the fastest and most cost-effective way. It will now be implemented around the country.
The 1,000 new public beds will improve services for patients. They will contribute to alleviating pressure on A&E departments. They will mean fewer operations being cancelled or postponed for public patients because of beds not being available.
This plan will also bring about better working arrangements for public hospital consultants. Working in teams, consultants will deliver a better service to patients. In addition, the balance of public and private work by consultants will be better managed.
I expect this to happen over the next five years. There is great interest in the private sector in building the new private hospitals that will free up public beds.
There is a great desire in the public sector and in the Government to provide new public beds. Everyone wants to move quickly.
I see this as a strategic reform of our hospital services. It has the merits of:
increasing bed capacity for public patients in public hospitals;
encouraging the participation of the private sector in generating extra capacity;
maximising the potential use of public hospital sites;
promoting efficiency among public and private acute service providers;
promoting greater competition in the supply of hospital services;
offering improved quality and choice to all patients.
The plan has been subjected to rigorous health policy and financial analysis within the Civil Service and it stands up as beneficial for all patients and for public finances.
It will mean that public and private hospitals will work effectively together for all patients.
It will reduce the two-tier system in our country, rather than exacerbate it.
I say this because I have made it absolutely clear that any new hospitals being built will have to make services available for public patients, paid for by the State. The State should be able buy those services at competitive prices.
This is the way the National Treatment Purchase Fund works. Over 30,000 public patients have been treated privately already, ending long waits for operations.
While we continue to invest large amounts in public hospitals, private hospitals can also be used to treat public patients.
I believe this will make best use for health policy of the capital allowances that already exist for private hospital investment.
When private investors build a hospital using the tax allowances, they are able to shelter other income from tax. There is a limit of €31,750 per person in relation to non-rental income. The benefit to the State is that the cost of the forgone tax will be less than if the State was to build the new beds itself.
The existing capital allowances apply only to the cost of construction, not to hospital equipment. The costs of consultants' rooms and offices, and land costs, are not allowed either. The tax cost will be less than 42 per cent of the full capital cost of a new hospital.
Most of the capital cost of each new bed will therefore be met by the private sector.
In terms of services, it is already a requirement of the capital allowances that a private hospital should offer at least 20 per cent of its capacity to the public sector at a discount of 10 per cent or more.
The investors in the hospitals are not guaranteed any return by the State. Investors have to keep their money invested for 10 years. The investment has risks and there could be some years of losses before a new hospital made profits. There will be no guarantees or bail-outs from the State for these hospitals.
I have asked the Health Service Executive to assess precisely the tax cost to the Exchequer of competing proposals.
This is the way we will ensure value for money and a lower cost per new bed than by direct Exchequer funding.
An objection has also been raised that under this plan, public hospitals would lose the income they currently charge for private beds, and this would not be replaced. This is unfounded.
Public hospitals do charge insurance companies for private beds. This has been the practice for many years and it is Government policy that the full economic cost should eventually be charged.
Without private beds, there is, on the face of it, an income loss to a public hospital.
We estimate the forgone income to the hospitals of the move of private beds into new facilities at €145 million for 1,000 beds.
This cost will be met by the Exchequer. It will be replaced. It will not mean a reduction in hospitals' budgets. It will not mean a cut in hospital services.
In fact, there will also be new opportunities for a public hospital to earn new income by selling some shared services to its private hospital counterpart on the campus
This is a new, cost-effective way of delivering long-standing goals: more public beds, better services for patients and a better way for public and private sectors to work together.
It will work.
Mary Harney is Tánaiste and Minister for Health and Children