The owner of Adare Manor, Tom Kane, said last May he would have to abandon the hospital project if Bupa quit Ireland over risk equalisation payments to the VHI.
VHI were expecting the government to demand that Bupa make yearly payments of €30 million to compensate the insurance body for insuring more elderly clients.
In anticipation of a favourable government decision, VHI stopped passing on the cost of supporting older subscribers to its customers last September and had been dipping in to its reserves to cover the costs.
But Ms Harney sprang a major surprise last Tuesday when she announced Bupa would not have to pay any compensation to VHI over the risk equalisation issue.
As a result, VHI said it may now have to consider a significant increase in premiums.
But this new development is believed to be a major factor in Mr Kane deciding to press on with a planning application for a private hospital.
The application proposes a 100-bed in-patient hospital which will be two and three storeys high, covering 30,935 square metres.
The proposed development will also provide for car parks and a detailed landscaping scheme.
The application is in the name of Adare Partners LP.
Mr Kane said the hospital will be ready by 2008.
It will not provide A&E, maternity or paediatric care. Mr Kane recently told the Irish Examiner that insurance cover for maternity care was prohibitively expensive and the catchment area was not big enough to sustain a paediatric unit.
“There is an A&E just six miles away in the Mid-Western Regional Hospital,” he added.
Mr Kane believes that the hospital location adjacent to the luxury Adare Manor Hotel and near Shannon will attract an international patient base.
The proposed hospital will bring more employment to the Adare area.