VHI’s U turn on cover threatens co-location plan

THE VHI’s refusal to guarantee cover for co-located hospitals on the grounds that they represent “additional capacity” in a saturated market is at odds with what it originally told the Government.

The refusal is threatening the future of the Government’s controversial co-location plan which proposes building private hospitals on the same campus as public hospitals.

A letter seen by the Irish Examiner shows that in 2006, the VHI wrote to the Government acknowledging that co-located hospitals represented replacement beds rather than additional capacity.

Vincent Sheridan, then VHI chief executive, wrote to Dermot Smyth, the department’s assistant secretary, reassuring him “we do recognise the difference between co-located hospitals (which we understand will replace private beds in public hospitals) and ‘speculative’ hospitals (which represent additional bed capacity)”. The whole premise of co-location is to free up beds in the public hospital by “migrating” fee-paying patients out of public beds to private beds on the same site. In this respect, it is viewed as providing replacement beds.

However, the VHI has now changed its mind about what co-location represents creating major headaches for the two groups involved in trying to build co-located hospitals in Cork, Limerick and Dublin. Bank backing is difficult to secure without the state’s largest health insurer on board.

The VHI defended its U-turn, arguing that the “world is now a radically different place” to what it was in 2006. “We cannot comment on specific hospitals, however our view remains the same that there is sufficient private capacity and that VHI Healthcare is currently unable to fund any additional capacity,” a VHI spokesperson said.

This stance is one of the main stumbling blocks behind the failure to reach final agreement on co-location, first announced as government policy more than five and a half years ago. The Beacon Medical Group is behind three projects at Cork University Hospital, at the Midwest Regional Hospital in Limerick and at Beaumont Hospital in Dublin. Synchrony, a consortium led by entrepreneur Fergal Mulchrone is planning to build on St James Hospital campus in Dublin. While project agreements were signed between the successful bidders and the Health Service Executive in 2008 and all have planning permission, not a single sod has been turned. Both groups have requested an extension of the expiry date in the project agreements.

However, with a general election imminent and a change of government on the cards, the future of co-location is increasingly uncertain. All the main opposition parties have stated their intention to “bin it” if they get into power. This could leave the state exposed to being sued. The groups have spent €40 million on the projects so far.