A PAINFUL LESSON

Cork Medical Centre is not the first private hospital in Cork to open its doors only to discover the VHI unwilling to come on board, thus scuppering its future, writes Catherine Shanahan

WITH their hand-woven carpets, fountains in courtyards and dazzling glass facades, private hospitals are nowadays touting the kind of five-star glamour on offer in our best hotels.

But the level of investment required is such that in these post-tax-break times, one might surmise that only the foolish or the brave would go ahead with such a venture.

The latest city to showcase a new private facility is Cork. On October 15 last, trumpeting itself as “Ireland’s most advanced hospital”, the Cork Medical Centre (CMC) slid back the glass doors to its €90 million five-star creation declaring it the first private hospital to open in the city for 90 years. It promised to employ 525 people, provide a huge boost to the local economy and offer en-suite rooms, single-bed only, to all its patients.

Kitted out with “ultra-clean” operating theatres, all fitted with the latest infection control and using advanced surgical techniques combined with the most cutting-edge technology, when fully operational, Sheehan Medical expected to cover 39,000 patient treatments per year.

Less than five months later, and having treated less than 30 patients, the hospital is effectively closed, following the temporary suspension last Wednesday of staff contracts and the cancellation of all procedures. The closure follows the failure, on behalf of Sheehan Medical, to get the VHI on board. Without the blessing of the state’s largest private health insurer, second-phase funding for the project could not be drawn down and Sheehan Medical is out of funds.

The VHI, the big bad wolf in all of this, is unrepentant, pointing out in successive statements that it left Sheehan Medical under no illusions from day one that it considers there is excess capacity in the private hospital marketplace.

“We first advised CMC in August 2009 of this position and they chose to go ahead with fitting out the new facility,” the VHI said, indicating that they have no intention of underwriting what they see as over-capacity. The VHI also argues that its customers have access to 26% more private beds since 2007. They have told Sheehan Medical that, while they are not interested in covering its facility this year, things may change next year, pending the outcome of a review of its use of beds in public hospitals.

Sheehan Medical might be advised not to put all their eggs in this particular basket. The group make a mistake in their press release when they said theirs was the first private facility to open in Cork in 90 years. Although subsequently corrected to 30 years, the claim remains incorrect. In fact a private hospital opened in Cork in 1988, and had Sheehan Medical acquainted itself with this particular piece of history, it might have spared itself some heartbreak.

The story of City General, the brainchild of South African doctor, Pallany Pillay, is a sobering one. Having qualified at the Royal College of Surgeons in Dublin in 1965, he spent six years at Altnagelvin Maternity Hospital in Derry before commencing private practice in Cork in 1974. The consultant obstetrician/gynaecologist found it difficult to get work in a public hospital, despite being “eminently qualified”, described as such in an RTÉ Today Tonight programme examining the history of City General, broadcast in 1988. Confined to an ad-hoc private arrangement with a consultant colleague in the then South Infirmary Hospital, Dr Pillay decided the only course open to him to continue practising as a consultant was to open his own hospital.

In 1983 Dr Pillay purchased the building on the site of the old St Monica’s Home for the Blind at Infirmary Road, adjacent to the South Infirmary. At the time, Dr Pillay believed there was significant need for additional private medical facilities in Cork. Media reports from the time suggest strong support among the public and some members of the medical community for his project. The three-storey building was refurbished to very high standards, offering single rooms, all with balconies; all en suite; with direct dial telephones in each of the 25 bedrooms. The VHI itself admitted the standard of accommodation was ahead of other private hospital accommodation available locally. But it refused to approve the hospital and then, as now, the reason given by the VHI was that there were sufficient private beds to meet local need.

City General was hoping to open its doors in October 1985, and the VHI was appraised of same by Val O’Mahony, accountant to Dr Pillay. Local VHI representative, Colin Powell, was supportive of the development, according to Dr Pillay.

However, without carrying out an inspection, the VHI refused Dr Pillay’s application in January 1986. James McNulty, then solicitor and now District Court Judge, took up Dr Pillay’s case. In his notes logging the story of City General, Mr McNulty said this refusal took place at a time when the VHI was granting approval to the Mater Private Hospital and the Blackrock Clinic where “Premium plans” were being introduced specifically to cover these new luxury medical facilities. “In contrast, City General Hospital was at all times intended to be used by the ordinary members of the VHI on their basic hospital plans and indeed by public health service patients if the Southern Health Board agreed,” Mr McNulty wrote.

Eventually, the VHI did visit the hospital in July 1986, and Mr McNulty’s notes suggest local VHI management were impressed and encouraged Dr Pillay to open and get the smaller health insurers on board. Mr McNulty said Dr Pillay was told the VHI would review his application in six-12 months time.

At this stage, Dr Pillay was servicing a bank loan of three quarters of a million punts from his own funds at a cost of £1,000 a week. Eventually, the hospital was opened in 1988 after Dr Pillay converted some of the beds to nursing home beds. The first baby was born at the hospital that October.

The struggle to get the VHI on board continued for the next decade during which time the private health insurer raised a multitude of reasons for not doing so. At one point, they said one of their main difficulties was accepting the concept of a profit-making hospital where the proprietor also acts as consultant with admitting rights (this was not unique to City General). In other words Dr Pillay could, if he chose, admit people, unnecessarily, for investigations, or keep people in hospital beds longer than required, costing the VHI more. Dr Pillay offered concessions including proposing that the hospital be run as a non-profit Trust Company with representatives of the VHI on the board of management. Nothing worked — neither a very vocal public lobbying campaign organised by a group of Dr Pillay’s patients nor political representations from Dáil deputies and government ministers — the VHI was not for turning.

The 1988 Today Tonight programme that examined the story of City General made a number of suggestions, among them that the VHI was overly concerned with the wellbeing of the Bon Secours private hospital.

“The power of the Bon Secours Hospital is a local legend,” the broadcaster said, pointing out that the hospital had “a long-standing working relationship with the VHI” and that then VHI general manager Thomas Ryan was on the record as saying “Cork is well provided for with the Bon Secours Hospital which is the biggest private hospital in Europe and had been upgrading its facilities dramatically over the last couple of years with our active encouragement”.

Today, the Bon Secours Health System is planning an €85m extension at its Cork hospital “to maintain its position as a leading provider of treatment and care in Ireland”. The planning application was lodged in 2008. This week a spokesman confirmed it was “at advanced planning stage” but that “the final plans have not been signed off by the board and this will be reviewed over the coming months before a final decision is reached”. She also said “the Bons has not had any discussion with the VHI regarding these expansion plans”.

Seasoned property developer Owen O’Callaghan is also pressing ahead with his plans for an €80m private hospital on Lancaster Quay/ Western Road in Cork city, undeterred by the VHI’s claim of excess capacity. Speaking to the Irish Examiner this week, Mr O’Callaghan said he had “no second thoughts” about the new facility and was “not concerned” with the VHI stance “at the moment”.

None of this is of any comfort to the Sheehan Medical Group, which, incidentally, does not include Dr James Sheehan, retired orthopaedic surgeon and founder of the Blackrock and Galway Clinics. Having invested €90m in its facility, it now faces the ignominy of going down the tubes faster than any private hospital in history. City General finally closed in 2000, having handled its last maternity case in 1999, and offering just dental care at the time of its closure. But to survive so long was no mean feat without the VHI on board. According to Mr McNulty, at one point Thomas Ryan, then general manager of the VHI, suggested to Dr Pillay that he convert his hospital into a hotel.

The parallels between what happened to City General and what is now happening to CMC include an offer from both to lower prices. City General in its day offered private rooms £20 cheaper than the going rate in local private hospitals. This week, Sheehan Medical offered to match the terms and conditions that VHI agreed three months ago with the 263-bed St Vincent’s Private Hospital, Dublin.

However the VHI said the offer was “not relevant” because St Vincent’s Private has been in existence since 1974 and offers critical services to VHI customers in the provision of cardiology and cancer care.

City General in its day, and CMC now, is at the mercy of the state-owned VHI. Sheehan Medical has said that VHI’s ubiquity in the marketplace means it performs a gate-keeper role to the private hospital sector and without it, private hospitals simply cannot survive. The VHI argues that its market share is declining and is now at 60%, while covering 82% of healthcare claims. Its financial health shows plenty of room for improvement recording a net deficit of more than €40m in 2009.

Some 9% of VHI’s customers are over the age of 70, a group that make five times the average level of claims across all age groups. VHI has four and half times more over-70 customers than Quinn and six times more than Aviva. The problems faced by VHI become obvious when you consider they have 92% of the over-80s market and four out of five health insurance customers over the age of 60 are with VHI.

There are plenty of commentators who argue that it is in the VHI’s interest to preserve the status quo: that by having less private facilities, patients with private health insurance — and approximately half the population has private health insurance — are more likely to be forced into public hospital beds, saving on in-patient fees for the insurer. It is in the VHI’s interest to claim that supply outstrips demand, but this claim is not always borne out. For instance, in the Munster region, figures compiled by consultants KPMG and PricewaterhouseCoopers show this part of the country has less private beds per head of population than elsewhere. Ireland on average has one private bed for every 416 people, while the figure in Munster is one per 474. In terms of operating theatres, Dublin on average has one private operating theatre in a private hospital for every 18,138 people; in Munster it’s one per 33,884.

There are those who would argue, as James McNulty did, that the VHI’s primary concern should be quality of service to subscribers and that limiting choice can effectively impinge on that service. As one letter-writer to the then Cork Examiner wrote in April 1988: “It is not for insurance companies to decide who gets the business but merely to establish that claims are reasonable and legitimate.” The reality is, an insurer as big as the VHI does get to decide.

Just as we grow accustomed to the calamity of ghost estates, we now face the spectre of a ghost hospital, and not for the first time.

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