Public-private partnerships, part 2: calculations of risk by ProQuest


Refinancing is also a potential landmine. In fact, refinancing P3 hospital deals proved to be so controversial in the United Kingdom that in May 2006, Edward Leigh, Conservative chair of the Committee of Public Accounts, labelled one of them as "the unacceptable face of capitalism." The refinancing gain on the Norfolk and Norwich Hospital was 116 million ($224.7 million) and that essentially "lined the pockets of investors," Leigh noted, arguing that it also significantly hiked the cost to the public (by up to 257 million more) should it seek to terminate the contract early.[Robert Evans] concurs. "When you tie yourself to 30-year contracts in a field that changes the way health care changes, it seems to me that you are on very dubious ground." He likens the deals to "the mentality of people who borrow long term on credits cards - you'll have a lot less at the end of the day, but [they say] I don't have to think about it."In an otherwise pro-P3 article, Toronto lawyer Timothy J. Murphy, who worked for Aecon Group Inc. on its bid for the Rouge Valley Hospital development in Ajax and Pickering, Ontario, argues that governments must not "succumb to private-sector demands for confidentiality," (Canadian Public Administration 2008;51[1]:99-126). Murphy writes that once P3 projects are operational, there should be public reporting of performance measures, including penalties for poor performance; information about the mechanisms for complaints and redress, and information about any retendering of the P3 contract. As well, he calls for policies to prevent bidders from lobbying public officials.

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									  CMAJ                                                                                                                                                 News
Public–private partnerships, part 2: calculations of risk
Canada’s 3 most populous provinces —
Ontario, Quebec and British Columbia
— have been shifting from traditional
public sector procurement methods to
public–private partnerships to design,
build, finance, maintain and, some-
times, operate hospitals. Part 1 of this
series (CMAJ 2008;179[9]:883-5) fea-
tured a primer of this sea change, which
has gone largely unexamined by health
professionals, academics and the public.
                                               Centre for Addiction and Mental Health

          ntario had already invited 3 pri-
          vate sector consortia to bid to
          build, finance, maintain and op-
erate services at a 289-bed hospital in
Sault Ste. Marie, Ontario, when Dr.
Michael Gardam submitted his report on
a deadly outbreak of Clostridium diffi-
cile at the existing Sault Area Hospital.
    Gardam, director of infection preven-
tion and control at Toronto’s University                                                 Artist’s drawing of redevelopment plans for the Queen Street, Toronto, site of the
                                                                                         Centre for Addiction and Mental Health. Phase 1 of the multi-year development proj-
Health Network, had been brought to the                                                  ect was opened in June.
Soo to investigate the fall 2006 outbreak
that led to the deaths of 18 patients.
    In addition to calling for measures                                                 vate consortia. “If you look at what has       P3 model for redevelopment on its
to reduce infection rates in the existing                                               happened to patterns of hospital utiliza-      sprawling 10.9 hectare Queen Street
hospital, Gardam recommended the                                                        tion in the past 2 decades, they’ve            West site, says the model places admin-
number of private rooms in the new                                                      changed radically and dramatically,”           istrators in a quandary. “It is a tough
hospital be increased to 80% from the                                                   says Robert Evans, a University of             dilemma for [hospital] boards. We
planned approximately 25%.                                                              British Columbia health care economist.        know the downside [of public–private
    The province agreed to revise the                                                       Debate over the merits of P3 hospi-        partnerships].”
hospital plans, hiking the proportion of                                                tals is highly polarized, but there’s little       “We know there is money involved
single occupancy rooms to 45%, and the                                                  argument about the need to update or           and there are risks and transparency is-
consortia were given more time to bid.                                                  replace aging hospitals neglected dur-         sues, but in the end … we have some-
    Had the timing been different — if                                                  ing years of spending restraints and           thing [built] in 5 to 7 years as opposed to
construction had already begun before                                                   deficit phobia.                                possibly never,” adds Fralick, now pres-
the outbreak, Gardam’s report, and the                                                      Certainly, the P3 projects are enthu-      ident of the Canadian Healthcare Asso-
revised hospital plans — the province                                                   siastically supported as a way to get          ciation, which represents hospitals and
and the hospital board would have                                                       hospitals built sooner. Ontario Hospital       regional health authorities. Her organi-
found themselves facing expensive                                                       Association President Tom Closson              zation has urged the federal government
change orders made more complicated                                                     says the advent of partnerships “has en-       to create a national program for invest-
by the fact that they were dealing with                                                 couraged the government to make deci-          ment in capital infrastructure for health
not 1 or 2 individual companies, but a                                                  sions on a hundred different hospital          but has taken no position on the merits
consortium of many different firms and                                                  capital projects since 2004.” Ontario is       of hospital public–private partnerships.
a complex legal agreement.                                                              in the midst of a $5-billion hospital              It is interesting, she notes, that some
     Critics say the evolving nature of                                                 building boom, which includes 19 part-         provincial governments are actively
hospital use is one reason to decry the                                                 nership hospitals under construction and       urging hospital boards to look at P3s.
recent proliferation of public–private                                                  another 7 deals close to completion.           “So rather than shying away, there is an
partnership (P3) hospitals, in which gov-                                                   But Pamela Fralick, who chaired the        encouragement.”
ernments are tied into extremely de-                                                    Centre for Addiction and Mental                    But critics of the P3 model, mostly
tailed, decades-long contracts with pri-                                                Health in Toronto when it settled on a     
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