Jerome-Forget defends hospital PPPs

They are financially sound, she says. Couillard favours private-public formula that would be 'adapted to Quebec reality'


Montreal's two proposed superhospitals will be built as public-private partnerships, two high-ranking ministers suggested in the National Assembly yesterday.
Health Minister Philippe Couillard said the government will announce details of the projects in the next few days.
On Tuesday, Couillard told reporters he favours public-private partnerships - known as PPPs - that are "adapted to the Quebec reality."
Should the Quebec government proceed with the PPP model, the complex negotiations with private consortia could push back construction of the superhospitals by up to two years - and beyond the next provincial election.
Treasury Board President Monique Jerome-Forget defended PPPs yesterday as financially sound. She contended more than 30 British hospitals have been built on budget as PPPs, despite new studies that conclude such partnerships have proved costlier for taxpayers.
"We are going to follow all the rules in (applying) the PPP formula, and that will require a lot of transparency, a lot of rigour," Jerome-Forget said in response to questions from the Parti Quebecois opposition.
Premier Jean Charest's government has been leaning toward PPPs as the cost projections for the two superhospitals have soared by hundreds of millions of dollars.
In July 2004, Quebec approved a $1.1-billion superhospital budget for the McGill University Health Centre, and a $1.1-billion budget for a similar project by the Centre hospitalier de l'Universite de Montreal.
Since then, reported estimates for the MUHC and CHUM projects have climbed by a combined $1 billion.
In a PPP, a private consortium finances, designs, builds and maintains a hospital for up to 30 years. The government, through the hospital, pays rent to the consortium during that period. After the lease expires, the hospital gains ownership of the facilities.
Studies have shown the hospital usually pays rent that is equivalent to twice the initial construction costs.
The advantage to the government is that the financing of the hospital's construction is off its books. But an MUHC study of British PPPs has pointed out numerous drawbacks, like hospitals having to pay for "extras ... significantly increasing the
expected costs."
"There was a feeling that even a request for an extra electrical socket could pose a problem, and design elements were conspicuously absent overall," the MUHC study observes.
The rental costs associated with a British PPP represent 20 per cent of a hospital's budget, the MUHC study notes. By comparison, in Quebec the maintenance of facilities takes up six per cent of a hospital's budget.
A new report by the British treasury endorses the PPP model, but recommends imposing numerous controls.
The report also takes issue with the reluctance on the part of some private partners to make changes to their buildings after construction.
"A number of contracts only have one change process, which must be followed regardless of the size, complexity or risk involved in the change," says the report, obtained by The Gazette.
"This approach ... can restrict the ability for minor changes to be made relatively quickly and inexpensively."
Arthur Porter, executive director of the MUHC, said in an interview that a PPP is fraught with many potential problems - from cost to the difficulty in renovating a hospital to accommodate new medical technologies.
"Why do we do a P3?" he asked. "What is the driving force? Is it to transfer risk? Is it to find money? Is it to get the money so it's not on the government's books? Is it because you feel the private sector can build and maintain a hospital better?
"Once you have identified the reason, you have to put that up against the conventional way of government financing.
"This is something we have to be cautious about," he added.
"Our experience in Quebec is we have not done this for large hospitals, and so we might not understand all the elements."
Should Quebec go ahead with a PPP, Porter recommended the hospital retain the responsibility of maintenance. Couillard agreed this week that maintenance be excluded from a PPP.
Renovations to the existing St. Luc Hospital - part of the CHUM project - would not be part of a PPP, Couillard added.
Denis Roy, executive director of the CHUM, was not available for comment yesterday. He has expressed concerns similar to those voiced by Porter, however.
"Does Quebec have the experience to embark upon something like this?" he said in a meeting with The Gazette's editorial board two weeks ago.
The MUHC study raises questions about the time it takes to conclude a PPP contract, typically two years.
"In addition to the resultant delay in commencement of construction of the hospital, there is a significant cost to the private sector preparing a proposal," the study says.
The MUHC had first proposed a superhospital in the early 1990s. Successive governments have since examined and re-examined the idea. Roy has estimated that since the CHUM unveiled its plans five years ago, inflation alone will boost the total price tag by $200 million.

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