Kingston’s Providence Care took the extraordinary step of sending a memo to staff on Tuesday stating that the proposed new psychiatric and rehab hospital will remain public.
The new hospital is presently going through a competition to select a private for-profit consortium to design, build, finance and maintain the new 270-bed hospital for 30 years.
“You may get the wrong impression from the P3 (Private Public Partnership) slogans being used,” CEO Dale Kenney writes. “Partnership is defined as ownership in a business and I can assure you that Providence Care is not entering into partnership with the private sector to build our hospital.”
Kenney insists that the project is instead being built under Ontario’s Alternative Finance and Procurement model (AFP).
Kenney is likely trying to rescue the beleaguered MPP John Gerretsen, who sees the new hospital as his legacy project. The fact that the private sector has been invited into a pricey long-term relationship with the hospital is sticking in the craw of many unhappy Kingston residents and members of City Council.
If last night’s packed organizing meeting at the new pro-public campaign headquarters of the Kingston Health Coalition is any indication, there is high community interest in this decision. Volunteers are coming to the campaign with considerable motivation.
This idea that somehow an AFP is different from a P3 is complete nonsense. Nobody believes this – not even the promoters of such projects. The Canadian Council for Public Private Partnerships lists the new St. Mary’s/Providence hospital as a P3. Yet we don’t see Kenney or an Infrastructure Ontario trying to correct that very public record.
Several years ago we attended an Insight Conference on P3s in which an advisor to then Public Infrastructure Renewal Minister David Caplan was speaking. In his presentation, the advisor spoke of AFPs, but then said as an aside, “or as you know them, P3s…” We weren’t ever fooled. Neither should you.
Organizations enter in partnerships all the time. It doesn’t mean they necessarily share legal ownership.
In the case of the new hospital, it does mean considerable private influence over the day-to-day running of the building. Other similar arrangements mean endless wrangling over how pictures get hung, how renovations take place (no open tendering), where signage is placed, or even the arrangement of office furniture. At the Royal Ottawa the P3 operator even told clinical staff that they couldn’t bring over display cases from the old building.
If Dale Kenney thinks nothing will change under a P3 arrangement, he should start talking now with other CEOs who have already entered into such partnerships. His headaches are only just beginning.
It also means he will have less flexibility with his operating budget. Given maintenance costs are paid out much like a condo fee, Kenney will have no option, for example, to put off new carpets for a year in order to save underfunded clinical services. He will be locked in on those costs for three decades.
It also means an extraordinary level of secrecy.
The Kingston Health Coalition asked for a copy of the Request for Proposal (RFP) data sheet which outlines the details of the project for bidders. Public RFPs are normally treated as open documents, yet the Providence Care Project RFP data sheet has 48 redacted items – almost the entire document. If everything is so positive, what is it they don’t want us to see?
P3s are notorious for their lack of transparency. When secrets are being kept even before the contract is awarded, imagine what it will be like afterwards.
The cost issue is no longer even up for debate. Gerretsen admitted to the Kingston Health Coalition that this new hospital will cost more than had it occurred under normal procurement rules. This is also reinforced by studies put out by academia and P3 promoters such as the Conference Board of Canada.
P3s cost more because the interest rate on borrowing is much higher for the private sector than government. A few percentage points difference on a 30-year $350 million mortgage is very significant. In the case of Brampton’s William Osler P3 hospital – the first general hospital in Canada to open as a P3 — the auditor estimated that difference on interest to be about $200 million. That’s on top of nearly $200 million more in other higher costs noted by the auditor’s Osler review.
P3 transaction costs are also much higher, much of it dealing with the incredibly complex arrangements between the P3 operator and the public hospital. This is one of the reasons why so many law firms are members of the Canadian Council for Public Private Partnerships. This generates a lot of legal work.
P3s need to provide a return to shareholders. Infrastructure Ontario has already told Kingston City Council that return on investment will be an extraordinary 12 per cent annually. That’s money paid out by all of us through our taxes.
Consortiums are also masters at finding ways to make more money off their ongoing arrangements. When mental health services moved into the new Royal Ottawa Hospital in October 2006, unit managers were asked to factor in additional P3 costs to their clinical budgets.
Dale Kenney should realize he is purchasing a new building that will be much more expensive than had he gone the traditional public route. He should realize he will not be in control of the physical infrastructure. He should realize that someday he is going to have to weigh the clinical benefit of making changes to that building against the high cost the P3 operator is going to foist on him for those changes.
Kingston residents will be asked to vote on the P3 proposal in a non-binding citizen-organized plebiscite being conduct April 13. The Coalition is asking the government to change the RFP to remove 30-year financing and maintenance from the project. The Kingston Health Coalition is also presently working on advanced polling dates.
Those who wish to volunteer for the campaign should go to http://www.KeepOurHospitalsPublic.org for more information.