Page 3668 - Week 08 - Thursday, 19 August 2010
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could still recognise the Calvary Public Hospital as a territory asset. Given the magnitude of this advice and the obvious changes it posed, the office of the Auditor-General was contacted to provide a view on the current and proposed arrangements.
The audit office then engaged a major accounting firm, which was not PWC, to provide them with advice on this issue and to review the advice received from PricewaterhouseCoopers. Treasury and ACT Health met with the audit office, and their draft report on the above confirmed that PWC advice that the territory can recognise a service concession asset. A final report was provided in early July 2010 which confirmed that the territory could choose to recognise a service concession asset.
I met with the Little Company of Mary to discuss this matter with them and I arranged for this meeting to ensure that the Little Company of Mary Health Care board was aware of the advice available to us and the implications of this advice. The Little Company of Mary Health Care have advised me that they do not support or agree with the government’s interpretation that the current agreements constitute a service concession arrangement and, as you would expect, the Little Company of Mary Health Care have sought their own legal and accounting advice and continue to inform me that they do not agree with the government’s interpretation.
If the territory was to invest hundreds of millions of dollars into building new facilities on the Calvary hospital site, under the previous advice and accounting standards that were in place at the time, and indeed still are, this would have resulted in the government gifting the facilities to the Little Company of Mary and not being able to capitalise on the investment made. The proposed purchase of Calvary hospital aimed to protect this investment for the territory. We did not know that the course of our negotiations with the Little Company of Mary would need to change in this way.
I believe that there are now four options available to the government and these include, first, Little Company of Mary maintaining the crown lease on the land with the establishment of a new activity funding agreement. The funding agreement could be for a 15-year term. Any new buildings required would be subleased back to the government for a period of 30 years and any newly constructed buildings would belong to Calvary hospital at the end of 30 years for a peppercorn amount.
The second option available to the government is to proceed with the network agreement in its current form. This is considered problematic, as it is anticipated that this may cause tension between the territory and the Little Company of Mary Health Care around the accounting and control issues I have described earlier.
The third option is to assist the Little Company of Mary Health Care in developing a standalone private hospital as a public-good investment. This would allow the existing beds at Calvary that are currently designated for private patients to be converted to use for public patients while still maintaining a private hospital on the north side of Canberra. If this option was to be pursued, it would be important to justify any such investment with regard to the public benefit.
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