Questions on how Vitals amassed millions in debt after Steward posts accounts

Defining exact use of all funds not possible due to the convoluted nature of Vitals structure

Steward, the US healthcare company which took over the 30-year concession to run three state hospitals from the now-defunct Vitals Global Healthcare, said it had to carry out “forensic-type” accounting in a bid to establish reliable audits for the years 2015 to 2017
Steward, the US healthcare company which took over the 30-year concession to run three state hospitals from the now-defunct Vitals Global Healthcare, said it had to carry out “forensic-type” accounting in a bid to establish reliable audits for the years 2015 to 2017

Vitals Global Healthcare amassed millions in debt through a complicating offshore structure and used taxpayers’ money to purchase companies, according to Steward Malta.

Steward, the US healthcare company which took over the 30-year concession to run three state hospitals from the now-defunct Vitals Global Healthcare, said it had to carry out “forensic-type” accounting in a bid to establish reliable audits for the years 2015 to 2017.

A company spokesperson said accounts for the first three years of the concession were submitted this week to the MFSA, after “nearly two years of professionally supported forensic-type accounting to establish reliable audited positions… these accounts have been disclosed to the Ministry for Health in full transparency as is required in the concession.”

MORE • Vitals amassed €36 million in debts over two years

MaltaToday is informed Steward will now be given just over €700,000 from a tranche of €4.3 million that the government paid in salaries for staff at the St Luke’s, Karin Grech and Gozo hospitals, for finally submitting the accounts.

But questions remain as to how VGH, a consortium of investors brought together by the Pakistani business consultant Shaukat Ali Chaudry and run by Canadian businessman Ram Tumuluri, incurred such high levels of debt and to whom is the debt payable.

“It is correct that throughout the period 2015/16/17 significant losses of over €25 million had been incurred by VGH. Defining the exact use of all funds during that period is not possible due to the convoluted nature of the organisational structure of the prior concessionaire and the lack of proper financial accounting, but a good picture has emerged,” the spokesperson said.

“It is not Steward’s responsibility but was the task of the supervising health authorities to ensure the proper use of public funds by the previous entity. To be clear, Steward was not hired as a retroactive policing entity but to provide high quality health care to the people of Malta. Unfortunately, though, these losses are now part of the concession and need to be considered going forward.”

The company said it had now been tasked with rectifying prior failures and implementing what it said was “a high quality, sustainable health care system” in Malta.

“To that end, Steward has unwound the existing complicated and shifting structure comprising a multitude of organizations in a multitude of countries. We restructured the concession into a simple and transparent organisational structure, that is 100% based in Malta.

“Previous purchases of companies through the use of public funds are being unwound and the money is being returned to the operations and clinical enterprises of our health facilities.”

Steward now says it has managed a “truly remarkable operational and financial turnaround since taking on the concession”, a state of play it says will become evident once filings for 2018 and 2019 are submitted.

“These accounts will show a significant reduction in losses for 2018, while aiming to reach a breakeven point with the conclusion of 2019 accounts and receipt of still outstanding dues from the government under existing agreements. This is due to Steward’s deep experience in taking on struggling entities and transforming them into high quality health institutions. The government of Malta has been continuously updated on the rapid progress and has been appreciative and supportive.”

The company is, however, seeking a renegotiated contract with the Maltese government, that includes a higher payment for beds as well as an added €4 million for the payment of salaries. MaltaToday understands the increased payments are essential for the company’s cash flow.

“Steward has, to date, spent over $30 million to turn the concession around and has no cash flow problems. In fact Steward has been recognised by the government for a remarkable turnaround of the VGH failure and finances. Multiple capital projects have been completed and creditors from VGH times settled.

“Adjustments of certain terms of the contract are necessary to secure the viability of the concession and financing of the capital projects in the long term, a fact that has not been disputed by ministries or government over the last year while continuously reviewing financial data provided by Steward Malta.”

Steward says it has drastically decreased overhead expenses which do not contribute to patient care, and that it had introduced high-standard accounting and auditing procedures.

The company also said it was cancelling contracts found to not be providing value to hospitals and patients, implementing transparent and efficient supply chain management, improving the poor IT infrastructure and applying private-enterprise level review of use of funds.

“In the end, the success of the concession will be judged by how we improve infrastructure of the hospitals, secondary/tertiary care processes, and the overall health of Maltese citizens. We want it no other way. Besides the herculean turnaround effort, Steward has invested heavily into improvement of the sites and services offered.”

It said it had provided a state-of-the-art medical school in Gozo, which will house the Barts’ Medical School in Malta. “Recent public statements that a highly advanced 8,500sq.m science facility should only cost $3-6 million is obviously beyond absurd,” the company said.

Steward has also defended itself from claims that it has fell behind on deliverables, citing the updating of the Orthotics and Prosthetics service at St Luke’s, a new fleet of transport vehicles, the new laboratory and Orthopaedic department at Gozo General Hospital, an improved round-the-clock air-ambulance service, and a new 28-bed ward at Karin Grech Hospital.

Later this week Steward will present finalised designs for the new hospitals.

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