$240m SA health budget blowout envelops Royal Adelaide Hospital

A $240 MILLION blowout in the state’s health budget has been uncovered and a significant portion is blamed on government expenses at the new Royal Adelaide Hospital. In addition, the company that runs the RAH’s food and cleaning services is haemorrhaging millions of dollars per month.

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A $240 MILLION blowout in the state’s health budget has been uncovered and a significant portion blamed on government expenses at the new Royal Adelaide Hospital.

An Advertiser investigation has revealed major concerns about the cost to the State Government of providing clinical services — doctors, nurses and medical equipment — to the $2.3 billion hospital, opened last September.

It is also understood that Spotless — the company responsible for facility management services — has been losing up to $6 million per month on its RAH operations.

Health Minister Stephen Wade confirmed the new government was investigating a $240 million blowout to the $1.39 billion annual budget for the Central Adelaide Local Health Network (CALHN), which includes the RAH and the Queen Elizabeth Hospital.

“The $2.3 billion Royal Adelaide Hospital was $600 million over budget, 17 months overdue and is now haemorrhaging money on a daily basis,” Mr Wade told The Advertiser.

“The State Government understands that unmet savings, inefficiencies, additional moving costs and the dislocation of services due to poor long-term planning have contributed to the budget blowout.”

The Royal Adelaide Hospital on North Tce.

Mr Wade accused Opposition Leader Peter Malinauskas, previously the Health Minister, of concealing the “massive blowout” before the March 17 election.

“These latest figures confirm Labor’s mismanagement of the health system cost South Australian taxpayers billions of dollars whilst patients were left waiting longer for treatment,” he said.

“The Marshall Liberal Government is committed to working with clinicians as we make this hospital work. Labor’s failure to engage them has cost us all dearly.”

Opposition health spokesman Chris Picton accused Mr Wade of talking down the health system, saying the new RAH was a landmark improvement delivering more beds, more operating theatres and modern facilities for patients and clinicians.

“The Liberal Party opposed it every step of the way. The former Labor Government never turned anyone away from our public hospitals if they needed treatment,” he said.

“A busy time in our hospitals over the past year saw more presentations at emergency and therefore more clinicians and hospital beds required.

“In addition, the RAH’s doctors, nurses and other staff have been working tirelessly to settle into the new hospital and obviously it was always going to take some time before it was running at peak efficiency. The most important thing is patient care.”

Health Minister Stephen Wade.

Labor health spokesman Chris Picton.

The previous Labor government’s Mid-Year Budget Review, released last December, allocated $467.4 million over four years for additional hospital services, “including to support the transition to the new Royal Adelaide Hospital”.

It is not known to what extent the $240 million blowout is linked to the 17-month delay in opening the RAH, on the corner of North and West terraces, or other cost overruns in construction.

The $240 million figure is comparable to $250.6 million earmarked in Labor’s State Budget last year to construct a new clinical building at the Queen Elizabeth Hospital, housing the emergency department, outpatient services, operating theatres, clinical support and brain and spinal injury services.

CALHN staff this afternoon were notified via an email from chief executive officer Jenny Richter that chief finance officer Shaun Eldridge would step down at the end of the week for personal reasons, after a period of reflection while recuperating from illness.

Spotless last November officially identified its contract with RAH operator Celsus as “underperforming” and said it was expected there would be no earnings from the project in the 2018 financial year.

The public-private partnership contract, inked in May 2011 between the then Labor state government and SA Health Partnership (now Celsus), involved the design, build, finance and maintenance of the new 800-bed RAH. It also covered the provision of non-clinical services over a 35-year period, including the construction.

Celsus declined comment and referred inquiries to the State Government.

Spotless is a subcontractor to Celsus and, according to its website, employs more than 700 staff to deliver 15 essential services to support the hospital around the clock.

This includes deploying robotic automated guided vehicles to transport food, linen and stores, employing orderlies and operating inventory and meal management systems.

The Advertiser has been told that the previous Labor govern­ment this year charged former Planning, Transport and Infrastructure chief Michael Deegan with leading an internal taskforce to investigate the extent of the Spotless cost blowout and to negotiate solutions.

The taskforce is also understood to have Crown Solicitor’s Office chief commercial counsel Chris Gray and Skip Lipman, the principal and founder of legal firm Lipman Karis.

The Advertiser has been told the team, which was commissioned by former treasurer Tom Koutsantonis, took a “brutal” approach to interpreting the contract in taxpayers’ interest.

In order to curb costs, Spotless is said to be likely to shed jobs and introduce more technology, accelerating a planned wind-down after an initial peak for the hospital’s opening.

Mr Picton said: “It isn’t surprising that the contractors would try their luck and that’s why the Labor Government ensured there was a strong contract to protect taxpayers.

“It is incumbent upon the new government to keep protecting taxpayers by defending that contract.”

The Advertiser last October revealed concerns about meal quality had prompted SA Health to employ food safety specialists to drive improvement.