Plan for KordaMentha to run finances at RAH and Central Adelaide Health Network
THE centrepiece of the state’s public health system effectively would be placed into administration under a government plan for corporate advisory firm KordaMentha to erase a crippling $375 million deficit blamed on the new Royal Adelaide Hospital.
THE centrepiece of the state’s public health system would effectively be placed into administration under a plan for corporate advisers KordaMentha to erase a $375 million deficit blamed on the new Royal Adelaide Hospital.
The radical plan to oversee the Central Adelaide Local Health Network’s spending comes as data shows that the winter rush in emergency departments forced the postponement of 177 elective surgery procedures.
In an option to be put before State Cabinet, KordaMentha’s consultancy would be extended to oversee its recommendations to slash overspending in the Central Adelaide Local Health Network, which includes the $2.4 billion Royal Adelaide Hospital and the Queen Elizabeth Hospital.
Treasurer Rob Lucas told The Advertiser a significant extension of KordaMentha’s contract was being considered, acknowledging this would be very expensive.
“But if you have the Budget haemorrhaging $300 million-$400 million, if there’s an expensive option that helps get rid of that, then that would be money well spent on behalf of taxpayers,” he said.
But Opposition health spokesman Chris Picton said KordaMentha was appointed at two of the state’s biggest public hospitals, despite having no experience in the sector, to implement cuts that would risk patient health and safety.
The Melbourne-based firm won plaudits for the administration and successful sale last year of Whyalla’s steelworks, which had been saddled with $2.8 billion debt. A summary of its initial report into CALHN, released late last month, forecast a $375 million deficit in 2018-19, unless there was “significant and immediate intervention”.
The latest option being considered by the State Government is to add to the initial two-phase, $880,000 contract and have KordaMentha oversee CALHN’s financial operations and implement its recovery plan.
This would involve the firm’s staff continuing to work with CALHN executives but giving financial advice in the manner of a corporate administration, even though the Government-backed operation would remain solvent and payments to suppliers would be unaffected.
Government sources stressed Korda Mentha’s involvement would be exclusively financial, with the case for its intervention bolstered by the complexity of the RAH’s Public Private Partnership.
Clinical services and patient care would be unaffected and remain independent of the administration-style operation.
Mr Lucas saidno final decision had been taken regarding an ongoing role for KordaMentha and this would be weighed up by Cabinet after the firm’s final recommendations were presented soon to Health Minister Stephen Wade.
The KordaMentha intervention to rein in costs is supplemented by mediation between the provider of RAH non-clinical services, Celsus, and the State Government, which is being conducted by former Supreme Court justice John Sulan and former ASC chief Steve Ludlam. This is expected to continue at a meeting next month.
Spotless, a subcontractor to Celsus, last November officially identified its RAH deal as “underperforming” and in August said it faced a loss of more than $90 million.
Mr Picton accused the Liberals of sitting on the KordaMentha report and refusing to let South Australians know what public health system cuts were being proposed.
“KordaMentha was appointed for a $880,000 cuts consultancy at two of our biggest hospitals with no process, in breach of the State Procurement Guidelines,” he said.