Struggling Toowong hospital ‘bought $300k artwork’

The sale of a $300,000 artwork by the director of the family business behind a private Brisbane psychiatric hospital has been questioned by administrators investigating the company’s collapse.

The unusual transaction came to light as the Queensland government ruled out acquiring Toowong Private Hospital, which closed its doors on Wednesday having collapsed under debt amid a hospital funding crisis putting private facilities across the country at risk.

The 58-bed hospital on Milton Road, which was owned and operated by NA Kratzmann & Sons, fell into administration last month.

Toowong Private Hospital operated on Milton Road for more than 40 years before collapsing into administration.Credit: Facebook

EY administrators filed a preliminary report, obtained by this masthead, to the Australian Securities and Investments Commission in which they highlighted the June 2024 purchase of the artwork from the company’s sole director, Wayne Kratzmann.

“Based on our preliminary investigations, we consider the sale of artwork by the director to the
company ... may constitute an unreasonable director related transaction,” the report states.

“It is not clear why the company entered into the transaction however we understand that prior to the transaction the artwork was valued by a valuer, and the sale amount which was paid to the director was returned to the company and offset against related party debts owed to the company.”

The administrators believe the artwork remains in Kratzmann’s possession.

“At the time of the sale transaction, we understand the company was experiencing financial difficulty and the purchase of artwork does not appear to have been to the benefit of the company,” the report states.

“Further investigations are required to firstly confirm if the consideration for the transaction was at arm’s length, and if so, the artwork into the void can be recovered and realised for the benefit of creditors.”

The report states there was a loan arrangement between the director and the company, dating back “nearly to the commencement of the hospital”, with $1.4 million outstanding.

The hospital appears to have operated on thin margins historically, the report states, “experiencing increasing strain over the [past] five years” due to rising operating costs and the impacts of COVID.

By 2024, the hospital’s net operating losses amounted to $4.7 million.

“Based on management discussions and our analysis, these reductions were primarily attributed to the decline in patient admissions to inpatient care,” the report says.

“In the past year, following the deterioration in the company’s financial performance, the company borrowed further funds from Westpac to finance the hospital’s operations and accumulated taxation liabilities for unpaid PAYG and payroll tax.”

The hospital’s chief executive, Christine Gee, denied rumours it was at risk of closing in September last year.

However, the administrators’ report reveals the company tried to find a buyer in mid-2024.

Despite this, patients and their treating psychiatrists were given just two weeks’ notice that the hospital would close, leaving doctors scrambling to find available beds at the few other private psychiatric facilities in Brisbane.

The report reveals administrators received four expressions of interest to buy the beleaguered hospital, but all were below market value. Two of those offers were for the Toowong property only.

“Unfortunately, for the reasons outlined above, the expressions of interest received were not commercially better than the closure and piecemeal sale of the company’s assets,” the report states.

Toowong Private Hospital provided a unique model of holistic care involving psychiatrists, psychologists and social workers.Credit: Toowong Private Hospital

Meanwhile, the Queensland government has ruled out acquiring the hospital to reopen its doors, with a spokesman for Health Minister Tim Nicholls saying the facility was located too far from other public hospitals and needed a major refurbishment.

“Queensland Health has determined that the Toowong Private Hospital would not meet public health needs,” the spokesman said on Wednesday.

The state opposition joined 11th-hour calls for the Crisafulli government to swoop in and save the hospital, pointing to the previous Labor government’s acquisition of Gladstone Mater Hospital in 2020.

But the health minister’s spokesman said the purchase of Gladstone Mater was “not directly comparable”.

“While [Gladstone Mater] was a private facility, it was co-located with the public hospital and was capable of staffing and operational integration,” he said.

“[Toowong Private] would need a major refurbishment to meet contemporary standards in order to cater for the cohort of patients who access public mental health services, and there would be significant ongoing costs associated with operating a new public facility isolated from other public facilities.”

Toowong Private Hospital treated 3000 patients annually, including Australian Defence Force personnel, veterans and emergency services workers suffering post-traumatic stress disorder. It also ran outpatient support programs.

Dr Astha Tomar, president of the Royal Australian and New Zealand College of Psychiatrists, said Queensland was short about 300 to 350 mental health beds.

“Now we’ve lost another 58,” she said.

Tomar called on the Queensland government to put pressure on the federal government and health insurers to ensure there would be beds for people at their most vulnerable.

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