Scandal-plagued Sydney hospital faces having contract terminated

The NSW Labor government is laying the groundwork to terminate its contract for the embattled Northern Beaches Hospital, which would mean compensation is paid to the private operator Healthscope or an independent umpire appointed if an agreement on costs cannot be reached.

In a major escalation in negotiations between Healthscope and the government, Labor will take the significant step of next week moving to amend a private members bill, introduced by Wakehurst independent MP Michael Regan, to give ministers power to end the hospital’s public-private partnership contract as if a hospital operator default had occurred.

The Northern Beaches Hospital in Sydney is one of Healthscope’s newest and largest facilities.Credit: Renee Nowytarger

The move follows last month’s appointment of receivers to Healthscope’s parent entities, which the NSW government considers a default under the contract.

The proposed amendments would give the Health Minister Ryan Park the power to issue a termination notice to Healthscope.

In addition, Treasurer Daniel Mookhey would have the power to ensure that compensation negotiations occur within a reasonable time-frame, and to appoint an independent person to determine compensation if agreement cannot be reached.

The government could have exercised its voluntary termination rights under the contract signed by the Coalition, but this would have meant hundreds of millions of dollars in compensation would have been payable to Healthscope’s receivers and lenders.

The government’s legislative approach would ensure there were no windfall gains to Healthscope or its receivers, although Labor’s preference remains that an agreement on the future control and operation of Northern Beaches Hospital could be reached with the private operator.

In April, Mookhey and Park launched a taskforce to investigate the operations of the public-private partnership, which is under contract until 2038.

There have been concerns that the model may lead to profits being put before care. A number of recent incidents, including the death of toddler Joe Massa, heightened concerns about quality of care at the hospital.

Regan’s bill was designed to legislate an end to the public-private partnership without compensation, but the government has accepted that some payment would be required.

Mookhey said the amendment to Regan’s bill was not a decision the government took lightly.

“But we are now in a position where the Liberals’ privatisation mess means Healthscope’s receivers are negotiating the future of the Northern Beaches Hospital,” he said.

“While an agreed exit from this failed PPP contract remains my preference, I must ensure the government has the right to step in and protect the Northern Beaches community from this dragging on.”

Healthscope won the contract to build and operate the $600 million Frenchs Forest hospital in a unique public-private arrangement with the former Coalition government.

A parliamentary inquiry in 2020 recommended the government avoid replicating the arrangement for future hospital projects after a succession of high-profile issues plagued the hospital’s first year.

The Minns government passed legislation this month banning any repeat of the failed public-private model in acute care, ruling out future privatisation of public hospitals.

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