ACC was considering purchasing two hospitals

The Accident Compensation Corporation (ACC) was quietly lining up to buy two public hospital buildings under the previous National-led government, before politics got in the way.

As the current administration makes a new attempt to find alternative ways to pay for major infrastructure, ACC says it still wants to invest in public health infrastructure.

“ACC is constantly looking for good investment projects and ACC is an important part of the public health sector,” the report said.

Health New Zealand Te Whatu Ora is seeking to reduce its budget deficit from $1.7 billion to half a billion, while more than doubling its annual capital expenditure on infrastructure to $2 billion.

The Accident Compensation Corporation has laid the groundwork for the $72 million purchase of the new Christchurch Hospital Outpatient Building and Westport Health Center for $12 million in the run-up to the 2017 election, according to newly published documents detailing the deals for be described in detail first. .

The deal came about as the district health boards offered to sell the buildings to ACC, while the Department of Health helped determine the terms.

At Buller, the construction of a 10-bed clinic “has been postponed due to the government’s refusal to provide the capital and therefore ACC’s involvement is likely to be seen as positive,” a mid-2016 investment committee document released under the OIA . said.

That optimism turned out to be premature. In the subsequent election campaign, Labor opposed the Buller deal and instead promised to spend $20 million on full reconstruction. Costs rose to $90 million in 2019, then $120 million.

There was little coverage of ACC’s Christchurch deal at the time – “this proposal did not receive ministerial approval and did not proceed,” a spokesperson for ACC’s investment fund told RNZ.

ACC had anticipated that there could be a setback closer to home.

“It is unlikely that this investment in the rebuilding of Christchurch will generate any negative media coverage, but it is possible that some members of the District Health Board (DHB) will oppose the transaction on the grounds that the DHB in their opinion should own property. assets rather than leasing them,” the papers said, repeating this in relation to the Buller plan.

Neither agreement reached the point of informing ministers.

The aim was for the health boards to have a 35-year lease.

The terms were set while the ministry was still looking for contractors to build the two facilities.

The rent and other costs are removed from the OIA documents. But Buller’s purchase price was expected to be “equal to the cost of construction” – at the time it was $12 million.

The boards would have directed all operating and capital expenditures and managed the buildings.

The five-storey, 10,500 sq m outpatient block in Christchurch was a solid investment due to its gold-plated tenant and location near Hagley Park, which was “always going to be of interest to a range of medical tenants”.

“Vacancy, tenant defaults and fluctuating valuations are mitigated by the length of the lease and the quality of the tenant.”

It opened a year later in 2019, just about on budget.

The newspapers made a comparison with a private investment company that – in agreements with supermarket operators – achieved returns of just over five percent.

ACC has a huge investment fund of $48.5 billion, but has invested very little in public health – just a parking concession at Auckland’s Middlemore Hospital.

“We would always consider an opportunity to invest in public health infrastructure. Any specific deals being considered are likely to be commercially sensitive,” the spokesperson said.

The return on health projects appears attractive. Private investors have a number of new private hospital projects in the works, with more in the pipeline, and groups like Infratil have poured money into new private radiology clinics.

But at ACC, not a single document had been generated this year on actual or confirmed investment in public hospitals, the RNZ told the OIA.

She refused to provide documents about possible transactions, due to commercial sensitivity.

Major hospital projects have been fraught, limited by cost overruns and public protests against attempts to re-examine the Dunedin hospital rebuild.

Te Whatu Ora was started long before the government changed hands and looked at “a more collaborative delivery model” with project partners for complex construction works.

Whether ACC is part of this has yet to be confirmed. Its investments extend to education, with it partnering with an iwi in a $50-60 million deal to buy four schools in 2020. It also has a joint venture with Ngāi Tahu to develop an office building for its Dunedin operations.

The Christchurch-Westport deals that failed were of the direct buy-and-leaseback type, but this is not the only option.

Another example is public-private partnerships (PPPs), in which private consortia design, build and operate facilities and typically receive annual compensation from the Crown for 25 years.

Te Whatu Ora said last year it had not considered PPPs to build hospitals, although documents in early 2017 spoke of this Drawing “lessons” from PPPs.

ACC was an early adopter of public-private partnerships, with involvement in a South Auckland prison in 2012, and two highways north of Wellington and Auckland.

Investment media reported this ACC was satisfied with how these investments went.

But the company’s latest annual report made no mention of investments in PPPs or in healthcare facilities.

The previous government ruled out PPPs in the health sector, and the current government has yet to explicitly allow them.

“The last government roundly rejected private capital,” said Infrastructure Minister Chris Bishop.

“Our approach is exactly the opposite, but it will take time to build up the commercial expertise and competence within government.

“I want to make it clear that this administration is open to PPPs, sale-and-leasebacks and unsolicited proposals for private sector infrastructure investments.”

The government has just revised the PPP framework to shift more risk from the contractors to the Crown. with the support of Labour.

Te Whatu Ora has been overhauling its approach to capital infrastructure for more than a year, which is getting caught up in the current massive reset aimed at restoring financial stability.

Critics recently wrote in the Medical journal on PPPs, warning against “any surreptitious introduction,” under the headline: “The looming specter of public-private hospital partnerships and the resulting decline in government responsibility for comprehensive secondary health care in Aotearoa New Zealand.”

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