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ANGE:

From Schwartz Media, I’m Ange McCormack. This is 7am.

The Catholic Church is known for running schools and charity services in Australia, but it also operates more than 20 publicly funded hospitals.

It’s an arrangement that helped bring healthcare to the public before Australia was even federated, but it often goes unnoticed by patients.

So, what happens when a hospital run by a Catholic body gets into major financial strife?

Today, senior reporter for The Saturday Paper, Rick Morton, on how an iconic public hospital may soon run out of money.

It’s Tuesday, January 16.

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ANGE:

So, Rick, you've been looking into a story about hospitals, and I want to start by asking you about this kind of interesting arrangement we have in Australia, where a lot of public hospitals are actually run by Catholic organisations. How does that work?

RICK:

Yeah, I feel like I should have known more about this before I started looking into this. But you're right, there are 21 public hospitals in Australia that are actually operated and run by the Catholic Church, and they're run by different bodies of the church, but they're all part of this big organisation, umbrella organisation called Catholic Health Australia.

And they have their own codes of practice, and many were actually set up by nuns or different religious orders. Before we had widespread public health care in Australia and then were folded into the public system without actually transferring the ownership, I guess, of the hospitals themselves. So it sounds kind of convoluted because it sort of is.

And so in many ways, these hospitals appear to Australians when they go to their local public hospital, as if they are indeed just part of the ordinary network. And they're exactly the same as every other hospital in their state.

Of course, the really interesting thing about religious groups operating public hospitals is that there's also nothing stopping them. In fact, many of them also do own and operate private for profit clinics. And so they're essentially two different business models. One is making money and the other is providing a public service.

ANGE:

Right. And so how does it work in practice for a Catholic organisation to run a public hospital and to run private health businesses?

RICK:

That is a great question, and I think it's probably most useful to talk about an actual example. And I'm going to use St Vincent's Hospital in Sydney, which is this pretty significant kind of hospital in the inner city that was, you know, actually the first hospital ever opened by a religious group in Australia.

Audio excerpt – St Vincent's Archive:

“On August 27th, 1857, St Vincent's Hospital began its now almost legendary mission of care. In a building called Tarmons at Potts Point. Hoping that the voluntary contributions of those who could afford to pay would offset the cost of nursing the poor and needy back to health.”

RICK:

And it's become a really crucial part of the hospital network in Sydney with its own special place in, you know, responding to, you know, the HIV Aids crisis of the 80s and 90s.

Audio excerpt – St Vincent's Archive:

“Highly skilled specialists determine the treatment required. And ultramodern equipment is used to provide that treatment.”

RICK:

Its mission has made it, you know, focus on servicing people who probably wouldn't get a look in properly at your ordinary public hospital. So people who are homeless, drug users, people with substance abuse disorders. So they actually do try to focus a lot on their work, not all of it, but a significant amount on these underserved populations. And it is, for all intents and purposes, a public hospital.

Audio excerpt – St Vincent's Archive:

“The years of unsupported financial struggle eventually gave way to a combined effort where government support supplemented but never replaced the need for community support, and this situation still exists today.”

RICK:

But this is where things get a little bit tricky, because it is, it is part of St Vincent's Health Australia, which is this kind of massive network of private health businesses all over the country. They're headquartered in Melbourne. It includes aged care, private clinics, private hospitals and another public hospital in Melbourne.

So I think if you do the tally right, you've got three public hospitals, you've got ten private and you've got about 23 aged care facilities. And so if you look at the St Vincent’s Health Australia group as a whole. So this is not just St Vincent's Hospital Sydney, but the whole group has $3.6 billion in assets and almost $400 million in cash and cash equivalents at hand, which is a lot, which, you know, that's my forensic accounting head on. That's a lot of money.

And according to its annual report, at the end of last year, it had managed to in fact, it was quite proud of the fact that it had been investing in excess of $300 million in, and I'm quoting here “in our private hospitals over the current building cycle to boost growth in the more lucrative side of the business”. But I've learned that despite this massive expanding business, particularly with the focus on the private, um, you know, the money spinning inside the public hospital that St Vincent’s reputation was built on literally within their own internal accounts departments. They're warning that they will become or could become insolvent in just a few months time.

ANGE:

Yeah, right. And how is that even possible for a public hospital to essentially run out of money.

RICK:

Like you think it shouldn't be possible, right? You'd expect the hospital management to, you know, commit to the services that they have to commit to and not overspend, but the overspend, certainly, or the underspend in terms of what they're going to be budgeted for. Um, they're warning that they're not even gonna have enough money to pay their staff if and this is important, if they don't get a bailout either from the New South Wales government, which they're asking for, or from their own private organisation, St Vincent’s Health Australia, so this is where they stand at the moment. Right.

And I've had a little bit of a sneak peek, I guess, at some of these internal financial problems that they're having, because I received this internal memo from their November update, um, when they were explaining to managers and staff what's going on.

And I wasn't meant to see this thing. And it's not a, it's not a pretty picture. They predict a 77 or $75 million turnaround figure of what they need to achieve to fix the current mess. And so the implications are quite significant. And this is a big, important public hospital in the middle of Sydney. It's got hundreds of beds. It's got more than 400. And as we know the public health system is already straining.

So the idea that a place like this can be in this much trouble with this little warning, it spells disaster on quite a few levels.

ANGE:

After the break - how the situation at St Vincent’s became so dire.

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ANGE:

Rick, we've been talking about how a major Australian public hospital, St Vincent’s in Sydney, has found itself with huge money problems. Who exactly has been making the decisions at St Vincent’s, and how did the hospital's financial position get so bad?

RICK:

So here's the thing, right? We might never actually know, because a regular public hospital would be run by the state government, and they'd be responsible to Senate estimates and parliamentary inquiries and, and the ordinary accountability measures such that they are in the public service.

But St Vincent’s, as a Catholic hospital, is run by a board. Um, it is not a board that is appointed by anyone in the state government. Um, and the board, yeah, sure, in the agreements that are signed, they have to follow New South Wales Health's core objectives as the operator of this public hospital. But it has an extreme amount of latitude, particularly on the financial regulation side of thing.

And if you look at the actual service agreements or the service level agreements between the New South Wales government and St Vincent's Hospital network, which is what they call that the body that runs the public hospital, they actually specifically say that New South Wales Health acknowledges that the values of the network are determined by the board of St Vincent’s Health Australia.

Now, the board itself says that this is all about providing good care to those who need it. They say that their mission includes the provision of services to poor, disadvantaged and marginalised members of the community. And and it does.

But speaking to staff at the hospital, they're not so sure that that mission has been front and center. And one source that I spoke to particularly tell me that, you know, I bet the private hospital next door, which is extremely lucrative and run by the same people, I bet the private hospital next door is not short of a penny, but they're asking the government to bail them out.

And this also went on to say we're talking about public money propping up Catholic health assets. So New South Wales Health can buy services from them. And that sounds a little bit maddening, it's because it is. It's, it's a weird arrangement.

So when I ask them about all of this, you know, whether the group St Vincent's had considered using its more lucrative private hospitals or dipping into that $400 million cash and cash equivalents that they've got at hand as a source of supplementary funding to fix their problems at the public hospital before asking the state government. They didn't respond to that actual specific question.

ANGE:

Right. And as you say, this organisation isn't short of money in any sense. So how are they kind of sharing and allocating their money across the private and public sides of their operations? Because if the public hospital is in strife, why aren't they just using money from their private facilities to kind of bail it out?

RICK:

Yeah. And the thing is, they're happy to do that when it suits them. In the financial reports with the charities regulator, if you scroll all the way back to like 2016, 2017, one thing caught my eye and is that they are quite happy to move money around between entities within the group and the group for accounting purposes, they're all counted as one big thing, right? St Vincent’s Health Australia, their records, they're all the same, but within it they move money around.

So rather than use profits from the private business side of the operation to improve either the position of the public hospital side or even just to get them out of a jam, they actually would rather loan money from the private side to expand and buy more assets.

So in 2017. If you look through the records, St Vincent's Health Australia actually doubled a loan that it took from St Vincent’s Private Hospital in Sydney. So that's from one entity within the group. And that shares the same block of land right in Darlinghurst with its destitute public cousin, St Vincent's Hospital. So they doubled that loan to $86 million. And from what I can tell in the records, they used that loan from the private hospital to pay off almost half of $96 million in secured bank loans that the group had already taken out and used to buy out the remaining 50% stake in what is now known as St Vincent's Private Hospital in Melbourne.

So essentially it's an acquisition move and they've used money from within the group St Vincent’s Private Hospital in Sydney specifically to shore up its expansion. But they're not doing that. Or at least they haven't flagged doing that. When the public hospital, which is metres away, you can touch it. It's looking at being insolvent.

In amongst all of this, they've got their hand out to the state government and tax payers, um, asking for an extra $500 million in funding from the state government, particularly for things like capital works like infrastructure, you know, redoing their IT network i.e all the things that are actually part of the asset base, which is owned by the Catholic Church with Australia.

But the issue now is, do they just kind of hand over this money? Is this a one off? Will it happen again? None of this seems to be speaking to a long-term solution. I guess it's a point that people are making particularly when it comes to this type of model.

ANGE:

How fit for purpose is this whole system? If we take a step back and look at it, of giving public money to a Catholic organisation to run such an important institution like a hospital. How justifiable in 2024 is it to do it this way?

RICK:

So this model we're talking about, you know, it might have made sense 150 years ago or more when it was actually started, but times change and in kind of expectations change as well. And of course, we've got this institution that's incredibly important to the public health network in Sydney and New South Wales Health wants those services. They might have been happy to buy them when the nuns were in charge, but of course now it's an extraordinary huge organisation. It's got a board that is running health care that's never been more complicated, and I think it's not too much of a stretch to expect that there should be some further avenues of probity and kind of communication between the funding body, New South Wales Health, and the private entity which is making decisions with 400 and something million dollars worth of taxpayer money.

I'm not sure that anyone is suggesting the New South Wales government is going to swoop in and take over St Vincent’s Health Australia or even St Vincent’s Public Hospital in Sydney. But there is an argument now to be made about, well, what do they ask for.

Certainly there is concern among staff at the hospital, and there's concern within the ranks of the government that these kind of arrangements are precarious because, you know, the mission might be the same at St Vincent's, but we've got a new breed of manager who are now in control and certainly doesn't seem to be working out so well.

ANGE:

Rick, thanks so much for your time.

RICK:

Thanks Ange, always a pleasure.

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ANGE:

Also in the news today…

Santos’s Barossa offshore gas project has cleared another hurdle, with the federal court striking down a challenge by traditional owners from the Tiwi Islands.

The group of Tiwi Islanders argued the gas giant had not properly assessed whether the pipeline’s construction would damage traditional burial grounds and cultural heritage sites submerged under water.

And…

A Woolworths store in Brisbane was found vandalised early on Monday morning, with graffiti of pro-Australia Day slogans and a call to boycott the supermarket chain.

It comes after Peter Dutton claimed Woolworths was pushing a “woke agenda” by not selling Australia day merchandise. A spokesperson for the chain said it wasn’t selling more merchandise because customers were no longer buying it.

I’m Ange McCormack, this is 7am. We’ll be back again tomorrow with an episode looking at the turmoil inside the ABC.

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