ACC is considering purchasing two hospitals

ACC has broken ground on the purchase of the new $72 million outpatient building at the Christchurch hospital. File photo.
Photograph: RNZ/Nate McKinnon

The Accident Compensation Corporation (ACC) had been quietly lining up to buy two public hospital buildings under the previous National-led government before politics intervened.

With the current government making a new push to find alternative ways to pay for major infrastructure, the 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,” he said.

Health NZ Te Whatu Ora aims to more than double its annual capital expenditure on infrastructure to $2 billion, while trying to reduce its deficit from $1.7 billion to half a billion.

Accident Compensation Corporation has broken ground on the purchase of a new $72 million outpatient building at Christchurch Hospital and a $12 million health center in Westport ahead of the 2017 election, according to newly released documents detailing the deals for the first time. .

The deal was made by district health boards, which offered to sell the ACC buildings, while the Ministry of Health also helped set the terms.

According to an investment committee document published under the OIA in mid-2016, the construction of a 10-bed clinic in Buller “has been delayed by the government’s refusal to provide capital and ACC’s involvement is therefore likely to be viewed as positive”. in question.

This optimism turned out to be premature. In the election campaign that followed, Labor opposed the Buller deal and instead promised to spend $20 million on complete reconstruction. The cost rose to $90 million in 2019, then to $120 million.

There was little news about the ACC’s Christchurch deal at the time; A spokesperson for ACC’s investment fund told RNZ “this proposal has not received ministerial approval and has not progressed.”

ACC had predicted pushback closer to home.

“This investment in the rebuilding of Christchurch is unlikely to receive negative media coverage, but some members of the District Health Board (DHB) are likely to oppose this transaction on the grounds that the DHB should own the property rather than lease the assets,” he said and he repeated this regarding the Buller plan.

Neither agreement came to the point of briefing ministers.

The aim was to lease the health boards for 35 years.

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

Rent and other expenses are omitted from the OIA documents. However, Buller’s purchase price was expected to be “equivalent to construction costs”; at that time the figure was $12 million.

The boards would manage all operating and capital expenditures and manage the buildings.

Christchurch’s five-storey, 10,500 square meter outpatient block was a sound investment due to its gold-plated tenant and site near Hagley Park, which “will always attract a number of medical tenants”.

“Vacancy and 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, roughly over budget.

Newspapers drew comparisons with a private investment company that had achieved returns of just over five percent on deals with supermarket operators.

The ACC has a massive $48.5 billion investment fund but little investment in public health; Only Middlemore Hospital in Auckland has parking concessions.

“We will always evaluate the opportunity to invest in public health infrastructure. Any private deals being considered are likely to be commercially sensitive,” his spokesman said.

The returns from health structures look attractive. Private investors have a raft of new private hospital projects, and groups like Infratil are also pouring money into new private radiology clinics.

However, according to information provided to RNZ under the OIA, not a single document has been produced at ACC this year regarding actual or approved investments in public hospitals.

He declined to provide documents regarding potential transactions due to commercial sensitivity.

Major hospital projects have been limited by cost overruns and public protests over the re-examination of the rebuilding of Dunedin Hospital.

Long before the government changed hands, Te Whatu Ora had begun looking for “a more collaborative delivery model” with project partners for complex construction.

It is yet to be confirmed whether ACC is part of this. Its investments also extend to education, partnering with 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 block for its Dunedin operations.

The Christchurch and Westport deals that didn’t work out were of the outright purchase and leaseback type, but that’s not the only option.

Another is public-private partnerships (PPPs), in which private consortiums design, build and operate facilities, with annual fees paid by the Crown, usually for 25 years.

Te Whatu Ora announced last year that it had stopped considering PPPs to build hospitals, but this was mentioned in documents from early 2017 Learning “lessons” from PPPs.

ACC became an early adopter of public-private partnerships in 2012, taking on a role at a prison in South Auckland and two motorways in Wellington and north Auckland.

Investment media reported ACC was pleased with the progress of these investments.

However, there was no mention of investing in PPPs or healthcare facilities in the company’s last annual report.

The previous government had ruled out PPPs in healthcare, and the current government is yet to explicitly ban them.

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

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

“I want to make it clear that this government is open to unsolicited offers for PPPs, sales and leasebacks, and private sector infrastructure investments.”

The government overhauled the PPP framework to shift more risk from contractors back to the Crown. With the support of the Labor Party.

Te Whatu Ora has been overhauling its approach to capital infrastructure for more than a year, getting stuck in the current major reset aimed at returning to financial stability.

Critics recently wrote: Medical Journal PPPs were warned of “all forms of covert promotion” under the heading “The looming specters of public-private partnerships for hospitals and the resulting diminished government responsibility for comprehensive secondary care in Aotearoa New Zealand”.

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