Maltese hospital mastermind – Arnold Cassola

Ram Tumuluri was just a Vitals figurehead. The real guy was Armin Ernst. They used Tumuluri as the front man to negotiate the Vitals deal so that Steward would not appear…

Armin Ernst was always lurking in the background.

Reality is that US companies are at risk of prosecution under the US Foreign Corrupt Practices Act if they pay commissions to foreign (in this case, Maltese) players. So, better not to appear in prima persona.

What we Maltese must ask now is how much money Vitals/Steward actually put into the hospital sites. The question we should ask is: has there been a substantial cash (not cosmetic) investment in technology and facilities to upgrade the three Maltese hospitals?

Having said this, I would be more inclined to think that if any dirty stuff had been going on in the original deal, this would have meant quiet understandings between Vitals and the politician crooks in the Maltese government.

In the US, at the moment, there is a major consolidation under way of backward and forward integration of the delivery of healthcare services.

In the past, the US had independent doctors. Some were grouped into small, local practices (multiple doctors sharing offices, nurses, secretaries) and would refer their patients to hospitals that were mostly run by not-for-profit organisations (often groups of nuns, like the private hospitals we have seen in Malta).

With all of the forces of technology, the diminishing supply of inexpensive labour (such as nuns), increased government regulation and cost pressure, medical functions from visiting the nurse for a quick flu jab through intensive surgery have been increasingly integrated. The catalysts have been a combination of the large hospital chains in each major city with private investor money (eg, Cerberus, in the case of Steward).

These have expanded the model across geographic regions to gain buying power and technological and cost efficiencies. This is a long way of getting to the Steward objectives – growth in size and presence.

Actually, Steward also have zero experience in functioning outside the US. This means that they have likely chosen Malta as a test site to learn how to do business within a microcosm, with limited downside risk to themselves. Buying a project in Malta is a much more containable risk than getting into a country with millions of people, if one is experimenting.

In any case, Maltese hospitals and we Maltese as a guinea pig – an experiment for Steward.

What about our Maltese interests?

If I were in Prime Minister Joseph Muscat’s shoes, my focus would be to look very carefully at the Vitals/Steward investment budget – make them spend a lot of money up front on technology, physical upgrades and other stuff (that will stay behind).

This will be a principal indicator of sincerity. If the experiment does not work, they will walk away.

But then, is Muscat free to decide? Or is it Konrad Mizzi and Keith Schembri who call the shots?

The focus then turns on Vitals – how and why did Tumuluri, with no discernable links in Malta or in the industry, get this contract? They got an especially good deal, but my suspicion is that Vitals were always a “broker” – they effectively acquired an option on control of the facilities through the contract, which allowed them to shop it around.

Vitals could have presented the Malta powers that be with an opportunity to line some local pockets with a deal that the local guys did not know how to package and shop to an institutional buyer, as would be necessary to sell a hospital contract.

This is a more complex transaction than selling a hotel, or even a power station: lots of moving parts and people. These deals do not happen in days. Vitals could only shop the “asset” once they had irrevocable control of the said hospitals.

Once the deal was signed, with Ernst having his finger in both pies, Vitals probably started shopping the contract immediately to Steward on signing it.

The deal had possibly been made between buyer and seller before the original Vitals contract was even signed.

As Daphne pointed out in her last message, there are crooks all around us.

Arnold Cassola
Published on the Times of Malta​ – 2 January 2018