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JOINT COMMITTEE ON HEALTH AND CHILDREN díospóireacht -
Tuesday, 10 Feb 2009

Roscrea Health Investment Co-ownership.

I now welcome Dr. Pádraig Ó Reachtagáin and Mr. Tom Conlan from the Roscrea Health Investment Co-ownership. Before we begin, I draw your attention to the fact that members of the committee have absolute privilege but this privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice that Members should not comment on, criticise or make charges against a person outside the House or an official, by name or in such a way as to make him or her identifiable.

I thank you, Dr. Ó Reachtagáin and Mr. Conlan, for your detailed presentation, which has been circulated and studied by all members. We would be grateful to have a brief synopsis of that presentation, after which members will be invited to ask questions and make further comments.

Dr. Pádraig G. Ó Reachtagáin

Thank you, Chairman. My name is Pádraig Ó Reachtagáin. I am a dentist in Roscrea. With me is Mr. Tom Conlan who is our financial adviser. Roscrea Health Investment Co-ownership comprises five GPs and me, the dentist. It was formed two years ago with the aim of providing purpose built accommodation for four practices. All of us identify the fact that the premises from which we provide medical and dental services are entirely inadequate both at present and for the future. None of us has purpose built accommodation. We practice from a selection of rooms with past histories as kitchens, parlours and bedrooms. Providing modern health services in such circumstances is, at best, difficult.

We are determined to provide an environment for all our patients and staff which will allow us to deliver what is expected of us as professionals in the 21st century. Our plans have dovetailed neatly with the HSE primary care strategy, and our proposed building can accommodate all of the primary care network for Roscrea. Our plans are well advanced and we are now almost in a position to commence construction. Funding of the project, while always a major issue, is a huge challenge owing to the current financial crisis. Our only recourse to capital is by bank borrowing and the principal issues for bank lenders at this time are the cost of funds and the loan-to-value ratio of the project. To make this and all other primary care projects planned by the HSE around the country viable, we need to attract funding to the projects and our proposal involves having primary care facilities considered as industrial buildings similar to private hospitals, nursing homes, palliative care units, for relief under section 268 of the Taxes Consolidation Act. Further details of this proposal are set out in our submission.

We are acutely aware that we are not developers. We are in this together purely out of necessity and an ambition to improve health services for our town. We have come to realise that we are at a significant disadvantage owing to the fact that a corporation cannot practice medicine or dentistry. This means that with personal tax rates approaching 50% we need to earn €2 to repay €1 of bank borrowing while a developer paying corporation tax earning €2 can repay €1.50. The availability of capital allowances would remove this inequity. It is critical that health care providers are stakeholders in primary care facilities. This will result in better managed and maintained premises. Our proposal will give professionals a greater incentive to become owner occupiers in their own centres.

If we can achieve our goal we will have provided the biggest public building for use by all of the people of Roscrea since the construction of the church 140 years ago. This project will bring significant additional local employment both during construction and when completed. In light of the effort, the commitment and the personal financing contributed already by the doctors, and the huge air of expectation generated in the wider Roscrea area, it would be a shame to see this vital piece of infrastructure lost to Roscrea and other towns like Roscrea all over the country for lack of this small incentive.

Thank you, Dr. Ó Reachtagáin. That was very concise.

Some points are not clear. Perhaps I have not read this properly. Is there planning permission for the building?

Dr. Pádraig G. Ó Reachtagáin

Yes.

What is holding matters up now is finance.

Dr. Pádraig G. Ó Reachtagáin

Yes. All our final figures have been prepared. We have tenders in. We have had a meeting with the banks. Finance remains the issue.

Does the delegation feel that the capital allowances are a major issue and the difference between going ahead and not going ahead?

Dr. Pádraig G. Ó Reachtagáin

Yes.

That is clear enough. Roscrea is a town with which I am familiar. It is quite a distance from any hospital.

Dr. Pádraig G. Ó Reachtagáin

Yes.

Are there facilities or any plans for X-ray or ultrasound facilities, rooms for visiting consultants and so on?

Dr. Pádraig G. Ó Reachtagáin

Not at this time. I listened with envy to the previous presentation because the reality of the provision of medical services in Roscrea is that there are no doctors with me today for the simple reason that the accommodation they have available to them at the moment is not sufficient to accommodate the number of doctors we need to provide a day to day service. One of our doctors is unable to work today for personal reasons. Therefore, our doctors are not only fully committed but are overstretched to the point where even the consideration of having diagnostic facilities does not register on their radar at present. That said, we have made provision in the construction of our building to be able to add to it and to provide further services, as required, as the future unfolds. As members are aware, matters are in a state of flux at present in our locality in respect of hospital services and so forth. As Deputy Reilly rightly pointed out, Roscrea is at the very periphery of the catchment area for our regional hospitals. Consequently, whatever services we can provide outside a hospital setting would be more than welcome in Roscrea.

I agree. At 10,000 sq. ft., is the HSE taking any space from the group?

We should bank the questions.

Very well. My other question is whether there is HSE involvement in respect of leasing space.

I thank Dr. Ó Reachtagáin for the directness of his presentation. He has been very honest about the financial aspects and it is important that the joint committee should get to grips with this issue. Dr. Ó Reachtagáin and the doctors involved are practitioners and I strongly believe members should ensure that such primary health care facilities are controlled by health care professionals, rather than by developers who simply are in it to make money. If those who build crèches, nursing homes and sports injury clinics can get tax breaks, I do not see why general practitioners and dentists should not. However, were members to recommend what Dr. Ó Reachtagáin suggests under section 268 of the Taxes Consolidation Act, would it be an incentive for developers who are not health professionals to simply use it as an opportunity to write off tax by getting involved? Could the joint committee recommend this in such a way that it would be purely for the benefit of those health professionals who would be working in the building? I strongly believe that were members to make this recommendation, such ring-fencing would be required.

As a former general practitioner, I fully approve of these developments and commend both the previous group and Roscrea Health Investment Co-ownership on their work because it undoubtedly is the way forward to ensure the best level and quality of service for patients. Have Roscrea Health Investment Co-ownership or its agents made an application to be considered for capital allowances? If so, has a response been received?

The other issue raised by Dr. Ó Reachtagáin pertains to the scarcity of GPs. What plans, if any, have the HSE and the GPs in Roscrea to increase the number of family doctors there? Are they in the same position that obtains in other towns in Ireland, where GPs refuse to take additional patients on to their lists because they are already overcrowded?

Perhaps Dr. Ó Reachtagáin will clarify whether the actual team has yet come into being. Members received a clear sense from the HSE's presentation that it is working very hard to create the teams and that the centres will come afterwards. He should clarify whether the team is in existence.

Dr. Pádraig G. Ó Reachtagáin

Shall I do that now?

Yes, as no one else is seeking to come in at present. I also congratulate Dr. Ó Reachtagáin because in one of the earlier presentations, members had received the impression that dentists were not becoming centrally involved in this process. Consequently, it is positive to see a dental surgeon taking a leading role in one of these projects.

Dr. Pádraig G. Ó Reachtagáin

I thank the Chairman. May I outline the chronology of events?

Dr. Pádraig G. Ó Reachtagáin

We came together on 8 February 2007, almost two years ago to the day, and formally signed up to a co-ownership in which each of us is equally responsible for what transpires from this development. From the outset, we were involved with the HSE for the simple reason that Roscrea has been identified as one of the towns in Ireland most in need of a primary care centre. My general practitioner colleagues have been deeply involved in setting up the primary care structure. The primary care team is already in place in Roscrea. The huge deficiencies of which we have spoken exist because, as is the case with Mallow, the Health Service Executive is fractionated throughout the locality. As a town of 4,000 inhabitants, Roscrea is home to seven different Health Service Executive locations, most of which are either rented premises or buildings converted from some other use. We are working with the executive in this regard.

We are quite advanced in our negotiations to become a primary care centre. We hope that matter will be concluded in the coming weeks. The building in question is 23,000 sq. ft. and we estimate the Health Service Executive will take something in the region of 60% of that space. The site is a private one, which we purchased at the height of the market, and we obtained planning permission last January. Invitations to tender were issued at the beginning of January. It is a great time to build because one can obtain great value for money given the current competitive nature of the construction industry. It is now a question of securing funding. In essence, building work could commence within six weeks if we can get the financing in place.

Deputy O'Sullivan asked about the importance of the building being controlled by GPs. It was always our intention that GPs would have responsibility for the building. In my short introduction, I set out why this is important. I can offer an example from my own experience as a tenant. I have been in the same building for 19 years but have never seen my landlord. Every morning, either I or a member of my staff sweeps up pieces of ceiling plaster from the landing. My landlord has written to me three times in those 19 years, each time seeking an increase in the rent. That is the extent of this individual's involvement in my practice.

One sees the situation fundamentally differently if one owns the building in which one's practice is based. The owner of a building will be concerned to see graffiti or litter on the ground on his or her way into the building and will most likely take immediate action. A tenant, on the other hand, will probably telephone the absentee landlord. There is no doubt that GPs being stakeholders in the buildings is of fundamental importance to the ongoing success of these projects. Developers simply will not bring the same drive and determinations as GPs in ensuring these buildings work for the community. I have heard the message coming across strongly since this meeting commenced that our interests are not those of developers. Rather, our interests are as providers of services in our local communities for the people who live alongside us. That is what we have set out to do with these projects. One of the reasons we have such difficulty in recruiting new doctors and dentists is that we do not have the facilities available in our practices that were available to them in their trainer practices. One of the most significant problems we face is that new recruits leave practices such as ours after only six months.

I refer the question on tax write-offs to my colleague, Mr. Conlan.

Mr. Tom Conlan

I understand the committee's concern with regard to the tax write-off is that so-called investors may become involved to create allowances which may be used to shelter other income. Existing legislation ring-fences capital allowances on designated facilities, such as private hospitals, nursing homes, palliative care units and so on, to the rental income alone so that they cannot be used against other income. In our submission we made the point that we did not believe the capital allowances should be available against other income to anyone who is providing finance to the project. We do, however, believe that the practitioners who are involved should be capable of utilising the allowances either as owner-occupiers in running their practices or, as in our structure, in a co-ownership where they lease the building to practices where the personnel of the practices will change.

In our group structure the ages of the personnel range from 38 to 63. Obviously personnel will move on, new people will come in, and the reality is that younger health professionals do not have access to surplus equity and they cannot be put in situations where they have to find a huge sum of money to replace a retiring doctor. Therefore, we have structured our practice as a co-ownership, equally owned by the six practitioners involved so that they will control the building and ensure continuity when personnel changes inevitably arise. Existing legislation allows for ring-fencing and, if necessary, it could be ring-fenced to utilisations by those who are actively involved in the primary care centre. I see no difficulty with that. Our submission makes the point that we would see no objection to ring-fencing to avoid high net worth individuals using it as a shelter against their other income. That is not the purpose of the ethos of the group I have been asked to advise.

I thank the delegates for the presentation which was concise and to the point. From my own perspective, I would promote the issue of capital allowances for owner-occupiers limiting them to involvement of one individual so that people do not try to corporatise general practice and primary care which would be disastrous for this country. It is interesting that the delegates feel strongly that they need that ring-fencing whereas others possibly have not been as strong and the HSE has not taken an absolute view on it one way or the other.

I apologise for being late. I missed most of the presentation. I have listened to the comments on ownership of the health care centres. Would it be possible to have a summary of the difficulties experienced with the current owner of the building? Do the delegates envisage a situation where they could have a good relationship with the HSE and work out a criteria where it could be the owner, from where there could be continuity, whether it be Roscrea Health Investment Co-ownership or somebody else coming after it?

Dr. Pádraig G. Ó Reachtagáin

The answer is quite simple. When we were first offered a rental rate by the HSE we agreed to sell the site to the HSE provided it rented back the premises we needed for the rental the HSE offered us but the answer was "No". We do not have the capital nor would that business model stand up for us.

Mr. Tom Conlan

At the rate the HSE is currently negotiating with us, the project is clearly not bankable. We have no bank approval as we stand. We are in negotiation with our bankers and we are under pressure in regard to the loan to value. Other occupiers of the building will be the practitioners, the practices involved. They are prepared to pay to make the project bankable. We have had to factor 26% more in rent into our projections than they will receive from the HSE. That shows how far off are the commercial rents the HSE is offering in the context of getting a purpose built building, ideally suited for the purposes and, most important, a commitment, in our case from virtually all the major doctors operating in the Roscrea area, to operate from that facility and provide equal access to all.

Would that be a fair comment?

Mr. Tom Conlan

Absolutely. That is the reality of the situation, hence the need for capital allowances. As Dr. Ó Reachtagáin explained, they cannot practise as companies, nor can they avail of low corporation tax rates and the banks must be repaid. Therefore, if one wants to repay the bank €1 of capital, one must make €2 profit. There is an issue in respect of bankability because the bank will examine ability to repay both capital and interest. For €1 of capital and €1 interest, we need €3 profit. The interest is tax deductible but the capital repayment is not and this is a major problem.

The issue of security is secondary but is a major one. GPs do not, generally, have access to enormous amounts of equity. GPs around the country know this is the reality. We are trying to encourage a purpose-built facility. We would like to build it in the current environment where, as of now, the tender costs are at least 20% lower than the tender costs when we started 16 months ago. Now is the time to spend money and get commitments. It is Government policy to roll out these projects. We have the ideal structure, we are not corporate driven, nor are we investor-driven to shelter income. We are people on the ground who wish to run a modern medical facility.

I thank the delegation for being forthright and frank. The presentation was useful to us.

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