Can the Caymans really sustain two major medical tourism and local care hospitals, plus other private hospitals and clinics? Ian Youngman considers the local game playing, politics, personal agendas and high finance involved in the country’s existing and proposed medical tourism cities.
Doctors Hospital in the Caymans has recently launched a blistering legal attack on the government over “vast and unilateral” financial concessions offered to both Health City Cayman Islands and Aster Med City. The hospital claims these concessions have unfairly distorted competition and could ultimately compromise the quality of healthcare in Cayman.
The first medical tourism city: Health City Cayman
The origins of the row started a decade ago with the launch of Health City Cayman Islands (HCCI), with ambitions to become the major medical tourism destination in the region.
In the following years, it is believed that HCCI did not hit its original targets for attracting international patients. It has never published how many local and international patients it has treated. US partner Ascension, with its own problems, pulled out, stating that HCCI was not attracting the many thousands of Americans it promised.
Locked into the launch of HCCI was local entrepreneur and property developer, Gene Thompson, as project developer for HCCI. Thompson Development’s business enterprises include commercial and resort development, tourism, real estate and retail. For unknown reasons, Thompson fell out with HCCI, and has since found overseas investors to launch a rival – Aster Med City. Thompson has refused to go public on the new plans and his links with it.
According to local reports, around 60% of HCCI’s patients come from overseas, but the facility is not sustained by medical tourism and also needs local business to remain viable. But there are fewer locals going overseas for treatment so the state has saved some money, as they are treated at HCCI.
Whether Aster Med City happens is uncertain as Aster has problems of its own. The Health Minister has suggested that it would be approved only if it can prove it gets at least 70% of patients from overseas. He may not be there after the election, and the big carrot of significant overseas investment with new jobs may override concerns.
The private healthcare incumbent: Doctors Hospital
Doctors Hospital (formerly the Chrissie Tomlinson Memorial Hospital) is a private, for-profit hospital dedicated to providing healthcare to the Cayman Islands. It is an eighteen bed, medical/surgical hospital specialising in surgical care.
It is a small competitor for medical tourists compared to HCCI, concentrating instead on local care. Without as many international patients however, HCCI has moved more into treating locals so is now a direct competitor.
The legal attack from Doctors Hospital came when HCCI announced it was setting up a clinic for medical tourists and locals on their doorstep on Grand Cayman, followed by the bigger plan for Aster MedCity in a nearby location.
The legal challenge
The challenge, from Dr Yaron Rado, Board Chairman and Chief Radiologist at Doctors Hospital, states:
“Doctors Hospital is seeking a judicial review of the vast unilateral concessions made by the government to Health City and Aster Cayman MedCity. The concessions unfairly distort competition between healthcare providers on the Cayman Islands, and could ultimately compromise the quality of healthcare available. DH challenges the fairness of the on-going grant of financial concessions to Narayana Hrudayalaya Private by the Government of the Cayman Islands for the current Health City development. Also, granting vast financial concessions to DM Healthcare for the Aster Cayman MedCity development, and the proposed financial concessions to NHP for the proposed development at Camana Bay is concerning.
CIG recently announced NHP will develop a new hospital at Camana Bay. The Premier reportedly stated, “concessions and duty waivers already in place for Health City would apply to the new facility” (Cayman Compass, 19 February 2021).
Concerning Aster Cayman Medcity, the Premier reportedly said DM would “not have to pay duty on medical equipment or supplies for 25 years after the commencement of construction of phase 1,” and an agreement to that effect would be executed that day (Cayman Compass, 21 December 2020).
DH acknowledges CIG’s intention to attract foreign investment to the Cayman Islands and welcomes it. However, DH firmly believes fair competition and a level playing field for all healthcare providers serves the best interests of all, especially the general public. Therefore, DH issued a pre-action letter to CIG on Monday, 8 March 2021, to which CIG has not substantively responded.
“We believe in fair and competitive marketplaces. Eliminating the gap between healthcare providers in Cayman is more important than ever. No market should be subjected to anticompetitive, monopolistic, or dominating behaviour. The power held by these companies affects the Cayman economy, our democracy, and ultimately the health and well-being of our citizens. It is especially unfortunate for the many local-owned businesses who have been contributing to the country for years, shaping our community to what it is today”
In a court filing, lawyers for the hospital argued that a 50-year concessions package – offering waivers on work-permit fees, stamp duty and customs duty – given to Health City in 2010, and now extended for a planned satellite clinic at Camana Bay, is both unfair and unenforceable.
Doctors Hospital also states that duty waivers contained in contracts with Dr. Devi Shetty’s Narayana Health and DM Healthcare – the respective parent companies of Health City and Aster MedCity – would illegally bind the hands of future governments.
They suggest that the government’s failure to publish criteria for how it determines who gets concessions and under what circumstances is unlawful.
The application makes similar arguments over any extension of the financial concessions package to the new Health City clinic at Camana Bay and the separate deal for Aster MedCity.
The court filing goes on to state that Doctors Hospital has been treated less favourably in its own applications for concessions.
Auditor general’s report
It is not the first time that questions about the fairness of the Health City agreement have been raised.
A 2015 auditor general’s report claimed that government had acted unlawfully in negotiating the deal and had committed to tens of millions of dollars in expenditure without adequately researching the possible costs.
“No information was provided to the Legislative Assembly, even though the agreement committed government to hundreds of millions of dollars in tax, duty and fee concessions and contained obligations for infrastructure upgrading and expenditure,” auditors found.
The Ministry of Finance is still unwilling to offer clarity on its position regarding concessions and the current status of government’s concessions policy, which had been recommended for implementation in the audit in 2015.
IMTJ view
It is almost impossible for the Caymans to sustain two major medical tourism and local care hospitals plus other private hospitals and clinics.
It is possible that the Aster plan is a stalking horse for local property developers to seek to take over HCCI and develop projects on land it has in East End and the more lucrative Grand Cayman. Or it could be a move to drive the price of HCCI down for someone who seeks to buy it.
Shetty and his family have a 75% stake in Narayana Hrudayalaya that owns HCCI, but the cardiac surgeon is 67. HCCI is a cash cow for the healthcare empire but the new 50 bed clinic would need an investment of US$100 million partly financed by new borrowing from banks and financial institutions.
With the double threat of a major competitor and legal action, plus the risk that politicians would lose their nerve and take away financial concessions, banks may be very nervous of offering loans.
The Caymans has made efforts to improve its reputation as an offshore financial centre for people and companies seeking to avoid tax. The British Overseas Territory has more registered businesses than residents, and has faced allegations of links to crime and politicians seeking to hide stolen money.
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