The health service that went underwater

Imagine being told that your local hospital may close in four months because the government and the company running it are still fighting over whether roof repairs following Hurricane Irma nine years ago were properly completed, despite the hospitals being fully insured against hurricane damage.

Now imagine that it is not merely your local hospital. It is practically the entire acute hospital service for your country.

This is the extraordinary predicament facing the Turks and Caicos Islands, an affluent British overseas territory lying between the Bahamas and the Dominican Republic. Its turquoise waters and white beaches attract more than two million tourists and cruise passengers in a good year, but only about 51,000 people actually live there. Some people call the Turks and Caicos a tax haven. Turks and Caicos has no income tax, corporation tax, capital-gains tax, inheritance tax or annual property tax.

That is a slightly smaller population than Bermuda’s, but spread over about 40 islands and cays. Approximately eight are inhabited. Most people live on Providenciales, while the capital, Cockburn Town, is on Grand Turk, about 75 miles away across the sea.

The territory has two principal hospitals, one on each of those islands. Together they form the Turks and Caicos Islands Hospital and provide virtually all public secondary and emergency hospital care.

Both are operated by InterHealth Canada, an international, profit-making healthcare company. In July, InterHealth announced that it was terminating its contract because the government had failed to make all the required payments for 18 months.

The company has promised to continue operating during a handover period. Unless something is resolved, however, it could withdraw altogether in January. The government has reportedly admitted privately that it may not be capable of taking over until the spring.

First reports made this sound like a government that had simply failed to pay its doctors and nurses, but the truth is more complicated.

The Turks and Caicos government says that it has paid all direct clinical costs. Doctors have been paid, nurses have been paid and patients have continued to receive medicines and treatment.

The withheld money concerns what the contract calls “estates services.” These include the financing, maintenance and repair of the hospital buildings, fire safety, hurricane damage and other facilities work.

The government says that permanent repairs following Hurricane Irma in 2017 were not completed as the contract required, despite the hospitals having comprehensive hurricane insurance. Those allegations have not yet been decided. The tribunal has so far ruled only that from a legal point of view the government must pay the disputed invoices first and pursue compensation later.

The government’s position has been that InterHealth failed to perform some of this work properly. It therefore began deducting about $1.8 million a month from the payments. Five unpaid invoices from the first half of 2025 alone amounted to $9.3 million.

That may sound like ordinary common sense, because if the company has still not repaired the roof after a hurricane nine years ago, why should the government pay the maintenance bill?

Unfortunately for the government, the contract apparently says that it must pay first and argue later. An international arbitration tribunal ordered it to pay the invoices immediately and pursue its complaints separately. The government says it has now complied, although further claims and counterclaims remain to be heard.

The dispute has already generated almost $40 million in awards, interest, arbitration expenses and legal bills. That works out at nearly $800 for every man, woman and child in the territory, before anyone has finally decided who should have repaired what.

It is tempting to see this as a clash between a small Caribbean government, where invoices may sometimes be regarded as merely advisory and negotiable, and an international corporation equipped with a contract and a platoon of lawyers.

There may be a little of that, but the real problem was built into the arrangement from the beginning.

The hospitals were created under a 25-year public-private partnership signed in 2008. InterHealth would finance, design and construct the hospitals, equip and maintain them, employ the clinical staff and operate the medical services.

This hospital-building model came largely from Britain, where it was known as the Private Finance Initiative, or PFI.

Under PFI, the government did not borrow the money and build a hospital itself. A private consortium borrowed the money, constructed the building and sometimes maintained it for 20 or 30 years. The government then made regular payments covering the construction cost, interest, maintenance and a margin of profit for the company.

The attraction was obvious. A government could open a splendid new hospital without producing the entire construction cost at once and the borrowing would not look like government debt.

But the debt had not been wiped out. It had merely been dressed up in a private suit and a maintenance contract.

Private companies generally borrow at higher rates than governments and they also expect to make a profit. The resulting contracts can run to thousands of pages and make even a minor alteration extraordinarily expensive.

Britain eventually discovered that some PFI hospitals cost far more than expected and that unhappy public authorities could remain trapped in hostile relationships with contractors for decades.

Even the British model, however, rarely handed over the actual medical service. The National Health Service normally continued employing the doctors, nurses, and other medical and diagnostic professionals. The private consortium only provided the building, financing and facilities management.

Turks and Caicos went much further and entrusted an international company not only with the buildings but with operating the country’s principal hospitals.

Why would it take such a risk?

The islands badly needed modern hospitals, but the government reportedly lacked the cash and did not want to place the full construction debt on its own books. A private partner also promised international recruitment, modern equipment, visiting specialists, professional management and internationally recognized accreditation.

The new hospitals really were an improvement. They opened in 2010 and subsequently received international accreditation, so this was not a case of paying millions for two empty sheds, but the trouble lay in the procurement, financing and supervision.

The 2008 agreement was made during one of the darkest periods in the territory’s political history. A British Commission of Inquiry later found evidence of systemic corruption and serious dishonesty involving politicians, developers and the disposal of Crown land. (Crown land means land owned by the government.)

In 2009, Britain suspended parts of the territory’s constitution, dissolved its elected government and imposed direct rule from London via a local Governor. Local democratic government was not restored until 2012.

The hospital procurement was also criticised. According to the present premier, there had been no proper competitive tender, while the hospital construction company was connected to the same beneficial ownership as InterHealth. The contract reportedly used a cost-plus formula under which all expenses were reimbursed with a percentage of profit margin added on, creating little incentive to keep costs down.

Responsibility was divided between related companies handling the clinical and infrastructure sides. That may have looked sophisticated on an organisational chart, but it made accountability difficult when something went wrong.

The result is a contract that the present government calls financially unsustainable, but cannot easily escape.

This kind of arrangement is not normal throughout the Caribbean. InterHealth itself described it as the first integrated healthcare public-private partnership in the region.

Caribbean governments frequently contract out particular services. A private company may operate a laboratory, supply dialysis, maintain medical equipment or construct a hospital. Small islands also send patients overseas when specialist treatment is unavailable.

Handing over the construction, maintenance and clinical operation of the principal public hospitals to one profit-making company for 25 years is another matter.

St Kitts and Nevis, which has about the same population as Turks and Caicos follows the more traditional Caribbean model. The government operates the Joseph N. France General Hospital on St Kitts, while the Nevis Island Administration operates Alexandra Hospital. Public authorities also run the community health centres.

That system has had its own difficulties. Equipment breaks down, supplies run short, buildings deteriorate and governments postpone repairs. But when the roof leaks, St Kitts does not have to ask an international tribunal whether it is contractually permitted to withhold the roof payment.

Bermuda, with about 64,000 residents concentrated along a connected strip of islands, has a different mixed system. Its main hospital is operated by the Bermuda Hospitals Board, a statutory public body rather than a profit-making hospital company.

Bermuda has private doctors, compulsory employer-based health insurance and considerable government subsidies. It also used a public-private partnership to finance and construct a newer acute-care wing. Crucially, however, the private consortium did not take over the doctors, nurses and clinical operation. The Bermuda Hospitals Board continued running the hospital.

Turks and Caicos therefore chose the most comprehensive and dangerous version of private financing. It placed the buildings, maintenance and medical service inside one enormous contractual basket.

The islands now face a choice between paying up for an arrangement they regard as unfair, negotiating an extremely expensive exit from the contract or attempting to reconstruct a public hospital service in a matter of months.

The government has asked Britain for political, technical and possibly financial assistance. Britain may feel some obligation to help. Turks and Caicos is, after all, a British overseas territory, albeit a self-governing one, and the disastrous financing model was imported from Britain in the first place.

The government may eventually prove that InterHealth neglected essential maintenance. InterHealth may prove that the government repeatedly violated a perfectly clear contract, and both positions could be true.

But there is one conclusion that requires no arbitration tribunal. A government should never begin a war with the company operating its only hospitals until it knows who will be operating them when the war is over.

Small island nations may be independent, but none is entirely self-sufficient. St Kitts, which is independent, turned to the IMF, the Caribbean Development Bank and its regional partners for a bail out. Turks and Caicos, which is a British Overseas Dependency turns eventually to Britain. The difference is not whether somebody comes to the rescue, which they usually do, but who arrives, what conditions they impose and whether they can remove the whole government and start again when they get there. And if you are an island group that has no income tax, no sales tax, and no VAT, you cannot expect a whole lot of sympathy from taxpayers elsewhere.