CHANGE IN MANAGEMENT AT ABUJA'S NATIONAL HOSPITAL:

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001164

SIPDIS

E.O. 12958: DECL: 06/30/2014
TAGS: ECON EINV PINR TBIO SOCI NI
SUBJECT: CHANGE IN MANAGEMENT AT ABUJA'S NATIONAL HOSPITAL:
BACK TO (FUNNY) BUSINESS AS USUAL?

REF: LAGOS 1291

Classified By: A/DCM CLAUDIA ANYASO. REASONS 1.5 (B & D).


1. (C) CONFIDENTIAL -- ENTIRE TEXT.


2. Summary: The GON's decision to terminate International
Hospital Group's (IHG) management contract at the National
Hospital appears to stem not from irregularities on the part
of the British management group, but rather on its
intolerance for irregularities that enriched powerful people,
some of them apparently close to the President. The saga of
National Hospital suggests that the GON's stated policies of
streamlining, transparency and anti-corruption do not
necessarily apply at the highest levels of government. End
comment.


3. Econoff met with a key member of the former management of
International Hospital Group team (protect source) for a
post-mortem of IHG's management contract at the National
Hospital in Abuja. His story was very much at odds with the
portrayal to date by the Nigerian press and by GON officials.


4. According to the IHG official, the contract IHG signed
with the Board of Directors of the National Hospital was, in
parallel, a management contract aimed at helping the hospital
to improve its operations in addition to a consulting
contract to lay the groundwork for improved operations in the
future. IHG had received a business plan from the Board at
the beginning of the contractual period but soon found it
useless. No accounts had been kept at the hospital since
1999, and most internal data on patient visits was suspect.
Unable to determine how many patients had been treated and
how much money the hospital had collected or spent, IHG had
no ready benchmarks to assess the hospital's performance.
Its first task, therefore, was to put the accounts in order
and set up a functioning IT system. After six months, IHG
produced audited accounts of the hospital's operations since
inception.


5. The National Hospital's Board of Directors consisted of
prominent people from health care, the various geopolitical
zones of Nigeria, representatives of key cabinet ministers,
etc. According to the official, relations with the Board
remained excellent throughout IHG's tenure. IHG's contract
was with the Board and contained appropriate mechanisms for
Board review of IHG's performance and procedures for
terminating the contract for cause with prior notice.
However, since the hospital is also a parastatal, the GON,
represented by the Secretary to the Government of the
Federation (SGF),had an exogenous but important role in
monitoring the National Hospital's operations.


6. IHG's contract, which was for UKP 2.8 million per annum
(approximately USD 5.12 million, not the USD 6.55 million
cited in press reports),gave IHG authority over personnel
matters such as the hiring and firing of staff, including
medical doctors. On its own, the GON committed itself to
placing anyone who was laid off from the hospital into new
positions in government entities. In the contract, the GON
also committed itself to providing working capital for the
hospital, which in fact never materialized.


7. The IHG source believes the company ran afoul of some
"important people" by terminating several senior staff
members and tightening up the contract tender process. When
IHG took over, the National Hospital had, for instance, a
very expensive maintenance contract with Julius Berger, the
German construction giant that had originally built the
hospital (and most of Abuja, for that matter). Not only were
the fees much higher than customary, but anomalies such as
monthly maintenance fees on pieces of furniture the hospital
owned were included. IHG put the maintenance contract out to
bid, and Berger was reportedly furious that it did not win
the contract. The reason it lost was simple: Julius Berger
did not even bother to bid on the contract, apparently
assuming their "relationship" would win them the contract.


8. In the end, IHG's tenure at National Hospital was
terminated by the SGF on one week's notice over the head and
over the objections of the Board of Directors. The
publicly-stated reason was that IHG was in breach of contract
because the hospital had not become self-sustaining after its
first year of operations under IHG. No mention was made of
the fact that the GON was also in breach for not providing
the promised and much-needed working capital. According to
the source, the report made by the SGF contained a number of
outright falsehoods, many half-truths and several arguments
full of sophistry intended to discredit IHG.


9. The IHG official noted that the interim management team
is headed by a medical doctor with close ties to the
president who had previously expressed interest in running
the hospital himself and who complained that National
Hospital was the only major hospital in Nigeria not headed by
a medical doctor. The IHG official further speculated that
the Nigerian government may intend to privatize the hospital,
because the privatization agency Bureau of Public Enterprises
(BPE) is represented on the interim management team.


10. The official also speculated that the reasons for IHG's
rapid ejection was that its oversight of outside contracts
had cut off some people's sources of illicit income.
Evidence cited for this was the rapid reinstatement of at
least three employees who had been terminated for cause,
including some who are still under investigation by the
Independent Corrupt Practices Commission (ICPC). In addition,
Julius Berger was rapidly brought back as management
contractor.

11. Other actions of the interim management committee
indicated that they were paying more attention to
personalities and ethnic sensibilities than to operational
effectiveness. One member of the hospital management, hired
by IHG just prior to the termination of its contract, was
quickly fired not on performance grounds but for being from
the wrong region and tribe. Another example is the IT
director of the interim management team, who has no computer
on his desk, declines offers to supply him with one, and
insists that any document presented to him be printed out on
paper.


12. Although the IHG official claimed no first-hand
knowledge of high-level political interference, the team
received numerous indications from sympathetic staff members
that IHG's tenure at the National Hospital was a casualty of
rivalry between President Obasanjo and Vice President Atiku.
The official said he now gives credence to this theory due
to the manner in which the termination was carried out: it
occurred over Easter weekend, when most of the Board was
unavailable and the Vice President was out of town. The
official suspects that while the Vice President, whose
influence is on the wane, was otherwise engaged, officials
close to the Presidency who had designs on National Hospital
or vested interests in its formerly corrupt practices gained
the President's support for the takeover. This group acted
so quickly that no one was in place to take over from IHG:
after the one-week notice period expired, IHG stayed on for
an additional two days, calling SGF regularly to find out
when someone would come to the hospital and assume charge.


13. Comment: Econoff has met most of the members of the IHG
team socially at various times, and all appear to be
level-headed, competent professionals. IHG's experience with
National Hospital suggests that the hospital is still running
as a parastatal, with political goals more important than
economic goals. Reinstatement of discredited employees and
questionable service contracts runs counter to the GON's
rhetoric on transparency and fighting corruption, as does the
sudden termination of the contract without formal Board
proceedings. If the suspicions of the IHG official are
correct, it would appear the GON's commitment to economic
reform might not extend to the highest levels of government.
End comment.
CAMPBELL