A Grand Court judge has found that the Cayman Islands Government “acted inappropriately when it awarded fee waivers and concessions” to Health City Cayman Islands for “extremely lengthy periods” without putting the deal before Parliament. The court also said the CIG should publish the criteria for tax and duty giveaways or other concessions in these types of agreements.
In a mixed judgment on the legal action brought by Doctors Hospital against the government, Justice Richards Williams didn’t decide fully in either side’s favour but he has called on government to review the deal with HCCI.
The contract signed by the UDP administration in 2010 with Dr Devi Shetty to build Health City, which gave away as much as $800 million in concessions and waivers, became the subject of a legal challenge by the Doctors Hospital when those concessions were transferred to an additional facility in Camana Bay and another medical tourism facility, Aster Cayman Medcity, was given a similar deal.
This was signed just before the PPM-led coalition government was voted out of office in 2020. The new agreement for a proposed $350 million hospital in West Bay also included a number of major fee waivers.
However, the Doctors Hospital (formerly the Chrissie Tomlinson Memorial Hospital), which is in the process of expanding, has said every time it needs to import new medical equipment, it must apply for a duty concession, which it may or may not get, and has no discounts on work permits or other government fees.
The local hospital has said this is unfair because each administration since 2010 has acted as though it is legally obliged to honour the contract with HCCI. In addition, there are inequities relating to the professional requirements of overseas doctors at the hospitals designated for medical tourism compared to those practising at other hospitals or clinics. Therefore, the management at Doctors Hospital filed for judicial review last year.
The hospital was seeking declarations from the court that it was unlawful for the government to grant waivers to Health City and Aster while it was refused similar concessions, that there should not be a two-tier system and that the government was not bound or fettered by the contract it had signed.
After a three-day hearing in April this year, Justice Williams issued his ruling this month, which was released to the public on Friday. Although the judge fell short of the “wide declaration” that Doctors Hospital was looking for, he did find that the government had acted inappropriately in awarding substantial waivers and concessions for extremely long periods without putting the deals before Parliament.
“There is no evidence filed by the Respondent (the government) to show that it has considered or taken into account anything other than the granting waiver provisions in the Agreement or to show that it has conducted any updated reevaluation in relation to the ongoing concessions,” he said.
Justice Williams said the government should now review the deal and that it was not eternally bound in its power to raise taxes by the 2010 agreement. He confirmed that the government’s statutory power to refuse to waive duty was “unfettered”, so governments are not bound indefinitely by deals made by their predecessors.
He said decisions by the government to grant tax concessions to interested parties to stimulate development were not in themselves unlawful. “Government may offer tax breaks to induce development which can limit future income,” but it was a matter of degree, the judge said.
“The issue is not the granting of individual waivers or concessions, especially if they are for a reasonable period of time. The issue arises due to the insular process Cabinet adopted to reach that decision, as the granting of such concessions over an extended period of time and then acting in a manner that is consistent with a belief that the government (and successive administrations) are bound by the Contracts to continue to give the waivers without further review,” he added.
Justice Williams also found that “despite the clear merits” of having properly published criteria for concessions, it was not appropriate for the court to declare that the government must do this because it wasn’t unlawful not to. But he said it would be “well advised and would be acting in a manner consistent with good governance if it did”, especially since the government has accepted that it should for the last seven years.
During the course of the case, the inequities over the registration of doctors were largely addressed. An official from the Health Practice Commission confirmed that, regardless of the technical registration and qualification differences between doctors at medical tourism facilities and those who work at all the other medical facilities, they had, in fact, been held to the same professional requirements.
The government already has guidelines for designation and has agreed there will be further reviews to maintain standards. Since a 2011 amendment to the law, all doctors must reach the same high professional standards.
In a statement following the ruling, Dr Yaron Rado, Chief Radiologist and Chairman of the Doctors Hospital Board, welcomed the judgement, even though they did not get all the formal declarations they wanted. He said the judicial review had succeeded in securing crucial developments for the healthcare sector.
“The Grand Court has… recommended that the legislature considers the need to amend the wording of the Health Practice Law and Regulations to make matters crystal clear in this important area of patient safety,” Dr Rado stated.
He said that as a result of the legal challenge, all doctors must now meet the same high standards before they are approved to practice in the Cayman Islands “and before they may hold themselves out as specialists in a particular field”.
He noted that the Grand Court found in favour of the claim that CIG’s powers to collect taxes cannot be fettered by long-term contractual promises and it should not commit to long-term subsidies. “The effect of this is that CIG is now free to collect taxes from Health City and Aster to the value of hundreds of millions of dollars,” Dr Rado said.
While Aster and HCCI were not directly part of the judicial review, they were interested parties. In the wake of the ruling, Health City issued a statement noting that over the twelve years since the deal with the CIG was signed, it has received just US$15 million in concessions and waivers, which is only a fraction of the agreed amount. In return, it has invested some CI$250 million and brought around $80 million worth of business into the economy.
HCCI also outlined its credentials and defended its “highly trained medical specialists”, who have “saved and improved the quality of countless lives in our community”. During the case, the Registrar of the Health Practice Councils confirmed that the hospital itself and the physicians registered under the “Institutional List” have always met the standards of doctors on the “Principal List” and are subject to the same educational requirements.
Health City further noted that its practitioners have never been exempt from the biennial licensing requirements, as Doctors Hospital had claimed during the case.
“Health City has consistently published our quality of outcomes that routinely surpass the benchmark for United States hospitals. These have been available to the public on our website. No other medical institution on island and in the Caribbean… provides this level of transparency to the public.”
HCCI noted that before it opened its doors, patients waited hours on end for air ambulances in serious life or death situations and that it provides quality healthcare at a fraction of the cost of the hospitals in the United States, where people had previously been taken. Aside from kickstarting the concept of medical tourism, the hospital said it was filling healthcare gaps and the concessions made this possible.