Those responsible at the children’s hospital now have to prove that they can get the finances under control. Otherwise, sensitive nationalization ideas will gain even more impetus.
The new building has put the children’s hospital in financial distress.
Til Buergy / Keystone
It was less than ten months ago that the canton of Zurich had to come to the aid of the children’s hospital. At that time the hospital was in danger of collapsing. To prevent this, the government council approved a loan of 100 million francs for the new building and a subsidy of 35 million francs to cover the operating deficit.
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In the meantime, the situation does not seem to have improved; the hospital had to adjust its already poor forecasts for the current year downwards by another 5 million francs. And so the canton has to step in again. As the Health Directorate announced on Thursday, he is spending another 25 million francs.
What are the problems of the children’s hospital? On the one hand, there is the new building by the star architects Herzog & de Meuron, which the hospital moved into last November. This has become significantly more expensive than planned. According to the original estimates, this should have cost 550 to 600 million francs. But in the end it was 761 million.
The increase in costs is only partly self-inflicted; it also had a lot to do with factors beyond our control such as inflation and construction delays due to the war in Ukraine. The hospital management’s mistake, however, was that they pushed the financial limits right from the start and included far too few reserves. This is the conclusion reached by an investigation report commissioned by the canton. Instead of making a realistic risk assessment, the hospital management adjusted the numbers to suit its own big plans – and in the end appeared surprised when the optimistic calculation didn’t work out. If she had recognized the risks early on, she could have saved money on construction.
The cost overrun meant that the private foundation that runs the children’s hospital had to burn through all of its assets. And this resulted in a second problem: There are no longer any reserves to cover operating deficits.
-Many hospitals are currently struggling just to break even. This is a particular challenge in pediatric medicine, which is considered to be underfunded. The children’s hospital also posted a deficit of almost 30 million francs in 2023; the figures for last year are not yet available. But the children’s hospital’s business plan assumes that the operation will not be back in the black until 2029.
Running deficits while the cash register is empty is a toxic combination. Without state rescue, the children’s hospital would no longer have been able to continue.
It is correct that the canton provided survival assistance in this situation. The children’s hospital is the largest of its kind in Switzerland and a vital part of healthcare. In other words: systemically relevant.
However, this puts the canton in an awkward position. How can we prevent those responsible for the hospital from giving up again if they have miscalculated or if operations are not going as well as desired? After all, they know about the system relevance.
The health department is now trying to impose financial requirements and increase control of the children’s hospital. Two supervisors from the authorities are supposed to ensure that the hospital repays the cantonal loan and sticks to its business plan. It’s good that the canton is increasing the pressure. Where the state invests so much resources, it has to take a close look. This has not been done enough in the past, otherwise the problems could have been identified and intervened earlier.
There is a lot at stake for the children’s hospital. Auditors from KPMG describe the business plan as “ambitious,” which is probably a euphemism for: difficult to achieve. But if the hospital fails, there are serious consequences: from further intervention by the canton to nationalization. Corresponding demands have already been made in parliament by the left and could gain momentum.
But anyone who thinks that the financial risks would be smaller with state management just needs to take a look at the city of Zurich. Their city hospitals in Triemli and Waid have been the most reliably in the red in recent years.
