New Tallinn hospital budget lines mostly still unclear

Model of the planned new hospital in Tallinn.
Model of the planned new hospital in Tallinn. Source: Tallinn city government

It is currently still unclear how much it will cost to build the planned new Tallinn Hospital in Lasnamäe, or who exactly should foot the bill for construction costs.

The future of Tallinn Hospital, a planned major new hospital to be built in the capital city's Lasnamäe District, is currently shrouded by questions. Is the total price tag of the project going to increase by 3 or by 50 percent? Is the ruling coalition Reform Party prepared to bail Tallinn out with state funding? What will happen if construction of the mega-hospital drags? Funding originally earmarked for Estonia in the EU's Recovery and Resilience Facility, which was going to help pay for construction of the hospital, is being reduced by €120 million.

Mid-March also saw several major price-related announcements as well, including the forecast cost of the planned Tartu Downtown Cultural Center (SÜKU) spiking from €60 million to €97 million, and construction of a new key bridge in Pärnu grinding to a halt following a hopeless procurement effort. Tallinn Deputy Mayor Andrei Novikov (Center) acknowledged that some investments just have to be pulled.

At the same time, however, Mayor Mihhail Kõlvart (Center) had submitted his own input to state budget strategy negotiations, according to which the current estimated cost of the Tallinn Hospital project increased just over 3 percent compared with the previous figure, from €520 million to €538 million.

Tallinn Hospital CFO Ebe Nõmm explained that the City of Tallinn is basing its calculations on the Ministry of Finance's construction price index. "In reality, this construction price index was last year's fall forecast," Nõmm continued, adding that the city is expecting to receive an updated price index reflecting the new spring forecast soon. "Then we can publish a new figure."

The new sum will likely be imprecise as well, as no one can offer precise figures at the moment. There are specialists at the Ministry of Finance who believe that construction prices will increase 50 percent.

Kiik: State has to pitch in €100-150 million

Amid the uncertainty, Kõlvart reached out to political party-mate and Minister of Health and Labor Tanel Kiik and offered that the state and the City of Tallinn could split the cost of the new hospital. Or rather, that €280 million in funding should be coming from the EU, and the city and the state could split the rest.

"More than 50 percent of the hospital burden will consist of patients from outside of Tallinn's administrative territory," Kõlvart said. "This project is of national importance in any case."

Kiik agreed with him — the hospital needs to be funded. "From a healthcare perspective, this is the most crucial investment, the most crucial project of the century," he stressed. "It would be reasonable for the state to contribute to this project in the range of at least €100-150 million here, if necessary then on an even larger scale."

What exactly "larger scale" means, in this case, Kiik was unwilling to suggest. Contracts for excavation work, ensuring water and power supply, and for the supply of reinforced concrete structures are slated to be signed in the fourth quarter of 2023, and the hospital's construction contract must be signed in the first quarter of 2024. It is at that point that final costs will be clear.

A few days after his first letter to the minister, Kõlvart raised the stakes. According to the mayor, Ukraine's experience clearly demonstrated that the planned hospital desperately needs a second basement level that could fit up to 500 beds if necessary. The additional level would cost €47.7 million according to the city's calculations; how much it would actually end up costing in reality, nobody knows.

"The project actually initially did include two underground levels, which were cut," Kiik said, acknowledging that the money should indeed be found to expand the hospital's basement level. "If we're already going to take on this project, then it would be reasonable to do it properly, not as some sort of suboptimal solution."

Tallinn coalition agreement priority

But does a limit still exist, exceeding which neither the City of Tallinn nor the state should pay more for the hospital? Kõlvart said that if Tallinn Hospital isn't built, then the existing West Tallinn Central Hospital (LTK) and East Tallinn Central Hospital (ITK) need to be renovated instead.

"But we need new technologies in order for medicine to develop," the mayor stressed. "And in order to implement new technologies, we also need to create a suitable environment, and that means a new hospital anyway. I believe that it would be very much the wrong decision strategically to give up on this right now."

Kiik added that if Tallinn Hospital isn't built, people's interest in working in the healthcare field will diminish as well. "I'm not in favor of postponing the Tallinn Hospital investment," he said. "This is an investment that should have been made years ago already."

The Social Democratic Party (SDE), Center's coalition partner in the Tallinn city government, considers the building of the hospital to be of crucial importance as well.

"The building of this hospital is one of the single most important priorities of the coalition [city] government formed last fall," SDE group chair Raimond Kaljulaid said.

Kaljulaid nonetheless also listed off several other items that need funding as well. Fixed costs are being driven up by both the presence of war refugees from Ukraine as well as rising energy costs. Some thousand or so buildings are listed on the city's balance sheet that require heating and power. Besides, there are other investments as well that are necessary: renovations of kindergarten facilities, extensions to school buildings. According to the SDE city council member, all of this needs to be examined as a whole.

"There is no good alternative to the building of Tallinn Hospital," he nonetheless added. "If we consider what we could do instead, i.e. overhauling existing buildings, then I don't think that is as good of a choice."

Michal: City should see if it can build smaller

The Reform Party, Center's partner in the Estonian government, is not feeling as generous. Minister of Finance Keit Pentus-Rosimannus (Reform) said a year ago already that the state does not intend to provide funding for the mega-hospital project, as the hospital will belong to the city.

Last summer, when the European Commission finally approved the hospital project, the minister stressed again that the rest would be up to Tallinn alone.

Reform board member and Tallinn group chair Kristen Michal recalled that the state was the one who managed to secure €280 million in funding from the EU's Recovery and Resilience Facility.

"This is a crucial part," Michal said, noting that the war in Ukraine has saddled the state with a slew of additional expenses. "The state should look for additional opportunities, such as what unnecessary assets it has in the city that it can sell, and how the city can manage by itself. I'd like to recall that the city budget is already nearly €1 billion."

The expected increase in the cost of the project did not faze him either, even with Kiik, his coalition partner, on board regarding the funding need. "If Tanel Kiik is proposing something like this, then Tanel Kiik will also certainly figure out where to get that money from," he said.

Michal isn't against the construction of the new mega-hospital. On the contrary, over the years, he has repeatedly stressed the importance of building a new hospital. But unlike Kiik and Kõlvart, who believe the right move is to increase the size of the project, Michal favors reducing it instead.

"Tartu for example announced that as the size and costs of [the planned] SÜKU have gone up, they will actually review the project and its size — Tallinn should be able to manage to do the same," he said, adding that the Tallinn city government should consult with North Estonia Medical Center (PERH), for example, regarding future plans.

Reform's resistance nonetheless may not thwart construction plans for the new hospital.

"These negotiations and discussions will certainly continue both in the current government and in the next government to begin work following the Riigikogu elections [next spring]," Kiik said, highlighting the fact that the lion's share of spending on the new hospital will fall into the next government's term.


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Editor: Aili Vahtla

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