Tallinn wants state to fund new hospital's construction as consolidation condition
Tallinn and the Ministry of Social Affairs have been discussing for several months how to merge the city-owned hospitals with the state-owned North Estonia Medical Center (PERH). According to Tallinn, the only feasible agreement would require the state to help fund the construction of a new medical campus. The Ministry of Social Affairs, however, believes the necessary funding could be secured without a political agreement.
Tallinn and the state began talks in August to merge hospitals. The consolidation of three hospitals owned by Tallinn – East Tallinn Central Hospital (ITK), West Tallinn Central Hospital (LTK) and Tallinn Children's Hospital – with the state-owned North Estonia Medical Center (PERH) is also outlined in the new hospital network development plan. The plan envisions a unified Tallinn hospital with two campuses in the capital, one in Mustamäe and another in Lasnamäe.
PERH already has a campus in Mustamäe, but a new facility would need to be built in Lasnamäe. Since construction is estimated to cost around €850 million, Tallinn cannot cover this from its budget and seeks state funding to cover half of this amount. This funding issue is currently the primary obstacle in negotiations, Tallinn Deputy Mayor Karl Sander Kase (Isamaa) told ERR.
"There's no point in merging institutions on paper alone," Kase said. "Tallinn's interest and goal in these negotiations is to find a final solution for building a new facility for Tallinn Hospital."
Thus, regardless of what the development plan suggests, Tallinn seeks an agreement to either build a new medical campus or, if the state opts not to pursue a new facility, to support the reconstruction of current hospital buildings. City estimates indicate this wouldn't be a cheaper alternative: the combined investment for all three hospitals would amount to €831 million, with the two general hospitals, LTK and ITK, accounting for €648 million.
However, Kase noted that finding a financial solution during ongoing negotiations is unlikely, as the decision would require action from coalition politicians.
"The biggest hurdle in the negotiations is political. We don't expect the secretary general of the Ministry of Social Affairs to suddenly allocate €400 million for Estonia's medical network development. This requires a political decision and commitment from the government. If we consider Estonia's hospital network as a whole, the investment need stands at €1.4 billion. It's clear that the need is most acute in Harju County and Tallinn. This political decision must come from the government; no one else can make it for them," Kase stated.
The Ministry of Social Affairs, however, sees the situation less pessimistically. According to the ministry's Secretary General Maarjo Mändmaa, state funding does not necessarily require a political decision.
"The real question is where the funding truly lies and what genuine funding sources exist. We can't rely solely on the state budget for such investments; other sources are necessary, such as external funds or loan capacity," Mändmaa explained. "A merged hospital would be a strong, well-capitalized organization with substantial revenue."
"I don't see this as a partisan political issue but rather as a matter of identifying real sources of funding. No one wants to make empty promises, and it's critical for us, as officials, to put forward serious funding options," he added.
Tallinn made cautious by promises of external funding
The ministry needs to make an effort to ensure that Tallinn takes funding proposals seriously, as the city has lingering reservations about promises involving external funding.
According to Kase, Tallinn would not accept a promise of funding for the hospital complex beginning in the next European Union funding period, starting in 2027. A negative experience in 2022, when the Reform Party-led government removed the Tallinn Hospital from the list of supported projects, has undermined the city's trust in state assurances.
"That is not enough of a guarantee for us to seek funds together with the state to build Tallinn's medical campus. In 2022, the government simply crossed the project off the list, and we do not want a repeat of that. We need concrete clarity and a new plan – a goodwill gesture from the state, perhaps in the form of state funding for the design phase of Tallinn Hospital. Waiting another three years on the chance something might happen in the late 2020s is also not reasonable," Kase said.
However, Mändmaa believes Tallinn's concerns are unfounded, as the situation has changed.
"It's likely that the previous decision to remove external funding was due to the project being seen more as a real estate venture. The main goal of consolidating all Tallinn hospitals to improve healthcare services took a back seat. Now, our agreement is centered on creating a competence center for Northern Estonia, which makes this construction project more appealing for both foreign aid and loans, and the state is committed to co-funding it," Mändmaa explained.
Kase confirmed that Tallinn's interest remains ensuring that the merged hospital has the necessary investment capacity.
An additional step forward is that, while Tallinn has previously argued alone that the hospital project is crucial not only for the city but also for North Estonia and, ultimately, the entire country, the Ministry of Social Affairs now shares this perspective.
"This is not a local government service; it is a state service to ensure healthcare accessibility in the area with the highest population in Estonia. We absolutely need to support this in the state budget," Mändmaa stated.
"50/50 split seems self-explanatory"
Negotiations have progressed to the point where discussions have been held on the potential legal structure of the merged hospital and how workforce sharing would be managed. The next step is to discuss the financial plan.
"We are being constructive, there are discussions, and if no result is achieved, the city will move forward with consolidating its hospitals independently. To merge East Tallinn Central Hospital and West Tallinn Central Hospital, for example, we don't need separate negotiations with the state. The goal is for Tallinn's hospitals to come under one roof. Whether this happens in half a year or a longer term, I can't say," Kase said.
Tallinn has sought state support for half of the hospital campus construction costs since the previous city administration, and Kase noted that they have no intention of settling for less now.
"A 50/50 split seems reasonable. This is a project that has been previously discussed. The Tallinn Hospital project began at its current location ten years ago. It's not fair to the Estonian people or healthcare professionals to leave this hanging indefinitely. If the state does not wish to fund the project, the realistic outcome is that Tallinn Hospital, as envisioned, will not be realized. In that case, it's up to politicians to honestly admit this, rather than sketching out plans on paper without real commitment," Kase stated.
According to Mändmaa, the ministry and the city are largely in agreement. As a gesture of shared commitment, a provision was included in the new hospital network development plan stating that the state and local government will jointly draft a funding plan for the new medical campus next year.
Design process to continue
The design planning for the hospital was initiated once before but was left unfinished. Tallinn announced a new design tender this summer, but the deadline was postponed due to pressure from the Estonian Association of Architects, allowing time to commission an independent architectural review of the preliminary design for Tallinn Hospital. The tender deadline is now set for January 20 of next year.
According to Kase, much depends on the ongoing negotiations with the state.
"When we started negotiations, our hope and intention was to have clarity on the funding model by October. It now appears that we won't reach that clarity by then. Our next meeting is scheduled for early November, and we are committed to reaching an agreement by the end of this year. If no agreement is reached, it's a legitimate question whether we should proceed with the design phase. However, we are moving forward in good faith and working hard to make it happen," Kase stated.
Mändmaa expressed confidence that an agreement with the city would be reached. Initial estimates suggest that the merged hospital would generate annual savings of approximately €10 million compared to the current arrangement.
"This is a very preliminary estimate, but consolidating support services, joint procurement, logistics, pharmacies and catering would certainly bring financial efficiencies," Mändmaa explained.
Hospitals' alternative plans
Kase noted that if the new hospital complex in Lasnamäe will not materialize, Tallinn's hospitals have plans to renovate their existing buildings. "If the new medical campus isn't built, we need to start tomorrow on renovating today's aging facilities," he said.
West Tallinn Central Hospital's alternative plan envisions consolidating acute care activities at its Paldiski maantee medical campus. This would involve reconstructing the medical campus and building a new eight-story treatment wing alongside a three-story facility for medical and support services. This project would take around ten years and cost an estimated €150-170 million at current prices, with additional expenses for equipment and value-added tax.
The alternative plan for East Tallinn Central Hospital on Ravi tänav would require finding a new location and building the necessary infrastructure. The main issue with the hospital's current buildings is that most are protected as heritage sites, making renovations to meet modern standards either prohibitively expensive or impossible. Additionally, the current plot lacks sufficient space for new constructions. The existing Ravi facility occupies around 40,000 square meters, but modern requirements would demand approximately 60,000 square meters in a new building. The new complex is estimated to cost about €300 million, with an additional €64 million needed to renovate Magdaleena Hospital.
The Children's Hospital also requires an expansion, estimated at €60 million. Furthermore, plans include merging the Children's Hospital with the Maternity Hospital to establish a perinatal center, costing approximately €42 million. Renovations would also be necessary for Building A, along with expanding the mental health center.
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Editor: Marcus Turovski