Purchase of unfinished hotel for patient care facility a 'highly unusual transaction': AG

The Nova Scotia government's decision to spend millions of dollars to buy an unfinished hotel and convert it to a patient care facility was a "highly unusual transaction" that did not demonstrate adequate due diligence to obtain value for money, according to a new report from the province's auditor general.

The government announced plans in December 2022 for two transitional care units, facilities that could house patients who no longer need hospital beds but are not ready to return home or are awaiting a long-term care placement.

A report released by Auditor General Kim Adair on Tuesday found that the government has spent $81 million in untendered contracts that did not comply with procurement protocols, as part of that process.

Adair found that the decision by the Progressive Conservatives to buy the property at 21 Hogan Court, just off Highway 102 near Bedford, for one of those facilities featured "an inadequate market scan of alternatives, a purchasing arrangement which reduced the province's ability to minimize costs and a valuation not based on the condition of the building at acquisition."

The report reveals for the first time that the province used an alternative procurement plan to secure a five-year $67.5-million contract with a third-party operator to run Hogan Court once the facility is operational. Adair notes that Nova Scotia Health is applying a health and social services exemption to facilitate the deal.

Seven proponents were considered for the contract and Adair notes that Nova Scotia Health started the process before getting approval to use an alternative-procurement process and that no conflict-of-interest declarations were completed by the evaluation team. Because such a requirement does not exist within the health authority, officials relied on people self-declaring any issues.

The Tories paid Cresco Holdings $34.5 million for 21 Hogan Court and subsequently said they are spending another $15 million to renovate the site to make it suitable to house patients. Adair's report pegs those renovation costs at $17.4 million.

Although the work was supposed to be complete early this year, Colton LeBlanc, the cabinet minister responsible for major health-care construction projects, told reporters last week that renovations would continue until sometime in the middle of the year before the site is turned over to Nova Scotia Health.

It would be up to officials with the health authority to determine when the property will begin receiving patients.

Not only did opposition members raise questions about the amount of money the government spent to purchase the unfinished hotel — both the Liberals and NDP called on Adair's office to examine the deal — but a report obtained last year by CBC News raised questions about the viability of the site to house patients.

The report, prepared for the government by Nycum + Associates, suggested it could take costly renovations to convert the property from a place designed to house hotel guests to a location appropriate for patients awaiting a long-term care placement or convalescing until they're ready to return home.

Adair's report noted that the consultant's findings not to convert the building had no impact on the government's decision to buy 21 Hogan Court because it came after the government granted approval to purchase the property.

"The Province entered into a significant purchase arrangement without a comprehensive understanding of the building's suitability for conversion or the associated costs," the report says. "This has contributed to project timeline delays, issues with code compliance, unforeseen costs, and changes to the patient profile."

But LeBlanc has maintained that the project makes sense and will result in more new beds for the system much sooner than if the government commissioned a project from scratch. The aim is to ease the congestion that exists with acute care hospital beds now, a problem connected to overcrowded emergency departments because patients cannot be moved out and into hospital beds fast enough.