Hospital fees could rise by five percent in real terms over the next five years to help pay for the $315 million improvements to King Edward VII Memorial Hospital.

Bermuda Hospitals Board CEO David Hill estimated the increase could cause insurance premiums to go up by three percent, however he stressed the actual figure would be set by individual providers.

The CEO explained that the BHB calculation was based on its own preliminary views of how it might deliver the multi-million project.

"The expected impact on the community for the new hospital plan is expected to be about a three percent rise in premiums phased over a five-year period," he said.

"This figure comes from our preliminary work on delivering the new hospital project. We estimate that we will need a five percent rise in hospital fees above inflation phased over five years.

"As the hospital fees make up about half of all healthcare costs, this is likely to impact premiums by about three percent depending on the payer."

Hospital fees this year rose by seven-and-a-half percent for the second year in a row. Health Minister Nelson Bascome explained that the increase was to help cover both the $11 million Kurron Consulting Contract and KEMH operational fees.

The fees now stand to rise next year to cover the first phase of a building project that the BHB, Johns Hopkins and accounting firm KPMG said would have to be built in phases to ensure affordability.

Phase one will see the erection of two new wings — an ambulatory building and a patient tower — as well as a central utility plant.

Renovations of the current buildings will also be undertaken.

Mr. Hill explained that to pay for these additions, the BHB may have to increase hospital fees by five percent more than inflation over the next five years – a move which could possibly lead insurance premiums to rise by three percent.

"We are in the process of selecting the delivery model that is the best value for Bermuda." he said. "The public/private partnership referred to by Mr. Malcolm Butterfield, managing director for KPMG (Advisory) at the press conference and in our press release, would result in a first upfront payment in about five years.

"We would then pay a fee over a period between 25 and 35 years, rather like a mortgage, although part of the payment would be for maintenance of the new facilities."

Mr. Hill also explained that constructing the payment scheme in these terms would help manage the risks and make the project more affordable.

There is also a chance that the additional space anticipated in the new buildings may reduce the need for Bermudians to travel overseas for certain healthcare services or consultants.

The savings this might provide, however, has not been evaluated. A spokesperson for the Health Insurance Association of Bermuda would only say the organisation is working with the BHB to ensure premiums rise by a minimum.