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The government told NHS Lothian in December that it was "not in a position to fund a new eye hospital now or in the foreseeable future" despite agreeing in principle to the plan in 2018.
Following a public outcry and cross-party calls for a rethink, Nicola Sturgeon said during the election campaign she would after all fund a replacement for the Capital's no-longer-fit-for-purpose Princess Alexandra Eye Pavilion.
Now staff at the Eye Pavilion have been told the government has requested that the business case for the new hospital be updated and resubmitted.
In a memo sent out on Friday, site director Aris Tyrothoulakis said: "We just received notification from Scottish Government this week that we should update our Outline Business Case (OBC) and resubmit it to the Scottish Capital Investment Group for consideration at its August meeting. If the case is supported there, then we will be allowed to progress to the Full Business Case stage.
"As per the original case, the updated proposal will describe the requirement for a new-build Eye Hospital in Edinburgh."
The government request comes after an external review of eyecare services, commissioned by NHS Lothian following the refusal of funding in December, backed the case for a new hospital.
Ministers had originally urged the dispersal of services across the region, but the report by Buchan & Associates highlighted the importance of a “centre of excellence” and the benefits of locating different eyecare services on one site, as well as the need to bring together care, training and research as would happen with a new hospital next to the BioQuarter at Little France.
Jim Crombie, deputy chief executive of NHS Lothian, said: “We shared the findings of the report with Scottish Government and have now been asked to re-submit the Outline Business Case to the next meeting of the national Capital Investment Group, which takes place in August. We are now progressing this important case with our outstanding ophthalmology clinical and leadership teams.”
One insider said: "Public and professional pressure on the government during the election campaign pushed the First Minister into agreeing to look again at this vital part of Lothian healthcare provision. And this announcement represents tacit acceptance from the government that the future of ophthalmology services in Lothian depends upon a fit-for-purpose full replacement of the Eye Pavilion, and not piecemeal dispersal of services across the region.”
Lothian Tory MSP Miles Briggs welcomed the news and said he hoped the new hospital could now progress quickly.
"We don't want to slow this down by starting from scratch. Nothing has fundamentally changed and significant amounts of money have already been spent, so I hope this is the start of fast-tracking the project."
But he stressed the need for the hospital to be "properly funded".
"My concern is that we don't see NHS Lothian short-changed again. If the Scottish Government just parks it on the health board, they are already the lowest-funded in Scotland and there are some key infrastructure projects coming down the line."
The Scottish Government has said the cost of the planned new hospital was £83 million when the business case was originally submitted to ministers in April 2019.
It is understood the updating of the Outline Business Case is likely to include inflation-related rises in costs, latest figures on patient numbers and waiting lists and some of the proposals from the review, such as an expansion of services in East and West Lothian.
Mr Briggs said: "Hopefully this is the eye hospital back on track, but the devil is always in the detail and it is making sure that the project will be what the campaigners and NHS staff need and want, that it's future-proofed because we have a growing population, we have waiting times which are unacceptable and that it can be financially stable for the health board to take it forward as soon as possible."
Lothian Labour MSP Sarah Boyack said the government request for resubmission of the business case was “very good news”.
She said: “I hope this means progress is going to be made on a new Eye Pavilion for Edinburgh. We need a centre of excellence – that’s what the experts have been telling the Scottish Government for months. Let’s hope this means real progress.
"It’s vital we get a new eye hospital that is a centre of excellence and incorporates research, emergencies and operations and increases capacity in the Lothians because that is something we urgently need.”
Sylvia Paton, of campaign group Keep Edinburgh Eye Pavilion (KEEP), also welcomed the move. "This is very positive and it will be interesting to see what the outcome is. Hopefully what they submit will be similar to what was put forward before. Now we need a guarantee of funding for it and we need to keep the pressure up to get it done now, not in ten years' time. This is a good step in the right direction."
And celebrated eye surgeon Hector Chawla, former director of the Eye Pavilion, said: “A centre of excellence on one site is what we have been saying all along. The message we have been giving to them has left an irrefutable case for rebuilding the hospital.”