Premier Colin Barnett has revealed that an inquiry will be conducted into the operations of the Peel Health Campus - two days after saying he didn't think an inquiry was necessary.
Speaking on ABC radio this morning, Mr Barnett said the details of the inquiry would be determined by Health Minister Kim Hames.
"It will primarily look at the administration of the contract and was that contract abused in any way," he said.
"And, in particular it will look at clinical or health services, that's the most important thing and Kim Hames is now working on that."
A parliamentary committee released a report last week after examining Peel Health Campus said evidence of fraud, corruption and witness intimidation must be investigated by an independent inquiry.
The committee has already referred one complaint to the Corruption and Crime Commission and believes almost $1.8 million gained by the hospital before being paid back could constitute fraud.
On Monday, Mr Barnett said: "I don't rule out an inquiry but I don't believe it will be necessary."
Dr Hames said he had read the committee's report with some concern but said while the allegations were serious they were “less than earth-shattering”.
The estimates and financial operations committee also questioned whether the Barnett Government’s contract with Health Solutions WA to run the hospital was in the “best interests of the State”.
“The committee was surprised at the seriousness and extent of issues revealed in the evidence it received and the documents it considered,” committee chairwoman Giz Watson told Parliament.
She said concerns included “implications for the financial administration of the State’s health system”.
The report all but torpedoed negotiations between HSWA and the Government for a contract extension and approval for a $75 million redevelopment of the campus.
The major shareholder that runs Peel Health Campus has rejected the allegations.
Singapore-based millionaire Jon Fogarty has said his company Health Solutions WA would continue its push for a contract extension with the State Government despite the damage done by the committee's report.