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Evidence of fraud, corruption and witness intimidation must be investigated by an independent inquiry into Mandurah’s biggest hospital, a parliamentary committee has recommended.

Releasing a damning report into the management of Peel Health Campus, 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.

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 Government has to act swiftly on this and to instigate a full inquiry with investigative powers,” Ms Watson said.

The committee’s report went beyond concerns about financial aspects of the hospital’s administration.

“This particular inquiry has led to a lot of concerns about people being intimidated and discouraged from giving evidence and that is actually an offence under the criminal code,” Ms Watson said.

The report singled out the hospital’s former executive chairman and major shareholder Jon Fogarty, who failed to appear before the committee and is still the subject of a summons.

Witnesses were reluctant to give evidence because of a “perceived threat of repercussions from Mr Fogarty”, the report said.

The inquiry was sparked by HSWA’s repayment of $1.8 million to the Health Department after a $200 “incentive” program was introduced to encourage emergency doctors to admit patients to wards.

“Evidence suggests this scheme was driven by Health Solutions desire to maximise revenue generation under the contract with the State and thereby maximise profits,” the committee said.

The Health Department said it was unaware of the arrangement and would not have agreed to it.

HSWA’s law firm Clayton Utz was criticised in the report for having “a lack of knowledge and respect for the Parliament” after a threatening letter was sent to the committee.

“The committee took a very strong view to threats to our actions and operation,” Ms Watson said.

The matters will be investigated by Parliament’s privileges committee. The committee also wants an inquiry to investigate whether the “fit and proper test” for private operators of public hospitals is adequate.

Former hospital chief operating officer Ashton Foley, whose house was searched by HSWA lawyers under a Supreme Court order, was praised as a courageous whistleblower by Ms Watson.

Acting health minister Troy Buswell said the Government would assess the report.

Shadow health minister Roger Cook called on the Government to order a judicial inquiry.

He said that the revelations struck at the heart of its “privatisation agenda”.

HSWA chairman Mark Stowell said the company was reviewing the report.

“HSWA has co-operated with the parliamentary standing committee, providing 24 lever arch files of documents comprising thousands of pages over recent weeks,” he said.