A Tim Hortons coffee shop nestled in a St. John's hospital stood Tuesday as a symbol of inefficiencies at Eastern Health, as the authority disclosed the franchise lost about $260,000 last year.

The Tim's location in the Health Sciences Centre, the largest hospital in Newfoundland and Labrador, will be fully turned over to the private sector, as will its cafeterias, president and CEO Vickie Kaminski said Tuesday.

"I don't know if any of you have lined up to get a cup of coffee there — the lineups are long, the usage is big," Kaminski told reporters.

The shop had opened in 1995 with expectation that it would turn enough of a profit to pay for the salaries of several nurses. [See the video above for a report on the shop's opening.]

Eastern Health CEO Vickie Kaminski said the Tim Hortons franchise will be fully turned over to private hands. (CBC )

"Let me tell you why that happens," Kaminski said of the fact the popular shop loses money. "We charge you $1.94 for that large coffee, but we insist that the staff who are pouring that coffee are Eastern Health staff, and they get paid $28 an hour, and no Tim Hortons pays that."

The direct wages are about $20 per hour. Benefits and employer costs account for the difference.

The shop is already privately managed. Kaminski said the private operator will now take care of employees as well.

Eastern Health — which on Tuesday laid out a plan to shave $43 million in spending, much of it to come from attrition and cuts to overtime — also said its cafeterias, like the coffee shop, are losing money it cannot afford to spend.

While private contractors already run some of the cafeterias, the authority pays an annual subsidy of $1.2 million for those operations.

"We cannot continue to subsidize those non-direct-care services, when we know that they can be provided more effectively and efficiently and we can apply that money [elsewhere]," she said.

Kaminski said private companies will now assume full responsibility for cafeterias.