Every time the health watchdog dispatches its inspectors to the National Maternity Hospital on Holles Street in Dublin, the conditions get worse. Inspectors have repeatedly warned of the dangers of packing ever increasing numbers of expectant mothers and infants into the dilapidated 19th century structure.

Mahony and the chair of St Vincent's, Jimmy Menton, posed for photographs. A press release outlined all the details - even the bit that the National Maternity Hospital would become a subsidiary of a healthcare empire owned by nuns.

The news was duly reported without a ripple of protest. Months passed. The remains of dead babies were discovered in a disused tank at a former mother and baby home in Tuam. Religious orders came under scrutiny once again.

Last week, the rehoming of Ireland's National Maternity Hospital was recast to seismic effect; the State was gifting the hospital to a religious order that has yet to cough up the €3m it owes the State in redress for survivors of abuse in its institutions.

The simmering debate about Church and State boiled over with such a vengeance that the deal brokered over five months of tortuous negotiations is in now jeopardy.

Protesters gathered outside the Department of Health and more than 78,000 people signed an online petition to stop the Religious Sisters of Charity from becoming owners of the National Maternity Hospital.

Two of the country's most prominent obstetricians - who also happen to be related by marriage - seem pitted against each other.

Peter Boylan, a former Master of Holles Street and a director on the board of governors, has repeatedly raised concerns about the Catholic ownership of a State maternity hospital required to perform procedures forbidden under Catholic ethos. Boylan says St Vincent's already precludes from performing tubal ligations and vasectomies because of its Catholic ethos. As he put it last week: "It's a maternity hospital. Being given to the nuns. Come on."

Over at Elm Park, rumours emanated from the executive corridors of St Vincent's Healthcare Group that the executives were furious and having second thoughts about the deal. The Sisters were said to be feeling particularly aggrieved.

Boylan's intervention did not help, but the last straw was Harris's turn on the RTE news last Thursday, demanding "assurances" that there would be "no religious interference" in the maternity hospital, having six months earlier declared himself "thrilled" with the nuns' involvement. On Friday, Menton issued a statement suggesting that the St Vincent's group was considering pulling out because of "the controversy and misinformation" and "the views expressed" by the health minister and other members of the Oireachtas.

"The whole deal is now at a critical juncture," said one informed source. "It's not as though they wanted the National Maternity Hospital in the first place. They were doing the State a favour."

The Religious Sisters of Charity, which owns and controls one of the biggest healthcare providers in Ireland, is dying out. At the last count in 2009, there were 264 nuns, with only 15 aged under 60. Their empire spans hospitals, nursing homes, hospices and counselling services in Dublin and around the country controlled through 10 different companies. The biggest is St Vincent's Healthcare Group which encompasses the public and private hospital on the Elm Park site.

The nuns have relinquished management of the group to executives but are still involved. The hospitals operate according to the nuns' principles and values.

Sister Agnes Reynolds and Sister Mary Benton, both in their 70s, represent the order on the board. The order's 100 shareholding is registered to Sister Mary Fahy and Sister Eileen Mary Durack.

According to financial statements, which the order submitted to justify its contributions to the Redress Scheme, the Religious Sisters of Charity owned property and investments worth €266m in 2009, €233m was tied up in land and buildings and €32.8m in 'financial assets'. Its cars were worth €400,000.

The order cannot sell the healthcare businesses, or draw dividends from them, and if any were to be liquidated, their assets would transfer to a similar charity, according to the 2009 report.

When the St Vincent's group came under pressure to share its hospital campus with the maternity hospital, sources said the nuns were willing but their executives were distinctly lukewarm.

The voluntary hospital group which guards its independence has been battling to restructure its debt. It has a toxic relationship with the Health Service Executive - it came under fire for mortgaging the publicly funded hospital to build the private hospital and was accused of breaching public pay rules.

"SVHCG was not at all interested in taking on the maternity hospital. There was no prestige attached to it. At the end of the day, there wasn't much in it for them. Their view was we are not asking for this to be put on our campus. But if Holles Street want to come on our campus, they are going to have to engage on our terms," said one informed source.

Talks started and failed. Two mediators came and went. Kieran Mulvey was the Department of Health's third and last shot. The deal he later brokered over five months last year made clear to both sides that this was the "final opportunity" to reach agreement on the project.

A professional negotiator, Mulvey is the retired head of the Workplace Relations Commission and the Government's Mr Fixit.

He knocked a deal together in five months, over a series of initially frosty meetings that gradually softened into a working relationship, usually in the neutral venue of University College Dublin.

The unpublished 25-page agreement, seen by the Sunday Independent, lists the central issues related to "future governance, identity, autonomy, ownership, shared services, clinical governance, operational management, site acquisition and construction management of the new facility". The issue of the nuns' debt to the State redress scheme didn't arise, as it wasn't in the terms of reference.

St Vincent's conceded to the maternity hospital having its own chief executive or master, but it insisted on having "oversight" of the hospital, given that it would be bang in the middle of its campus. Mulvey's solution was to incorporate the maternity hospital as a new company, its independence protected by ministerial veto and 'reserved powers'. But St Vincent's would own the company. The board would be drawn 50/50 from St Vincent's and the National Maternity Hospital and one independent obstetrics expert.

The final unpublished agreement lists eight areas in which "reserved powers are to be exercised by all of the directors". Included is the "clinical and operational independence" that is "without religious, ethnic or other distinction". They also provide for the hospital controlling and protecting its own budget.

The Master of the National Maternity Hospital will become clinical director for obstetric services across the group, reporting to the group clinical director or the group medical board.

The maternity hospital will be "physically connected" to St Vincent's University Hospital, so that consultants and staff can move freely from one to the other. Patients will transfer "seamlessly" from one hospital to another, to protect patient care.

Mahony said the triple lock of controls was sufficient - ownership was "not really here or there".

But it is on the question of ownership that the hard-fought agreement is now unravelling. The controversy, if anything, has escalated with some politicians now demanding that the State seize St Vincent's lands. The group board is expected to meet to discuss whether it will continue to stand by the project.

Terms of agreement

The 25-page unpublished 'Terms of Agreement' between the two hospitals spells out how the independence of the new national maternity hospital will be protected:

The 'central issues' relate to...

'future governance, identity, autonomy, ownership, shared services, clinical governance, operation management, site acquisition and construction management’ of the new National Maternity Hospital.

The Master will ...

have a group role, as clinical director for obstetrics and gynaecology, and will report to the Group Clinical Director and the Group Medical Board, under 'an agreed system of clinical governance' with the St Vincent’s Health Care Group.