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“Wariness of private companies’ involvement in healthcare is a British obsession and an irrational one,” proclaimed the Times in an editorial yesterday, accompanying a lengthy article by Camilla Cavendish on the NHS.
Cavendish’s piece began with an almost delirious appraisal of Circle Health, the private healthcare operator that is 50 per cent owned by its staff.
Circle’s hospital in Bath is “designed by Lord Foster, there is a grand piano in the front hall and the NHS patients get the same fluffy white dressing gowns and ensuite rooms as the private patients,” Cavendish gushed.
Cut to the Guardian, where three days ago Circle’s CEO, ex-Goldman Sachs banker Ali Parsa set out his view that the NHS is “an unsustainable industry” that costs too much to run. “In his view, Britain has world class retailers, telecoms and financial services firms, as these sectors have been opened to competition over the past few decades,” the paper reported.
Some might argue the financial services in particular have enriched a lucky few individuals over the past few decades without much public benefit at all – hardly something the NHS should aspire to.
They might also want to know how it is that Circle can afford grand pianos and dressing gowns for its patients, while the NHS, which offers no such luxuries, is “unsustainable.”
“What we’re very good at is asking how to make the money go a long way,” Parsa told the Guardian.
The Department of Health is obviously convinced: last year it appointed Circle to take over the management of an NHS hospital – Hinchingbrooke, in Huntingdon (though the deal has not yet been signed off).
But from the outside it’s hard to be so sure.
Circle Health Limited’s most recently published set of annual accounts, for the year ending 31 December 2009, show the group made a pre-tax loss of £28.3 million on an income £63 million.
And the accounts reveal a structure of fiendish complexity, with 49.9% of Circle’s shares held in the British Virgin Islands, and the remaining 50.1% in Jersey, although Circle says the Jersey arm “has recently been re-domiciled as a UK tax resident company”. The Jersey company’s accounts include six pages of related-party transactions.
It gets even more complex when you realise the Foster-designed hospital in Bath, which Cavendish so praised, is leased from Health Properties (Bath), a company on whose board Lehman Brothers have 50 per cent representation. That’s the same Lehman Brothers that went into administration in 2008. Health Properties (Bath), the hospital’s landlord, is also part-owned by the Jersey arm of Circle and by Health Estates Fund.
“The investors in this fund are un-connected wealthy individuals who have chosen to invest their money in the fabric of UK hospitals,” says Circle.
All this comes at a time when Britain’s largest care home operator, Southern Cross, is struggling to survive. It’s a debacle that has arguably come about because private equity and other funds chose to invest in the fabric of UK residential care homes.
“After a series of arcane financial deals, the company is facing wipeout unless it can put together an agreement between the complex competing interests of creditors, property investors, bondholders, banks, shareholders and landlords, among them the offshore fund of the Qatari Investment Authority (QIA),” the Guardian reported this week.
What will happen to the 31,000 residents in the company’s care homes if it goes under, is not clear.
With examples like this, is – as the Times would have us believe – British wariness of private providers’ involvement in the NHS really irrational? Or is it an entirely rational response to the risks and uncertainties lurking beyond the fluffy white dressing gowns?
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May 27th, 2011 at 10:30 pm (#)
A well written article indeed. An eye-opener and one which lays to light Cavendish’s fabrications. It makes one think why Cavendish wrote as she did and what her motivation was.
Healthcare is never to be considered a profit making enterprise save in the setting of private hospitals. The NHS is a welfare organisation and has to be run efficiently (as different from profit making). Are we to understand that any private company coming forward to run the NHS hospital is doing it out of motives of public service only and not with the ulterior motive of profit ?
Melanie Newmann, I salute your article.
May 28th, 2011 at 3:26 am (#)
My parents, sister, husband, daughter and myself have all been patients at Hinchingbrooke Hospital at one time or another. My daughter, born in the hospital, has Downs Syndrome, is now an adult, and lives in a residential care home, run by Southern Cross Healthcare.
We have watched with interest as the bidding process has progressed for Hinchingbrooke, wondering with awe at the magical qualities Circle must have to be able to promise to run a hospital within the NHS, not cutting any services, and manage to reduce the £40million debt, yet still pay their shareholders.
As to Southern Cross, we have had strong reassurances from the Home’s manager that all the residents and staff are safe where they are. We had a letter from the Home a few days ago to say he has taken up a post with another company.
Are we wary of private companies’ involvement in healthcare in Cambridgeshire, let alone Britain? You bet!!!
June 1st, 2011 at 11:38 am (#)
Thanks mealnie
Despite the financial crash it seems people are still using dodgy deals to finance their companies and no doubt expecting the taxpayer to pick up the pieces when they fall apart. As taxpayers should we not be able to go to shareholders meetings of the banks we bailed out? Years ago there was a lobbying group that purchased one share in a company so they could go to the AGM-how do we find out about this in today’s world? W
June 1st, 2011 at 12:24 pm (#)
Excellent article which exposes what we all know deep down, namely that the involvement of private healthcare in the NHS is a sordid business that will not benefit the public one iota. So much has been written about this issue that it’s hard to believe that anyone with an ounce of common sense could still support it. Except of course if they have something to gain personally. One has to wonder. Let’s not forget that until the last few days, no-one would have said that FIFA was corrupt. Please keep digging Melanie.
June 1st, 2011 at 6:59 pm (#)
1. The costs of ‘making the money go a long way’
Despite Parsa’s protestations – mutuality, participation, clinical leadership – Circle is already staggering under a toxic culture of management by directive at least as bad as any they claim to replace. It’s all about the numbers. What does this mean for patients? Frontline staff are watching their backs. Quality of care: watch this space!
June 1st, 2011 at 9:31 pm (#)
Grand pianos’ place in treatment.
Thank you for this exposure of rottenness. I feel anxious for those needing healthcare at Hinchinbroke. The evidence is masive that th private sector will look, as ever, for quick profits and then cut and run. Note – do they really pay corporation and income tax in UK?
June 1st, 2011 at 9:45 pm (#)
Melanie’s research into the dodgy world of corporate finance is to be applauded. You have to ask yourself who, in the government’s Department of Imaginative Accounting, even considered Circle’s bid to take over the running of Hinchingbrooke Hospital as a realistic option? If Circle could make a loss of £28m on an income of only £63m how would it cope with a Hospital Trust which is unlikely to have an income from PbR of more than £100m (based on population of 160,000), and that is before any of the alleged £40m debt is paid off. Sounds to me like more of the flawed machinery that covered up MP’s expenses for so long.
What supporters of the NHS desperately need is for some retired accountant(s) prepared to spend time, free of charge, nit-picking their way through the accounts of e.g. Hinchingbrooke for the next 10 years. Only a kosher accountant would be able to spot the mysterious way in which money can move around a business and suddenly pop up in the credit column instead of the debit column or visa versa, in order to satisfy a particular financial target.
Check our website to see how a SHA appeared to be able to cook their books.
June 1st, 2011 at 9:46 pm (#)
What has happened to Southern Cross shows exactly why essential public services should not be put out to ‘any willing provider’. Companies win contracts by offering a cheaper price–and in health care this all too often results in worse treatment. The NHS provision will then become non-viable if too much of the work has gone to the private sector.
If the company then decides the service is not profitable enough and goes bust or pulls out at the end of the contract, there is no NHS service to fall back on and a disastrous situation results.
The Health bill just must be withdrawn .
June 2nd, 2011 at 12:40 pm (#)
Excellent! The coincidence between the Circle and Southern Cross stories is condemnatory indeed! All seems to be based on the unproven and unlikely hypothesis that motivation by (the possibility of) profit is more likely to achieve both cost and qaulity improvements than motivation by commitment, pride and sheer humanity – I doubt it! What is worse than Circle is the fragmentation of care already introduce by the private sector in cleaning, catering etc – and the fragmentation likely to be introduced by competition rather than collaboration, particularly in the absence of any real involvement of secondary care, and of any good measurement of the quality rather than the cost of health care. Please contine your investigations!
June 2nd, 2011 at 8:51 pm (#)
2nd part of my comment [not sure why this was moderated out?]:
2. Circle float on the A.I.M. on the 9th June [this is in the public domain, moderator]. This is desperately premature. Their Bath hospital is yet to break even, they have been decommissioned in Burton: only the TC in Nottingham which they purchased from Nations Healthcare in 2008 shows any sign of the Parsa productivity gain. All Circle’s hopes rest apparently with Hinchingbrooke!
Meanwhile Parsa continues to try to rebrand Circle as a social enterprise and position himself as a flagwaver for the Big Society. Word is that he is in line for a title: the reality is that he is lining up for a bail out.
June 8th, 2011 at 8:49 pm (#)
One has only to see the costs of the USA health care system, bearing in mind that the USA epitomises free market capitalism. at three times the cost per capita of the NHS to know that any involvement of the private sector will be disastrous for this county. The USA does not provide comprehensive coverage for all and depends solely on how well off one is. The NHS provides fully comprehensive coverage for all.
The NHS costs are about £90 billion pa and happens to be the lowest costs system in the Western world. At £270 billion it would be gold plated indeed