General Healthcare Group (GHG)

1970 when the US company AMI acquired its first UK hospital, but since then the company has undergone several name and ownership changes.

BMI Healthcare (private hospitals) and Netcare (clinics) (1). BMI Healthcare operates acute private hospitals, and is the largest provider of private healthcare facilities in the UK, with 61 hospitals UK-wide. Netcare is a network of clinics set up in 2002 in the UK by South African company Netcare, which undertakes work under contract to the NHS. (2)

GHG’s management has made clear that it views NHS reforms as an opportunity to expand its business. In a press release detailing GHG's annual results for the year ended 30 September 2010'. This was headlined: Sustained growth, expanding footprint and on the cusp of a new era – and clearly outlines the opportunity the company can derive from NHS White Paper including: consultation paper indicates significant additional opportunities for private/NHS partnership and added pressure on NHS funding will mean a return of self pay and insured lives over time. The CEO at the time, Adrian Fawcett noted in the press release “We are entering a new, exciting era, driven by the forthcoming healthcare reform that will ultimately change, to our benefit, the landscape in which we operate.” (3,4)

Until May 2011 the CEO of BMI Healthcare was Adrian Fawcett and he was highly vocal expressing his opinion on the role of private healthcare in the UK. In a speech at the Reform Health Conference in July 2010, Fawcett called for "greater self-responsibility in healthcare", saying "it is important that those that can afford to pay for themselves should be encouraged to if that makes financial sense to the Exchequer." (4) However, according to the Health Services Journal (5), he was a little too outspoken in an interview with the magazine in May 2011. (3) In the interview Fawcett is enthusiastic about the potential for private care in the NHS and is adamant that competition on price is inevitable. He told the HSJ: “At a macro level, I’m more excited than ever about what the healthcare marketplace and healthcare reforms mean for the future” and is also quoted as saying it would be “madness not to end up where price became part of the equation” when providing healthcare. Soon after this interview, Fawcett was replaced in early June 2011 by Stephen Collier, a barrister by training, however in a statement upon his departure Fawcett noted that the company strategy was “clearly set” and was not going to change: “You won’t get a cigarette paper between what [Mr Collier] is saying and what I’ve said.” (5, 6)

In an interview in August 2012 for HealthInvestor, Collier noted that NHS work is “pretty critical” to GHG and that the firm could “do very well” out of policies such as Any Qualified Provider. (7)

GHG’s leading shareholder, South African company Netcare, made clear in a press release in 2006, when it acquired GHG, that the UK provides an opportunity for expansion for Netcare as there is little opportunity for expansion in its home market (8). In the same press release, the company's reasons for expansion in the UK were described: "We have targeted the UK healthcare market for expansion, as the long-term demographic trends and prospects for development of the private acute care market as well as partnership with the NHS, offer significant future growth potential.” (8)

When Netcare acquired a majority share in GHG in 2006, GHG was split into two operating companies BMI OpCo, the healthcare operating company, and a property-owning subsidiary containing the subgroups GHG Propco 1 and GHG Propco 2. GHG Propco 1 has substantial debts (see Concerns – Financial Instability).

According to Netcare’s annual report for the financial year ending 30 September 2012, GHG recognised a tax benefit of £201.8 million for the financial year and in the previous year a tax benefit of £36.5 million; in effect GHG paid no tax in the UK in these years. The major reason for the tax benefit was the decline in the UK property market, which has resulted in the properties owned by GHG Propco 1 being valued at substantially less than in previous years; this has led to what is known as a ‘non-cash impairment charge against the GHG Propco 1 goodwill’ of £811.4 million, which led to a tax credit of £130.1 million. Overall, GHG Propco 1 exceptional items and changes in interest rates amounted to £862.8 million in 2012. However, as a result of the tax benefit GHG recorded a profit on continuing operations of £5.7 million. If exceptional items (the £862.8 million) and discontinued operations are included GHG recorded a loss of £825.3 million. (2)


In 2006 BC Partners sold GHG to a consortium led by Netcare (Network Healthcare Holdings Ltd), South Africa’s leading private hospital group, and the private equity firms Apax Partners, London & Regional and the Brockton funds for £2.2 billion. The majority shareholder (50.1%) of GHG, and consequently the most influential, is Netcare. The acquisition saddled GHG with a considerable amount of debt. (8)

GHG carries out a large amount of NHS work at its hospitals via the NHS Choose and Book system.NHS services through Netcare UK include surgical centres and ophthalmic units (specialising in cataract operations). (9)

GHG has had close ties with the Conservatives. The company’s Chairman Sir Peter Gershon was recruited by the Conservative party just before the election in 2010 as one of David Cameron's independent efficiency experts who identified the £12 billion in spending savings an incoming Conservative government could make. Although his independence is open to debate given that GHG openly admits it will benefit from NHS spending cutbacks. (10)

Care Quality

In July 2012 a letter was leaked to The Independent written by the director of BMI’s Meridian Hospital. The letter to consultants ordered them to postpone surgery for patients referred from the NHS Choose and Book system, to encourage more people to opt for paying for their operations. The initial period of postponement was four weeks from first consultation rising to eight weeks by September 2012. (12, 13)

In May 2013, the CQC produced a scathing report on the dangerous and chaotic conditions at BMI's Mount Alvernia Hospital in Surrey. This led to a block on referring patients to the hospital and the suspension of children's surgery. Care failures cited by the report included a surgeon who operated without gloves in blood-stained shirt sleeves, and a child who was not seen by a paediatrician for seven hours despite their condition deteriorating. The unannounced inspection in February 2013 was carried out after concerns were raised by whistleblowers. The hospital failed on every measure but one - the management of medicines. (two refs 13, 14)

Financial

Following the acquisition of GHG in 2006 by the consortium, GHG was restructured as separate operating (BMI OpCo) and property companies (GHG Propco 1 and 2), with a considerable amount of debt secured against its hospital properties. In January 2012, media reports highlighted GHG’s escalating debt, with its property arm having debts of £1.65 billion and its operating arm debts of £230 million (14). In 2012 GHG paid £354.2 million in financing expenses (primarily interest) servicing its debt. Media commentators have noted that “vulture funds” have already bought much of GHG’s debt at discount rates in the hope of a default in 2012/2013. The property arm’s debts of £1.5 billion fall due in October 2013 and the company will have to raise funds by this time; if this does not take place the company’s viability will be in question. By May 2012 GHG reported that it was in discussions with its creditors for restructuring the debt. However, in Netcare’s annual report for the financial year ending September 2012, Netcare reports that GHG had not yet found a refinancing solution to its debt problems. This strategy of splitting a company into operating and property arms and securing the majority of debt against property was used by the ill-fated Southern Cross care home company. As the cost of servicing debt increases, the properties are sold, but the operating company then no longer has control over the cost of rent and this cost also escalates. In the case of Southern Cross this led to a spiral of escalating rent and debts which eventually bankrupted the company. (2,14,15,16)

Other Concerns of note

In Netcare’s home market the company was the centre for an illegal kidney transplantation syndicate. In September 2010 charges were finally laid against the company, its CEO Richard Friedland and several ex-employees after a long-running investigation. According to the original charge sheet Netcare, Friedland, the prominent kidney specialist Jeffrey Kallmeyer, two specialist surgeons, two doctors, transplant unit staff and an Israeli interpreter were involved in an illegal scheme to give kidney transplants to wealthy Israelis, using organs donated by poor Brazilians, Romanians and Israelis. In September 2010 Netcare Limited and its CEO, Richard Friedland were charged on 100 counts of involvement with the syndicate. The charges included five counts in which the supplier of the kidneys were minors and of receiving payments for the operations. In November 2010, however, the criminal charges against CEO, Richard Friedland, were unconditionally withdrawn as a result of a plea agreement, although the Netcare subsidiary Netcare KwaZulu-Natal (NKZ) was convicted on charges related to human tissue crimes in October 2010. The kidney specialist Jeffrey Kallmeyer, who allegedly set up the scheme, was eventually convicted in early 2011, seven years after his original arrest; he had fled to Canada after the initial investigation. (17,18,19,20) 

  

  1. http://www.ghg.co.uk/GHG-PLC
  2. http://www.generalhealthcare.co.uk/GHG-PLC/media-centre/news-detail?p_news_id=1774
  3. http://www.netcare.co.za/content/NetcareLtdCompanyProfile2009~2.pdf
  4. http://www.cqc.org.uk/sites/default/files/media/reports/ins1-571177028_1-128767043_bmi_mount_alvernia_hospital_20130427_f4.pdf
  5. http://www.guardian.co.uk/society/2013/may/03/nhs-private-hospital-damning-report
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