Four Seasons, Private Equity and the Care Sector

Money Talks - Do you listen?

Both the Guardian and the Financial Times report on the possible imminent buy out of Four Seasons by ‘Terra Firma’ – a private equity company. Guy Hands, who chairs the company is described by the Guardian as

the tax exile and private-equity baron best known for his disastrous debt-fuelled takeover of EMI


Four Seasons Healthcare is a large provider of nursing and residential care homes in across the UK. As it says on the front page of their website

We are the leading independent healthcare provider in the UK. We own and operate over 500 care centres and nursing homes, employing around 30,000 people. Our care homes and nursing homes are unique and we’re proud to offer consistently high standards of service and care.

Seems like a perfect investment opportunity for a.. er.. private equity company, right?

Maybe I’m being a little disingenuous. Having an A level in Economics doesn’t give me a significant understanding in financial models of support however what is blatantly obvious is that the sector as a whole (and we’ll push Southern Cross into the mix here as well) have over borrowed on assets which haven’t produced the intended profits.

The further link with Southern Cross is the irony (or maybe it isn’t) that Four Seasons took over a number of Southern Cross homes when they went under.

The Financial Times explains that Four Seasons is looking to refinance a £780 million debt and is ‘likely to raise £525 million of new debt’.

These kinds of fantasy figures have little in the way of substance to me. But that’s a lot of money and I do wonder at the amounts of money knocking around in these health and social care sectors.

Last month Terra Firma bought a Gardening Centre group for over £200 million.

The type of business is of little interest to the company putting the money in. It is purely and simply a business opportunity. This is one of the reasons I shudder at the leaking of health and social care into the private markets. The reality of financing, refinancing and profit making can be cut throat but for the people who live in these nursing homes it’s worth remembering that they are possibly the last years of the lives of people at stake rather than lilies and tomato plants.

Four Seasons has a deadline of September 2012 to refinance the debt it has. It is currently owned by a consortium of banks. A private equity company will be no worse nor better than what exists now unless it is able to offer the company more financial security (which I presume it is) but the interesting part, for me, as an outsider to the world of equity and financing is that this is not the first very large healthcare company to be switching hands and talking in terms of millions regarding profit in health care.

The Matlock Mercury (in the East Midlands) has a story which raises concerns by the GMB union when Southern Cross staff were transferred to Four Seasons and they asked for a response from the CQC. They write

Recently the Care Quality Commission said as follows: “The large health and care organisations are not overseen financially by anyone.

“The Care Quality Commission (CQC) require that a provider is financially stable, but it is outside of our remit to carry out financial audits or financially background checking of any service provider.

I can appreciate that. The CQC is pushed but isn’t it worrying that there is no-one at all overseeing whether service providers are ‘financially viable’? It doesn’t need to be the CQC – but perhaps – as we move towards a situation where more and more health care services are moving into private hands – it should be someone..

This is the future of the NHS. It is already here. Profits will be pushed to shareholders and companies are accountable to those shareholders rather than the people who use and need the services provided.

Tomorrow, this will be the hospitals.

picture by w4nd3rl0st at Flickr

Choice, the NHS and Social Care Bill and the Lords

It’s likely that the NHS and Social Care Bill will be voted on today in the House of Lords and the supreme irony remains that this unelected ‘Upper’ chamber may get the chance to carry the will of the people (and involved professionals) in the face of the lilly livered House of Commons.

Lansley’s Bill is pushing choice. Oh, you see, how wonderful it will be, he claims, when we will be able to choose which hospital we want to be treated in? Yes, that works great for routine surgery but there’s not much choice involved after a proverbial car crash. Choice is all well and good but it is a luxury of those who are able to express it.

I’m not knocking it – well, ok, I am a bit – but I have seen how the word itself has been warped in the field of social care and has been used to promote discriminatory practices which bypass those who are not able to make choices.

Those who can, choose. Those who can’t, are given the poorest services and it is those who are not able to exercise choice that often need much more support.

The voiceless will become ever more voiceless. That is my fear. The ‘Southern Cross’ situation was bubbling under the surface for a couple of years before the company, which gambled for profit on the homes of residents who were mostly older people, went bust. Where is the choice of those who live in those homes whose ownership has just changed with the signing of the cheque?

Think forward to an NHS with this abundance of competition and choice. I will choose the hospital in which I receive treatment. I can’t imagine I’d choose anything other than my most local hospital with good transport links (I don’t drive so that further would limit my choice more than someone who had access to a car, for example) – and why will I go with whatever consultant is allocated to me? Because I tend to trust doctors who are employed and practice in the NHS know what they are doing.

I don’t want to have to research and grade doctors. I want a doctor who will treat me well.

But choice is nice. I’m not anti-choice. I am anti a system which does not build in safeguards for the rights of those who are not able to make choices. My local hospital, as it happens, has a poor reputation (I’ve not, fortunately, sought treatment there often but every time I have been there for myself or to visit others, I have never had any reason to be concerned and indeed, have come across some of the most thoughtful and kindest staff possible – see what a reputation does?). It will probably be one that is mostly used by people who live locally, like me, actually, who don’t want to be travelling miles to get to the next closest hospital. Is that the choice I have?

Or maybe it’s about choosing a named consultant? I wonder what vested interests my GP would have in linking in with particular hospitals/consortiums to commission services with specific consultants. Is it my choice or my GPs choice? How linked is my GPs decision to money and profit? I hope it isn’t at all, but you see what changes in thinking this bill is leading me to.

I attend a multi-doctor, city practice. I don’t know my GP. My GP doesn’t know me. Cameron lives in a fantasy rural idyll where we all know and trust our ‘family doctors’. Sure, I trust my doctor but I wouldn’t recognise them if I walked past them in the street. Each time I’ve been to the GP (fortunately not often), I’ve been seen by different locums. I don’t mind this but I do mind the automatic assumption that I have built up a specific relationship with the practice. I doubt it will be my GP making commissioning choices anyway. Chances are the surgery will ‘buy in’ to an external commissioning company that will provide tidy, juicy profits to shareholders.

Yesterday Lord Owen and Lord Hennessey tabled an amendment which calls for greater scrutiny of the Bill.

Earl Howe wrote a letter to the Peers demonstrating an edge of fear in the government warning about

“The potential for slippage in the timetable carries grave implications for the government’s ability to achieve royal assent for the bill by the end of the session.

“The house must have proper time to examine the bill, but the proposal put forward by Lord Owen could result in delay which could well prove fatal to it. This is not a risk that I believe this house should take.”

Shaky ground when the House whose role remains to scrutinise legislation is asked not to.

As for me, I find it ironic that the will of the people – because there is no doubt that this is a hugely unpopular bill without public support – let alone professional support (all the medical Royal Colleges have expressed opposition to this Bill) – is in the hands of the unelected Peers.

I’ll be following with interest and hoping that the Lords are able to represent us in a way our elected politicians have been unable to.