Virgin Care Ltd
Virgin Care has become a major player in the market for NHS services since it entered the healthcare market in 2010. Over the past six years the company has been awarded contracts worth well over £1 billion, with several large contracts in community health. Virgin Care has probably been the most active private company in the area of NHS contracts for community health and in 2016 the company moved into the area of adult social care (social workers).
Virgin Care has been highly active in tendering for NHS contracts, despite the company showing no signs of a profit: since 2010 the company has recorded an annual loss of £9 to £10 million. As Virgin Care Ltd makes no profit in the UK, according to its accounts, the company pays no tax in the UK. However, Virgin Care Ltd is a small entity in Richard Branson’s Virgin empire. Virgin Care’s ultimate parent is Virgin Group Holdings registered in the tax haven of the British Virgin Islands.
The ultimate owners of Virgin Care are trusts registered in the British Virgin Islands where no tax is paid whose beneficiaries are Richard Branson and his family. Questions have been raised over where exactly any of Virgin Care's profits would go and if tax would be paid on profits in the UK.
Virgin Care Ltd was founded in March 2010 when Virgin acquired a majority stake in Assura Medical; the renaming took place in March 2012. Assura began life in 2003 as a property investment company, The Medical Property Investment Fund Limited (MPIF), which then became Assura Medical in 2006. The property arm of Assura continues to trade as a separate company listed on the LSE as Assura Group Ltd.
Virgin Care has two arms to its business: primary care services, including GP services and walk-in centres; and community-based NHS services.
Virgin Care’s strategy in the UK market appears to be tendering for medium to large contracts with the NHS primarily in the area of community health. Virgin Care now has contracts in a number of areas including musculoskeletal, dermatology, adult community health, children and young person's community health and sexual health services. Recent contracts include ones for community health in North Kent, in Wiltshire and in Bath and North East Somerset, all of which cover a large number of services. In mid-2016 Virgin Care reported that it had over 250 services around England.
In November 2016 Bath and North East Somerset CCG and the local council made the unprecedented move of awarding a £700 million contract to Virgin Care that includes adult social care - the first time adult social care has been privatised. Another interesting aspect of this contract was that it was reported by the CCG and the council involved that a clause was included in the contract under which Virgin would reinvest any "financial surplus" in the service. What this means exactly is unclear, however.
Originally Virgin Care was strong in the area of GP services, however since the advent of CCGs the company has reduced the number of GP surgeries substantially. In October 2012 Virgin Care announced that it would be taking over all jointly owned GP-provider companies, to give Virgin Group 100% ownership of Assura Medical. This meant that over 300 GPs would have to relinquish stakes in the GP provider companies. At this point 358 surgeries were listed as being part of these provider companies.
The move by Virgin Care to acquire 100% ownership was reported to be due to possible conflicts of interest between GPs in the Virgin Care practices and the newly introduced CCGs. It appears that many GPs chose to take full control of the GP provider companies, rather than relinquish control to Virgin Care and by 2015, the number of contracts for primary care services, including GP services, held by Virgin Care had reduced substantially to 30, 19 of which were GP practices.
The most recent financial data for Virgin Care are the accounts filed with the UK Companies House for the year ending 31 March 2015. Turnover was reported as £40.38 million leading to a gross profit of £5.2 million, however after administrative expenses of over £20 million, the company made a loss of £9.1 million. As a result the company paid no tax in the UK.
For the past five years Virgin Care Ltd has reported an annual loss of around £9 to £10 million in its accounts and so has paid no tax in the UK.
Virgin Care Ltd is registered in the UK, however, an analysis by Richard Murphy, a chartered accountant at Tax Research UK, found 13 holding companies, some of them offshore, between Virgin Care and its ultimate parent company, Virgin Group Holdings Ltd based in the tax haven of the British Virgin Islands. Virgin Group Holdings Ltd’s principal beneficiaries are Sir Richard Branson, reported to have a net worth of £2.7bn, and his family. According to Murphy’s analysis, this type of company structure makes it unlikely that Virgin Care will pay any tax in the UK in the foreseeable future.
According to Virgin Care the company operates over 230 NHS and social care services for the NHS including community-based intermediate NHS services, GP-led walk-in and healthcare centres, urgent care centres, out of hours care, community services and GP practices. According to data collected by the NHS Support Federation, since 2010 Virgin Care has won contracts for NHS work valued at around£1 billion. However, this is likely to be an underestimate as several contract awards have not been reported publicly or the monetary value of the contract has not been disclosed.
Notable contracts won by Virgin Care, include the following:
Bath and North Somerset health and social care
In August 2016 Virgin Care was chosen as preferred bidder to take on a seven year contract, worth around £700 million with an option to extend for three years, to coordinate over 200 health and social care services in Bath and North Somerset. The contract was awarded in November 2016 despite substantial opposition.
Virgin Care was chosen over a consortium led by the social enterprise Sirona Care and Health, which included Avon and Wiltshire Mental Health Partnership Trust, Royal United Hospitals Bath Foundation Trust, Dorothy House Hospice Care, and the GP organisation Bath and North East Somerset Enhanced Medical Services.
This is a prime provider contract with Virgin Care directly delivering and coordinating services, but with the option to subcontract to other providers where appropriate.
Under the contract Virgin Care will run three statutory services – adult social care, continuing healthcare and children’s community health – from April 2017.
The deal marks the first time a council’s core adult social work services will be directly delivered by a for-profit private firm. Previous outsourcing by councils have seen social work run by local authority-owned trading companies or not-for-profit social enterprises that have been spun out of social services departments.
A range of non-statutory services such as public health nursing, integrated re-ablement and speech and language therapy are also included in the contract.
According to Councillor Vic Pritchard, cabinet member for adult social care and health at Bath and North East Somerset Council there is a clause in the contract that would require “any financial surplus made by the new prime provider to be reinvested into services in Bath and north east Somerset”. However, it should be noted that definitions of "financial surplus" can vary widely. The contract has been opposed by unions and social work leaders.
West Lancashire Community and Urgent Care Services
In November 2016 Virgin Care was awarded two contracts by West Lancashire CCG worth a total of £65 million over five years. The community services contract, worth around £45 million, and the contract for GP out-of-hours care and an urgent care centre in Skelsmerdale, worth around £20 million, were run by Southport and Ormskirk Hospitals Trust.
Guildford and Waverley CCG adult community services
In August 2016, Virgin Care was named as preferred bidder to provide adult community care services for Guildford and Waverley CCG as part of an alliance with Royal Surrey County Hospital NHS Foundation Trust, Surrey and Borders Partnership NHS Foundation Trust, Age UK Surrey and Surrey County Council.
The two year contract begins in April 2017 after the large contract for all of Surrey community care held by Virgin Care since 2012 expires. CCGs in Surrey have decided not be retender the community care contract in its current form covering the whole of the county, but are opting for contracts covering smaller areas. The two year contract has an option to extend for a further eight years under the lead provider contract.
The contract is worth £17.6m a year and covers 17 different services, including diabetes services, a minor injuries unit, community nursing and GP direct access physiotherapy.
North Kent adult community services
In January 2016 Virgin won a bid to run adult community services across Dartford, Gravesham, Swanley and Swale region of North Kent. This seven year contract is worth £18 million per year and could be extended for an extra three years. Virgin Care will take the contract from Kent Community Health Foundation Trust, which reported that it lost out to Virgin Care in the area of price. Kent Community Health Foundation Trust, said it scored ”slightly higher” on quality in the assessment process.
In February 2016 Kent Community Health Foundation Trust questioned the commissioning CCGs (Swale and Dartford, Gravesham and Swanley) over their methodology in the selection procedure. In late February 2016 the Kent Trust began legal proceedings at the High Court challenging Dartford, Gravesham and Swanley CCG and Swale CCG. This challenge triggers an automatic suspension of the awarding of the contract until the case is settled or discontinued. In June 2016, however, the contract suspension was lifted and the contract could then be transferred to Virgin Care.
Community child health services in Wiltshire
In December 2015 Virgin Care won a £64 million, five-year contract, to provide community health services in Wiltshire for children, including children’s specialist community nursing, speech and language therapy and health visitors. The contract is due to begin in April 2016 and is worth £12.8 million per year.
Elderly care in East Staffordshire
Virgin Care won a £280 million contract in March 2015 to provide services for the frail and elderly in East Staffordshire. Virgin Care will be the prime provider under this seven-year contract and could sub-contract the work to other organisations. In March 2016, it was reported that the start of this contract had been delayed by a month and it was now due to begin 1 May 2016; this was due to the need to finalize some arrangements, according to the CCG and Virgin Care.
The contract is expected to cover 38,000 people with long term conditions, as well as an estimated 6,000 elderly people. It will measure performance against patient outcomes such as rate of falls, admissions into hospital, diabetes blood test management and patient mortality.
NHS and social care services for children in Devon
In July 2012 Virgin Care won a three year £131 million contract to provide a range of core NHS and social care services for children and adolescents in Devon.
Community services in Surrey
A five year contract with NHS Surrey to deliver community services across much of the county to April 2017 was awarded to Virgin Care in 2012. The £450 million contract covers community health services in South West and North West Surrey, as well as some provided county-wide such as prison healthcare and sexual health services. The services will continue to be known as Surrey Community Health providing NHS healthcare for Surrey patients.
As this contract draws to a close it is unclear if the contract will continue in its current form as a single large contract or be broken up into smaller contracts with the individual CCGs involved. By April 2016 three individual Surrey CCGs had already advertised separate contracts for community services; Virgin Care was reported to be interested in at least one of these contracts.
In August 2016 Virgin Care was named as preferred bidder to provide adult community care services for Guildford and Waverley CCG as part of an alliance with Royal Surrey County Hospital NHS Foundation Trust, Surrey and Borders Partnership NHS Foundation Trust, Age UK Surrey and Surrey County Council.
- With NHS Coventry to provide health services at the Anchor Centre and Meridian Practice for the homeless, asylum seekers and refugee patients in the city;
- Urgent care service at Croydon University Hospital;
- A £6.5 million contract to provide an integrated system for musculoskeletal services in the Hastings & Rother area;
- Primary care at HMPs Norfolk and Waveney worth over £51.5 million won in 2014;
- Sexual health services in Oldham won in 2012;
- Urgent Care centres in Sutton Coldfield won in 2011;
- Primary care at HMP Bullingdon worth an estimated £6.6 million won in May 2013. Virgin provides primary healthcare to several other prisons, including HMP Coldingly, HMP Bure, HMP Downview, HMP Wayland, and HMP Highdown.
- Sutherland Lodge Surgery in Chelmsford - Virgin Care took over this surgery in July 2016 after cuts in PMS funding forced the GP partners to hand back the contract. The CQC had rated the surgery as outstanding.
Staffordshire Cancer and End-of-Life Care
In November 2016 Virgin Care was reported to be in the running for the £535 million contract for end-of-life care in Staffordshire. The tender process for this ten year contract had been restarted; it was put on hold following the collapse of the UnitingCare contract in Cambridgeshire and Peterborough.
The end of life care contract has three remaining bidders: Virgin Care, Optum and an Interserve consortium. This deal is expected to be awarded in the autumn of 2017.
At the same time, Staffordshire CCGs are tendering for a ten year contract to coordinate cancer care in Staffordshire worth £687 million: there is only one bidder left for this contract - a consortium of the private company Interserve and University Hospitals of North Midlands Trust and Royal Wolverhampton Trust.
A Guardian article noted that Jeremy Hunt, the Health Secretary, pushed through the deal in Surrey.
Baroness Morgan of Huyton, an ex-director of failed care home firm Southern Cross, is a paid member of the advisory committee board for Virgin Group Holdings Ltd.
Since 2010 when Virgin Care was formed the company has not reported a profit but a loss of around £9 to £10 million each financial year. No profit means no tax is paid in the UK. However, Virgin Care’s position within the complex structure of Richard Branson’s empire has raised some questions about tax liabilities.
In March 2015, an investigation by Richard Murphy,a chartered accountant at Tax Research UK, highlighted the use of tax havens by Virgin Care and other private companies working with the NHS. The investigation found 13 holding companies, some of them offshore, between Virgin Care and its ultimate parent company, based in the British Virgin Islands, a tax haven.
Murphy’s research also found that Virgin Care borrows money solely from a Virgin holding company and reports that it will repay that loan, which will be corporation tax-deductible, when a profit starts to be recorded. That holding company is based in the UK but it, in turn, owes money to other parts of the Virgin business, whose ultimate parent company is in the British Virgin Islands. This type of corporate set-up has potential for reducing or eliminating the tax liabilities of operating companies; a company in the UK could always report a loss due to loan repayments to sister companies thereby never having to pay tax. Virgin Care refute suggestions that the company will not pay tax at some point in the future.
Virgin's use of tax haven’s within its corporate structure, such as The British Virgin Islands, has led to controversy in the media. It also proved a component in a campaign against Virgin Care being awarded a contract with Bristol CCG for children’s community services. In the end the contract was awarded to a community interest group.
The whole campaign, however, highlighted a rule that many CCGs have adopted in their constitutions about the awarding of contracts to companies that use some form of tax-avoidance strategy, such as off-shore companies. According to a report in The Independent in February 2016 Bristol CCG is now in the process of deleting the rule, after it was questioned during the tender in 2015 for children’s community services. Lawyers for the CCG reportedly feared that the rule discriminates against companies that are legally avoiding tax, thus allowing them to sue the NHS if they do not win the contract. There are a number of CCGs that are now reconsidering this type of clause in their constitution.
As Assura Medical the company received little in the way of media coverage either positive or negative. However, with the takeover by Virgin Care and the winning of the £500 million contract to run healthcare in Surrey in 2012, the company has come to the attention of the media and some criticism. The announcement of the choice of Virgin Care as preferred bidder for the children’s services bid in Devon triggered a legal challenge by the mother of two children that use the service.
In October 2012 Channel 4's documentary series Dispatches focused on Virgin Care's business in a programme entitled 'Getting Rich on the NHS'. The programme reported on Virgin Care's clinic in Northampton, which patients claim has become over reliant on locum GPs and Virgin Care had failed in its committment to extend opening hours.
The programme also highlighted problems in Teesside, where the company provides sexual health tests. The service repeatedly missed targets on the numbers of people screened for Chlamydia. A memo revealed staff were asked to take home testing kits to use on friends and family to help make the numbers up.
In September 2015 an inquest heard of the death in September 2013 of Madhumita Mandal of multiple organ failure and sepsis. Mrs Mandal visited the Virgin Care run urgent care centre in Croydon in agony and vomiting, according to her husband, where she was triaged by a receptionist with no medical training, as not seriously ill enough to see the A&E doctor but put on the list to see a nurse.
The senior coroner at the inquest said she would write to Croydon CCG, which buys in the Virgin Care service, with her concerns about the triage system, which gives receptionists with no medical training responsibility for deciding if patients need emergency treatment. Virgin Care are reported to have defended the use of a non-medically trained receptionist to triage patients and said that Mrs Mandal had been “correctly streamed”.
The problem with Virgin Care’s use of receptionists to triage patients had already been noted by CQC inspectors: Mrs Mandal died two months after a CQC inspection of the urgent care centre, in which the inspectors noted: "We were concerned that there was a risk of a patient with a serious illness or injury being wrongly streamed and their condition deteriorating." A&E doctors had also voiced fears about the Virgin Care centre's triage system, the inquest heard.
Interference in CCGs plans
In February 2016, the HSJ reported that Virgin Care had made a legal challenge over Hull CCGs plans for primary care provision in its area. Hull CCG wants to create geographical groups of practices, each operating as larger scale providers. However, the initial plan to create the groups, by inviting groups of GPs to take over practices currently run under time limited contracts, was challenged by Virgin Care.
Eight out of about 50 surgeries in Hull are run under alternative provider medical services (APMS) contracts, which are due to expire in March and three of these are run by Virgin Care. Hull CCG now has to undertake a full procurement process in four lots for the future provision of the primary medical care services currently provided through the APMS contracts. Critics note the additional cost that a full procurement process will place upon an already cash-strapped CCG.