Company: Circle Health

Business: Private hospitals, NHS hospitals and clinics

Year founded: 2004

Founders: Ali Parsa previously an Executive Director of Goldman Sachs' European Technology Investment banking team, and Massoud Fouladi, a hospital consultant. (1)

Business overview: Circle has two private hospitals, Circle Bath and Circle Reading, and two private clinics in Stratford-upon-Avon and Windsor. For the NHS, Circle runs a Nottingham treatment centre and HinchingbrookeHospital in Huntingdonshire. (2)

Management: (2)

Stephen Melton – Interim Chief Executive Officer

Dr Massoud Keyvan-Fouladi – Chief Medical Officer

Paolo Pieri – Chief Financial Officer

Directors of Circle Holdings

Michael Kirkwood – Chairman

Lorraine Baldry – Non-Executive Director

Peter Cornell – Non-Executive Director

Andrew Shilston – Non-Executive Director

Timothy Bunting – Non-Executive Director

In December 2012 Ali Parsa stepped down as CEO and Stephen Melton became interim CEO. Ali Parsa received a payoff of £400,000. There was some controversy over Ali Parsa’s resignation and the Government’s Public Accounts Committee questioned whether he had been sacked. Margaret Hodge MP noted "I know you want to be really honest with us but it stretches our credulity to hear that you have been there six months with this completely new project the government is engaged in, and you're off with a year's money and you are saying this is completely normal. Somebody sacked you Mr Parsa to walk away with a £400,000 pay-off, most of which comes from the taxpayer." Mr Parsa’s resignation came soon after the National Audit Office found that Circle had failed to make its projected savings at HinchingbrookeHospital. (3, 22, 23)

Business Strategy:  Circle was set up to provide a new model of providing private health care in the UK, according to founder Ali Parsa. Circle’s ownership differs from that of other private hospital companies, in that 49.9% of equity is owned by employees. Furthermore, in exchange for a guarantee of a share of a consultant or GP’s private business, Circle offers equity in the company. (7)

The company’s financial strategy is based upon investment from venture funds and it has undertaken two share placements, first the flotation on the Alternative Investment Market (AIM) in June 2011 and the second in June 2012. The company’s structure is very complicated; Circle is split into the operating arm - Circle Partnership - and an investor arm - Circle Holdings. The latter company lends money to Circle Partnership to enable it to carry out the business, with Circle Partnership paying interest on the loan at 7%. In addition, since 2004 Circle has bought a considerable number of sites for building new hospitals with each acquisition being financed via the company Health Properties domiciled in Jersey. Most of the planned hospitals have not yet materialized, with the exception of Circle Reading. Circle obtained £50 million in institutional investment to build Circle Reading and it opened in mid-2012. (4,7,8,9)

With regard to the NHS, Circle has always viewed the NHS as a major opportunity to make money, although it has not yet acquired many contracts.  Circle ran two treatment centres – Bradford and Burton – but these contracts ended in 2011 and were not renewed. A third treatment centre in Nottingham is still run by Circle, with the tender coming up for renewal in 2013. However, despite its relatively small size, Circle has aimed big and won the contract to run the debt-ridden HinchingbrookeHospital in 2011. In a presentation to investors in September 2011, Circle highlighted eight health trusts which it considers to be an “NHS growth opportunity” of more than £8 billion. (10,11)

Financials:  For 2011 Circle reported group revenue of £74.6 million and a net loss of £32.3 million. For the first six months of 2012 group revenue was £34.4 million with a net loss of £11.6 million. In 2011 Circle’s parent company became resident in the UK for tax purposes. In 2011 Circle had a tax credit of £613,000, due to deferred tax and other factors. In the first half of 2012 Circle paid £30 thousand in tax. (4,5)

In June 2011, Circle undertook a limited public offering with a listing on Alternative Investment Market (AIM). The flotation raised £45 million, which values the company at £95.4 million. (4)

In June 2012 Circle raised £47.5 million through a placing of shares with institutional investors. (6)


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Investors: Circle Health is 49.9% owned by its staff and 50.1% owned by private investment funds. The 49.9% owned by employees is via the company Circle Partnership registered in the British Virgin Islands. Majority ownership (50.1%) of Circle is in the hands of large private equity companies.  As of June 2012, following the share placement that month, the leading institutional shareholders are as follows: Lansdowne Partners 29%; Invesco Perpetual 21.9%; Odey Asset Management 21.1%; Balderton Capital 9.8%; BlueCrest Capital 7.1%; and BlackRock 6.1%. (7,13)

Lansdowne Partners is a hedge fund with $16 billion under management, co-founded by Paul Ruddock, a generous donor to the Conservative Party. Ruddock and co-financier David Craigen have donated more than £300,000 to the Conservative Party, most of it since David Cameron became leader. Lansdowne made £12 million by exploiting the collapse of Barclays shares in 2009. (14,15)

Invesco Perpetual is an independent asset management company and part of the US company Invesco Ltd, which is incorporated in Bermuda, but headquartered in Atlanta, Georgia, USA. Invesco is incorporated in Bermuda as a means to reduce the amount of tax the company pays in the USA (17).

Odey Asset Management is a £3 billion hedge fund, run by Crispin Odey, a donor to the Conservative Partyand to the Christian Party, whose slogan is "Proclaiming Christ's Lordship". In addition, he has donated £18,000 to Libertas EU. (14,16)

Balderton Capital, is an early-stage venture firm founded by Benchmark Capital in 2000. Balderton manages approx $1.9 billion in venture capital. The bulk of the capital comes from university endowments, charitable foundations and pension funds. (18)

BlackRock is the giant money-management firm established 23 years ago by Larry Fink, which controls or monitors more than $12 trillion worldwide. BlackRock has around $3.56 trillion in assets under its direct management. (19)

BlueCrest Capital Management LLP is Europe’s third largest hedge fund or “alternative asset management company” based in Guernsey. (20)

Major Contracts: Circle has two major contracts with the NHS – Nottingham NHS Treatment Centre and HinchingbrookeHospital.

Nottingham:  The Nottingham NHS Treatment Centre contract with the Department of Health expires in June 2013, however in October 2012 Circle noted that it is re-tendering for the contract.  This contract has been extremely important for the financial stability of the company, particularly following the loss of the contracts in Burton and Bradford in 2011. In 2010 the Nottingham contract provided Circle with over 50% of its total revenue and in 2011 this had risen to just over 68% of total revenue at £51 million. (4,5,6)

Hinchingbrooke: In November 2011 Circle signed a ten year contract to run HinchingbrookeHospital, with management beginning in February 2012. Under the agreement, the staff and assets remain part of the NHS. Hinchingbrooke hospital has debt of approximately £39 million, which Circle is going to have to eliminate if it is to make a profit from the contract. Hinchingbrooke is reported to have an annual turnover of £90 million. Media reports have noted that Circle could make £31 million out of the contract over the ten year period. Circle is only required to cover any losses incurred by the trust over that period beginning in February 2012 up to the first £5 million. If the trust incurs further losses whilst managed by Circle, either party can terminate the deal, requiring Circle to pay a £2 million termination fee to Hinchingbrooke. This means the company’s potential losses are capped at £7 million, or approximately 0.7% of the NHS funds it will manage over the term of the contract.  Any surpluses made at Hinchingbrooke will be split between Circle and the NHS. (21,22)

Political Ties: Political ties lie with the investment companies that own a significant share of Circle. This includes Paul Ruddock of Lansdowne and Crispin Odey of Odey Asset Management. (15,16)


Care Quality

In September 2012, the National Audit Office reported that Circle has already missed its own financial target for the Hinchingbrooke contract, generating a deficit of £4 million by September 2012, £2 million behind where Circle said it would be. Circle admitted that this meant that it would end up bearing £3.5 million in losses in 2012, which it would fund. The National Audit Office warned in its report that "Circle's projected savings of £311 million over 10 years are unprecedented as a percentage of annual turnover in the NHS... Circle's bid did not fully specify how it would achieve these savings." (23,24)

Circle is having to make savings at Hinchingbrooke and this is reported to be at the expense of staff, with between 270 and 300 jobs being cut and several wards now lying empty. The hospital has fallen from joint-highest in the area in a patient satisfaction survey to nineteenth out of 46 hospitals trusts across the NHS Midlands and East region in August 2012. This is a “friends and family test” in which patients are asked to say whether they would recommend the trust to friends and family. (23,24)


Circle’s unstable financial situation has been an ongoing aspect of media articles about the company.  Just prior to the flotation in June 2011 media articles highlighted the company’s debts and operating loss of £34.7 million. Net debt had fallen by December 31 2011 to £42.4 million from £52.4 million, however in 2011 22.7% of revenue was spent servicing the company’s debt. The company’s 2012 interim report notes that a Circle subsidiary has defaulted on a loan of almost £7.4 million from AIB, full repayment of which fell due on 30 June 2012. The loan was used to buy land in Edinburgh for a Circle hospital.Of the company’s net debt of £42.2 million at December 31 2011, £22.2 million is due within one year.

With regard to the stability of the company’s revenue, over 68% of 2011 revenue was generated from just one contract for the Nottingham NHS Treatment Centre. By mid-2012, this percentage had risen to over 76%, as the company’s other NHS business had fallen significantly due to the loss of contracts to run an NHS treatment centre in Burton and one in Bradford. In October 2012, Circle reported that it is tendering for a renewal of the Nottingham contract, but if unsuccessful this would mean a significant loss of revenue for the company. (4,5,6,23)

Circle does not own its hospitals, instead the company is split into an operating company and a number of property companies (registered in Jersey). The operating company leases the hospitals and pays rent.  This practice has become common in recent years, often with vast sums of debt secured against the properties. This makes the properties attractive to investors who may not want to buy a healthcare company, but do want property. However, if Circle sells its hospital buildings, the operating arm of Circle could then be at the mercy of several property companies and possible escalating rents. This is the situation that the care home company Southern Cross found itself in and which led to its downfall.  According to the flotation documentation, there are already financial complications surrounding the lease on Circle’s flagship hospital – CircleBath. In addition, Circle's accounts reveal it was forced to delay a number of key hospital building projects as finance dried up. The company secured £50 million in institutional funding for the development of Circle Reading, but a project in Edinburgh has been delayed. Developments in Manchester, Plymouth and Tunbridge Wells announced in 2010 have also been delayed. (4,7,25)

In May 2011 just prior to this flotation on the Stock Exchange, the Board of Directors, chose to move Circle Holdings’ registration from Jersey to be domiciled in the UK for tax purposes. However, Circle’s properties are owned by the company Health Properties registered in Jersey and the employee-owned 49.9% of Circle operates through the company the Circle Partnership which is registered in the British Virgin Islands. (4,25)

Other concerns of note

Circle’s appearance in the private health market has not been welcomed by its competitors, in particular the five large private hospital companies. Circle has been proactive in standing up to what it views as unfair practices by the five major private hospital groups, and in 2011 referred these companies to the Office of Fair Trading, which in turn referred the entire sector to the Competition Commission. The resulting investigation of the private healthcare sector undertaken by the Competition Commission found that there were practices within the sector that were anticompetitive, however submissions from Circle’s competitors also claimed that Circle itself operated uncompetitive practices. Nuffield Health highlighted Circle’s approach of offering consultants and GPs a share of the company; Circle operates a formal ‘lock in’ agreement or equity incentive program under which consultants and GPs are offered equity in the company in return for a share of the consultants’ private work.  In its submission, Nuffield noted that this approach is something that needs to be investigated as it creates a ‘clear barrier to entry’ for other companies. Although the investigation was on private healthcare, it has shed a somewhat unfavourable light on the business practices of companies that are now getting involved with the NHS. (26)


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