Private providers that have been awarded NHS contracts can be one of the following:
- Not-for-profit/community enterprises;
- Privately owned;
- Companies listed on a public stock exchange
These organisations are funded in very different ways. Charities and community enterprises rely on money from grants, donations, and selling their services/products via contracts with the public and private sector. They do not need to make a profit for shareholders. The private companies are reliant on selling services to make a profit to satisfy individual shareholders and investors, usually investment funds and banks.
All of these categories of business, regardless of size, can get into financial difficulties and no type of organisation is immune to financial meltdown. When this happens, the NHS and councils are usually left to pick up the pieces, often at short notice and at great cost. Here are some recent examples.
Carillion, a multi-million pound, global company listed on the FTSE 100, had contracts worth billions with the NHS for building hospitals and services. Despite its huge size it was not immune to financial collapse, with the company finally going under in January 2018 with debts of £1.5 billion. In May 2018, a parliamentary report noted that Carillion’s business model was a “relentless dash for cash, driven by acquisitions, rising debt, expansion into new markets and exploitation of suppliers”. The company’s business was enabled by dodgy accounts and greedy executives. At the end, Carillion had £1.7 billion worth of government contracts. The report noted that £150m of government cash was needed to prop up essential contracts.
2018 also saw financial difficulties for one of the UK’s largest home care suppliers, Allied Healthcare. In October 2018, the CQC issued a report on the financial status of Allied Healthcare; Allied Healthcare was due to make a large loan repayment at the end of November 2018 but there appeared to be insufficient funds. The report noted that the company might not continue trading after the end of November 2018. A letter to all councils and CCGs advised them to make contingency arrangements in the event of the company withdrawing from contracts.
Allied Healthcare provides care and support to over 13,000 elderly and disabled people in their homes. The company’s Primecare subsidiary has contracts for out-of-hours and urgent care throughout the midlands. In Birmingham, Primecare gave GP practices just 10 days notice to seek replacement OOH cover. Primecare also provides OOH and urgent care services in Walsall, Sandwell and West Birmingham, Herefordshire, and Nene, and is part of an integrated 111 and OOH contract covering 16 CCGs in the west Midlands. All these areas have had to find replacement providers. Allied Healthcare was owned by German private equity investor Aurelius, but in December 2018 the company was saved from bankruptcy by its sale to Health Care Resourcing Group for an undisclosed sum.
The long-term care sector is in a particularly difficult financial position, with leading providers such as Four Seasons reported to be in a precarious financial position: for more details see our Long-Term Care Sector.
Financial difficulties played a role in the disastrous Coperforma contract for non-emergency transport in Sussex and a number of other private ambulance companies have ceased trading over the years following financial difficulties, leaving NHS organisations to pick up the pieces, often at short notice. Details can be found in the section – Contract failures in the ambulance service.
In the primary care sector, several companies have closed GP surgeries due to financial difficulties, including Danum Medical Services in Doncaster and Horizon Health Choices Ltd in Bedfordshire. More details can be found in the section – Contract failures in GP services.
In the private hospital market, many of the companies have found themselves in difficult financial situations over recent years. One reason is costly rent agreements that were signed before the 2008 financial crisis, which made businesses vulnerable to a fixed annual increase in rents. In October 2018, Reuters reported on the private hospital chain BMI Healthcare finally agreeing a financial restructuring deal with its landlords and creditors.
See further reading below for more information on financial insecurity.