Menu

Capita

5486265803_88d727021f_b

Capita is an international process outsourcing and professional services company with its headquarters in London. The company can be contracted to perform the operations and responsibilities of a specific business process, such as payroll, accounts, human resources or a customer service centre.

The company's major contract for the NHS is the Primary Care Support Services Contract, which since its start in 2016, has seen numerous problems. Most recently, Capita was found to have not sent out correspondence to nearly 50,000 women about the cervical cancer screening programme.

Strategy

Capita is a large diverse company that has experienced significant problems in recent years. In the company's 2017 annual report, its Chairman, noted that "Capita has lacked a clear strategy and operated with a short-term focus. This focus has resulted in short-term decisions to pursue near-term growth and in-year profitability at the expense of planning for long-term sustainability. Capita has taken on too many low-margin/ high risk contracts and has amassed too much debt in support of acquisition-led growth."

Under its new CEO, Jon Lewis, appointed in December 2017, the company is reviewing this strategy.

Financials

For the year to end December 2018 Capita reported revenue of £3.9 billion (£4.2 billion in 2017), down 5%. Pre-tax profits fell 26% to £282.1 million.

2018 was a financially turbulent year for Capita. Soon after the announcement of 2017 results, Capita was forced into a £701m cash call to shore up its finances. In April 2018, the company issued 1bn new shares at 70p. This rights issue, coupled with sales of assets, successfully reduced the company's debt to £467 million.

Capita said proceeds from the rights issue – £662m once fees to advisers are deducted – would be used to pay down a £1.1bn debt burden, invest in technology and fund its turnaround plan.

CEO Andy Parker left in September 2017 and Dr Jonathan Lewis became the new CEO on 1 December 2017.

In June 2017 Capita announced the sale of its troubled asset management services arm for £888m.

Concerns

Capita and the Primary Care Support Services contract

Capita took over the coordination of primary care support services in September 2015. The contract with NHS England was designed to save £40 million per year by bringing together a previously fragmented service to a single national provider for Primary Care Support England (PCSE). Capita's bid hinged on making a £21 million per year saving. The contract is worth £330 million over seven years. Capita immediately began centralising support services to three national hubs and implementing a single online ‘portal’ for practices to order supplies and ‘track’ the movement of patient records.

However, since the contract began there has been an never-ending series of problems - ranging from things as mundane as surgeries running out of prescription pads and syringes to far more serious problems with the secure transfer of patient notes around the country, with notes going missing or delivered to the wrong surgery, and women being dropped from the cervical cancer screening programme. The problems encompassed GPs, dentists, opticians and pharmacists.

A woman holding a babyA campaign by the GPC (General Practice Council) has been ongoing since early 2016; in May 2016 chair of the GPC Dr Chaand Nagpaul wrote to NHS England demanding practices be compensated for extra workload due to the ‘systematic failure’ of PCSE, and indemnified against any claims as a result of support service issues.

In September 2016, NHS England had to intervene, serving default notices on Capita and increasing the numbers of staff. However, in November 2016 the GPC reported that the support services remain a 'chaotic mess' despite nearly a year since the services were outsourced to Capita.

Finally, in May 2018 the National Audit Office (NAO)  produced a report on the contract noting that patients had been “put at serious risk of harm” due to Capita's failures. The report  noted how both parties grossly underestimated the size and complexity of the task and the risks involved. The NAO report was particularly critical of NHS England and its inability to control Capita’s “aggressive” programme of office closures and redundancies, even when it became clear “it was having a harmful impact on service delivery”. In response NHS England highlighted the £60 million the contract had saved; the NAO report noted that the extent of harm to patients will not be known for some time to come.

In an excellent analysis of the contract by Richard Vize in The Guardian, he notes that the contract was "a textbook example of how to set up an outsourcing contract to fail. Pretty much everything that could have gone wrong went wrong."

Under the contract Capita was expected to make massive losses in the first two years in return for later riches. Vize notes that "With a big upfront loss, Capita had a massive incentive to cut costs quickly, so by the end of 2016 it had shut virtually all the local offices it had inherited and halved the staff. Vital local knowledge was lost."

Furthermore, as things went wrong, Vize notes how everyone argued rather than focusing on fixing the problem. Capita is reported to have lost £125m in the first two years – double the target and Capita and NHS England are still arguing over the contract. The NAO notes: "two and a half years into the contract basic principles are still not agreed, which limits NHS England’s ability to hold Capita to account. NHS England and Capita have still not agreed how to calculate 11 performance measures, and how these data should be used to calculate payments owed to Capita for delivering the services."

One of the ways patients could potentially have been put at risk was the problems with the “performers list” of GPs, dentists and opticians practising in the NHS, including whether they are suitably qualified and have passed other relevant checks. According to the NAO report, problems with the list also led to around 1,000 GPs, dentists and opticians being unable to work, 200 of whom have sought money for lost earnings.

Another part of the contract was pensions administration for GPs. Delays have been reported to the payment of pensions as well as confusion surrounding many of the administration processes for the pensions. Despite Capita being in charge since 2015, in April 2018 there were still many ongoing issues.

Capita have had long standing issues with payroll and pensions nationally, in 2016 they were a year late submitting Barnet Council’s pension scheme to the Pensions Regulator, resulting in a fine.

Problems are still ongoing with the Primary Care Support contract, the NAO notes that "users continue to experience poor delivery with seven severe service failures in February 2018."

Dr Richard Vautrey, chair of the BMA’s GP committee, said his members want elements of the service to be taken back in-house. “With this as an option, we are now asking NHS England how it plans to resolve the shambles that is Capita’s running of Primary Care Support England,” he said. The NAO also recommends  that NHS England should determine whether all current services within the contract are best delivered through that contract or be should taken in-house by NHS England.

In November 2018, the BMA reported that Capita had failed to deliver correspondence relating to cervical cancer screening to 47,700 women. The BMA called Capita’s running of services ‘nothing short of shambolic’ and said it is ‘frankly appalling’ that the private company’s ‘gross error’ may have put patients at risk. The letters relate to appointment invitations or reminder letters, but does include some screening results. The BMA has demanded that the contract with Capita be stripped back and the contract taken back in-house.

In March 2019, Simon Stevens told the Public Accounts Committee that Capita would be stripped of its contract to run the cervical cancer screening programme.

There was further issues in May 2019, when Capita incorrectly archived 130,000 patient records, instead of sending them to the patients new GPs when they registered.

Earlier Issues

In January 2013, it was revealed that Capita, under a UK Border Agency Contract, had been misinforming people that they had to leave the UK as they had no valid visa.

In June 2014 five of eight Liverpool NHS Trusts who had contracted their payroll and recruitment to Capita in 2012 withdrew from the contract because of concerns about the quality of the service provided.

Then in September 2014, West London Mental Health NHS Trust cancelled their contract for human resources services after Capita proved “unable to meet acceptable ‘time to hire’ targets”, particularly for nurses. At the same time Alder Hey Children's NHS Foundation Trust and Liverpool Heart and Chest Hospital NHS Foundation Trust terminated their contracts.

In 2014, a leak to The Guardian revealed that the Department of Work and Pensions had to send civil servants to help the company process personal independence payments for the seriously ill and disabled as "waiting times for assessment have been so long that in some cases people with terminal conditions have died before receiving a penny.”

In February 2015, it was reported that Capita was responsible for a breach of NHS employee’s personal data during the time the company had been in charge of payroll and human resources for trusts in Liverpool.

Financial concerns

In April 2018, Capita announced a massive rise in losses and £1.1 bn worth of debt. Capita announced a heavily discounted rights issue; 1bn new shares at 70p. Media commentators were quick to compare Capita to Carillion, the debt-laden outsourcing company that went into liquidation less than four months previously. These comparisons were dismissed by the company’s new chief executive, Jonathan Lewis, who took over in December.

In January 2018, Capita’s shares slumped when the comapny issued a profit warning, cancelled its dividend and said it would need seek more cash from investors. The news of the rights issue sent the shares 13% up, but they are still down by more than two-thirds over the past year.

Sign up to our newsletter for more articles like this

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.

Something went wrong. Please check your entries and try again.