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BMI Healthcare (GHG Group)

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BMI Healthcare was acquired by Circle Health in early 2020. 

BMI Healthcare offers services to private patients, those with medical insurance and NHS patients. BMI was the largest provider of private healthcare facilities in the UK, with 59 hospitals around the UK. It provides 115 different specialties and services. The company was experiencing financial problems prior to its takeover by Circle Health. Circle Health announced its intention to acquire BMI Healthcare in December 2019 and the acquisition was approved by the Competition and Markets Authority in early 2020. 

Strategy

In December 2019, Circle Health announced its intention to acquire BMI Healthcare. This was referred to the Competition and Markets Authority, but no issue was found and the acquisition was given the go ahead in April 2020.

Over the past few years, BMI's strategy for development in the UK has combined private healthcare patients via the insurance market and self-pay, plus expanding its work for the NHS.  BMI's management has been enthusiastic about the role private healthcare company's can play in the NHS.

Until May 2011 the CEO of BMI Healthcare was Adrian Fawcett and he was highly vocal expressing his opinion on the role of private healthcare in the UK, telling HSJ that “At a macro level, I’m more excited than ever about what the healthcare marketplace and healthcare reforms mean for the future.” He believed that the NHS had underestimated the efficiency cuts it needed to make, and that therefore there was room for the private sector to step in. According to the article “To maximise its ability to capture NHS demand, GHG would invest in everything from communications materials to medical equipment, consultant training, beds and wards.” Only days later, however Fawcett was replaced by Steven Collier.

Collier defined NHS work as “pretty critical” and said that the firm could “do very well” out of policies such as Any Qualified Provider (AQP). His main aim is to increase the occupancy rates of BMI private hospitals; the group will also “be looking for more joint ventures with “strong NHS trusts”,[and] developing their private patient units”.

Netcare ltd, until 2018 the company's leading investor, had a group strategy that listed becoming a “provider of choice” to the NHS within its first “strategic pillar”. Their outlook in the UK market listed several avenues of growth within the healthcare market: picking up more NHS patients through the e-Referral system (choose and book); increased business from local contracting due to rising NHS demand and funding constraints; and an increased number of private patients due to a failing NHS.

Political

GHG has had close ties with the Conservatives. The company’s Chairman Sir Peter Gershon was recruited by the Conservative party just before the election in 2010 as one of David Cameron's independent efficiency experts who identified the £12 billion in spending savings an incoming Conservative government could make. Although his independence is open to debate given that GHG openly admits it will benefit from NHS spending cutbacks.

The conservative party and its leader at the time, David Cameron, have also received large donations from London & Regional Properties - a lead shareholder for GHG. Overall a total of £134,930 was donated directly to the party. Over a million has also been personally donated by Paul A Beecroft - who was a director of Apax, another lead shareholder.

Financials

BMI healthcare's most recent financial report was for the 12 month period ending 31 March 2019, which can be found on Companies House (02164270).

The total revenue for the 12 month period was £918.1 million. Gross profit was £357.4 million. The company reported that administration expenses were £432.1 million. Total loss for the period was £14.3 million.

Investors

BMI’s strategy included a separation of property ownership from operating company. In 2006, the company signed leases for 35 hospitals, this was at the height of the market and the annual rent rise was 2.5% per year. This structure has meant that over the years, the company’s rent bill has been around 20% of its UK revenues, and a major drain on the company’s profitability.

In 2006 GHG (the parent company) was sold to a consortium formed of 3 principal shareholders: Netcare ltd; Apax partners; and London & Regional Properties. The ratio of shareholders among these three groups is: 53.7% - 32.1% - 7.5%. Meanwhile the difference of 6.7% was held by the management and senior staff.

In the years running up to the acquisition by Circle Health, BMI Healthcare was in difficult financial circumstances. An FT article in March 2018 noted that lease re-negotiations between Netcare and the major property owner had become “acrimonious”.  The property arm of BMI has debt of more than £1.5 billion.

In March 2018, Netcare, BMI’s majority shareholder (57%), announced that it is to sell its share in the company. The reasons for this included a fall in NHS and private medical insurance work and increasing rents. BMI leases many of its hospitals and Netcare was unable to renegotiate favourable leases on 35 of its 59 properties; Netcare was seeking significant rent reductions.

In June 2018 , BMI reported that it was in advanced talks with Hospital Topco Limited (HTL), the landlord of 35 of its hospitals, and certain of its largest stakeholders regarding a major recapitalisation, including a reduction in rent obligations.  In 2018 BMI Healthcare was acquired by HTL and a recapitalisation was sponsored by a consortium of existing shareholders and creditors of HTL and its subsidiaries led by Centerbridge Partners L.P., a private investment management firm. The recapitalisation delivered a significant rent reduction and enabled the commencement of a four-year £250 million capital investment programme. By December 2018, BMI Healthcare's ultimate parent company and controlling party was Hospital TopCo Ltd (HTL), according to accounts filed on Companies House.

At the time of Circle Health's acquisition of BMI, a separate transaction involved Medical Properties Trust Inc acquiring the leases on 30 hospitals leased and managed by BMI Healthcare. MPT already owns one hospital that is leased and managed by BMI Healthcare and two hospitals leased and managed by Circle Health.

Contracts

BMI carries out a large amount of NHS work at its hospitals via the NHS Choose and Book system.

As of 2016 NHS-funded caseload comprised of 41.6% (up from 39.5% in 2015) of total inpatient and day case activity within BMI

A contract for Cardiac surgery

A contract for Provision of Adult and Paediatric ENT Services

A contract for Provision of Outsourcing of Dermatology Services

A contract for Mobile and Static Diagnostic Imaging Services

In March 2020, BMI Healthcare was part of the deal with the government for using all its premises and staff for NHS patients during the Covid-19 pandemic. NHS England  block booked almost the entirety of the private hospital sector’s services, facilities and nearly 20,000 clinical staff for the foreseeable future to help cope with the surge of covid-19 patients. The agreement only covers England and added around 8,000 hospital beds, nearly 1,200 more ventilators, more than 10,000 nurses, 700 doctors and 8,000 other clinical staff. This deal, which means the NHS is paying all operating costs for the hospitals, has been a lifeline for the company, as the lockdown meant that no private work was possible.

In June 2020, a £5 billion deal to extend the March deal to help the NHS clear the backlog of work was agreed by NHS England and the private hospital companies, however this has been blocked by the Treasury.  The Treasury does not believe the deal represents a good value for money and that the evidence is not substantial.

 

 

Concerns

Safety

In April 2018, the Manchester West coroner wrote to Jeremy Hunt, the health and social care secretary, warning about care in private hospitals. The coroner noted poor processes for emergency transfers, the lack of responsibility that private companies have for the consultants they employ, and the use of junior doctors working alone for 24 hour shifts with a lack of training and monitoring.

One of the incidents that triggered the letter was the death of Mr Peter O’Donnell in January 2017 after surgery at a BMI hospital. Mr O’Donnell, an NHS patient, had hip replacement surgery at BMI Healthcare’s Beaumont Hospital in Bolton. Following the operation his hospital-acquired pneumonia was not properly recognised by staff. When the severity of his condition was finally realised four days after surgery the hospital dialled 999 to rush him to the Royal Bolton Hospital, where he suffered a cardiac arrest resulting from organ failure and sepsis. He died a few days later.

The coroner said that following the diagnosis of a chest infection: “Thereafter, by reason of ineffective communication between professionals, irregular observations and inadequate documentation, opportunities to escalate his care were missed. Antibiotic therapy was significantly delayed.”  The coroner also said that there were “gross failures” in Mr O’Donnell’s care, and he believed “there was a possibility, even a real possibility” the pensioner had been neglected. BMI conducted its own internal investigation in which it admitted “there were care related issues” and Mr O’Donnell “showed signs of deterioration post-operatively”. It said observations were not completed and inaccurate early warning scores were calculated, which was a “potential missed opportunity for escalation of care”.

CQC reviews from 2017 show that out of 51 BMI hospitals two were ranked inadequate - the worst possible rating - while 22 required improvement; none were outstanding. The two inadequate hospitals are: BMI Fawkham Manor Hospital; and BMI The Duchy Hospital.

At Fawkham CQC inspections over August and November numerous problems were identified. These include: patients being at high risk of avoidable harm or abuse; lack of infection control; lack of secure storage of patient records; and a lack of safety checks on electrical equipment.

At The Duchy CQC inspections over October 2016 revealed similar issues, including: an insufficient supply of nursing staff; inaccuracies in locally held data; and a lack of cohesive leadership.

senior surgeon, Suhaib Sait, at BMI’s Fawkham Manor hospital is under investigation over allegations he performed unnecessary surgery on both NHS and private patients. He has also been accused of compromising patient safety at times and overcharging for his work - work which the hospital then billed the NHS for - and could only see female patients in the presence of a chaperone, following complaints of inappropriate behaviour. There is currently no national system in place for monitoring the care provided to NHS patients treated in the private sector.

Payment issues

In July 2012 a letter was leaked to The Independent written by the director of BMI’s Meridian Hospital. The letter to consultants ordered them to postpone surgery for patients referred from the NHS Choose and Book system, to encourage more people to opt for paying for their operations. The initial period of postponement was four weeks from first consultation rising to eight weeks by September 2012.

In 2015 the BMI Three Shires hospital was found to have charged the NHS twice for private treatment of patients.

Other concerns of note

In Netcare’s home market the company was the centre for an illegal kidney transplantation syndicate. In September 2010 charges were finally laid against the company, its CEO Richard Friedland and several ex-employees after a long-running investigation. According to the original charge sheet Netcare, Friedland, the prominent kidney specialist Jeffrey Kallmeyer, two specialist surgeons, two doctors, transplant unit staff and an Israeli interpreter were involved in an illegal scheme to give kidney transplants to wealthy Israelis, using organs donated by poor Brazilians, Romanians and Israelis.

In September 2010 Netcare Limited and its CEO, Richard Friedland were charged on 100 counts of involvement with the syndicate. The charges included five counts in which the supplier of the kidneys were minors and of receiving payments for the operations. In November 2010, however, the criminal charges against CEO, Richard Friedland, were unconditionally withdrawn as a result of a plea agreement, although the Netcare subsidiary Netcare KwaZulu-Natal (NKZ) was convicted on charges related to human tissue crimes in October 2010. The kidney specialist Jeffrey Kallmeyer, who allegedly set up the scheme, was eventually convicted in early 2011, seven years after his original arrest; he had fled to Canada after the initial investigation.

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