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Spire Healthcare

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Spire Healthcare is the UK's largest private hospital company, with 39 hospitals, 11 clinics, a diagnostics centre, and a cancer care centre. The company was founded in 2007 and is a public company with share traded in the UK. The company's revenue is from personal medical insurance patients, NHS patients and self-paying patients. In 2018, Spire received 29.2% of revenue or £272.2 million from the NHS.

Strategy

Spire was formed through the buy-out of 25 BUPA hospitals in 2007 by the UK private equity firm Cinven. The hospitals were rebranded as Spire Healthcare and a further 11 hospitals were added in 2008.

The group employees 8,380 full-time staff including 3,900 plus consultants and had 775,000 patients in 2017.

In January 2017 Spire announced a move into the private GP market. The company has set up a network of GP clinics in its hospitals around the country. Spire is not the first private company to do this, HCA, Nuffield and BUPA all have private GP services within their clinics.

Spire Healthcare's revenue is derived from three major sectors: personal medical insurance (PMI); the NHS; and self-paying customers.

Work carried out for the NHS accounted for just over 29% of total revenue in 2018, the majority of this is from GP referrals rather than block contracts from local commissioning groups. Private medical insurance (PMI) made up just over 46% of revenue in 2018.

Spire had great hopes of gaining business as a result of the underfunding of the NHS. In an article in the Financial Times in August 2016, the company was reported to be investing £190m in new hospitals, wards, and operating theatres in the belief that the NHS funding squeeze would push more British patients into its private facilities. Although, it was noted that in the short-term the company's business from NHS referrals is likely to suffer as NHS budgets are constrained. Results for 2017 and 2018 showed however that cost-constraints in the NHS were reducing the work Spire carries out for the NHS. The company now sees the NHS market as one in which "overall, we seek to hold share" rather than a growth market. In 2018 NHS revenues fell by 7.2%, whilst the private medical insurance business was up 1.5% and self-pay was up 8.7%.

The company expects a major growth opportunity in those patients who self-pay. This the company believes will be fuelled by the increase in NHS waiting times and the increase in treatments that are unavailable within the NHS. The company reported in its 2018 annual report that progress in the private market was "pleasing".

Spire opened new hospitals in Manchester (costing £67m), Bushey (£23m) and Nottingham (£60m) in early 2017, as well as five additional operating theatres at existing facilities over the previous two years.

Financials

Spire Healthcare was floated on the stock exchange in July 2014 valued at £850 million.

In 2018, Spire Healthcare reported revenue of £931.1 million down from £931.7 million in 2017, and a net profit of £11.3 million, down 32.7% from £16.8 million in 2017.

The company's income in 2018 comes from PMI (personal medical insurance - 46.5%), the NHS (29.2%) and self-paying customers (18.7%). In 2018, revenue from PMI amounted to £432.6 million (2017: £426 million), from the NHS £272.2 million (2017: £293.3 million), and revenue from self-pay customers rose 8.7% to £174.1 million (2017: £160.2 million). Revenue of £25.2 million (2017:£25.6 million) was attributed to the category "other".

The company attributes the decline in underlying revenues from the NHS (down 0.5%) to patient choice and eligibility for treatment being actively restricted by Clinical Commissioning Group policies in response to NHS cost pressures.

In 2018 net debt fell to £453.8 million, from £462.8 million in 2017.

In March 2018, Spire's principal investors were Mediclinic International PLC 29.90%, Woodford Investment Management LLP 16.02%, The Capital Group Companies, Inc 4.83%, Norges Bank 4.32%, and GIC Private Limited 3.95%.

In October 2017, Mediclinic International, a South African company, put in an offer to acquire Spire International for £1.3 billion in cash and shares. This offer was rejected by Spire in November 2017.

Contracts

Spire Healthcare is part of the e-referral system (formerly Choose and Book) for NHS patients.

In 2018, Spire reported that it dealt with 92,700 day case/in-patient admissions on behalf of the NHS, down 8.7% from 101,500 seen in 2017.

Concerns

Care Quality

In May 2018, a CQC report found that two in five private hospitals are failing to meet safety standards. The private hospital sector was warned by Jeremy Hunt, the then Health Secertary, to put its house in order if it wished to partner with the NHS. Of major concern is that some private hospitals currently avoid liability by saying a clinician is not an employee if something goes wrong. In addition, a clearer process is needed for managing a patient if their health deteriorates in private care and they have to be transferred to the NHS in an emergency.

The breast surgeon Ian Paterson, convicted in 2017 of of multiple charges of wounding with intent due to his botched operations, worked within several Spire hospitals. In 2017, Spire settled all current and known claims against the company relating to his practice at Spire. Spire paid £28.7 million in relation to this settlement, plus related costs, of which £26.1 million has been paid.

In the company's 2017 annual report, it noted that three of its hospitals are rated ‘Outstanding’ by the Care Quality Commission (CQC), 20 hospitals and two clinics as ‘Good’, and 11 as requiring improvement in certain areas.

In February 2011 MP Ian Duncan Smith called for an inquiry into the death of a patient with bowel cancer at Spire’s Roding Hospital in Essex in 2009. The patient died of a heart attack and questions have been raised over the hospital’s resuscitation procedure. Furthermore, the patient’s death was recorded as carcinoma of the colon rather than heart attack, and it was only due to information from a nurse who had worked at the hospital that the true nature of the patient’s death came to light.

Financial Stability

Over the years the financial stability of Spire Healthcare has been questioned. The company has massive debts and as it leases several of its properties, it is subject to rent increases and disputes. In 2017, the company's debts increased to £462.8 million, from £432.3 million in 2016. However, this is considerably lower than the £1.3 billion worth of debt in 2013.

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