Big business is all about big branding, and nobody does branding better than Branson. His red logo is just about everywhere – travel, banks, media, mobiles, you name it – except healthcare. Until now, that is. Earlier this week, the Virgin Group bagged a three quarter share in Assura Medical, the company that runs the Khazi Klinics.
Virgin have been sniffing the panties of healthcare for some time, but, like most novices, were for some time unsure about how to proceed. “For us, this is the culmination of what has probably been five years of knowing we wanted to be in this space but really not finding the right entry point,” said Gordon McCallum, chief executive of Virgin Management. Now they have found the ‘entry point’, the shagging can begin in earnest.
Or can it? On the face of it, the deal – a paltry £4 million (plus a £4 million ‘loan note’) for the 75.1 per cent stake in Assura’s medical division – seems so small as to be trivial, mere pocket money to the Bearded One. And loss-making Assura – with net debts of £222 million at the end of 2009 – seems more lead balloon than hot air balloon.
It is only when we review a few well-worn givens, and look deeper, that it all starts to fall into place. The givens – the recession, and the inevitable cuts to public sector funding once the election is out of the way, combined with Amis’s ‘silver tsunami’ mean that over the years ahead the pressure on public healthcare funding – currently some £100 billion a year – will be unprecedented. At the same time, governments of all colours are keen to off-load service provision – and risk – into the private sector.
And – when we look behind the headline figures – see here and here – Assura is by no means the lead balloon it first appears to be. It has a large property portfolio worth in excess of £300 million, including 30 Khazi Klinics, along with pharmacies and other primary healthcare properties. It may be loss-making now, but it is sitting on huge assets.
Some have questioned how Virgin will profit from buying a three quarter share in a loss making business. To Dr No, it is blindingly obvious. The acquisition means Virgin now has access to – and so in effect is – the leading private provider of Khazi Klinics. Add the famous Virgin branding and the sky, as the say, is the limit. Virgin salesmen have already been out on the road flogging the idea to GPs, while the Bearded One has himself cosied up not only to the Tories (and backed their plans for urgent public spending cuts), but to the Patients Association (which Virgin Healthcare help fund).
A neat triangulation of the three Ps really: Patients, Prime Minister-in-waiting and Property. Expect to see Virgin red replacing NHS blue before too long.
McKinsey in a secret report advises the NHS to close beds and put everything into polyclinics. Then McCallum, who used to work for McKinsey, buys the polyclinics. This whole change been driven by outsiders with an eye only on the profits they can make. Lord Darzi and the government have acquiesced without one iota of evidence that the taxpayer will get value for money.
http://www.civitas.org.uk/nhs/download/Civitas_LiteratureReview_NHS_market_Feb10.pdf
It seems that it may soon be game over for NHS GP practices and the friendly family doctor. Is this really what people want?
The Civitas report (link above – thanks) has some interesting things to say. Their conclusion is:
“However, the reforms have not been proven to bring about the beneficial outcomes that classical economic theory predicts of markets, including provider responsiveness to patients and purchasers; large-scale cost reduction; and innovation in service provision. Many researchers have attributed this to the failure to create a true, functioning market (e.g. due to political interference, weak purchasers, and barriers to exit and entry), as well as a lack of a stable policy environment to inspire staff commitment and enthusiasm.
The available research indicates that the NHS may have found itself in a lose-lose situation—taking on the extra costs of competition without experiencing the benefits.“
To which Dr No would add – for the benefit of those who claim the market has failed because it never became a ‘true functioning market’ – it will always fail, because the health service can never be a true market (were it to become so then some very nasty things would happen).
Hacksaw and BATman’s idea (and the other later adopters) that the market can ‘fix everything’ always was and always will be pure bunk. What it is about for the politicians is getting the risk off the government’s books. That’s why all governments want to encourage privatisation.
There are some revealing comments to another blog that picked up on the Civitas report – see here. How strange that they should be FT readers!
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