John Lewis-style – The Bath Clinic
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The first of a planned chain of up to 30 private hospitals run as John Lewis-style, employee partnerships was launched in Bath yesterday, increasing competition with NHS trusts for patients and health contracts.
Ambitious growth plans unveiled by Circle Health involve employing up to 10,000 staff through an investment of £1.5bn in a chain of clinics designed by eminent architects such as Sir Norman Foster that offer patients a “five-star-hotel” experience. The rapid expansion, due over the next five years, is the brainchild of a former City financier, Ali Parsa, who believes his mutual ownership model will shake up the healthcare market and the NHS. His company has already been shortlisted as a bidder to take over management of the debt-ridden NHS Hinchingbrooke Hospital in Huntingdon, Cambridgeshire.
Circle also operates three independent sector treatment centres (ISTCs) across the UK, providing non-urgent, elective surgery to NHS patients. The new hospitals expect to attract business from the NHS and the private market.
After the £50m Bath opening, Circle will launch hospitals in Plymouth and Edinburgh later this year, followed by Tunbridge Wells, Ashford, Warwick and Reading in 2011. The expansion is further evidence of the blurring of lines between the private health market and the public health service.
Parsa insists his plans are not dependent on any future change in government. Charitable and private firms recently suffered an ideological setback in their ability to compete in the NHS’s internal market when the health secretary, Andy Burnham, declared that the NHS itself should be the “preferred provider” of any existing services.
“We will be building 25-30 new hospitals over the next four to five years,” Parsa told the Guardian, “and employing between 6,000 and 10,000 staff.” Born in Iran, he has a PhD in physics and subsequently became an investment banker at Goldman Sachs. He set up Circle in 2004.
“We are creating a partnership so that everyone who works in or contributes to the hospitals, whether cleaners or consultants, all hold shares in the company. The first thing we want to do is to make sure that everyone understands that we are doing it so they benefit. You give them ownership not to make money, but to give them control.”
Operating such a system had already produced 20% productivity improvements in Circle’s ISTC in Nottingham, Parsa claimed. “Under the NHS Choose and Book system, we will be open to [referrals] of all NHS patients.”
His hospitals – specialising again in elective surgery – will take on patients at the agreed NHS tariff rates for treatments – a rate due to be frozen in the coming years under the new era of economic austerity.
“Employee ownership works,” Parsa said. “It was the model we used as partners at Goldman Sachs. Most law firms operate as partnerships, GPs are partnerships. Healthcare is a professional anomaly in not being a partnership. There’s no reason why we can’t run NHS hospitals and give control back to our [staff].”
The model of mutual ownership has been praised by figures in all the main political parties. Andrew Lansley, the Conservative health spokesman, Norman Lamb, the Liberal Democrat health spokesman, and Lord Darzi, the former Labour health minister, spoke at Circle’s formal opening in Bath yesterday. The chairman of the John Lewis Partnership, Charlie Mayfield, was also present.
Last month, the Labour party launched an investigation into how far it can go in its ambition to apply the John Lewis Partnership model to hospitals, schools and housing. The research is being led by the Centre for Mutual and Employee-owned business, based at Kellogg College in Oxford. The cabinet minister Tessa Jowell is a keen exponent of “mutualism”.
According to the Circle website, “49.9% of Circle is owned by Circle Partnership Ltd, which is owned by everyone who works in clinical services, directly or indirectly and at every level”. However, it adds that: “50.1% is owned by Circle International plc. This is the investment vehicle that blue-chip City institutional investors have subscribed to for shares by providing the capital for Circle”.
Within the private healthcare market there has been some scepticism about the “optimistic” growth plans envisaged by Parsa. There is over-capacity already in the private health sector, partially due to the recession – making it more difficult for the uninsured to pay for one-off operations – and partially because the government has been so successful in tackling the backlog in waiting lists.
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Circle – which hopes to open up to 30 “employee-owned” John Lewis – style hospitals to compete with the health service over the next few years – and other private health firms will present a serious challenge to the NHS, Carter said.
The private sector was growing thanks to an NHS initiative that enables patients to choose where their operation is carried out using a menu of NHS and private hospitals . “If that means [Circle] building lots of [new hospitals] then inevitably, in the long term, acute hospitals will close.”
But he warned that the ability of private hospitals to win NHS contracts must not fatally undermine the health service. He told the conference: “As you succeed in getting more and more business, the incumbent’s tactic is to retreat slowly.
“So you have to encourage innovation, but we have to ensure that as the [medical] traffic flows away from the existing services they don’t degrade to the point of collapse. You can’t let them.”
Carter, a businessman and former private healthcare executive, is currently chair of the quango set up to adjudicate on competition issues in the NHS. He holds a number of board positions in Whitehall, was chair of Sport England between 2002 and 2006, and headed government reviews into offender management and legal aid.
The NHS co-operation and competition panel he chairs is currently examining a formal non-legal “class action” complaint from hundreds of charities and private health providers over an annoucement last year by the health secretary Andy Burnham that the NHS was the “preferred provider” of health services. They argue this would exlude them from NHS contracts and breaches health service rules on choice and competition.Owen
Asked about Burnham’s comments by members of the conference audience, Carter declined to comment. But he said he believed competition was now entrenched in the ethos of the health service and would not disappear.