Southern Cross became a FTSE 250 company on the back of the profits it made from looking after the elderly. Earlier this year it realised that it could no longer afford the rent on the care homes it once owned, but had sold off and leased back.
Unlike most business models that don’t pan out, this failure put the future care of 31,000 old people at risk. Many of them will have understandably been frightened when the news emerged.
But when chairman Christopher Fisher issued a statement announcing that Southern Cross was shutting down, he made his priorities explicitly clear. “We regret the loss of value which shareholders have experienced,” Fisher said in a statement.
You might have thought that this fiasco would have made governments think twice about allowing for-profit companies to operate entire district hospitals. Not a bit of it.
Circle Healthcare, run by former Goldman Sachs banker Ali Parsa, is about to take over Hinchingbrooke hospital in Cambridgeshire. The exact terms and conditions of the contract are not being made public, it seems.
There are built in safeguards, we are assured. The NHS will continue to own the buildings. Hinchingbrooke will act as social enterprise, removing the duty to maximise shareholder value, and the staff will be accorded a John Lewis-style 49.9% stake.
It’s also worth pointing out that the deal is a culmination of a process set in train by Labour, the party of which I am a member. That alone ensures that any criticism from the opposition will have to be muted.
In the next ten years, Circle says that it will not only pay off the £40m of debt that Hinchingbrooke owes, but will generate a profit as well. I wonder if anyone has asked the obvious question; what if it doesn’t?
UPDATE: The website politicshome.com points out that Circle is part-owned by Odey Asset Management and Lansdowne Partners. Odey donated £242,000 to the Conservative Party between 2007 and 2011, and until August this year employed Tory MP Kwasi Kwarteng as a consultant. Paul Ruddock and David Craigen, respectively chief executive and partner at Landsdowne, donated £589,586 and £59,000 to Tory coffers between 2003 and 2011.
Hi David,
With reasonable exposure in the national / local papers and blogs one can only wonder why this story hasn’t gained more interest with the general public. The NHS is one of the most important issues at a General Election. So why after Southern Cross Care Home was asset stripped and now Hinchingbrooke Hospital being privatised it doesn’t seem be getting the media attention it deserves – it should be a warning where this Tory (ex New Labour) policy is going: complete NHS privatisation.
Even before the Health and Care Social Bill has been passed in the Lords (and eventually in the Commons) – this and other NHS hospitals are going to be privatised e.g. the Royal National Orthopaedic hospital in London and the Whiston hospital (St Helens) on Merseyside. It all seems a fait accompli??
Andy Burnham Shadow Secretary for Health has mentioned this development “has worrying implications” – yes it does, but where / what is the Labour Party going to do to highlight this privatisation disaster?
Regards Jon Williams