In the hands of England’s government-run health system, Hinchingbrooke Hospital was called “a basket case” in Parliament. Ali Parsa wants to show that private enterprise can do a better job than the state in providing medical care.
Parsa, an ex-Goldman Sachs Group Inc. banker, wants to change how U.K. hospitals are run, right down to the meals served to patients. He’s chief executive officer of Circle Holdings Plc (CIRC), which in February became the first for-profit firm to take over a National Health Service hospital when it began managing Hinchingbrooke in Huntingdon, England. Circle last month raised 46 million pounds ($72.3 million) in part to help the company pursue contracts to manage more NHS sites.
“People told us you can never run a hospital a different way; you can never change the way NHS staff work,” Parsa, 47, says in an interview at the company’s London headquarters. “We have fundamentally changed them.”
As the U.S. debates what role government should have in health care, the U.K. is slowly putting some pieces of its 64- year-old state-run health system into private hands to try to improve patient care and reduce costs. Prime Minister David Cameron says more choice and competition are needed to improve the NHS. Instilling a profit motive in a government-owned hospital means patient needs won’t come first, said Allyson Pollock, a researcher at Queen Mary, University of London who opposes privatization.
“It’s immoral, it’s obscene,” she said in an interview. “It’s a system that’s going to be built on greed, not need. It’s the antithesis of everything that we worked for for 64 years.”
Emergency-Room Waits
From a medical point of view, Parsa appears to be doing something right. Emergency-room waits at Hinchingbrooke, 70 miles north of London, have improved from the county’s worst to its best and lengths of stay for people getting non-urgent orthopedic care have dropped 38 percent, freeing up beds. The company says serious incidents, such as medication errors or patient falls, fell by 80 percent in May. Circle also will save 1.5 million pounds on purchasing this year.
Circle’s bid for the 10-year contract to run Hinchingbrooke beat 18 others. The company gets the first 2 million pounds of profit from any surplus, and a percentage above that amount, which the union that represents hospital workers has said will benefit the company and its shareholders at patients’ expense. Circle must also fund the first 5 million pounds of any loss, a risk at a hospital that already has 40 million pounds of debt.
Patient Perks
Circle isn’t new to the NHS. Its two-year-old private hospital near Bath serves as many NHS patients as private patients -- at NHS prices. Circle has run the U.K.’s largest treatment center in Nottingham since 2008. The company plans to open another private hospital in Reading in August or September and has sites for more clinics.
Parsa says it’s possible not only to provide quality care and a pleasant patient experience for rich and poor patients alike, but to make money in the process. At the core of the business strategy is increased efficiency, primarily through shorter hospital stays. Patient perks, like inexpensive parking and food prepared by a chef from a Michelin-starred eatery, ensure that hospital beds stay full with more rapid turnover.
In Bath, Circle hired a hotel manager and chef from nearby Lucknam Park Hotel & Spa, a five-star country house hotel. People from the local village of Peasedown celebrate their birthdays in the hospital cafe, says Shelagh Meldrum, the hospital manager. No wonder: A recent lunch served to patients consisted of scallops and crab salad over dill and cucumber, followed by a gently grilled salmon main course and lemon posset for dessert.
Stock Performance
Taxi driver Dave McGlennon had a cyst removed from a finger last year at the hospital. A high point: the food. “I had a ham and cheese omelette with potato wedges” after surgery, McGlennon says. “It was to die for.”
Financially, Circle has yet to succeed. The company had revenue of 75 million pounds last year and has lost money every year since it was founded in 2004. Circle’s stock has plunged 51 percent to 75 pence since its June 2011 initial public offering, giving the company a market value of 98 million pounds.
The publicly traded company owns 50.1 percent of a partnership that operates the hospitals and clinics. Parsa and institutional investors Lansdowne Partners, BlackRock Inc. (BLK) (BLK), Odey Asset Management and Invesco Perpetual are among the shareholders. Employees, including doctors, own the other 49.9 percent.
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