Privatisation

I think the main point is that these are not "profits" in any respectable sense of the word, Vninect. Perhaps it is another big word. They are profits in the sense that someone has made money through buying cheap and selling dear: but there is no added value. As I see it there are the same number of care homes as before; though more are owned by one company. There are the same number of beds in them as before; though in some cases there may be increased occupancy. So in terms of service to the community there is not much change.

Either the businesses were worth what they were sold for: in which case it is odd they were bought so cheap in the first place: or they were not and somebody got burnt at the end of the chain. But what is striking is that the people who get burnt never seem to be the people who made the money. Hundreds of millions of pounds have appeared out of nowhere: sparkled briefly; then vanished as if they had never been. None of that has improved the actual business of looking after people: none of it has gone to provide high quality reliable care. And since we need this service the taxpayer has been the source of the money which persuaded people that it was a good and profitable investment: the taxpayer has also lost because of the re-structuring which means these apparently very good businesses do not pay any tax at alll; and the taxpayer (you and me but not them) will lose again when they have to be bailed out.

I fail to see how this is cheap, efficient or cuts public spending. Where do people who support privatisation imagine this magic money comes from?

www.bbc.co.uk/iplayer/episode/b0124...4_Elderly_Care/

"Analysis" radio programme about the care of the elderly.

The LA buy in care: they pay what they can afford. It is not high enough. They now face a huge cut in their budgets so it is not likely they will be able to pay any more. The programme says one LA (Pembrokeshire) was taken to court because they calculated the fees based on what they could afford, without taking into account anything else. That is not legal. The law is like that in a lot of fields: they are required to provide service on the basis of need: but they don't get any money to pay for it once they have assessed that need. Central government then blames the LA for the failures.

www.bbc.co.uk/news/business-13746695

www.bbc.co.uk/news/business-14102750

Seems Southern Cross has not managed to reach agreement with the landlords etc and so it is to be wound up. The Chairman denied last week that their decision to sell the homes and then lease them back (taken when Blackstone had the company, I believe) had anything to do with their current problems: which is a rather curious statement, given they can't pay the rent. He founds on the argument that "continuing to borrow from banks would have caused greater problems.
"We could have borrowed money, but lease structures create greater stability than bank borrowing, that might typically have a five-year term," he said." That seems to rather skate over the obvious fact that if all that money had not gone out of the company it might not have needed to continue to borrow: and the other obvious fact that rents are going to be more stable if you are paying £100 million a year more than the the commercial comparator suggests you should.

I see he also says they have given priority to improving standards of care in the last two years: that is once everybody had taken out all the profit they possibly could in their game of pass the parcel. Colour me a teensy bit unimpressed by that pathetic statement.

So now they say that: "little or no value would be left for the shareholders.". I wonder who they will turn out to be? The owners paid only a fraction of the price and the rest was borrowed. But the debt was sold on. I wonder where it ended up?

Of course we are asked to believe that the level of fees is the reason for all this. And it is true they are squeezed because of the spending cuts. That is only going to get worse, but we are not to think about that because it is in another part of the forest

But I am left wondering: who is going to run these homes? It is all right saying "other providers" but if you are saying at the same time that they cannot make ends meet because of the fee levels why would other providers come in and take them over?

Well this remains murky but a couple of things have emerged in the news over the last couple of weeks. One is that some of the care homes are going to be run by a guy who previously ran the Priory group. People mostly know that name from the very expensive rehab services it ran for celebs. Dr Chai Patel was the boss of the group until it was sold in 2005. He alsp formed a company called Court Cavendish, which is curiously described as a "healthcare turnaround specialist". Don't ask me what that means, for I have no idea.

Court Cavendish is to form a new company with NHP (the landlords separated out by Blackstone discussed above). NHP said it is "retaining" £28 million pounds of interest due to be paid in two tranches in July and October, in order to fund the new operator. It is not very clear who that money is owed to: presumably the banks, given the indebtedness of NHP referred to above. Incidentally Southern Cross told shareholders, at a meeting on 13/7/11, that the winding up of the company was precipitated by NHP which "pulled the rug out" and forced the liquidation

So I had a dig about about The Priory, and about Dr Patel.

Dr Patel has been described as a "veteran" of the sector and I think that is supposed to leave us with the impression that he has a lot of experience in providing high quality care. Well, he has been an important player for quite a while, certainly. He has advised government on elderly care: he has pushed the PFI initiative: and he was a trustee of the respected charity "Help the Aged".

Dr Patel qualified as a doctor in 1979 but he worked for the NHS for only 5 years before a change of career saw him working in the city for Merril-Lynch and later Lehman Brothers. Goldman Sachs helped him to buy Westminster Health Care in 1999.

In 1999 Dr Patel formed Westminster Health Care, after selling a previous care company to BUPA in 1997. He was Chief Executive of Westminster Health Care, which acquired the Priory group in 2000.

In 2002 a report into a care home called Lynde House, which was owned and run by Westminster Health Care demonstrated appalling standards there.

http://oncomarchive.com/campaigns/LyndeSup.../LyndeRpt03.pdf

That same year Dr Patel resigned from involvement with Help the Aged, to "save them embarrassment". The care homes division of the Priory group was subject to a management buyout the same year: though Dr Patel continued as the CEO of Priory Healthcare until 2007

In 2004 Dr Patel was charged with serious professional misconduct over that episode, though the GMC dropped the case due to insufficient evidence in 2005. For some reason the linked report was not admisssable as evidence: this seems to have been because the issue was not aboout his practice of medicine: which is fair enough. But the fact remains that he was in charge of the company which presided over the abuse of elderly residents and did nothing to remedy the situation in face of widespread complaints from relatives and others.

Dr Patel, as has been noted, was a strong supporter of PFI, one of the labour party's favourite policies under Blair and Brown. It just so happens that he is a major donor to the party, and as well as donations he lent the party £1.5 million at commercial rates in 2005. There followed a stink when he was proposed for a peerage two months later: he withdrew his candidacy: perhaps he wished to save the party "embarrassment".

Priory Healthcare was itself bought in 2002 by a company called Doughty Hanson, a venture capital outfit, for £288 million. Dr Patel is reported to have received £8 million from that sale, and he continued as CEO, as noted.

In 2005 Doughty Hanson sold Priory Health care for £875 million. The buyer was ABN-Amro (this is the bank which was a big part of the problems which led to the collapse of RBS). Dr Patel, along with other shareholders, cashed in some of their equity but he declined to say how much, that being "private". But he retained 12% of the equity, according to a report in the Daily Telegraph of the time. Being a bank, ABN-Amro said they did not intend to keep the investment: they intended to "re-finance" and sell it. That made Dr Patel's statement of delight at the buyer rather curious because he based his pleasure on the fact that being owned by a bank would be a long term and stable relationship, unlike the venture capital model. But hey ho.

I am not clear on what happened but in 2007 it was reported that the entire managment board, including Dr Patel, "suddenly and unexpectedly quit". Reports at the time mention that ABN-Amro had not been able to shift any of the assets. The group was famous for services to celebs with addiction problems; but 77% of its income came from the NHS. Cuts to the NHS budgets had bitten into profit and the private sector had not grown as predicted: ABN-Amro had paid 18 times the group's annual pre-tax profit to buy it. This was surprising at the time and other bidders were not in the same league with their offers: there was speculation at the time that this was because ABN-Amro did not view it as a business per se: but more as "social infrastructure". To me the implication of that is that the the price was predicated on a bottomless pit of public money: because it is the public which pays for infrastucture. And that in turn informed their strategy: which was to break it up into debt and equity parts, and sell it on. Only there were no buyers. Another major part of their plan was the "sale and leaseback" we saw in the Southern Cross model: the one which led to the failure of that company. To that end the property was transferred to a subsidiary. The financial press speculated at the time that the management resigned en masse because of the rents demanded by that subsidiary. This was denied by both sides, however.

In 2007 a company called Global Health Partners bought 34% of the Priory: but as Dr Patel owned 20% at that time it is not clear just which shares GHP acquired. Given RBS's increasingly desperate attempts to offload its share it seems likely that GHP bought from Dr Patel and the other managers who resigned: not from ABN-amro. As an aside, GHP is owned by the tax dodging Tory donor, Lord Ashcroft

It is interesting that after the management resighed, former Southern Cross CEO, Philip Scott,who did very well out of the boom years (he sold his stake in that company for £11 million just before the share price started to plunge), joined the Priory as CEO.

Whatever happened ABN-Amro did not manage to sell Priory and so when RBS took over the dutch bank it got the Priory as well. It has been trying to sell it ever since and has now succeeded. A company called Advent International has bought it for £1 billion. Advent is an american private equity company just like Blackstone. In their comment on the acquisition they have this to say:


Does anybody remember a childhood game called "musical chairs"?

Small follow up on Castlebeck Care, referred to above when Winterbourne was closed after abuse was recorded and broadcast by BBC's Panorama programme

At that time the CQC undertook an investigation in to the remaining Castelbeck care homes. On the basis of that review a further 4 homes were found to be cause for "serious concern": and another 7 were not "fully compliant" with care and safety standards. 12 were found to be ok: so more than half of their total facilities were not good enough: and 5 out of 24 were no good at all. This is the reality of the private sector magic.

When the CQC reported the results of the review they declined to give details about what kind of failings they had found: as that is a public regulatory body I find that odd, to say the least. In July it seems that 4 members of staff at a 9 bed home called Rose Villa were suspended because of allegations of "misconduct", whatever that means. The CEO
www.bbc.co.uk/news/uk-14327180

One of the four worst of these homes announced it is to close "for operational reasons" last week. Today I learned that a third home, Arden Vale, is also to be closed by next Thursday. Apparently the CQC had taken legal action which would have resulted in Castlebeck not being allowed to operate the home: so it has decided to shut the home in advance of an outcome to that. I suppose I should be pleased that this will save legal costs for the taxpayer. It is a bit unfortunate that the CQC decided to take the action after seeing "no evidence" of improvement following the initial report. So much for the warm words from Castlebeck: but I cannot say I am surprised!. The company say they do not intend to appeal, which is something. They also say they are addressing the problems in the other homes subject to the strongest criticism. Forgive me if I have little confidence in that.

Apparently Castlebeck are working to ensure that the residents will suffer "minimum disruption, and that the right services are found for their needs". Oh I am sure that will happen by next Thursday. The light from my window has dimmed because of a passing flock of airborne suidae; and they all appear to be rare breeds, too. The fact that such nonsense can even be reported is breathtaking. Are we supposed to believe that there are empty beds in suitable facilities just lying around waiting, because of a lack of demand?.

Meantime the BBC has learned that there were 9 complaints about Winterbourne last year reported to the CQC: one man phoned them directly and it took three months for them to call him back. A more unedifying response to that finding (obtained under freedom of information provisions) could hardly be found: the CQC says that that kind of report is a matter for the police, or the local authority. Or maybe the brownies? Anybody apart from the regulator, anyway

http://ht.ly/6lpzz

Four Seasons is now intent on buying 100 of the homes formerly run by Southern Cross. This will make Four Seasons the biggest care provider in the UK, taking over that position from Southern Cross.

It is probably coincidence, but I notice that Four Seasons was a basket case in 2009: and the intervention of new managers has turned it around so that it is now thriving and constitutes a good investment opportunity. Does that sound familiar (see history of Southern Cross, outlined upthread. The article says that it is now trading profitably if you ignore the debt interest. Seems to me that was just what was said of Southern Cross too. In this instance the article says


Well is that right? Upthread I reported on what was said about Southern Cross/NHP at the time of their "renaissance"



Does that look the same to you? It does to me.

From where I am sitting it looks like we are going to do exactly the same thing again; for exactly the same reasons; and I see no reason whatsoever to expect a different outcome.

As noted above NHP is now working with Court Cavendish, Dr Chai Patel's company specialising in " operational and financial turnarounds of multi-site Social Care and Health Care organisations."

http://courtcavendish.com/

In July there was this report in The Daily Telegraph

www.telegraph.co.uk/finance/newsbys...care-homes.html

It makes interesting reading. Patel points to a successful turnaround of a company called Care Management Group as evidence that they know what they are doing and can be trusted with this. I don't know the details of that.

But as noted above and admitted in this article, NHP is controlled by "bondholders" after it was bought by Delta and the cost was recouped by issuing "asset backed debt". Yet NHP is to provide the funding for the new company it is setting up with Dr Patel. That funding is to come from the "retention", also mentioned above: in other words they are not to pay the interest due to the bondholders at present: this is to yield £30 million start up money for the new company. Sounds a lot? Well no, not really. That is the sum which is going to "turn around" the 250 homes which are to be transferred. £120,000 each. Now since this is "only" 250 homes one can perhaps presume that they are the pick of the bunch and they do not need a lot of investment. Except it is the whole of the NHP holding of Southern Cross care homes. It does not seem likely to me that NHP held all the good ones and since bed occupancy in Southern Cross homes increased when it did the "miraculous" turnaround; but subsequently fell so that it is now unfavourably compared to Four Seasons in those terms, it seems likely that a great deal of investment might be required if long term viablity is to be established. But that doesn't matter, because that is not the plan. As the article notes,
So more asset stripping where there are no assets. Plus ca change....

Dr Patel is confident that this need not concern residents and others, who are looking for some security for the future. So apparently the "future sale" is not going to give rise to any uncertainty and that is all right. Except he bases this reassurance on this rather curious statement:


Interesting. You will recall from earlier posts that NHP and Southern Cross were restructured by Blackstone so that NHP held the property and Southern Cross paid them rent. That rent was at a far higher level than the commercial comparator, according to the GMB analysis: and that led to the collapse of Southern Cross in the first place, arguably. Southern Cross wished to reduce its rental payments when the crisis came: NHP (presumably amongst others) refused to agree that, and so Southen Cross went down. Now, apparently, reducing the rent is perfectly acceptable. I do not see how that makes sense.

As noted above, Robert Peston of the BBC reported in June that NHP relied on rents from Southern Cross for 90% of its income. Its refusal to countenance a reduction in rent made sense in light of that. Now we are to believe that it is will forego some (large?) part of that. And it is still heavily indebted, although the debt of £1 billion was "restructured" in 2009. It is presumably held by the "bond holders", who seem to be a group led by Capita. Those "bond holders" are not foregoing interest on their investment through concern for the care of the elderly, I suspect: they want to recoup their losses, and they must think this is a way to do it.

I think that Mr Patel's statement that "all of those things carry on even if NHP goes down" should be amended to "all of those things carry on even when NHP goes down". For I see no way it can continue with a much reduced income and a huge debt to service. So what is this all about? It seems to me that the transfer of these properties to the new company means that NHP no longer exists in any meaningful sense. Remember it was a property company: and it has just passed all of its properties to the new company. Presumably it has not sold them, because the new company does not have that kind of money. So it must be a new leasing arrangement. And the rent is much reduced, so NHP has no income with which to pay its mortgages. Otherwises the structure is exactly the same as Blackstone put in place: and which led to the problem in the first place

That my musings are not completely off the mark is supported by this article written in June

http://m.propertyweek.com/news/southern-cr...5019232.article

when Southern cross was reducing the rent payments when this mess first came to public attention.

In first discussing NHP I characterised its situation as one which for an ordinary person woud be called "negative equity". NHP is now in the position of an ordinary person in negative equity who has just lost his job. When that happens to ordinary people they cannot pay the mortgage and the lender forecloses. The asset is seized and sold (usually for less than the outstanding loan) and the mortgage holder loses their home and is still in debt.

As noted the ultimate owner of NHP is the Qatari government: so one might imagine that they are the losers in this. But they recouped their money by selling the debts to the bondholders, so they are off the hook so far as I can tell. NHP goes down but the owners lose nothing which actually exists, it seems. The bondholders are those at risk. It is not easy to find out who they are, but at least one of them is Lloyds Bank: and Lloyd's bank is 43% owned by the British tax payer, following the bank bailout. I am not able to discover what proportion of the bonds are held by that bank.


Looks like he intends to pull exactly the same trick as we have seen with Southern Cross and Four Seasons all over again. Why change a plan when it works so well? Here is my advice: when the thing is floated or sold in 2016: DO NOT BUY IT!

Edited by FionaK - 30/9/2011, 11:29

Meanwhile, back in the world of small operators it seems all is not rosy either

www.guardian.co.uk/business/2011/no...uble?CMP=twt_fd

The number of care homes which have gone into administration has doubled. Once again the problem seems to be sale and lease back of the property and falling income due to LA cuts.

Although these are not large companies like southern cross or four seasons, there are 72 care homes which have gone bust this year; and 35 last year. That is not a small number and there is no indication in this article what is to happen to the people who live in them.

The administraters of Argus care homes, which is mentioned in the article, hope to sell the 12 homes they are now in charge of as "going concerns". Given the rate of bankruptcy that seems a tad optimistic to me

The National Audit Office confirms that the CQC, the regulator mentioned upthread, only carried out 47% of planned inspections between October 2010 and April 2011. They are 14% short of staff and they have targets to meet which are not directly concerned with their role as inspectors. This is no suprise: and once again we have assurances that they are "learning" and "improving". Since the head of the service is the one who defended "paper inspections" on the radio last year, I have my doubts.

If you are going to privatise a service and you consider that can be monitored through a regulator then that regulator needs to have adequate resource and a sound understanding of what its role is. There is no indication that this is taken seriously, and so far as I can see the main aim has been to save money. The whole structure is flawed: but even if you accept it it is surely clear that proper regulation costs a lot and is a high priority. Apparently our ideologues do not agree...

www.bbc.co.uk/news/health-15985922

www.bbc.co.uk/news/health-16035012

Seems I am not alone in thinking there are insufficient safeguards to ensure that care providers are solvent. Not much detail in this report, however

This is not directly on-topic because it is related to the demanded "efficiency savings" in the NHS, rather than to privatisation. I put it here because the topics are related.

http://www.guardian.co.uk/society/2011/dec...eatment-elderly

The article is about a report on a "waste of resources" within the NHS. According to the authors a lot of money is being wasted because some people stay in hospital longer than is necessary and a great many of them are elderly. We see the by now familiar fig leaf of apparent concern for people's welfare. As people who are out of work for more than a fortnight lose the will to work, so people who are in hospital for more than a fortnight apparently become depressed and/or lose their independence. It is quite interesting how a fortnight is a watershed for all sorts of long term changes arising from use of government services, such that people's whole outlook is affected. Or it might be nonsense: you decide.

What this report is mainly talking about is the care of people who are elderly and who are admitted to hospital as emergencies because they have pneumonia or have broken a hip, or things like that. The authors consider that a stay of more than 2 days is seldom necessary and they say that it costs the health service a lot of money. Planned admissions do not take up unnecessary bed space, but the emergency ones do, and this has to change if hospitals are to meet the "efficiency savings" demanded of them. I suppose it is inevitable that each service will focus on its own financing because that is how things are structured: but it is completely at odds with any notion of integrated service.

You may not be aware, but the issue of "bed blocking" by the elderly has been a problem forever. It is one of those issues which comes up from time to time in the press and in politics and we hear just such arguments as are again contained in this report. I am aware of it because of my work: when the hospital wishes to discharge someone they pass responsibility to the social work department for services: we have regular fights about this because the SWD has no more resource than the NHS and hospitals have been rather odd in their ideas about what is reasonable: I have often had calls from NHS staff demanding a full package of care for a vulnerable elderly person who is to be discharged that afternoon. That has improved in recent years becaue there has been a slightly better mutual understanding of the different pressures NHS and social care staff are facing: but this report ignores all that, and talks of discharge within two days if a person has broken a hip.

If someone is to be discharged from a hospital you have to know what they need in terms of care, including equipment. An occupational therapist has to assess the need at the point of discharge and then has to make equipment available if the person is to go home: such things as aids to allow them to get into the bath so they can wash or special chairs so they can get up if they are mobile enough to do that. It is not all rocket science: but it is essential. And OT's are in heavy demand and their budgets are such that if you happen to need equipment between January and April there is likely to be a problem. Alongside that assessment there has to be a package of care which suits the need and that needs to be assessed too. And then someone has to be identified to do the tasks required. And the money to pay those people has to be applied for and agreed. These things take time to do properly: two days is laughable.

Think about that for a moment. A frail elderly person with a broken hip is to be discharged from hospital in two days, they say. Now it is perfectly true that once that hip is set, and assuming no other health problems come to light on admission, the person does not really need health care as such. So on the face of it they need no be in hospital. Hospital care is, as they say, expensive. Adequate care of any kind for such a person is expensive, as it happens. The relative costs of out of hospital care are lower, as the article says: but as we have seen that is because the payments to residential homes are inadequate to meet the costs: so homes are closing. It is perfectly true that this is in part an artefact of the privatisation of those services becaue much of the cost comes from the need to pay rent to related companies and the associated profit. It doesn't matter. This report is not concerned with what should happen at a wider political level: it is about money. There are not enough beds in residential care homes and there is concern that there are likely to be fewer in the future because the costs will have to rise if the current arrangement of buying care from private firms continues: and there is no suggestion it will not. This government is not going to nationalise care: you can take that to the bank. So for very many people there will be no bed available in a care home.

Even if that were not true, you have to consider the effect of discharge to a care home for people who are depressed by hospital care and by "long" stays. If it is the case that they are concerned about a loss of independence then a move from hospital to residential care will not alleviate such fears. Quite apart from the disruption such a move entails many people understand and trust that a stay in hospital is temporary, and expect to go home when they are well. That is not how they see residential care, however. For many people they see a move to residential care as permanent. That would change if there were more short stays of the sort we are discussing: but so long as the report chooses to tell us how people react to the decisions taken about their care, then my experience of that is valid: and that is how many people see it. This is at least as depressing as a fortnight in hospital: but it does not suit the authors of the report to focus on people's reactions when it is not in support of their money driven agenda: so they don't. At least if they do it is not evident in this article.

It is said that most people prefer to be at home. If home is a safe and comfortable place where your needs are met, that is probably true for most. It is not true for everyone even when they are healthy: it is true for fewer when they have a broken hip. That is because you are not mobile if you have a broken hip. You are not really well placed to make a cup of tea or use the toilet, or get up and dressed. If you live alone ( as very many elderly people do) it is quite scary to be ill and alone and dependent on carers. Leaving aside the recent findings on inadequate home care through callousness or lack of training or neglect, home care is underfunded and not readily available. It has also been privatised, very largely.

What that means is that home carers do not have time to do what they are required to do properly: and they don't. In practice what happens is that they go in maybe three times a day: half an hour in the morning to wash, dress and prepare a meal for the person: 15 minutes at lunch time for another meal: and half an hour at night to put the person to bed. I say at night: you need to be aware that the constraints of staff etc often mean that folk are put to bed early: by early I mean 8 pm. For folk with a broken hip that means they are stuck in bed from then till the carers arrive the next morning. It is unfortunate than many elderly people don't sleep well: it is a long and lonely night when you can't sleep: are in pain perhaps; can't get up to make a cup of tea or whatever: and can't use the toilet. Did I mention that elderly people often need the toilet through the night?

Some people have a good social network which can supplement this level of care: they have friends or family or a church or whatever: and many people don't. If you are 85 many of your friends will be dead, or themselves unfit. Family might live hundreds of miles away; or may not exist. Many elderly people are quite isolated and have no links with church. Clubs and activities they may have previously participated in will sometimes generate social support: but by 85 you are not likely to be still bowling or playing golf or whatever you used to do. Those links also diminish as you age, for most people at least.

In the past it was part of a social worker's role to visit people who were at home or in temporary residential care: we used to have some time to do that and so would be aware of problems with the care package: that is much less possible now. We are now "care managers" and what that means is we commission services from private companies, mostly. We have no time to visit and talk to the people concerned in the way we used to. That is the model for "community care" and it leads to vulnerability for the elderly as much as any group. Their safety is dependent on the regulator, and we have already seen how effective that is.

But we must make "efficiency savings" and so none of this matters. The costs are to be transferred from one inadequately funded service to another inadequately funded service on grounds of cost: and all that matters is the bottom line.

Aaaand....Mr Cameron has decided to "order" the integration of health and social care. Just like that. Do these people never get tired of insulting us?

Is that rhetorical?

It is, yes. I know they never get tired of it ...