News from Nowhere

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Under fire already

Readers of News from Nowhere know that working in the NHS is no quiet mission. Just the opposite, the flak rises to greet all new entrants, but is especially intense for politicians. Even before he had settled into Jeremy Hunt’s shoes, the National Health Executive website alleged that new health secretary Matt Hancock had accepted donations from the chairman of a think-tank that supports the privatisation of the NHS, the Institute of Economic Affairs (IEA). The donations include £4,000 given to Hancock on 29 November 2013 to support parliamentary work and travel costs, following a similar amount in 2012.NHE reported on July 13th that the Charity Commission will investigate whether or not the IEA breached charity regulation over political independence.

And another thing

Responding NHS England’s latest performance figures, Niall Dickson, chief executive of the NHS Confederation, which represents organisations across the healthcare sector, said:

This is a baptism of fire for the new health secretary. These performance figures show a system under intolerable strain with growing accident and emergency attendances and emergency admissions. This is now the day-to-day reality of life at the clinical coal face, but it cannot go on. The government’s funding settlement for the NHS should be welcomed – it is a lot more than has been offered in recent years and importantly it is a five-year deal which should help to provide at least a degree of stability.  Of course, it is not enough, but if it is used wisely and the government also invests in social care, we should do everything we can to see that it makes a difference.  It will be critical though to invest in ways of providing care in the community to reduce the pressures on hospitals and other services. If instead we use the extra money to prop up the existing system, we will surely fail and patients will suffer.”

Promises, promises

The Resolution Foundation reminds us that on of Teresa May’s first promises was to put injustices right. She has had other things on her mind since then, so the Foundation decided to refresh her memory about health inequalities, race discrimination, social mobility and the gender pay gap, as well as home ownership, insecure work and the cost of living. You can see the Foundation’s analysis at www.resolutionfoundation.org/media/blog/top-of-the-charts-burning-injustices-special-edition/ but here’s the comment on  Health inequalities:

We live in a country where if you’re born poor, you will die on average 9 years earlier than others. This is about as burning as an injustice gets: if you live in a poor area you can expect to die a lot earlier. In England the gap between the richest and poorest areas is over 7 years for women and 9 for men. This gap may have narrowed in the 2000s, but more recently the gap has been growing again. But the really bad news that has emerged on Theresa May’s watch is less about health inequality and more just about health: mortality rates have stopped falling to a significant extent since 2011, meaning life expectancies are not rising as quickly as we used to think. They are of course still improving, just more slowly, and the government has announced £20 billion extra NHS spending, so it’s not all doom and gloom…”

Mergers and acquisitions in the commercial sector

It is not just the NHS that has to reorganize itself. The first half of 2018 has seen mergers and acquisition (M&A) and investment activity in the UK Healthcare sector remain high, according to data from Alantra, the global investment banking and asset management firm.   The first six months of the year saw 65 deals, compared to 83 during the same period last year and M&A momentum is expected to continue for the second half of 2018, as a result of favourable market drivers.   

Justin Crowther, a Partner in the UK advisory business of Alantra, has identified the following significant healthcare deals and market drivers that have positively impacted on M&A activity in the industry during the first half of 2018.

Strong private equity appetite for market-leading platforms  Core.  Equity, the Belgium-based private equity firm, acquired Portman Dental Care following a competitive dual track process involving serial acquirers such as Jacobs Holdings. Core Equity recorded the highest first-time fundraise in 2017. It has about €1bn of capital to deploy in market-leading platform companies with substantial opportunities to generate value over long periods of time. Portman’s strong reputation, geographic positioning and ability to access an extensive clinical network embedded in the UK private health system aligns neatly with this investment philosophy. Portman offers an attractive opportunity for further consolidation within the UK, whilst potentially providing a launch pad to create a pan-European market leader.

UK market access remains a high priority for international acquirers.  Virtus Health Group (Virtus), the listed Australia-based provider of in-vitro fertilisation services, continued its international growth strategy with the acquisition of Complete Fertility (90% stake). The UK fertility market is of key strategic importance due to its strong international healthcare reputation, well-regulated market and the ability to implement the most advanced treatments by combining recent advancements in technology with unparalleled scientific capability. The fertility services market, underpinned by favourable market drivers, remains a hot-bed of activity and this trend will continue.

Specialist care market attracting a new breed of institutional investors.  Antin, the specialist infrastructure fund, followed up its recent investment in Kisimul Schools with the acquisition of Hesley Group, the specialist residential care service provider for adults and young people with autism and other complex needs. Infrastructure funds are increasingly looking towards the fragmented specialist care market as a source of non-cyclical growth that will generate stable cash returns for investors. Other notable investments by infrastructure funds include AMP Capital’s acquisition of The Regard Partnership and Montreux Capital’s investment in Active Assistance.

Increasing number of social care M&A transactions. Domiciliary and elderly care providers, especially those funded through local authorities, remain exposed to a difficult operating environment. Government austerity measures combined with the introduction of the National Living Wage are placing significant pressure on margins resulting in a slowdown in M&A activity in this space. However, the acquisition of the domiciliary care business Ark Home Healthcare by City & County is a signal of intent by a key strategic buyer in the field – is this an early indication that social care M&A activity is on the up?

AI and health services

A report from PricewaterhouseCooper (PwC) on the impact of AI and robotisation on work suggests that the most positive effect will be seen in the health and social work sector, where PwC estimates that employment could increase by nearly 1 million, equivalent to around 20% of existing jobs in the sector. By contrast PwC estimates the number of jobs in the manufacturing sector could be reduced by around 25%, representing a net loss of nearly 700,000 jobs.  Healthcare is likely to see rising employment as it will be increasingly in demand as society becomes richer and the UK population ages. While some jobs may be displaced, many more are likely to be created as real incomes rise and patients still want the ‘human touch’ from doctors, nurses and other staff. Go to www.pwc.com. for the UK Economic Outlook  report of July 17th 2018.

 

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