Investors are making a fortune from UK healthcare. Why is nobody holding private equity to account?

David Rowland | March 13, 2024 | Blog, Featured

If you are in a vulnerable situation in the UK because of your age, personal circumstances, violent crime or ill health, there is a strong chance that somebody somewhere – most likely an offshore private equity investor – will be making a profit out of your health and care.

In the case of older people needing care towards the end of their life, companies backed by private equity funds have been generating significant returns for decades. Our research at the Centre for Health and the Public Interest shows that around £1.5bn is taken out of the care home sector each year in the form of different types of returns to shareholders and investors.

Even during the pandemic, when the care home sector witnessed more than 40,000 Covid-related deaths and was propped up by £2bn of taxpayer support, a number of private care home companies continued their focus on profit-making, with 122 of them paying out dividend payments totalling £120m during the first year of the pandemic (an increase of 11% on the previous year) – all this while many of the staff in those homes worked longer hours and received no extra pay.

At the other end of the age spectrum, thousands of children in care homes, as well as those who have been fostered, have also been treated as a source of income and profit by companies who have made large margins from buying up and delivering these services. More than 80% of residential care homes for children are provided on a for-profit basis, with local authority leaders warning that profiteering is occurring at the expense of young people in care.

People with serious mental health needs are also a major revenue stream for the companies variously owned by private equity funds and US healthcare corporations, which operate hundreds of inpatient mental health facilities in the UK.

But that’s not all. As our joint investigation with the Guardian has revealed, more than half of the people seen in the NHS-funded Sexual Assault Referral Centres (SARCs) are treated by two companies owned by private equity investors, with slightly under a third of the total NHS SARCs budget now going to these companies. These are services for people who have been raped or sexually assaulted, including children. The centres help thousands of victims each year by providing psychological and medical services, and gathering forensic evidence for criminal prosecutions.

Again, the returns generated by such companies are very handsome. In the case of the one company for which financial data is available, we found that it had paid out dividends worth £8.7m over two years, from income of £45m that it had generated from delivering both SARCS as well as healthcare to those in custody and secure accommodation. In 2021, the amount of dividends paid out exceeded the amount of pre-tax profit generated by the company in that year.

The lack of democratic input into the decision to contract out such services is striking – for example, it is difficult to think of a time when a government minister proposed that care for victims of sexual assault should be privatised. Nor have the three main political parties who have formed governments in the last two decades made manifesto commitments to allow investors to generate uncapped profits from children’s care homes, mental health facilities or care homes for older people.

Much of this outsourcing has taken place on the quiet, often described euphemistically as “public sector reform”, while those receiving the services are often the least able to raise concerns. Moreover, there has been no public debate about the types of companies that should be allowed to run such vital services.

While some members of parliament are up in arms about the possibility that the Spectator and the Telegraph might soon be owned by a foreign government, none of them seem to be concerned that some of our major healthcare providers are now owned in whole or in part by the sovereign wealth funds of the Chinese Communist party (in the case of the private cancer care provider GenesisCare, which has a growing presence in the UK) or the United Arab Emirates (in the case of Circle, the largest operator of private hospitals in England). This is in addition to the numerous companies running health and social care services in the UK whose owners are registered in offshore tax havens.

The mantra that has been used to justify private sector involvement in delivering health and social care from the Blair government onwards is “what matters is what works”: it doesn’t matter who provides care, it is the quality of care that counts.

But a recent study published in the Lancet found that transferring the ownership of publicly owned hospitals into the for-profit sector almost never had a positive effect on the quality of care, and that any reduction in costs came at the expense of care quality. A paper in the BMJ found that private equity ownership increased costs to those paying for care with “mixed to harmful impacts” on quality. A US review of deaths in nursing homes for older people found a 10% increase in mortality after the home was taken over by a private equity-backed company.

Now we know there are no health and care services that are off limits for private equity investors in Britain, nor any limits on the amount of profit they can extract, it is time for the National Audit Office and other parliamentary committees to do their job and find out exactly where the millions of pounds that are being pumped into these services actually end up, and what impact the high rates of return being made by these companies are having on people experiencing some of the most difficult situations imaginable.

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About the author

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David Rowland

David Rowland is CHPI's Director. He joined the organisation in 2019 after over a decade of working in senior policy positions within the healthcare regulatory sector. For David's full bio see our People pageSee all posts by David Rowland