Bupa chief's pay soars to pounds 623,000

Click to follow
The Independent Online
The chief executives of Britain's two biggest not-for-profit private health insurers, Bupa and PPP, are taking more than half-a-million-pounds a year in pay and benefits from organisations founded to provide subscribers with mutual cover for private health care.

Since 1990, their pay, pension and benefits packages have risen by 150 per cent, or at six times the increase in national average earnings. Last year, according to the organisations' annual accounts, Peter Jacobs, 53, who became Bupa's chief executive in early 1991, received a total of pounds 623,000, made up of pounds 346,000 in salary and benefits, plus a pounds 164,000 bonus and pounds 113,000 in pension contributions.

At PPP Peter Owen, 47, who took over in August 1994, received pounds 505,000 - pounds 301,000 in salary and benefits, a further pounds 119,000 in pension contributions and a pounds 85,000 bonus. At WPA, the third biggest provident association, increases have been less spectacular.

These packages are causing mounting criticism within the private and public health sectors.

Precise comparisons of the chief executives' pay are hampered by accounting rules which used not to require declaration of pension contributions, and some other benefits. But allowing for pension paid in the same proportion in 1990 as in 1995 - when Bupa's chief executive was paid pounds 176,000 and PPP's pounds 159,000 then the increases total approximately 150 per cent. Over the same period, however:

The subscription income of both Bupa and PPP has risen by less than half;

The numbers paying for private medical insurance have been virtually static;

The premiums those subscribers have paid have risen at well above the rate of inflation and at around twice the rate of the increase in NHS costs, according to the Office of Fair Trading (OFT);

Average earnings have increased by only 24 per cent, and inflation by only 16 per cent.

Over the same period, Bupa has lost market share and PPP has done little better than hold its own, according to industry analysts. Across the private medical insurance business, of which Bupa and PPP combined account for around two-thirds, premium rises have been so sharp that the OFT says subscribers have been trading down to less comprehensive cover.

Professor Alan Maynard of the economics department at York University, who has been studying the provident associations' performance, said: "These generous levels of remuneration do seem reminiscent of the big increases we have seen in the privatised utilities like gas and water. Our work shows that throughout the 1980s, top-level pay at the provident associations was relatively flat. It has, however, moved quite extraordinarily in the last few years in a way that seems to bear little if any relation to performance.

"Despite a string of initiatives, Bupa and PPP have had little success in controlling costs. Instead premiums have continued to rise and their senior executives have been paid ever more generously. I do think questions need to be raised."

John Randle, a former chairman of the Independent Hospitals Association and now head of the Hospital Management Trust which runs two small private hospitals and a string of nursing homes, said: "If I were a subscriber of Bupa and PPP I would be very worried at these levels of directors' income. Over the past five years, they have ceased to be provident associations in the old style. They have turned themselves for all practical purposes into privatised companies, concerned not with mutual health care but market share in a largely static market. This does nothing for medicine and health care."

John Spiers, chairman of the Patients Association, said the figures appear "startling for organisations that are historically dedicated to mutual help for patients seeking private treatment". A Bupa member himself, Mr Spiers said: "It is an obvious cause of concern if very significant sums are apparently not being used to improve services to patients. Certainly these figures should be raised as a matter for discussion at their next annual meetings."

PPP earlier this year turned itself from a provident association into a company limited by shares. Asked to comment on the employment packages, PPP said that the pay of all staff "reflects individual quality, expertise and the delivery of the best service in the business". While staff costs for all of PPP totalled pounds 190,000 a day, benefits paid out totalled pounds 1.6m daily.

Bupa argued its financial performance had been "particularly impressive" since 1990, when it had made an underwriting loss. Its 1995 surplus was pounds 99m against pounds 18m in 1991. Reserves had risen from pounds 312m to pounds 565m and its solvency ratio from 40 per cent to 65 per cent. "You need to look at those figures too," a spokesman said.

Last year, according to William Fitzhugh of Health Care Information Systems, both Bupa and PPP spent around pounds 2.3m on all directors' emoluments. Given the present tensions in the private health industry, he said, "it is not surprising that hospital operators have been looking with interest and some surprise at both the total and individual remuneration on the provident asso- ciations' boards".

Latest figures show that Dr Harry McNeilly, PPP's medical director, received a package worth pounds 233,000 a year, while Sir Duncan Nichol, the former NHS chief executive who is now a non-executive director of Bupa, received pounds 20,000. Bupa's second highest paid director received a package worth pounds 288,000 and PPP's pounds 360,000.

The pounds 500,000-plus employment packages of Bupa's and PPP's chief executives - pounds 623,000 in Bupa's case - is around double that of Eddie George, Governor of the Bank of England, who receives pounds 227,000 plus an estimated pounds 50,000 pension contribution, and, in Bupa's case, half as much again as that of John Blackburn, chief executive of the Halifax, Britain's bigggest building society. Mr Blackburn's pay and pension package just topped pounds 400,000.

Comments