Controversial psychiatric hospitals sold at a loss to US
Joey Jacobs, the US drug addiction clinics tycoon, has swept into Britain to buy the psychiatric hospitals group Partnerships in Care for £394m.
PiC, which is owned by private equity giant Cinven, was exposed in an Independent investigation last year for being among the slew of private healthcare companies relying on revenues from the taxpayer, but who pursue aggressive accounting policies to minimise their taxes. It also has a patchy record on the quality of its services.
Now, it is being taken over by Acadia Healthcare, a US psychiatric and substance abuse care giant which has 51 facilities across the US and Puerto Rico.
Mr Jacobs has made himself a multi-millionaire building up addiction and psychiatric clinics in the US. Acadia Healthcare is one of the biggest of its kind. It will take over PiC in the hope of benefiting from what Mr Jacobs termed: “An expanding population, higher rates of hospitalisation and declining NHS bed availability.”
The company said it was also looking for more takeover opportunities. Acadia said in a statement that the private mental healthcare market “has grown at a 9.2 per cent compound annual growth rate since 2004”. However, the deal marks a substantial loss for Cinven, which paid £552m for the business in 2005.
A sudden shift in public spending during post-election austerity towards using more NHS-owned facilities hit PiC's business hard. However, referrals are now increasing again and the business is in the process of turning around, sources said.
An investigation by The Independent and Corporate Watch into the tax activities of the UK's private health companies exposed how many of them, including PiC, avoid UK taxes by taking big loans.
The investigation highlighted how PiC managed to turn what would have been a hefty tax bill into a tax credit in 2012, according to accounts filed at Companies House.
It owed £321.9m to its owners Cinven. By paying interest of £29.7m on these borrowings in 2012, it helped to turn a healthy operating profit of £31.7m into a pre-tax loss, leaving the group with a tax credit of £629,000.
Some of the group's secure hospitals for mental health patients had received damning inspection reports, which criticised poor patient safety, critically low staffing and a lack of respect for basic dignity.
Sources close to the company said it had moved to fix the problems quickly, with a spokesperson adding: “Partnerships in Care has a strong regulatory performance.”
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