Don't bet your life on healthcare shares

Running properties full of incontinent old ladies is not the same as icing a cake or wrapping a sliced loaf
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The Independent Online

If sorry is the hardest word, then accepting responsibility when things go wrong is surely the mark of a mature adult. And if you are a manager, then it's part of the job description. A hearing this week shows just how problematic this concept is for many people in the healthcare business. The allegations include old ladies left unwashed for weeks and sleeping in their own urine overnight.

If sorry is the hardest word, then accepting responsibility when things go wrong is surely the mark of a mature adult. And if you are a manager, then it's part of the job description. A hearing this week shows just how problematic this concept is for many people in the healthcare business. The allegations include old ladies left unwashed for weeks and sleeping in their own urine overnight.

At the General Medical Council, Dr Chai Patel, a millionaire businessmen and Labour Party donor, a former trustee of Help the Aged and once a Health adviser to Alan Milburn, stands charged with neglecting elderly patients at the Lynde House care home in Twickenham. At the time, he was chief executive of Westminster Health Care, the group which owned it.

Since 1998 residents and relatives had complained vociferously about a decline in the care offered to the residents, which cost around £800 a week. An independent report published in 2001 found that Lynde House was understaffed and inadequately resourced, with poor standards of cleanliness. It also failed to respond to criticism. Dr Patel's position is quite clear. He says he was unaware of the report his company commissioned into Lynde House and added "how can a doctor run a multimillion-pound service if he is to be personally accountable for the actions of 13,000 or 14,000 employees on a day-to-day basis?"

Of course, this assumes that running health care is exactly like running the Hovis bread factory. Dr Patel uses his medical title on his publicity and all public communications, even though he hasn't practised since 1985. But there is no doubt that if you think a doctor is in charge of a business, you expect a certain set of ethics and standards to prevail. But above all, he is a businessman.

Dr Patel was quick to see that the future in medicine lay in providing facilities which the NHS was desperately short of and, after a spell in merchant banking, he set up a company running nursing homes in 1988. He took over Westminster Health Care, and then the Priory Group was added to the portfolio (it's the one which regularly hits the headlines as the mental care facility that those in the public eye flee to when it all gets too much). He gained around £8m from selling Westminster and then led the management buyout of the Priory, of which he is now the chief executive.

Dr Patel has spent his time in health provision running hundreds of clinics and care homes. He has advocated removing the elderly from NHS hospitals to private care facilities to release beds for urgent cases. He won an important contract for the Priory to treat Britain's servicemen and women with psychiatric problems, from anorexia to drink and drug abuse. The Army closed its only mental health facility, at Catterick, last year. He set up an internet company with the former BBC chairman Gavyn Davies to buy goods for NHS hospitals on-line. I make no comment about the ethics of government advisers potentially profiting from their advice, nor do I draw any conclusions from the fact that he donated £5,000 to Labour and was made a CBE shortly afterwards for services "in the development of health care".

Dr Patel is undoubtedly a brilliant businessmen, and when I mentioned bread earlier, I could have added fruitcakes, because these days the biggest investors in the Priory Group (with an 86 per cent stake) are Doughty Hanson, who own Hovis, Mr Kipling, and a share in Umbro. They are thought to be considering selling off Priory Clinics later this year, which they now value at £500m. Treating drug-addicted celebrities, anorexic naval ratings and "exhausted" footballers and models is clearly highly profitable. The group has 35 hospitals, and 1300 beds, and in 2003 an extraordinarily high dividend of £47m was paid to shareholders, on a profit of just £14.5m. Dr Patel and his management team own 14 per cent of the equity, so they will have received around £6.5m.

The Government is committed to reducing waiting lists in the NHS and providing a better service. And, increasingly, they turn to the private sector to take over everything from cleaning to care homes. But running a large number of properties full of incontinent, albeit charming, old ladies is not the same as squirting the icing on a cake or wrapping a sliced loaf. You can't run places which rely on human interaction - tactful responses in difficult situations - with customers who can be extremely demanding and difficult to a set of pre-agreed targets. In short, care for the elderly is not like ironing out the glitches on a cup-cake production line.

Expanding private medical facilities will continue as the Government seeks to semi-privatise the NHS. In 2002 an Observer report noted that half of all the revenue for the Priory Group came from NHS referrals, and that the NHS was generally charged more than private referrals covered by the major medical insurers. Individual managers at the 35 Priory hospitals strike their own deals, and so the whole charging process is shrouded in secrecy and difficult to penetrate. Clearly, it has been very hard for the NHS to get the best deal available, and the shareholders in the Priory group must be very happy with the rewards of their efficient operation. Dealing with addicts and making fruit cakes melds seamlessly into one line of profit.

Treating the mental problems of a stressed-out Britain is a booming business, and clinics like the Priory have only taken advantage of the lack of NHS provision. The hearing into Dr Patel's alleged shortcomings in the running of Lynde House is expected to last a month. We can be sure of one outcome, no matter whether he is exonerated or found guilty of serious professional misconduct. Fewer and fewer people will want to invest in or run a company in a business which is so fraught with problems. Providing care for the elderly is besieged by regulations, stunted by lack of government funding and, as a career option, suffers from incredibly low esteem. Plus, there's a huge shortage of staff. At the same time, an ageing population seems unwilling to contemplate their own options for retirement.

Since 2001 we have lost 13,000 beds in care homes for the elderly. Faced with a generation of baby-boomers (myself included) who will not accept the current low standards, a crisis is looming. At the same time fragmented families mean fewer and fewer of us are willing or able to care for an older parent. Divorce means more single women working to support themselves through middle age. Property prices mean more of their income goes on paying the mortgage. Many of the residents of Lynde House had sold their homes in order to finance their care. Sums offered by local councils can be pitifully small, and so families have to stump up to supplement the cost of housing their relatives. And, if we already can't get enough primary school teachers, a queue is definitely not forming to wipe up after grannie or to offer her a commode.

Smart bankers will be watching the outcome of Dr Patel's case very carefully, and I'd bet that they will be investing in addiction rather than the elderly in the future. Which is another problem for a Prime Minister so keen to offer a brighter future for all of his voters. Especially when most of them are over 50.

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