RE: In the light of the proposed reforms, where is the investment case for Totally Plc ?16 Feb 2021 11:40
Healthcare providers, both NHS Trusts and private, run on debt, lots of it.
The NHS is too expensive to be funded by taxpayers national insurance contributions alone.
At the end of 2019/20, NHS providers held £13.4 billion of outstanding debt on loans taken out from the Department for Health and Social Care for ‘interim support’. Additionally another £3 billions of business debt accrued by in 2018/8.
In 2020 the Health Secretary announced over £13 billion of debt to be written off as part of a major financial reset for NHS providers.
**Tax payers pick up the tab.**
Contracts between the NHS and private are not allowed to profit the NHS, but private providers can accept contracts and manipulate the debt so that it does not show up on their books but on the NHS instead.
**Tax payers pick up the tab.**
The ten largest private hospitals owe £2.6bn in loans from companies within their corporate group, which is over 2.5 times more than what they owe to external lenders, such as banks.
There are rent payments and management fees made to companies which are part of the same corporate group.
Four of the largest private hospital providers (Spire, BMI, Nuffield, Ramsay) have an average gearing (total debt / equity) of over 300%. For this reason, the government’s deal to purchase their entire capacity in return for covering their “operating costs, overheads, use of assets, rent and interest” is in effect a bailout for private hospitals. This is because it keeps the sector afloat when it would likely face the same fate as other industries who are experiencing a significant drop off in demand due to the virus. Crucially it also represents a bailout for the landlords and lenders of the private hospitals whose investments would also be at risk if the hospitals were unable to honour their payments.
**Tax payers pick up the tab.**
Care homes providing a service to councils for patients who cannot pay may be acquired by the private sector where they are used as debt 'cash-cows' which often go bust as they are used on as short-term basis to 'make' money to pay directors and dividends. Who bails them out - the government.
**Tax payers pick up the tab**
Private healthcare providers get concessions on tax for equipment and medicines, the NHS does not.
It’s worth noting that the UK’s ten largest private hospital groups make losses before tax (on average), and many of the unlisted private companies have been doing so for a number of years.
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