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Care UK runs 85 residential homes, provides care for over 17,000 people across the UK and has been at the front of the queue when NHS services have been privatised. It also carries huge debt, avoids tax, siphons money off to its private equity owners, and has been accused of negligence and abuse.
Care UK runs 85 residential homes and provides care for over 17,000 people across the UK
Operates GP practices, NHS walk-in centres, GP out-of-hours services, independent sectortreatment centres, Clinical Assessment and Treatment Services and prison healthcare services
Has contracts with all of the current Strategic Health Authorities, works with one in three Primary Care Trusts
Currently bidding to take over the management of the NHS George Eliot Hospital and lobbying for contracts to run more NHS services.
Care UK was bought by private equity firm Bridgepoint Capital in 2010. Private equity firms, sometimes called ‘vulture funds’, buy companies, restructure them and then sell them, often making huge profits for the private equity managers and investors but leaving the company in difficulty. This was what happened with Southern Cross (see Care UK and private equity: another Southern Cross?).
Private equity firms use other people’s money to buy companies. Ironically, in Care UK’s case, Bridgepoint is managing money from the pension funds of public sector workers in the US, including the California Public Employees’ Retirement System, the New York State Common Retirement Fund and the Ohio School Employees’ Retirement System.
Care UK is bidding for care home and NHS contracts around England and Wales. The company says it can provide a better service than the public sector. However, Bridgepoint has loaded it with huge debt at very high interest rates and introduced tax avoidance schemes. This means the company is not as financially secure, or as ethical, as its publicity suggests:
Huge Debt – Bridgepoint issued a £250 million bond, secured against Care UK’s assets, to fund its acquisition. It is paying a massive 9.75% interest a year on this, meaning £25 million is leaving the company every year, going straight to banks and financiers (this is very similar to the Glazer family’s takeover of Manchester United, which fans are currently protesting against).
Tax avoidance – On takeover by Bridgepoint, Care UK issued £130 million of loan notes on the Channel Islands stock exchange. It is paying £8 million a year in interest on these loans. The inland revenue deemed £4 million of this interest could be tax-deductible, helping Care UK wipe out its taxable profits (see here for more details).
Profiteering – Care UK is paying another £8 million a year straight to its owners as dividends on £126 million of “cumulative preference shares” in the company. These guarantee its owners a return, whether or not the company is profitable.
In total, £41 million is leaving the company every year. If the care homes and NHS services Care UK is running were public, this money could be re-invested into the services. But with Care UK involved, it goes straight to Bridgepoint, banks and financiers.
In the news…
Care UK says it can provide a better standard of care than its public sector equivalents. However, there have been several examples in the last two years of mistakes and negligence that suggests it is not making sufficient investment in the services it provides:
‘Abandoned: woman, 85, left alone and bed-ridden for three days as carers fail to turn up in red tape blunder’
“A graphic symbol of the appalling care provided by [Care UK] was the case of Janet Finn, an 89-year-old woman from Hertfordshire who suffered from dementia and double incontinence, meaning that she required three home care visits a day, each lasting for at least half an hour. Yet one day in June 2008, her visits were skipped entirely. For 24 hours she had no food, no water, no medication and was left sitting in her own faeces and urine. She was found by her son in this terrible state of neglect. Partly as a result of the outrage over this case, Hertfordshire got rid of Care UK, though the firm still operates elsewhere. And the abuses continue.”– Daily Mail, 26th June 2011
Another Southern Cross?
Care home operator Southern Cross notoriously hit trouble in summer 2011, when its financial troubles left 30,000 elderly people at risk of eviction. This came after Blackstone, the private equity firm that owned it from 2004-2007, had broken up the company, selling the ownership of the care homes to an investment fund, leaving Southern Cross to only manage them. Blackstone and the new landlords made a fortune but Southern Cross could not keep up with the ever-increasing rent payments on homes it no longer owned, forcing the government to guarantee that residents would not be thrown out of their homes.
Care UK’s annual accounts show that when Bridgepoint – another private equity firm – bought it in 2010, it immediately created another company called Silver Sea Holdings to build and own care homes and then “enter into an agreement for lease and development with Care UK”. So instead of owning and managing the care homes itself, Care UK will rent them from Silver Sea.
The separate companies will be easier and more profitable for Bridgepoint to sell: Silver Sea can be sold to property companies that would not be interested in buying a large healthcare provider, for example. But the danger is that whoever buys the homes can then raise the rents, increasing the pressure on Care UK’s finances and its capacity to provide adequate care, especially if it continues to carry huge amounts of debt. Worryingly, its annual accounts say “a number of other sites have been provisionally approved for development” by Silver Sea.