The Social Enterprise Coalition ("the voice of social enterprise") defines a social enterprise as:
Social enterprises are businesses driven by a social or environmental purpose. ... As with all businesses, they compete to deliver goods and services. The difference is that social purpose is at the very heart of what they do, and the profits they make are reinvested towards achieving that purpose.There are two main criteria. First, the business has a social purpose, and second, any profits (or surpluses) are re-invested into the social enterprise. It is very important to remember these criteria.
Healthcare is often described as being a "social purpose", but clearly since there is a private healthcare sector where businesses treat healthcare as a profit-generating commodity, it means that healthcare can only be a "social purpose" when it is run not-for-profit (ie, healthcare is not treated as a commodity). If the company starts treating healthcare as a commodity (ie, it sells healthcare to private patients) then it is not a social enterprise.
At the same time we need to remember that not all for-profit companies have rentier shareholders, some for-profit companies are owned by the people who work for them and thus the workforce receives a profit hare. Such an organisation is a co-operative or mutual. The important point here is that they are for-profit and that the profit is shared between members. This is often quoted as the John Lewis model, but since such companies make a profit (it is shared with employees, but it is still a profit) such companies are not social enterprises.
So where does Circle fit in? This was taken from Circle's website in October 2010, curiously, it is no longer there:
Circle is structured as a partnership of clinicians and other professionals. Being a partner means you share in the ownership of Circle, with shareholder voting rights to help direct the company.There are several interesting things here. The first is that the majority of Circle (50.1%) is owned by City investors (Balderton Capital, Landsdowne Partners, Bluecrest and BlackRock). This means that less than half of the company is owned by the workforce. The share allocation policy of Circle is designed to keep it that way. There is no worker control of this company! The dividends for these shares are paid to their shareholders including the employees so the employees receive profit share. the company does not re-invest its profit into the company.
* 49.9% of Circle is owned by Circle Partnership Ltd, which is owned by everyone who works in clinical services, directly or indirectly and at every level.
* 50.1% is owned by Circle International plc. This is the investment vehicle that blue chip City institutional investors have subscribed to for shares by providing the capital for Circle. They ensure that any refinancing is achieved without diluting partners' 49.9% ownership.
* The investment needed to buy land and build hospitals, clinics and invest in infrastructure is raised by Health Properties Ltd, a separate business.
Every year from 2003-2015, up to ten million shares will be available for allocation to partners until 100 million shares have been issued.
All of this means that Circle is a for-profit organisation where over a half of the dividends go to City investors. This means that Circle is not not-for-profit so it fails the first criteria to be a social enterprise (namely re-invest surpluses into the company). However, since Circle also sells healthcare as a commodity - it has private patients as well as NHS patients - it means that they fail the other criteria to be a social enterprise that they have a social purpose..
It is very clear that Circle Health is not a social enterprise.
As I said above, Ali Parsa calling Circle Health a "social enterprise" is an attempt to deliberately deceive.
Circle run two Independent Sector Treatment Centres under the Nations Healthcare brand. ISTCs are the rather dodgy way that New Labour tried to privatise the NHS. The ISTC They allowed private sector companies to provide healthcare to the NHS and to entice them the government paid then 11% over the national tariff (the payment for NHS hospitals). The then government also allowed the ISTC to reject any patient they did not want to treat, while still being paid for the patient ("take or pay"). It is estimated that this meant that ISTCs only completed 85% of their contracts, making them even more expensive. Finally, the last government provided a buyback guarantee so that when the ISTC contract was completed the NHS would buy back the ISTC properties at market rates (Residual Value agreement), so that the private company would bear no risk at all.
Now have a look again at the last point from the Circle website (that they have now deleted):
The investment needed to buy land and build hospitals, clinics and invest in infrastructure is raised by Health Properties Ltd, a separate business.This basically says that Circle do not own their hospitals! Bear this in mind whenever you hear Ali Parsa speak about his hospitals. He always implies that Circle (registered company number 5042771) have built hospitals, but they haven't, Health Properties Management Ltd (registered company number 5811838) have built them. Isn't saying that you are doing one thing when someone else is doing it for you rather dodgy? Health Properties is a separate company to Circle Health. They have different owners (though, interestingly, they have the same CEO, Ali Parsa). This is very dodgy. (It is something that Norman Warner, the former Labour Health Minister can be accused of too: saying one thing and doing something else, as I'll explain in another blog).
Recently the Bureau of Investigative Journalism have taken a good look at Circle and they say that:
49.9% of Circle’s shares held in the British Virgin Islands, and the remaining 50.1% in Jersey, although Circle says the Jersey arm “has recently been re-domiciled as a UK tax resident company”.This is even more dodgy. Remember that Circle want to take over as many as 30 NHS hospitals and make a profit from their NHS work. Rather than investing the surplus back into the hospitals (as is the case with Foundation Trusts and social enterprises) Circle will take these profits and give them to shareholders as dividends. If they gave them as taxable dividends, that would be bad enough. But squirrelling away these profits into tax havens is far worse! If the government give NHS money to Circle they are condoning tax avoidance while starving NHS facilities of this re-investment cash.
Where is the social purpose of putting profits into a tax haven and avoiding paying tax?
BIJ also say:
Health Properties (Bath), a company on whose board Lehman Brothers have 50 per cent representation. ... Health Properties (Bath), the[ir] hospital’s landlord, is also part-owned by the Jersey arm of Circle and by Health Estates Fund.If you are interested here is a link to the company information in Jersey for Health Properties Limited (company number 91705, registered 11 Nov 2005), Here's a link to more company information about Circle Health (company number 05042771, registered 12 February 2004).
A final interesting bit of information from the BIJ article, is this:
Circle Health Limited’s most recently published set of annual accounts, for the year ending 31 December 2009, show the group made a pre-tax loss of £28.3 million on an income £63 million.Bear in mind that Circle do not own their hospitals, so they cannot use the excuse that many companies use that their property have lost value. These loses are due to the fact that Circle are simply incompetent at running a hospital. Yet they run two ISTCs where they paid 11% more than the NHS doing 85% of their contract! If an NHS hospital had such poor finances it would be in serious trouble and the Department of Health would now be looking at bringing in private management to replace the NHS management, just like the Department have done at Hinchingbrooke!
Oh Circle are the company who have been chosen to take over the management of Hinchingbrooke!
Circle make a loss and are brought in to "fix" an NHS hospital that is in debt... Hmm is this why they are called Circle, with the debts going round and round and round?