Could this be the explanation?

Circle Health have been on a public relations offensive in the last few weeks, and this culminated in the appearance on the 1st August of their Chief Executive, Ali Parsa, on both Radio 4's Today programme, but also on BBC2's Newsnight.

On both programmes Parsa gave the same message, much of it plain wrong. He said that Hinchingbrooke will "have balanced books this year" when the first quarter's results showed that they made a £2.3m loss which was £652k more than they had planned. He then said that Germany spends the same as the UK on healthcare, and this is largely on private providers like his company, yet Parsa claimed that the German providers had greater patient satisfaction than the NHS. His claim was unsubstantiated and does not fit in with the facts: Germany spends much more (12% of a much larger GDP than our 10% of GDP) than the UK on healthcare and Germany report access to healthcare issues almost as worse as the US (and five times worse than the UK) and the Commonwealth Fund ranked Germany two places below the UK in patient satisfaction. Parsa topped-off his tirade with the Conservative accusation that GPs are private providers (which they are not for many reasons). The BBC (in the form of Justin Webb of Today and Kirsty Wark of Newsnight), left the worst claims of Parsa to go unchallenged, through ignorance rather than bias.

So why isn't Ali Parsa taking a long August vacation, why is he in the media at a time when most people are watching the Olympics? The reason may well be the following graph: the share price of Circle Holdings over the last 12 months (screen shot from Interactive Investor):

Over the last year the share price of Circle Holdings has fallen from around 200p a year ago (at the time of a large share offering and the listing of CIRC on the AIM stock market) to a value of about 80p now (it even fell as low as 44p for a few days).

This is not the graph of a company with a bright future: investors are showing their lack of confidence in the company. Mix into this the results from 2011 where Circle Holdings made a loss of £13.6m (EBITDA) and the announcement from the government that they will no longer pay Independent Sector Treatment Centres (ISTCs, like Circle's treatment centre in Nottingham, the only part of their business to make a profit) above the NHS rate (and hence this is a cut in payment of about 20%), and you have a company that should be panicking.

On the first of August Parsa was in firefighting mode. His media appearances were to reassure investors, to try and get the share price out of the slump it has been in for two months. The following graph shows the effect of Parsa's efforts:

He added 5p to the price (82.5p) before it fell back to 80p: the share price is still in a slump.

Parsa clearly has a lot more work to do to get the share price back up to its high of 200p, so expect a lot more media appearances in the next few months.

UPDATE:
In a piece on Open Democracy Richard Whittell of Corporate Watch says:

"Earlier this week [31 May] Circle Health went to investors to raise money, partly to help pay off £14 million it had borrowed from hedge fund James Caird Asset Management, at a staggering interest rate of 25 per cent."

Could this be the reason for the sharp drop in Circle share price at the beginning of June?

UPDATE2:
Further searches came up with the following from Reuters confirming Whittell's statement:

Circle Holdings PLC Announces Cash Placing And Subscription To Raise GBP47.5 Million
Tuesday, 29 May 2012 02:04am EDT
Circle Holdings PLC announced that it intends to raise GBP46 million (net of expenses) by way of a placing of 65,714,286 Placing Shares and a subscription of 2,142,857 Subscription Shares at a price of 70 pence per New Ordinary Share with institutional investors. The Placing and the Subscription are conditional, inter alia, upon Shareholder consent. The Company has received Irrevocable Undertakings to vote in favour of the Resolutions from Shareholders representing in excess of 75% of the Existing Issued Share Capital. The Group intends to use the proceeds of the Placing and the Subscription as follows; repay in full the outstanding GBP14.1 million loan from JCAM which will mature in February 2013 and is subject to interest at the rate of 25% per annum; meet its current working capital requirements at CircleBath and Hinchingbrooke; complete the commissioning of CircleReading and its subsequent operating cash flow requirements; continue to support the Group's central operations; and provide working capital to implement the Group's strategy of bidding to take over the management of further NHS Trusts as and when they are put out to tender. Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. It is expected that Admission will become effective on June 19, 2012, and that dealings in the New Ordinary Shares will commence at 8.00 a.m. on June 19, 2012.

Footpaths Across the Grass

Unfortunately I cannot find it, but a few years ago I read an article about a local council who were annoyed that people ignored the "Keep Off the Grass" signs in one of their parks. The council looked at what people were doing and found that the people who walked on the grass were simply cutting off a corner when walking from one part of the park to another. The existing paths were to parts of the park where people did not want to go. So the council simply created a path where people wanted to walk. This solution meant that the grass was not walked upon and there were no unsightly bare-earth paths.

This is an important lesson. If you make rules that no one wants to follow you should not be surprised when no one follows them. Equally so, you should not be surprised that it costs you so much trying to make people follow those rules (like employing extra park keepers to shout "Oi! Keep off the grass!")

This story came to mind yesterday at a meeting at my local CCG where a member of the committee I was on asked why a cancer patient was not getting treatment and who was it that would take up the patient's case to ensure that the treatment was delivered. That question was followed by a lengthy discussion from officials about how the complaints and advocacy system should work and how it should work in the future with Local Healthwatch. They gave no reason why this system didn't work for this patient, and although they didn't say it, I got the impression that they felt the patient was at fault for not using the system the way it was designed to be used.

The problem is that the system is not working for this patient because the various providers (the GP and the local acute hospital) and the local PALS service are not working how they should be. The concern is that the new structures will not work how they are supposed to work, and this is more to do with the system not being designed around how the organisations actually work and how patients use them. It would be far better to observe how these organisations communicate and to improve that, rather than changing completely how they work together.

(My opinion is that GPs should be empowered to act as advocates in such a situation and have the responsibility for ensuring that the care is delivered. GPs are patients first point of contact with the NHS.)

Put the path where people want to walk rather than telling people to walk where they don't want to go.

Hinchingbrooke double fail

The Hinchingbrooke Health Care NHS Trust Chief Executive's & Franchise Representative's Report (franchise representative represents Circle) has the following quote:

Mark Simmonds MP for Boston and Skegness visited the trust on 6 July and was able to attend a meeting about the positive changes that have been implemented in our Emergency Department this week. He had this to say: "In this hospital you can change the way the NHS works, in my view for the better, you are at the frontier of the way healthcare is going to be provided in the future. I hope patients and the local community recognise the positive changes that have been made and provide sufficient support and recommend it to their family and friends."

Hinchingbrooke is in Cambridgeshire, Boston and Skegness is in Lincolnshire, so this is not a quote from a local MP. One has to wonder why Hinchingbrooke is inviting seemingly random MPs to inspect their hospital. Do you think his invitation has to do with Simmonds' Register of Members Financial Interest:

Strategic adviser to Circle Healthcare (social enterprise), 42 Welbeck Street, London W1.
March 2011, £12,500 quarterly fee received. Hours: 10 hrs per month. (Registered 3 May 2011)
June 2011, £12,500 quarterly fee received. Hours: 10 hrs per month.
Late entry to which the rectification procedure was applied on 6 March 2012. See paragraph 108 of the Guide to the Rules.
(Registered 3 October 2011)

Simmonds was reluctant to declare that he was paid £12,000 a quarter (£50,000 a year) by Circle, and earlier this year had to apologise to parliament for deceiving them like this. Can someone explain to me why Hinchingbrooke, who are franchised to Circle, are quoting an MP who is paid by Circle? This is hardly an independent view, the public are being fed a biassed statement.

However, a rate of £1,250/3 per hour is pretty steep*, and you would expect that when you pay someone this large amount of money the recipient would come up with something more enthusiastic than "you are at the frontier of the way healthcare is going to be provided in the future". For that amount of money (£1,250/3 = £420 per hour) I would expect "get your asses down here right now, this place is brilliant!"

So not only is Hinchingbrooke duping the public, they are not getting value for money, either. Double fail.

[* oops arithmetic error corrected as per comments]

Imaging the cutting of bureaucracy

The Conservative Draft Manifesto in 2010 said: "we will cut the cost of NHS administration by a third". This, apparently, was to be done by cutting management by 45%.

The Nuffield Trust have just released some slides showing how the NHS has changed since 2010 and what Lansley's new NHS will be like. I have extracted just the charts showing the organisations:

You can make the image bigger by clicking on it, but before you do that, have a look at the shapes out of focus. The left side has four types of organisations top to bottom; the right hand side has five (or six) types. Top to bottom are the layers of management. Lansley claimed to cut the layers of management, but he has clearly added to them. Further, if you look at the total number of organisations, the left side shows fewer separate organisations and the transition to the right shows more types of organisations: the system is getting more complicated. Bureaucracy comes from complication and Lansley's NHS is more complicated.

Self referral

"I haven't seen you for years, your condition must be bad: I only get to see the difficult cases."

This is what the consultant eye surgeon said to me at an emergency appointment at the eye clinic early in the summer of 2005. He was right, the last time I had appointment with him was seven years before. When I moved to the area I was referred to the hospital for diabetic retinopathy by my previous doctor. Retinopathy is a condition where the blood vessels on the retina grow large and weak and are liable to burst. Previously I had had a big bleed in one eye and had started a series of laser treatment. This treatment continued under the new consultant, having many thousands of laser burns per eye (a session every 3 months, then 6 months over a period of 5 years). I was referred to the eye surgeon's clinic and initially it was him that treated me, then when my eyes stablised another doctor from his team took over the treatment. In the follow up for my last treatment by the senior consultant he told me that there was one blood vessel that they could not treat and I should expect it to burst some time. Now I was in his office with the results of when that vessel bursting.

The previous few days I had removed about a tonne of hardcore from my garden. Over several years I had dug up stones and concrete in my garden and I wanted to get rid of this pile. I ordered a skip and spent a couple of days moving the hardcore from the pile to the skip. This involved a lot of bending down and picking up heavy stones. The next morning I noticed a strange mark on my retina and remembering the previous bleed, I went to my optician. He looked at my retina and told me to go immediately to the hospital eye clinic. I was fitted onto the list of one of the doctors and, after seeing my eye, he made an appointment the following week for the senior eye surgeon. And that is when he made the comment above.

The seriousness of the bleed made me a priority. Indeed, the bleed was so large that the surgeon called in two of the other doctors in the clinic to see the extent of the bleed and compare it to the photos of the vessel that had burst. There was an impromptu case meeting. The surgeon told me that I would need an operation under general anaesthetic where the gel in my eye (the vitreous humour) would be removed and then he would stop the bleeding of the vessel and clean up my retina. My eye would then be re-filled with an oil-like substance which my body would eventually absorb (over a period of about a month) and replace with more of the vitreous humour. The size of my bleed made me a priority for surgery and the surgeon's list was changed accordingly.


The surgery was successful, and the surgeon was able to clean up some of the damage from the previous bleed, so I had eyesight that was better than it had been for a decade. There is still some permanent damage and this is like having several blind spots in my eye. After the surgery I had a follow up with the eye surgeon and although I have had several follow up appointments for my retinopathy, I didn't see him again until I needed cataract surgery, which he also carried out.


The government has decided that in the interests of "patient choice" we all must have the choice of the "consultant-led team" for our care. This is an attempt to get closer to the US system of patient referrals. Self referrals are one of the causes of the high costs of the US system. If an American colleague gets a rash they will go and see "their" dermatologist. If I get a rash I will see my GP and if my GP thinks the rash needs the opinion of someone more specialist, I will be referred to the consultant dermatologist. The NHS system ensures that you get care according to need. It is the GP who decides what that need is: can they deal with it, or does it need a specialist. This is NHS prioritising, which some people call "rationing", but it is rationing only in the sense that GPs "ration" the work of the specialists to only those who need it. I have had countless arguments with American colleagues who interpret NHS prioritising as a form of denial of care. It isn't. The NHS ideal is that we get the care prioritised according to our clinical need. Those who do not get the care, do not need it.


Diabetic retinopathy cannot be "cured", so I still have 6 monthly monitoring of my retinas. If I was given the choice of consultant I would choose the eye surgeon who had operated on my eyes. I like his manner and how he explains my condition to me. But I also know that he is considered the best eye surgeon in the region. When it comes to their health, everyone wants the best. Every surgeon's time is limited, so he limits his time to the more serious conditions. My eyes are stable, so I will be a waste of his time and expertise. That is the way that the NHS works and it means that regardless of who you are or what you earn, if you need the expertise of the top clinician in the country, you will get it.


In the US the rationing of expertise is carried out through money: only those with the most amount of money can afford the best. In the NHS the "rationing" is carried out according to clinical need. 


Lansley's plan of choice of "consultant-led team" will be a failure. The guidance says:

"Patients who want to should be able to choose a particular named consultant-led team for their first consultant-led outpatient appointment where it is clinically appropriate. The right to access services within maximum waiting times under the NHS Constitution continues and applies to patients who choose to be referred to a named consultant-led team."

The 18 week referral to treatment waiting time target means that the more popular consultants (inevitably the most skilled) cannot handle the increased numbers of patients through longer waiting times. The only tool they have is the interpretation of the terms "consultant-led team" and "clinically appropriate". This policy will fail to give the patients the consultant they demand because responsible consultants will interpret "consultant-led team" to mean that they can delegate a patient to another doctor who is part of their team. They will also interpret "clinically appropriate" as I have outlined above: the consultant will see the higher priority cases and his junior staff will see the rest.



Lansley does not expect this policy to succeed because he knows that it cannot succeed. However, even as a failure this policy will achieve what Lansley wants: it will increase patient demand for self-referral, and that will lead us to a healthcare system that will be worse for us because we will not get the care we need, and it will lead to a system that most of us cannot afford.

Circle Bath

This is an interesting presentation (pdf) by Circle aimed at their investors. I want to show two graphs from this presentation.

The first one shows vividly how the NHS is subsidising the debt ridden Circle Holdings. The red bars are the private patients and their figures are generally declining over the year. The black bars are the NHS patients and payment for these consistently provides much more income than the income from private patients. Without the NHS patients Circle would go bust; without Circle, the NHS would continue quite happily. Who needs who?

This second graph shows the "market share" between three hospitals in the Bath area, two private hospitals (including CircleBath) and the local NHS provider, the Royal United Hospital. The market share of the BMI hospital is broadly flat, and the small; peaks and troughs more or less correspond to the red bars on the previous graph (ie where the red bars are smaller and CircleBath have fewer private patients, there's an increase in BMI private patients). The interesting line is the decline of the market share of RUH which matches the rise of CircleBath.

How is CircleBath doing this? Well, it is not by being efficient and making a profit. Quite the opposite, they appear to be using their boutique hospital as a loss leader. The hospital had a revenue of £12.2m in 2011 (that is, the income of the hospital). Circle Holdings overall has a turnover of £75m on which it makes a loss of £14m. Circle's other hospital (in 2011) was the ISTC (Independent Sector Treatment Centre) at Nottingham which had a turnover of £51m on which it maked a profit of £2.4m. (Circle ran another clinic in Burton for the first 7 months of 2011, but this was a small unit, with an income of £1.5m). Considering Circle makes a profit at Nottingham on NHS work and it makes a loss over all, it is clear that the company makes a huge loss at CircleBath. Circle cannot make a profit from its private work, and any profits it makes from NHS work go to alleviate the losses they make from treating private patients.

The NHS "competitor" is RUH. This has an annual income of £216m, but the trust has a historic debt of £40m. The trust have been in surplus since 2007, and paying off this debt, and the current surplus is £4.2m. The trust has a loan from the Department of Health of £38m payable over 20 years, and like many of these loans it is at an eye popping rate of 5.05%. The government keeps boasting that they can borrow at historically low interest rates, so why are they lending this money at loanshark rates to NHS Trusts?

Clearly the situation in Bath is far from ideal. Circle are running a hospital at a loss poaching patients from the local NHS hospital. If CircleBath was an NHS hospital it would have been put into administration by now. Instead, it is allowed to threaten the viability of the local NHS trust by poaching patients and treating them for NHS rates that are less than they need to sustain the hospital.

NHS funding

Today, the Nuffield Trust have published a report about NHS funding carried out by the IFS (pdf).

The IFS say that:

"Public spending on the UK NHS has increased faster than economy-wide inflation since the 1950s, with an average real growth rate of 4.0 per cent a year between 1949/50 and 2010/11"

This is a silly statement because it is a wide date range, with some widely different government policies and it makes no sense to give an average. They may as well tell us that the average person has just under two legs, it has just as much meaning. Also, an average increase of 4% a year is a geometric increase (ie non-linear, the gradiet of the graph is not constant) whereas the actual data shows that the increases were broadly linear with three general trends.

I have mentioned before, these three trends:

• 1974 to 1998 there is a year-on-year increase in real terms of around £1bn each year 
• 1998 to 2010 there has been a real terms increase of approximately £4.8bn every year
• 2010 to 2015 there is real terms flat funding

For my analysis I only had data (for England) from 1974, the IFS show data (for the UK) from 1949 to present. This data shows that the £1bn/yr real terms increase started at about 1960. I have copied their graph (Figure 1) and coloured it to show the government in power (blue is Conservative, red is Labour):

The Wilson/Callaghan Labour government suffered from the oil crisis and IFS imposed austerity, but it still increased NHS funding overall. The Thatcher/Major period also increased NHS funding. The Cameron period is clearly a new shift, and the IFS is suggesting that a Cameron government after 2015 may provide increases somewhere between flat funding and Thatcher levels of real terms increases.