PMI: Legal & General Ventures acquisition of hospital network provokes a cautious reaction among providers
BUPA Hospitals has sold nine of its facilities to a private equity provider in an £85m deal.
Legal & General Ventures (LGV) has purchased the sites as part of a sustained move into the healthcare sector and will be operating under the name Classic Hospitals Ltd.
The acquisition means that the new group is now the fifth largest hospital network in the UK.
BUPA Hospitals announced plans to sell its 10 smallest facilities in June 2004, following a review of the group's hospital business.
As part of a new strategy aimed at increasing the amount of NHS work that the group conducts, the smaller sites were identified as being "unable to cope with the increased investment that the new strategy would bring," according to Lydia Aydon, public relations manager at BUPA Corporate Communications.
Aydon stressed however that the sale was not an issue of profitability with all of the sites in question remaining "very profitable." Although the initial proposal was for the sale of 10 hospitals, LGV did not purchase the BUPA facility at Hastings citing problems with the local NHS Trust.
"It was all an issue of timing.The sale was subject to reaching an agreement with the NHS who own the lease on the hospital and the deal was simply taking too long, so we decided to go ahead without it," said Michael O'Donnell, managing director at LGV.
The sale of BUPA Hastings seems to be inevitable however, since it is at odds with the new BUPA strategy.
LGV has admitted it is not averse to the idea of acquiring the facility at a later date.
"We would potentially be interested as we have more hospital acquisitions planned for the future," revealed O'Donnell.
This is not LGV's first foray into private hospitals.
In 1998, the firm bought the French hospital group, Santé Finance, for FRF 70m, and sold it in 2001 for FRF 180m.
LGV is, by its own admission, a profit making organisation - which raises fears that service standards may suffer in a drive to increase profits, a suggestion that LGV has dismissed.
"That simply would not happen. It did not happen at Santé Finance and it will not happen now. We will not cut corners," said O'Donnell.
He did confirm however that LGV's long-term strategy is to sell the BUPA hospitals at a later date but announced it would be remain in the market for several years to come.
Private medical insurance providers have reacted cautiously to the news, and are unsure about the implications of the sale.
"It is too early to tell what the longer terms implications of this acquisition might be, as it poses more questions than it answers," said Ronjit Bose, marketing manager at Clinicare.
"In the short term it means another hospital group for us to negotiate with, but how this will change the hospital 'map' is not clear as we do not yet know LGV's long-terms plans.
However we will naturally be watching the situation with interest," he added.
