Breakfast seminar

David Porter, Apposite Capital
Ejaz Nabi, Active Assistance

February’s Care Conversation heard from two different speakers on the attractions of the healthcare sector for private equity

‘I saw a niche,’ said Managing Partner of Apposite Capital, David Porter, on how his organisation had become involved in healthcare. “In the US you had a lot of companies supporting the healthcare sector, but no one was serving that market in the UK.”

His organisation analysed what was happening in the system and then “tried to do something about it”, he told delegates. “We’re different – all we do is healthcare, and we also don’t confine ourselves to healthcare management. We have companies in drugs, devices, surgery equipment. We’re right across the system and we think that’s a strength. We’ll look at a problem and figure out what we can do – we’re thematic, hands on.”

The UK’s changing demographics were much discussed and obvious, he stated, with 28% of the population aged over 60 by the year 2050 and 75-85% of healthcare spending related to chronic diseases.

“One of the other issues we think is really important – and an area of huge opportunity – is that the system isn’t configured for what’s going to happen.” The UK essentially had a 19th century infrastructure geared towards acute and episodic disease, he said. “We have lots and lots of hospitals and not nearly enough happening to manage people in the community or keep them out of hospital in the first place.”

Regardless of the outcome of the next election, the role of the private sector in healthcare would continue to increase, he stressed. Among the areas for investment opportunity were reducing the cost of healthcare – “getting innovation in, taking a slightly longer view, making changes and improving quality” – as well as introducing high quality premium services for private and self-pay patients where public sector provision was inadequate. “Private insurer and self-pay want the absolute best results, but so, increasingly, does the NHS, because it saves money in the long term,” he stated.

Other opportunities, meanwhile, included offering new services to manufacturers of products like drugs and medical devices, as well as joint venture with the NHS and special situations that needed re-engineering. “There are quite a lot of areas in private sector healthcare were people have become over-leveraged, for example,” he pointed out.

There were risks, however, including the potential re-structuring and disruption that a change of government could bring. “Also, private sector adverse events are difficult to recover from, whereas the NHS just keeps going,” he said. There were also “cultural and political issues” around working with the NHS, while constant innovation was a pre-requisite for “staying ahead of the game”.

“There’s also the question of why private equity is attractive to healthcare,’ said Ejaz Nabi, Managing Director of care providers for people with complex needs and disabilities, Active Assistance. “Why should healthcare organisations choose to partner up with private equity? The starting point always has to be the healthcare space and the patient within that.”

When working within the NHS he’d tried to set up a system to manage people in their own homes, he said, which hadn’t worked out. “In the end I came to the conclusion that there was another way, provided you do you what you promised to do, which is getting as many people out of hospital as possible.”

The problem, however, was that “somewhere along the line we, as a society, fell in love with hospitals. We changed the culture, and we need to change it back”. This would involve politicians creating a vision of care in the community that was as attractive in the public imagination as hospitals, he stressed, particularly in the face of controversy over closures and downsizing. “Most illnesses are no longer episodic, so we need to change the model. And to do that you need funding – yes, you can go to a friendly bank, but somewhere along the line you’ll need the resources that private equity can provide.”

The “public/private” debate of NHS versus private sector belonged “in the ‘70s”, he said, and there was a huge range of areas where innovation could lead to enormous improvements. This innovation would come from the leaders in the health sector, he stated. “From the people who are visionary enough to say ‘we need to do this differently’. But they need support, and that support can come from private equity.”

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