The majority shareholder in one of England’s biggest private hospital groups has pulled out, citing unsustainable rent rises.
South African firm Netcare has announced that it will sell its 57 per cent stake in BMI Healthcare, which has a turnover of £887m. Around £370m of the firm’s income, or 42 per cent, comes from NHS-funded work.
BMI Healthcare said its business would continue as normal while a buyer was found.
In a statement Netcare said it had ”spent considerable time and resources pursuing a rent reduction transaction with BMI Healthcare’s largest landlord on 35 of its 59 hospital properties”.
However, ”after more than five years of negotiation, Netcare has concluded that it is highly unlikely that it will be able to conclude a rent reduction transaction under which the UK business will have the resources necessary for ongoing investment to allow BMI Healthcare to remain competitive and generate an appropriate risk-adjusted return”.
The company was split into an operating company and a landlord by its previous owners.
Netcare said in 2006 it had negotiated a deal with the landlord company with a fixed escalation in rent of 2.5 per cent a year.
Netcare chief executive Richard Friedland said: “Following the global financial crisis of 2008, the accompanying declining private medical insurance demand, and the sustained period of exceptionally low inflation in recent years, BMI Healthcare’s rent obligations have grown to be unaffordable.”
All private hospital groups in England have been hit by a decline in individual privately-insured patients, but also report a recent upswing in self-payers. BMI’s latest annual accounts said NHS-funded choose-and-book referrals had risen.
BMI Healthcare is the second biggest private provider of NHS-funded acute care, behind Ramsay Health Care.
The company has good coverage across England, with the Alexandra Hospital in Cheadle, Greater Manchester, considered a jewel in the crown.
Pressure on NHS elective procedure waiting lists from emergency admissions has seen hospital trusts outsource significant amounts of work themselves.
Senior figures with knowledge of the private healthcare sector said it was unlikely a single buyer would take over the company, and that the landlord taking shares in BMI was one possibility.
BMI chief executive Karen Prins said: ”Netcare’s announcement will not affect the day-to-day running of our hospitals. BMI remains a stable and profitable healthcare provider and our staff and consultants continue to provide an excellent quality service.
”We have supportive lenders and continue to operate within our bank facilities as we work towards a long term recapitalisation of the business.”