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Lightning will strike again- when to invest in healthcare

Ed Marsden Verita Consultancy Ltd
Managing director

Ed Marsden

Published 7 October 2020 More about Ed

Ian Paterson was a consultant surgeon from the Heart of England NHS Foundation Trust who carried out thousands of dangerous operations on women whilst working at two Spire Healthcare hospitals in the Midlands. Paterson is now serving 20 years and Spire Healthcare paid out £27.2 million in compensation to 750 of their private patients.

Unfortunately, this case is not unique in the Verita casebook.

Healthcare is gaining increasing interest from investors, as the coronavirus pandemic has highlighted the importance of having high-quality diagnostic and treatment facilities. However, delivering healthcare can be high risk and the provision of healthcare services is often in the public and political eye. This is all the more reason to understand exactly what you are buying and the benefits and risks that come with any acquisition.

Any investor should rightly insists on due diligence. Yet when investing in healthcare, investors often seem content to leave the due diligence to the accountants and lawyers. Although these analysts can assess the financials of a business and comment on commercial risks, it is another thing to know how healthcare organisations function on the ground.

Verita recently carried out a clinical governance due diligence review for a private equity company buying a large international healthcare organisation. Our brief was to find out for the new owners what was working well and where the risks lay. We looked at whether the leaders of the organisation understood their responsibilities for safe care, and if the board really knew about day-to-day clinical operations. Overall, we thought that care was good, and the organisation well led. Our clients were reassured when we told them so.

Our judgements were based not just on the investigation but also on our 19 years’ experience of consultancy and investigative work in healthcare.

The jailed surgeon Ian Paterson had admitting privileges at Spire Parkway Hospital from 1998 and Spire Little Aston Hospital from 1993. Verita’s independent review of the hospitals concluded the management at both the Spire hospitals and corporately were weak and that colleagues had been expressing concern about Paterson for years.

Stronger clinical governance may have stopped Paterson. It would certainly have increased the likelihood of earlier detection and avoided untold harm.

They say lightning never strikes twice in the same place. Perhaps, but the certainty is that lightning will strike again. The difficulty is knowing where and when. The wise buyer wants questions answered. It’s even more important to question answers; to search beyond the work of the analysts, auditors and lawyers; to carry out not just due diligence but true diligence.

To read our recommendations for private equity firms acquiring healthcare services, visit the article in full on the Health Investor magazine’s website here (free trial or paid subscription required): https://www.healthinvestor.co.uk/feature/lightning-will-strike-again/

To read find out more about our due diligence service please get in touch by emailing [email protected] or call 020 7494 5670.

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