BUPA to sell off its hospitals

After almost thirty years of being both an insurer and a provider of health services, BUPA is going to sell its 26 private hospitals to Cinven for a reported sum of £1.44bn – some £200m more than expected and a remarkable multiple of 14 times the predicted EBITDA. Good for BUPA but possibly not so good for future upward price pressures as the new owners look for adequate returns. Cinven was apparently selected from a number of competing bids because of its current and past experience in the health sector. (It is currently owner of Partnerships in Care, which provides services to patients with mental illness, and was owner of the largest UK hospital group, General Healthcare.)

Some commentators have suggested that it is because of this apparently invidious situation of having a foot in both camps that BUPA has decided upon the sale. However, we think this unlikely since BUPA has lived with the criticism for so long and avoided this following a Competition Commission inquiry into the matter. BUPA’s statement on the sale refers to its belief that, separately, the two businesses can achieve more.

Less than three years ago, it sold nine of its hospitals because it believed that they were not viable, now that the NHS is the largest single purchaser of private hospital services, and is not prepared to pay anything like the fees and charges accepted by private insurers and their customers. BUPA launched a massive restructuring of its remaining hospitals to make them competitive in the new environment, and the latest developments may suggest that it had decided that they could not complete the task successfully.

All this raises many questions, not least just what BUPA’s 'mission statement' now is. Most of us understood it was essentially a not-for-profit organisation that engaged in any area of health activity where it believed that it could bring benefits to its members. 'Members' we always assumed to be those who subscribed to its core insurance products. The reality is probably that BUPA now feels able to operate more like a commercial company with profit as the prime goal. It may also feel that without a hospital chain in the portfolio, it can achieve new objectives – and growth – with insurance products.

Despite the sale it is important to note that there is no change to the range of hospitals still available to all – BUPA insured, or otherwise. 

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