Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So. Workshop A Financing the Future of healthcare Chaired by Rodney Schwartz CEO and Founder, Clearly So. Noel Plumridge Healthcare Finance Journalist.
Financing the Future of healthcare
CEO and Founder, Clearly So
Financing the Future of healthcare
CEO and Founder, Clearly So
Health care: the current financial outlook
17 May 2012
The productivity/efficiency challenge
formerly known as the “Nicholson challenge”
The “Nicholson Challenge” was to save £20bn a year by 2014
£15-20bn productivity challenge
Illustrative figures only
the health of a growing population: around 1.4% per year
the health of an ageing population: around 1.5% per year
scientific and technological advance: around 1.5%
how robust are these cost projections?
the NHS is delivering savings; productivity is less certain
2012 budget implies real terms savings of around 3.8% per year beyond 2014
where’s the re-investment?
HM Treasury has begun to grab savings before they can be re-invested
- PCTs and SHAs - £1.375bn surplus
- NHS Trusts - £0.121bn surplus
- FTs - £0.406bn surplus, with cash balances of £3.3bn
2011-12 quarter 3
- forecast PCT/SHA surplus - £1.498bn (1.5%)
- forecast NHS Trust surplus - £0.03bn
- 4 PCTs (all in London and SE) forecasting deficits totalling £82m
“In 2010/11… overall, 23% of the savings achieved were non-recurrent. So NHS bodies will need to find this money again in 2011/12…”
Main slippage areas: failing to reduce emergency admissions, failure to manage demand, failure to reduce length of stay
(Audit Commission, September 2011)
PbR-funded hospitals have been drawing in funds, at the expense of non-PbR care (including primary care, community care and mental health)
DH moves to shield commissioners from activity-led hospital growth
Development of “best practice” tariffs
Slowness in extending the scope of the tariff
Very low interest rates
Low direct taxation, but mounting fees and charges for services
Reduced role for the public sector
- outsourcing and privatisation
- marketisation of publicly-funded services
- promotion of the “third sector”
Orthodoxy driven by banks, multinationals and international consultancies
- does government really want to trade with SMEs?
Impervious to democratic change?
The Health and Social Care Act 2012
Commissioner configuration – clinical commissioning groups replacing PCTs (but with heavy scrutiny via “support organisations”)
Provider configuration – no direct implications, but:
- pattern of mergers and acquisitions
- private sector expansion, especially in non-acute care
Competition and “any qualified provider”
Oversight structure – the NHS Commissioning Board replacing strategic health authorities
Monitor as economic regulator
Implications for social enterprise
What are the advantages of social enterprise?
Advantages for patients and service users, health and social care organisations and the third sector...
...for patients and service users
Social enterprises involve patients, staff and service users in designing the services they provide. This means that services are better tailored to meet patients' and service users' needs and are based on expert knowledge of a particular area.
Social enterprises re-invest any surplus profits into the community or into service developments. This means that social enterprises very often benefit the whole community as well as the people who use their services.
Involving patients, staff and service users in designing services.
...for health and social care organisations
Social enterprise offers health and social care organisations the opportunity to deliver high quality services in ways that are flexible, non-bureaucratic and have the potential to deliver good value for money. It also allows health and social care organisations to deliver services that are tailored to their local population, and make a difference to the local community. Because staff have a stake in social enterprise organisations, experience has shown that they are very committed to the aims of the service, and that this delivers benefits for the organisation, for example, improved staff retention.
High quality services: flexible, non-bureaucratic, good value
(Department of Health, 2011)
VAT and competition with FTs
Ownership of the NHS estate
Access to capital
Size and resilience
Commissioner caution and vulnerability
and then there’s the whole pensions and TUPE issue…
“If you don’t do something with the commissioning environment, then in five or ten years’ time you will not be dealing with mutuals, you will be dealing with Serco, Capita and Virgin.”
(Patrick Burns, Cabinet Office mutual taskforce, 2011)
The current financial outlook
Co-founder and CEO
Social Stock Exchange
Social Stock Exchange- overviewMay 2012
This Presentation is provided for information purposes only by the Social Stock Exchange (“SSE”) which is not authorised by the FSA or operating as a Recognised Investment Exchange (RIE) and does not constitute an offer to sell or an invitation or solicitation of an offer to buy any security. SSE makes no representation or warranty as to the accuracy, reliability, or completeness of any of the information contained in this Presentation, and said information may not be relied upon in connection with any investment or listing decision. This Presentation is provided on a confidential basis and may not be copied, reproduced, distributed, disclosed or published, in whole or in part, to any person for any purpose whatsoever without the prior written consent of SSE.
JP Morgan report estimates an investment opportunity of between $400 billion and $1 trillion and profit opportunity of between $183 billion and $667 billion over the next decade
“Impact investors earn more than good karma
Commentary: The majority of social enterprises profit”
November 28, 2011, Wall Street Journal Marketwatch
ImpactBaseplatform – access to $7 billion for impact investments
“Impact Investment ‘a burgeoning asset class’”
FT, November 2010
Partnered with an FSA authorised and regulated investment exchange (RIE), to create a specialist segment for the trading in securities of social enterprises and other social purpose businesses
Its goal is to become the premier trading venue for international social businesses, enabling social impact investors to find businesses that reflect their values
It is a deal aggregation platform with global visibility aimed at impact investors across private wealth managers, family offices, foundations and institutions
The SSE provides a market mechanism for price discovery as well as valuation and trading of shares – and, in particular, an entry and exit route for investors’ social investments
Aim to launch Q1 2013
“Impact investors need a collective, legitimate voice to advocate for this type of investing and recruit other investors to orient themselves toward impact.”
Chris FoySainsbury Family Investments
Annie E Casey Foundation
Lunt Family Office
Big issue Invest
Bill & Melinda Gates Foundation
Capricorn Investment Group
Gatsby Charitable Trust
Gray Ghost Ventures
The Rockefeller Foundation
Sarona Asset Management
The Tony Elmelu Foundation
Triodos Investment Management
W.K Kellogg Foundation
Wolfensohn & Company
Circle Holdings plc
Social Impact agenda below the radar:
Principal asset is its holding in Circle, an employee co-owned healthcare provider.
Circle is 50.1 per cent owned by Circle Holdings and 49.9 per cent owned by the Circle Partnership which is 100 per cent beneficially owned by Circle's clinicians and employees.
Objective is to redefine secondary healthcare delivery in the UK. It benefits from a unique operating model, whereby clinicians are empowered to achieve high levels of patient care and efficiency, through co-ownership and active participation in managing operations.
Circle’s mission is to “run great hospitals dedicated to our patients. By putting doctors and nurses in charge of our hospitals, and making all employees owners, we empower our people to go the extra mile for our patients.”
Good Energy Group plc
Investor base aligned with social mission?
Purpose has always been to empower individuals, businesses and communities to make a difference through their energy supply.
Core business is trading 100% renewable electricity; have over 28,000 customers and source power from a growing community of over 12,000 independent generators across Britain. Support over 600 renewable heat generators.
Investing in new sources of renewable capacity for the country; have own wind farm in Delabole Cornwall and are planning to add a further 50MW over the next five years
Social Finance is gaining momentum
Government support for outsourcing of public services
DoH’s Right to Run: £1bn of community health services transferred and delivered by emerging social enterprises
The Public Services (Social Value) Bill - an opportunity for social enterprises to deliver more public services
Growing number of innovative businesses addressing social challenges
“..approximately 62,000 social enterprises in the UK contributing at least £24bn to the economy. Social enterprises are estimated to employ 800,000 people. We believe the true picture is that the social enterprise sector is bigger than this data suggests.”
Social Enterprise UK
Increasing retail investor interest
Community Share Issues : £44m raised through 41 issues
Golden Lane Housing was established by Mencap in 1998 and was “formed to help tackle the immense problems that people with a learning disability face when making choices about where, with whom and how they wish to live their lives.”
Golden Lane has a highly diverse portfolio geographically and by type. To date, the existing portfolio has a value of £74 million and they now want to acquire a greater number of residential properties with a capital raise of £30m.
Social investment options include issuing a bond, or alternatively, a REIT where investors get exposure to a modest yield based on the rental value of the estate, and the underlying capital growth in the residential property portfolio. The charity would co-own its estate with social investors.
Not new exchange infrastructure, rather working in partnership with an existing RIE. SSE builds a new interface onto that technology platform
Goal is a quote driven, market-maker backed trading system with visible screen based pricing
Financial disclosures and Prospectus must conform to FSA requirements with companies required to make an application to UKLA if full list; application to corporate advisor network if quoted company – responsibility of our RIE partner
There are no direct admissions to the exchange – all companies will have to be admitted via a regulated investment bank/corporate advisor
Issuers must prepare a Social Prospectus and have it audited by a competent individual
Targeted sectors include affordable housing, social transport, ethical consumerism, clean-tech, recycling, regeneration, public health, education, sustainable forestry and organic agriculture
In time, we believe that investors looking to create a portfolio of social businesses will find the SSE the best port of call to look at and find exactly what they are looking for
Mark Campanale, Co-founder & Business Development Director
Mark is responsible for business development for companies seeking to list on the SSE, as well as promoting the platform to corporate advisors and investors. Mark’s background is in asset management, as a co founder of the Ecology Funds at Jupiter in 1989, then the Global Care Funds at Henderson Global Investors through to the Sustainable Future Funds for AMP Capital. Since 2007, Mark has specialised in impact investing and corporate advisory to businesses in the social and environmental markets.
Tel: + 44 7714 415 262
Jon has joined the SSE team to help set up and run the key operational systems, both internal processes and external trading systems with the platform provider and FSA interface. He is a sustainable finance specialist having worked with clients across government, leading environmental and civil society organisations and the private sector. Jon co-founded EnviroMarket in 2005 following previous career as a strategy consultant with Mars & Co and equity research analyst with DLJ.
Tel: +44 7808 161 000
Alison joined the SSE to extend its business development function. Alison is a corporate finance specialist and has worked across multiple industries and geographies with companies of all sizes and stages of development. She started her career in the Corporate Advisory team at Deutsche Bank and more recently was a founder of Four Elements Capital, a specialist corporate finance advisory boutique advising companies in the environmental markets and social impact sectors.
Tel: +44 7880 730 076
Pradeep Jehti, Co-founder & CEO
Pradeep spent three years at the London Stock Exchange as New Product Development Manager and has direct experience of setting up new exchange ventures as well as an understanding of their technical and regulatory requirements. Prior to his career at the LSE, Pradeep was Founder and Head of FTdynamo.com, a Financial Times business and management information portal. Pradeep has previously worked as a consultant to the UK Government on social stock exchanges and regularly speaks at conferences on – and advises on – the social impact investing and social enterprise marketplace.
Tel: +44 7968 030 720
Lunch and Marketplace
Financing the Future of healthcare
CEO and Founder, Clearly So