HCRG Care Group – formerly known as Virgin Care – has agreed to buy Operose Health, which runs nearly 60 NHS GP practices across the UK.
Pulse reported in August that US medical giant Centene, trading in the UK as Operose Health, was looking to sell its nearly 60 GP practices, as part of a move to exit the UK health market.
HCRG Care Group has confirmed to Pulse that it has agreed with Centene to acquire Operose Health in its entirety, but did not wish to comment on the price tag.
A spokesperson for HCRG Care Group told Pulse: ‘We have agreed with Centene a proposal to transfer ownership of Operose Health and AT Medics to our UK-based health and care organisation.
‘Our agreement specifically acknowledges the next step as a formal change of control process by local NHS commissioning organisations and we have been, and will continue to, engage constructively with this formal process to demonstrate the benefits to patients and commissioners.
‘We are committed to supporting Operose Health’s continued delivery of local high-quality NHS primary care and contractual responsibilities, which aligns with our track record of delivering for patients, communities and the NHS over the last 15 years.’
In the summer, the Financial Times reported that Centene had launched a sale process for its GP subsidiary Operose, which could sell for around £51.2m, according to sources close to the process.
The company also sold its network of 53 UK private hospitals – Circle Health – to a company in the Middle East for $1.2bn (£948m).
Centene indicated that the move had come amid lacking profitability, reflecting the sentiment of Babylon Health, which also exited the market this year.
After more than 10 years as part of the Virgin Group, in December 2021 Virgin Care rebranded as HCRG Care Group and was acquired by private equity firm Twenty20 Capital.
In 2018, Virgin Care was found to have won the most NHS clinical contracts, picking up over £1bn worth of NHS awards in 2016/17, which amounts to a third of the total value of contracts won by non-NHS providers in the last year.
READERS' COMMENTS [7]
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As it is illegal to sell basic GMC goodwill the only value is for the goodwill (ie potential profit) of enhanced services(and OOH etc) and buildings. How do they reach this sum (£50million)
Hi Nicholas – the answer to your question also is the basis of a gross misunderstanding from many on independent contractors working in the NHS, as my organisation Connect Health does. Valuation of a business is standard whatever sector and is based on the profit ( or more accurately “EBITDA”) on the accounts. GP businesses are an exception as you indicate re ” goodwill” ( unlike dentists) but you do get NHS pension and other benefits which I do not. GP practices make profits too before anyone shouts out – that’s how the partners are paid ! Despite earlier discussion on Operose – they were making a profit but I presume decided primary care was no longer what they wanted to do and so they have sold. AS they do make profit, with a bit of due diligence to ensure that is the case, HCRG see this as a viable business which will enhance their value and I imagine they will develop plans to make it more efficient and profitable – just like a a GP partner would try to enhance their pay by controlling costs and seeking new income streams.
I started giving talks a few years ago to NHS staff on finance in the NHS as no one really understands it never mind how businesses work. My leaving general practice and becoming CMO of an independent provider made me realise how little I and most of my GP colleagues know how business and finance works … which is sad as we miss out on so much … we should all be taught it at medical school – there again why would the managers in the NHS want us to know? Hope that helps
PS having re read your question – the value of a business on sale is based on a “multiple” of the “EBITDA” ( profit measure) . The EBITDA is fixed in the accounts, the multiple is negotiated based on the prospects of the business growing – its usually a multiple of 8-10 but could be more if prospects are good but if its £50million purchase and lets say the multiple was 10 then their EBITDA would have been £5million . Bear in mind before someone says how did they take £5million a year – this is used to buy things and develop – new IT systems , higher pay etc etc
Thanks Graeme – can I ask how the excess paid over net assets is dealt with in the balance sheet? My understanding is that it it would appear as goodwill and (also my understanding) is that you cannot have goodwill on GP accounts. Is this not the case?
Hi Mark – my understanding would be that the sale of a provider on APMS contract is not considered as goodwill which I think is really “the patients” at the end of the day. Its the contract with the NHS which has the value and provides the basis rather than the patients whom are not guaranteed of course. The reality is its a different rule in this situation for GP owned practices and company owned. This may seem unfair but there is a significant risk which GPs wont have in that should for example Primary Care be completely changed fron current model as is under proposal in Scotland then you could lose that £50m value overnight ……… with little sympathy I am sure ! That’s part of the due diligence and risk assessment that will have been done which involves a little bit of guess work.
Given my own experience, do not equate independent provision and quality …… after all most GPs are independent providers but we can wonder why Dentists were allowed to sell and doctors aren’t – in the heyday some dentists got multiples of >20 ! Multiply all your partner take home pay for the year by 20 and you will see the huge gap with our dental colleagues who cashed in and also still got NHS pensions too ! But Who would wat to look in a mouth all day ?
In the past I ran an independent medically related company and this experience and the difficulties experienced is where I learnt my own most important lessons in terms of what was required to run a GP practice in difficult times . NHS GP practices do have many vast advantages which are taken for granted eg paid IT systems, reimbursements of rent, rates etc etc. and 24hour sources of advice . I don’t believe many who run GP practices and have never ran a private business where income is not guaranteed and nothing is paid for by any other organisation other than self generated income and other than by attracting clients will ever understand this concept and good fortune of working within the NHS despite its difficulties. The problem in the NHS in my view is that many managers at all levels within the NHS also do not have anything other than sheltered NHS experience and very low level qualifications not fit for a large business organisation. To make matters worse, they are often competent receptionists who have been in some cases over promoted to managers but do not have any where near the capability of running ,managing or overseeing modern GP practices. It is only because they are all too often spoon fed by the NHS and information is supplied to them via various meetings ,reminders that they manage to cope rather than them possessing a lot of this knowledge through personal ability and most rely on external organisations for ALL their HR, accounting, etc etc advice and for income generation and they do very little in terms of what would really be called management outside of the NHS. A new generation of managers who are more highly qualified and innovative is required but this will be acting against a very large entrenched jobs for life pre existing management group and will be a taboo subject!
Money milking exercise if you ask me.