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In the hot seat

GHG’s new chief executive Stephen Collier talks to Tom Ireland about taking charge of the UK’s largest hospital group

Stephen Collier is not shy about promoting the benefits of private medicine. Back in 1988, he tells me, at the age of 30, he found himself using Scottish television to advertise what was then an under-occupied hospital in Glasgow. “Being the young thing I was, I decided ‘let’s do adverts’,” he says. “I spoke to the local health correspondents. Lots of people talked about the TV adverts because it was so unusual at the time. The challenge was to make the average Scottish male use private healthcare when they intuitively used the NHS.”

Twenty-odd years later and there are parallels between Collier’s strategy then and what he does now, albeit on a larger scale, as boss of the UK’s largest hospital group. In July, for example, GHG’s BMI Healthcare brand ran a large advert in the Mail On Sunday (“With increasing cutbacks at the NHS and fewer operations being available, you may be struggling to get the treatment you need”) – a message perhaps more direct than other providers would dare.

Collier still sees his job as one of redefining what people think of private healthcare. “It’s about trying to create profile without ramming it down people’s throats,” says Collier. He’s clear what his challenge is as chief executive over the next year: “GHG has a fantastic set of hospitals – but they’re running at sub-optimal occupancy.” And there is pressure on Collier; he replaced GHG’s long-serving boss Adrian Fawcett in June – his predecessor’s abrupt departure widely believed to have been instigated by the group’s board.

Collier began his career as a barrister in London, but soon rose up the ranks of US healthcare group American Medical International (AMI) as a corporate lawyer. After the firm successfully listed its UK business in 1988, Collier says he’d “had enough” of law, so when he was offered the chance to manage Ross Hall Hospital in Glasgow at the tender age of 30 he jumped at the chance.
“The chief executive at the time, a very laid-back guy, concluded that I could do something more managerial and operational than legal, and I wanted a new challenge. The period was two years of enormous hard work. We took an under-occupied hospital and made it relevant to Glasgow.”

As well as these formative years in Glasgow, Collier feels he “learnt health from the Americans”, having worked with AMI, the hospital’s US owners, throughout the eighties. “The huge lesson from America I learnt is the impact that a change of funding mechanism can have on the viability of a healthcare business,” says Collier. The transition to a tariff-type system of funding in the mid-eighties sent a “shockwave” through the American healthcare sector that most companies took a decade to recover from,
he notes.

He feels there’s little chance the current NHS reforms will have a similar impact here, luckily. In fact, Collier sees a big opportunity, but doesn’t like the way the debate in the UK has been hijacked by fears over cherry picking and profits. “The tone of the debate over the last three months has been unhelpful,” he says, “when there is so much the NHS needs to get on with doing.”

Collier is a hospitals man, through and through. When AMI eventually splintered into a number of firms, (with some of its hospitals ending up in the hands of stellar versions of hospital groups HCA and Tenet) Collier to work closely with the firm’s new French owner. Since then he has undertaken a variety of operational and leadership roles within the company over a number of years, including hospital executive director and director of BMI Health Services. He’s also held board member roles in a number of hospitals across Europe.

But his fondest memories clearly come from his rise at AMI. As well as enjoying the trips to the firm’s plush Beverly Hills headquarters, Collier employed his French language skills for a while at the company’s Paris offices. “I had this amazing title: secrétaire general,” he says with a theatrical accent. “Which just means operations manager.”

Collier is a jovial and candid character in what can be a rather reclusive sector. He acknowledges income from fee paying patients should pick up as the NHS tries to control demand, an obvious effect that some in the sector are reluctant to recognise for fear of looking cold-hearted. He’s level-headed, too – we meet the morning after a third night of violent looting in the capital, and Collier merely rues the inevitability of it all, with a shrug. The GHG boss is happy zooming between meetings on his motorbike round the capital, which he says is “just a great place to live”.

He’s also happy to opine on the Office of Fair Trading’s (OFT) investigation into the private healthcare sector. Others have chosen to say nothing in the face of complaints from private hospital group Circle of “alleged anti-competitive agreements” between providers and insurers. Collier’s predecessor, Adrian Fawcett, took a defiant position against Circle’s combative chief executive, Ali Parsa, but GHG’s new boss goes further, and says the sector as a whole could have stood up for itself better. “‘No comment’ isn’t a particularly illuminating response and the sector should be more confident in what it does,” he says.

Collier rejects Circle’s complaint that insurance networks are blocking new entrants to the hospital market, and says he welcomes the OFT’s investigation, due to report towards the end of the year. But after hinting that the report may uncover some unsavoury practices in other areas of private healthcare – and after a few veiled digs at rival operators – he says there is no real animosity between the UK’s private hospital groups. Competition in the sector is simply “hard-fought,” says Collier. “There is an openness about the importance of acting responsibly and people don’t want to damage the private sector brand. We are all competing for patients and consultants.”
Collier thinks the OFT will focus on three main areas: insurance networks, the availability of clinical information, and the potentially distorting practice of consultant incentivisation. He is particularly concerned that consultants “achieve the right balance between clinical freedom – acting in the best interest of patients – with the apparent risk of being motivated by high value incentives”.

Clarity in these areas will be hugely welcome for private hospital groups, says Collier. After all, the NHS gets guidance from the Cooperation & Competition Panel, “and the OFT’s ruling could be parallel to that,” he says, with the confidence of a man whose own house is in order.
Despite Collier’s confidence, he says it’s “no secret” that GHG and most hospital groups are struggling with occupancies. He’s also concerned about debt in the sector, and the reputational hit that independent healthcare has taken in recent months. But, he says, as any good chief executive would, that GHG is well-placed compared to others. Over the past four years, revenue at the group has grown by around a third and ebitda by around a half, he points out.

“I think some of us [in the sector] are carrying more debt than would be optimal. Acquisition debt is higher than what the market wants to see with re-financings ahead – but given the growth of our cash flow over the last five years we are reasonably confident.” There’s also a risk that the sector could find itself on the defensive, he says. “There is scope for confusion after the torrid events that have racked the care sector” – think Southern Cross and Castlebeck – but “we are a different sector with different funding and different, defensive characteristics.”
The sector is also undergoing a period of radical reform. GHG’s statement announcing Collier’s promotion to chief executive lauded his “wealth of experience of working with the NHS” and how the group “is well placed to thrive in a post NHS reform environment”.

So how closely will Collier get to the NHS? Well, NHS work is “pretty critical” to GHG, even though it is not the firm’s dominant activity. “It helps define our capabilities. It’s part of our spectrum of services. The critical issue is not who is funding the activity.”
The firm could “do very well” out of policies such as Any Qualified Provider, says Collier, “but we shouldn’t underestimate the task ahead. We have to be the provider of choice for GPs and patients.”

What Collier really wants is for GHG to move towards higher acuity services, in the hope of raising occupancy rates and redefining the type of services private hospitals provide. GHG will drive this by focusing on high-end technology and clinical innovation, says Collier, but the group will also be looking for more joint ventures with “strong NHS trusts”, developing their private patient units over the next 12-18 months.

In fact, Collier sees GHG as a good bellwether of much of the sector’s position and strategy. “We have enough hospitals and don’t think now is the time to be expanding our estate,” he says. “We’ve stopped some projects we are working on and are putting capital into what we’ve got. As a sector we’ve too often been financing led rather than looking at operational considerations, and cash raising.”

GHG’s major investors, Apax and Netcare, are very supportive of GHG’s continued development, he says, despite the general malaise in the sector. But he’s unclear about their intentions and too fresh in the top spot at GHG to talk exits or acquisitions.

For the time being, Collier will keep doing what he does best: getting people into his hospitals.

Posted on: 31/08/2011

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