August 2012 - The Irish Times
Investing in primary care centres in a recession may seem a curious decision. But Centric Health’s chief executive, Maurice Cox, is convinced it is good for the sector – and for business
Familiar to many Dubliners as the site of the VHI Swiftcare clinic near Dundrum shopping centre, Rockfield Medical Campus is the headquarters of Centric Health.
Centric’s joint venture with VHI healthcare – the company jointly runs three Swiftcare clinics with the VHI – is only one strand of this multifaceted private healthcare business. The company is now about to embark on a new stage in its trajectory.
Earlier this week it announced the creation of 200 jobs, with the development of 10 primary care centres and an expansion of its medical diagnostics business. Fifty of the 200 jobs will come on stream by the end of the year, with the first primary care centre due to open in Newbridge in February. The new jobs will bring Centric’s total workforce to 550.
The expansion follows a € 20 million investment by European private equity group Metric Capital Partners. The investment will result in a complete financial restructuring of the company’s capital base, priming it for expansion, chief executive Maurice Cox explains.
“We’re ready for the next stage, but it’s been a tough couple of years,” he says.
Cox has built a career straddling the spheres of business and medicine. Having studied medicine at Trinity in the mid-1980s, he took a one-year postgraduate course at Cambridge University. On completion, he planned to begin a career in surgery, taking in-house jobs in hospitals around Dublin, specialising in orthopaedics.
“I loved medicine, loved the work,” he says. But, hearing of a job opening with McKinsey, he decided to throw his hat in the ring.
“I thought it would be great interview experience, but had fully intended to go back to medicine.”
A one-year post turned into five years, and Cox threw himself into the world of consulting and corporate finance, specialising in the healthcare sector.
In 2000, he met Ray Power, the owner of medical recruitment business Locumotion who was looking at expanding. Cox left McKinsey and went into partnership with Power alongside Lar Bradshaw, the future Anglo Irish Bank and Dublin Docklands Development Authority board member, for whom Cox had worked in McKinsey. The company began to grow, specialising initially in GP recruitment and primary medical care, including a partnership with VHI Swiftcare clinics.
In 2007, it acquired a stake in Global Diagnostics, a radiology business with operations in Australia.
Today the company has three main strands – medical recruitment, diagnostics and primary healthcare.
Its medical recruitment business, built around Power’s original Locumotion business, recruits doctors from around the world, mainly South Africa, New Zealand and Australia, to work in Ireland, and also organises placements for Irish doctors in Australia.
This kind of locum recruitment plays a significant role in GP provision in Ireland, according to Cox.
“These are the guys who keep the lights on at general practices around the country. At any time we could have 300 or 400 GPs on placement.”
Centric’s medical diagnostics business represents about half the company’s revenues, and has grown since the acquisition of a stake in Global Diagnostics in 2007. The service provides remote radiology services for public and private hospitals.
A significant number of new client wins, particularly with NHS hospitals in the UK, has boosted business, while Centric also provides services to hospitals in Ireland, such as Ennis.
But it is the company’s primary care division which will be the focus for growth over the coming years. The 10 new primary care centres will expand Centric’s current portfolio of 10 primary care centres. It is also acquiring the remaining 25 per cent stake in Global Diagnostics.
Central to these expansion plans has been the investment from Metric Capital Partners. The London-based private equity fund specialises in small to medium-sized companies, typically in service sectors. The Centric investment is the fund’s biggest to date. Metric is putting in € 20 million and will take a minority stake in the company.
Current shareholders Johnnie Walker, the founder of Global Diagnostics, and Lar Bradshaw are being bought out as part of the deal. Former Independent News Media chairman James Osborne will remain as chairman of the company.
Cox describes the private equity investment as transformative for the company. Though Centric turned a profit of just under €90,000 in its 2010 financial year, on turnover of €32.5 million, in 2011 it faced a number of exceptional items that put pressure on the balance sheet despite a 10 per cent increase in revenue.
Performance has improved this year, Cox says, with revenue now more than €40 million for the financial year.
“Look, it’s been tough for the last few years,” says Cox. “For the first three or four years in business, it was a lot easier to raise finance but over the last few years things have tightened completely. It’s the same situation the length and breadth of the country for small and medium-sized businesses.
“Like any business we have our challenges, but the business has been a relatively successful business. Trying to get the right funding structure in place was difficult.”
Centric started to look at new funding and restructuring options about 18 months ago, appointing NCB Corporate Finance.
“I would have initially been sceptical about hiring advisers, but it was the best thing we ever did,” Cox says.
“They asked tough questions about our own business and where we wanted to go. I would definitely advise small and medium-sized businesses to get that advice and support.”
Centric talked to a number of potential funding partners, particularly in the UK. Was it difficult to sell the Irish story to would-be investors?
“There were some who were, shall we say, tuned in to the Sky News version of Ireland, but then there was a group, including Metric, who thought Ireland was undersold and saw it as an opportunity.”
The decision to invest in primary care centres at a time of economic uncertainty may seem curious to some. Cox disagrees.
“Primary care centres, the idea that you have a range of services available in one site, are a central plank of Government policy,” says Cox.
“Over the last decade or so, there hasn’t been any political party which has thought it’s not a good idea. It’s just that the implementation of it has been painfully slow.
“Now there is some debate about how it should happen, but there is a belief that these centres need to happen, and probably in excess of 200 of them.”
Currently 41 primary care centres have been built around the State, 10 of which have been built solely for the HSE, others through lease mechanisms with other operators including GPs.
Centric’s plan is to develop each site about 30,000sq ft in size. It will take a lease for about 20 per cent of the site, where it will locate GP, physiotherapy and other health services, with the HSE occupying the remaining 80 per cent.
Centric has already got buy-in from the HSE on five of the sites, and has a shortlist for the remaining five drawn up. Ultimately, explains Cox, the aim is to have dialogue between the two strands, which will involve integrated IT systems between the two parts of the business.
Cox is something of an evangelist when it comes to primary healthcare. “There is widespread research internationally that shows the better the primary care structures in a country, the better the patient outcome, and the lower the cost on the exchequer,” he says.
He cites the example of Ennis General Hospital, for which Centric provides radiology services.
“Since contracting the radiology services, the cost of providing the service has been reduced by 30 per cent, turnaround times have gone from two to three weeks down to nine hours, and we can have a report ready within 15 minutes. It’s better for the patients, the GPs and has a material impact in terms of cost savings.”
Encouraging greater independent sector involvement in the provision of public healthcare services is, of course, implicit in this vision. What are Cox’s views on the involvement of the private sector in public healthcare provision?
“I believe the State has a responsibility to look after the health of its people, and that every Irish citizen is entitled to world-class healthcare. That’s why universal healthcare is a great idea.
“But I do think that the Government being a payer of healthcare should be slightly different from the Government having to provide that healthcare.”
Pointing out the savings that can be made, he notes that in Australia over 60 per cent of radiology is done by the independent sector; in the UK, it’s about 10 per cent, and in Ireland, it’s around 5 per cent.
“There’s a lot of room for development,” he says.
The introduction of a widespread primary care strategy in Ireland has become a protracted process – not least the issue of GP buy-in.
The success of the Government’s primary care strategy is predicated in part on a sufficient number of primary health providers being willing to partake in a shared services model.
“For some GPs, it’s a great solution; others are just happier to do it themselves,” Cox responds.
“We’re not the solution for every GP but there is a sizeable group out there who want to be part of it.”
The crucial driver, he admits, will be cost.
“Primary care is a classic example of how you need to spend money to save money. While the HSE is committed to primary care centres, the real question is whether it will sustain the level of investment needed to drive innovation in healthcare practices.”
It will also require a cultural and mindset shift.
“Embracing primary care will require some of the long-held views and, to be honest, long-held vested interests to be challenged.
“In the end, it is for the good of the patient. We’re not saying that we’re the panacea for all problems, but primary care is the future and we want to be part of it.
“The Government needs around 200 of these centres. We’re not going to build all of them, of course, but, if we can build 10 of them, well, that’s something.”