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Connell C - LB Mar 2022

Priority is quality and growth

HealthInvestor catches up with Spire Healthcare’s chief executive Justin Ash as the London-listed private healthcare provider has undergone a “complete quality transformation”. He discusses this, as well as Spire’s focus on private services and expansion plans in the pipeline.

Justin Ash, Spire Healthcare
Justin Ash,Spire Healthcare

Ash was appointed Spire’s chief executive in October 2017. He is also a member of the strategic council of Independent Healthcare Providers Network and chair of the trustees of Tropical Health & Education Trust. Spire operates 39 hospitals and 11 clinics nationwide and is the largest private hospital group by turnover in the UK today. At the end of 2021, the hospital group had a turnover of £1.1 billion.

What’s Spire’s overall strategy, and geographical and medical focus?

We’ve just refreshed our strategy. The new strategy is all about wrapping services around Spire’s existing hospitals and being more relevant to people’s total lives. We want to make a positive difference in people’s lives and keep that link with hospitals. So, we’ve got a hospital strategy as well as a non-hospital expansion strategy.

Having completed detailed research to assess who uses private care, who would use it, and who can afford it, we found that there are about 15 million people in the UK, who are either highly amenable to using private healthcare or are already using private healthcare. And waiting lists have changed the scene for private healthcare in the UK. Self-pay grew by 115% compared to 2020, and now accounts for around 26.4% of Spire’s total revenue compared to 18.2% in 2019, the last full year before the pandemic.

So, our priority is quality and hospital growth and we’ve now moved into a leadership position and that’s a competitive advantage.

In terms of expansion, we’re going to start building clinics either as add-ons to hospitals or in new locations – we’ve identified eight locations already and there’ll be more. We are moving into diagnostics, expanding our GP primary care facilities and introducing a digital GP service. But interestingly, 70% of people prefer a face-to-face appointment according to Spire’s research. We see big opportunities to grow a private GP service.

Later in 2022, we’re going to start looking at our role in long-term condition management too. We plan to launch a private Type 2 diabetes subscription service at the end of this year, providing a specialist nurse and online diagnostic tracking access to a GP.

We have further invested in systems for online bookings, digital inquiries and digital marketing. And then we screened our first TV campaign just as the 2021 peak of the pandemic subsided, which had an incredible response.

Finally, we continue to invest in our people. We are running the largest nursing apprenticeship programme in the sector in the UK. And we have also set the objective to be sustainability champions with a commitment to net zero by 2030.

How much are you investing in your expansion strategy?

We want to get £50 million of turnover from those new services – that’s where we want to aim. One single clinic will cost five to seven million to build. And we expect to make a double-digit return on capital from it. We plan to build at least two clinics next year, see how they work, and then expand further. We’re targeting areas where we know there’s pent-up demand. We’re probably not looking at London, for the time being.

Is organic or inorganic growth a priority?

Our new clinics are likely to be organically built, but when it comes to digital, we’re unlikely to build our own digital app and we’re more likely to partner with providers. Bolt-on acquisitions are definitely on the agenda, but in a very disciplined way. We want products that fit with our strategy and our profile as a private hospital operator and have inherently good quality.

How are you improving and ensuring the quality of your services?

We look at culture, systems and processes, audit, and continuous improvement – in that particular order. Quality culture and patient safety top our priority list. We then reinforce that with automated systems and processes and have an internal audit team who go around and conduct CQC-style inspections internally. That was a really important tool early on, but over time it becomes less necessary to inspect as this is a self-sustaining quality programme.

What we’re focused on is quality improvement. We have 120 quality improvement champions now driving programmes in the hospitals, and then using systems and processes to take what they learned in one hospital and transfer it across. We have a whistleblowing policy and Freedom to Speak Up Guardians at every hospital, to whom people can speak confidentially.

We are also rolling out LGBTQ+U Champions across the business. And of course, the other key point is learning. We have 48-hour flash reports circulated by our group clinical director to hospital senior management teams within 48 hours of a serious incident. The report

includes information on contributory factors and preventative measures identified from an initial review of the incident.

And everything I described didn’t exist in the past.

How are your margins performing?

Our margins went backward for two reasons. We invested heavily in quality and we were very clear, that this is going to cost money, and we took our shareholders with us. Second, Covid-19 cost us £53 million related to cancellations, staff absence, PPE and so on. However, we are confident that we can improve margins going forward and maintain our quality and top line growth, partly because we’re growing our private business which has a higher average spend and a more favourable margin profile. We’ve also focused our business more on core treatments. For instance, we used to do a lot more cosmetic work. We’ve now reoriented away from cosmetics to orthopedics – cosmetics was 8% (2018:15%) and orthopedics was 43% (2018:32%) of our self-pay revenue in the 12 months to March 2022.

We’ve been really investing in the digital core, which has allowed us to start digitalising processes, keeping safer, faster and better patient records. We can then start using artificial intelligence to examine those records. So, we’ve already delivered half of the projected £30 million savings derived from changing processes and making sustainable differences to the business.

Are you planning to get acquired following Ramsay’s bid rejection a year ago?

Building, with my great teams, a brilliant hospital group with strong healthcare services, is enough – who knows what will happen in the broader environment. There are no plans, we’d have to announce them if they were.

Will you continue partnering with the NHS?

Since 2018, apart from the pandemic period when we were devoted to the NHS, we’ve driven consistent, strong private growth. Our focus is on meeting the demand for diagnosis and treatment from people looking for private healthcare But the NHS is a key partner and we’re proud of our support for the NHS. With 25-30% of our business being NHS and a turnover of £1.1 billion, we’re still looking at over £300 million a year of work supporting the NHS. We stand by to help the NHS more, should the NHS wish it. And let’s also remember that for every person who goes private, it means one fewer person potentially joining the NHS waiting list.

What’s your aspiration for Spire Healthcare?

We’ve set out some financial targets. We want the hospital business to continue to grow the top line at about 5% a year and we want to consolidate our focus on quality. In five years’ time, we want to have more achievements on the quality front so we can define ourselves as leaders in the sector. I want us to be fully digitalised, highly efficient, as well as providing a safe, high-quality environment for our care.

We currently have 21 cancer centres and we’ve just announced a partnership with Bupa for the next four years which includes more specialist cancer centres. So, we’d like to be the biggest acute or complex provider outside of London. I’d love to see us with a strong network of clinics providing rapid high-quality diagnostics that also feed into quick treatments in our hospitals and I’d like us to have a strong presence in broader healthcare, particularly private GPs, also in the digital long-term condition management space.

And I think we can achieve all that. We’ve got the building blocks. We’ve got brilliant teams and with them, we can pretty much achieve anything. Overall, it’s a good time for the sector. There are headwinds, of course, like inflation and the competition for good talent, and we know that Covid-19 is ever-present. With that demand, it’s a great time to run hospitals. It’s never straightforward running hospitals but it’s always a pleasure.

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