UK (Parliament Politic Magazine) – US health insurance provider Centene has announced plans to divest its chain of GP clinics and the UK’s largest private hospital group as part of its strategic exit from the British healthcare market.
Centene, listed on the NYSE, has initiated a sale process for its nearly 60 Operose GP surgeries across the UK, with a deal expected to be finalized before the upcoming Christmas period, according to sources closely connected to the ongoing process.
Analysts estimate that the business, which reported £89 million in revenues for 2021, could be sold for approximately eight times its EBITDA, totaling around £51.2 million. This decision follows shortly after Centene revealed a $1.2 billion deal to sell its Circle/BMI UK hospital chain.
Centene’s Exit from UK Healthcare Market: Divesting GP Clinics and Largest Private Hospital Group
These two divestments signify a significant shift in Centene’s UK strategy, which had aimed to establish a seamless route into private healthcare by acquiring publicly funded GP services and encouraging doctors to refer patients to its network of 53 Circle/BMI hospitals in England.
Centene’s acquisition of Operose GP surgeries in 2021 encountered legal challenges from anti-privatization activists. Although their claims were not upheld in court, the purchase was interpreted by activists as indicative of a growing trend towards privatization within the National Health Service (NHS).
Challenges also arose as Centene’s GP practices in northern London were geographically distant from any Circle/BMI hospitals. Additionally, the company faced difficulties in incentivizing doctors, as analysts noted.
Victor Chua of Mansfield Advisors, a healthcare consultancy, remarked, “Centene has struggled to make Operose profitable due to the locations of many Operose sites in less affluent areas, where recruiting GPs has been a challenge. There was limited synergy between Operose GPs and the Circle Hospitals, which cater to a distinct demographic.”
Centene’s Strategic Shift: Abandoning Plans to Enter Britain’s Healthcare System
Citing higher operational costs such as staffing, Centene has opted to refocus on the US market, finding other countries more lucrative than the UK. Last year, the company sold its Ribera chain of private hospitals in Spain.
Centene predominantly provides affordable care to uninsured and underinsured individuals through government-sponsored programs like Medicaid and Medicare in the US. However, the company has faced allegations of overbilling Medicaid for pharmacy services, resulting in multi-million-dollar settlements.
In a statement, Centene indicated a concentration on its primary lines of business in the United States, including Medicaid and Medicare. The company’s strategic portfolio review led to the decision to divest assets outside of this core US focus.
Sale Process Initiated: Centene to Divest Chain of Operose GP Surgeries in the UK
Recently, Centene announced the sale of its Circle/BMI hospitals to PureHealth, owned by Abu Dhabi, for an enterprise value of $1.2 billion, encompassing debt. PureHealth will assume control of Circle’s portfolio, including the UK’s inaugural purpose-built rehabilitation hospital, scheduled for early next year.
While US healthcare providers have been expanding in the UK healthcare market, including renowned institutions like the Mayo Clinic, Cleveland Clinic, and HCA Healthcare, they have encountered challenges in adapting to the UK system, according to Victor Chua.
He stated, “Numerous US providers have entered the UK with the assumption that it would be an easily penetrable market, only to find greater difficulty than anticipated.”
During the Covid-19 pandemic, private hospitals benefited from an arrangement in which the UK government covered all their costs, including staffing, interest, and rent. These facilities now capitalize on extended NHS waiting lists, leading to an influx of patients—some self-funded, others covered by insurance or the NHS.
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Deal Expected to Conclude Before the Christmas Season
Approximately 14% of hospitals in England are privately owned, with the remaining majority falling under NHS ownership, which outsources specific procedures, primarily related to hip and knee surgeries and ophthalmology, to private hospitals.
U.S. health insurance provider Centene is divesting its series of GP clinics and the UK’s most extensive private hospital group, abandoning its previous efforts to establish a foothold in the British healthcare sector, according to a report by the Financial Times published on Wednesday.
Sources familiar with the situation revealed that the company has initiated the process of selling its portfolio of approximately 60 Operose GP surgeries located in the UK. The report stated that the transaction is anticipated to be completed prior to the Christmas season.