FOUR Seasons Health Care, the largest provider of care homers for the elderly in Britain, has announced that it is going bust, losing £26 million in the three months to June this year.
The private company operates 450 nursing homes which care for 20,000 patients. It also runs 50 specialist care units in hospitals. Four Seasons took over running these homes in 2011 after the financial collapse of the previous owners Southern Cross.
With much fanfare Four Seasons announced that elderly residents would not be thrown onto the streets as the ‘market came together to provide an ordered solution’. Four Seasons boasted a different economic model from Southern Cross – one that would ensure that patients would receive the best possible care while generating large profits for the company.
These boasts have turned to ashes in the mouth of the owners of Four Seasons, Terra Firma, which describes itself as one of Europe’s leading private equity firms and claims: ‘We create value for our stockholders by acquiring, transforming and selling asset-backed businesses.’
It now turns out that the brilliant business strategy employed by these private equity firms amounts to nothing more than buying up on the cheap and using massive loans to finance their speculation in the lucrative business of private healthcare.
This strategy has blown up in their face as Four Seasons struggles with debts of £500 million on which they have to pay £50 million a year in interest repayments, while its earnings last year only amounted to £51.5 million. Along with piling on debt to the companies it acquires, the other main plank of the speculators’ master plan for ‘turning around’ bankrupt companies like Southern Cross is simply to cut costs to the bone by restructuring and wage cutting – closing down unprofitable parts and relying on poverty level wages to keep the profits rolling in.
Last week Four Seasons joined with other major private health companies in writing to the Tory Chancellor, George Osborne, begging the government for money. Their letter moaned that the Tory pledge to introduce a national minimum wage next year will lead to the collapse of a major care provider within two years and force the closure of ‘hundreds’ of care homes run by these privateers, meaning ‘thousands of older people could be left without a home’ unless the government provides them with bucketfuls of extra money.
It now appears that we won’t have to wait two years before a major private care provider goes belly-up, as Four Seasons has calculated that its profits will take a further loss of £10 million as a result of being forced to pay even the derisory £7.20 an hour proposed by Osborne.
In response to this crisis Four Seasons is promising to close unprofitable homes – that is the vast majority of its 450 – and cut back on refurbishment of those remaining while it concentrates on its only profitable patients – the wealthy who can afford to pay the exorbitant charges levied on private patients.
For the thousands of elderly who rely on local council funding, which is not enough to keep these companies in profit and is being cut back all the time as a result of government cuts, they face being thrown onto the streets and left to die. Unlike in 2011 when Southern Cross collapsed, this time no private equity speculator will be willing to jump in and save the day after the failure of Four Seasons to rake in the profits they dreamed of by exploiting the old and infirm.
Shamefully the response of unions like the GMB has been to back the privateers’ call for ‘emergency funding’ to bail out these companies. The only answer to this crisis in care homes is not to beg the Tories for money to keep Four Seasons and the rest in profit but to organise a general strike to kick out the government and bring in a workers government that will expropriate all the privateers and the banks and provide the money to ensure a completely free health system as part of a socialist planned economy.
