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Wednesday 18 January 2017

Business in rude health with high standards

He's overseeing the biggest expansion since the hospital was founded, and views positive patient experiences as the key to healthy growth in this competitive sector. By Donal O'Donovan

Published 07/04/2011 | 05:00

TWENTY-FIVE years after the launch of the Blackrock Clinic brought large-scale commercial medicine to Ireland, CEO Bryan Harty is approaching the end of a €100m spend on the biggest expansion since the hospital was founded.

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He tells the Irish Independent about the challenge of balancing conservative business policy with a radical medical agenda and says even after the latest project ends the business cannot afford to stand still.

Englishman Bryan Harty has been at the helm at Ireland's best-known private hospital for 11 of its 25-year history.

In that time, he has seen its majority shareholder come and go, seen the hospital almost double in size and the business mature into a dividend-paying market leader.

There is no question of resting on those laurels, however, as he oversees the latest round of expansion from a neat but frugal pre-fab hidden away on the prestige venue's manicured grounds. It's a far cry from the bright, hi-tech theatres and patient rooms in the five-storey hospital itself.

"There will be a management suite inside, once redevelopment is complete," he tells the Irish Independent with a vague wave, but the focus has been on adding beds and care facilities.

Harty joined the Blackrock Clinic as a manager with UK healthcare giant BUPA back in 2000. BUPA had taken a 56pc stake in the business. The UK company sold out of Blackrock in 2006, in a deal that valued the hospital at around €60m.

Harty was persuaded to stay on in Ireland and BUPA booked a hefty profit on the deal, but the company's entry into and exit from the Irish market highlights just how tough a sector private healthcare can.

"Running a hospital is a complicated business, whether that's in the public or in the private sector. We have 620 staff here operating around the clock; occupancy was 90pc last night," he says.

Blackrock has generated profits in recent years, much of which has found its way into similar investments in the Hermitage in Lucan and the Galway Clinic.

Ownership

The three hospitals are independent, and despite significant common ownership, there are no plans to integrate the three businesses.

Having come from a large group originally Harty says merging is something he would be happy to consider.

"I think it would be desirable clinically and commercially to move to a group structure eventually, but the shareholder mix is different in each and it's not on the cards right now," he says.

In the meantime the three do co-operate on major spending, managers of the three hospitals meet regularly to share views and ideas. Harty says the biggest obstacle to a full merger is the different stage each hospital is at as a business.

Blackrock is now a mature business, self-financing and happy to expand within its own bounds, while its two potential partners are at an earlier stage.

Most patients at Blackrock are financed through the main private health insurers, with the state-owned VHI far and away the hospital's biggest 'customer'.

It makes for a difficult relationship. The insurer is loss-making and needs to pass some of the losses on to care providers, which in turn complain that higher-spec treatments and medical inflation are squeezing margins.

After months of wrangling, Harty says he is close to finalising this year's deal. While he understands that the VHI has huge numbers of older, sicker patients, there is no doubt that he, and other hospital managers, would like to see its domination of the sector broken up.

Another 10pc of revenue comes through the National Treatment Purchase Fund (NTPF) or the health authorities sending public patients to Blackrock for its hi-tech scanning equipment that is not available elsewhere.

A growing number of patients in Dublin are public patients from the North sent south for treatment under a contract with the NHS.

It makes Blackrock reliant on the vagaries of public policy.

Health Minister James Reilly's plan for universal health insurance is certainly on the radar.

"It seems to be an opportunity, but what I have seen of the plans is all very high-level and some time away, so it is just not something we can start trying to address right now."

Policy formation

In fact, neither the Blackrock Clinic nor the rival Mater Private Hospital in north Dublin is involved in any way in healthcare planning or policy formation.

Their purchasing power and capacity makes a material impact on the provision of care, making their exclusion from policy formation a frustration.

"We don't know what the new landscape will be so our strategy is to be the place that patients want to come regardless of who pays or how," he says.

Surprisingly, his experience of Britain's socialised NHS was that its planning and decision-making was often more commercially minded than has been the case with Irish health.

"They identify what they want and find a way to pay for it; there tends to be less joined-up thinking in Ireland," he says.

Blackrock itself was born out of frustration with what its founders saw as poor public policy.

It is frustration that has borne fruit; turnover was €85m in 2009 and 2010's results should see significant increases, with 11pc more inpatients and 14pc more day cases treated. Operating theatre cases were up 19pc last year as the hospital's five-year expansion programme brought more beds on stream. It is not an investment for tycoons seeking a quick turnaround, however.

"For the first 15 years, the clinic failed to pay a dividend, investors saw very little return on their investment, at least little they could extract from the hospital."

The initial investors were part of the clinical staff and to some extent they were motivated as owners by clinical considerations -- using the freedom of action private-sector status gave them to invest in technology that recession-hit Ireland could not afford in the 1980s.

Since then, developer James Flynn and beef baron Larry Goodman have come on board as shareholders, but Harty insists that long-term view of value creation remains intact.

The original founders launched Blackrock out of frustration as doctors at the State's unwillingness to invest in new technology.

What was a professional concern became a business defining policy and staying competitive means the founders' ethos has become business policy.

"Successful investors have to be shrewd enough to realise healthcare is a rapidly moving area; the business has to keep investing to remain competitive," he says.

Blackrock established its reputation by being the first to deliver a range of new surgical procedures in Ireland.

"The skill here is to identify the new technologies that are going to be in demand, choosing the right technologies and being able to invest."

Conservative model

If Blackrock is willing to spend to get the best technologies, it does so thanks to a fairly conservative business model.

"At €50m our debt is at a very serviceable level, despite the €103m expansion programme, which was actually funded from a mix of bank debt and profits being ploughed back into the business."

It highlights the long-term view needed to maintain the reputation for advanced care crucial to Blackrock's brand.

"Word-of-mouth is no longer good enough, so how we approach patient care is how we will set ourselves apart as a respected/trusted brand," he says.

Harty is all too aware that the biggest risk to this brand is poor-quality healthcare. One of his proudest achievements as a manager has been the eradication of MRSA in the hospital.

It's an area where the medical and business sides of the company really interconnect, because patients are increasingly taking control of their own treatment options.

"Word-of-mouth, or a lovely room, is no longer good enough. Patients are asking questions about issues like infection control -- which is where moving to all-single rooms really matters.

"We have to be able to show them as customers how well we rate compared to international standards."

Harty has ring bound folders to hand, benchmarking patient's clinical experience at Blackrock against experience elsewhere. The data is detailed and comparisons of mortality and post-operative infection rates can be difficult going, but Harty says it is information patients want as they take control of their decision-making.

It is information he's happy to provide and seeking new ways to make available.

"Patients are making decisions and as managers, we have to identify what those patients are basing decisions on and make sure we meet the standards they demand."

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