The revolving door
Movement of directors and administrators between government and healthcare companies shows the ever-tightening links between the private and public sectors
Faced with ballooning deficits in its healthcare budget in the late 1990s, the Popular Party-run regional government of Valencia decided to look for new ways to fund and run its hospitals. Starting with the district of La Ribera, a densely populated area to the north of the capital, the government invited a private consortium led by Adeslas, a leading Spanish private health insurance company, not only to build a brand-new hospital there, but to run it as well. The hospital, in the town of Alzira, cost 61 million euros and opened in 1999. It was managed by a new kind of corporate entity known as a public-private investment partnership (PPIP).
Alzira gave its name to a pioneering approach to the provision of healthcare through public-private partnership now known and copied throughout Europe. Under the Alzira model, the private contractor receives a fixed annual sum per local inhabitant (capitation) from the regional government for the duration of the contract and in return must offer free, universal access to its range of health services.
In short, the public sector's role is reduced to being that of a commissioner, funding healthcare services by paying the provider a capitation charge derived from the public health budget. La Ribera hospital in Alzira was originally designed for secondary care only, but the model was extended to cover primary care in 2003. Full integration of healthcare provision has hinged on aligning clinical and business directorates and the use of technology across all services. This model now delivers healthcare services to around one fifth of people living in the region of Valencia.
In 2000, Dr Manuel Marín Ferrer was named commissioner of La Ribera's health service, and tasked with overseeing the private company that runs the hospital, a post he occupied until 2007. He had previously been the medical director of a public hospital in nearby Gandia. In September of 2007, Marín Ferrer then moved from the public sector to the private, and took over as the hospital's director.
The public sector's role is reduced to being that of a commissioner
Spain's health sector has been hit hard by government cuts, and in recent years regions run by the center-right Popular Party (PP) have pushed for a bigger role for the private sector, arguing that privately run hospitals are more cost efficient. The management of 10 hospitals in Madrid and Castilla-La Mancha are about to be privatized, a decision that has prompted an angry reaction by healthcare professionals, who have staged noisy public protests and hospital sit-ins.
Opposition to privatization in the sector is not simply a knee-jerk reaction against neo-liberalism by professionals who have grown used to the security of unlimited state funding, as some in the Spanish government would have it. PPIPs based on the Alzira model have been implemented around Europe, but there is still no real evidence to suggest that privately run hospitals are any more efficient than their state-managed counterparts; while concerns have been raised about the bidding processes for management contracts. One outcome of the growing role of the private sector in healthcare delivery has been greater movement between the private and public sectors.
Marín Ferrer was previously employed by the regional government, but now heads the management of the privately run hospital he was once responsible for making sure met its contractual obligations and delivered the healthcare it had agreed to.
In a written reply to EL PAÍS, Marín says that he sees no conflict of interest by moving from the public sector to the private. "The regional government's health department and the company awarded the concession of running the hospital have worked together since the outset to guarantee high quality universal health care: there is no incompatibility in this."
No advantages have been shown that would advise the adoption of PPIP"
At present there is no legislation to govern any possible conflict of interests when people move from the private to the public sector or vice versa. That said, PriceWaterhouse Coopers raised the issue in a report earlier this year on the key issues facing the Spanish healthcare system. "With the aim of resolving some of the more controversial aspects of public and private collaboration, it seems reasonable to discuss the convenience of establishing a regulatory framework that would set out the public interests to be protected, along with the desired type of relationship with the private company or companies involved," it reads.
SESPAS, the Spanish Society of Public Health and Health Administration, which defends the role of the state as the primary provider of healthcare, has undertaken extensive research of the role of the private sector in Spain's health service. It says that there is still very little information about the results of privatization of healthcare. "Contrary to what its defenders say, in reality no advantages have been shown that would advise its adoption." It warns of what it calls, "the real dangers from excessive proximity between authorities and those awarded concessions that could reduce efficient supervision of services," and goes further, highlighting the "enormous risk of the regulator being co-opted," in situations where companies have such influence that they can effectively overrule the authority's ability to regulate, "prioritizing the company's interests over those of the general public."
Juan Oliva, president of the Association of Health Economists, which works with SESPAS, and represents around 900 health sector professionals, says that there is nothing necessarily problematic in "separating healthcare provision and funding. The problem at the moment is that there is no code of best practice in relation to this model." He is particularly concerned about the lack of competition in the sector, which means that a few powerful companies have acquired influence over the regional governments that contract out healthcare provision to the private sector, companies such as Ribera Salud and Capio.
Antonio Burgueño, director general for hospitals within Madrid's Health Department since 2008, is the brains behind the Popular Party-controlled regional government's plans to privatize the management of six hospitals and 27 health centers next year. He has more than 20 years' experience working for private healthcare providers such as Adeslas, and was part of the team that set up the Alzira initiative. He has also provided consultancy to Capio, a private healthcare company which built and now runs a hospital in the Madrid dormitory town of Valdemoro that opened in 2007. His son, Antonio Burgueño Jerez, works for Ribera Salud, which in turn advised on the construction of a new hospital, now owned by private medical insurer Sanitas, in Torrejón, just outside Madrid.
The last two heads of Madrid's health department have subsequently moved into the private sector. Manuel Lamela occupied the post between 2003 and 2007. In 2010 he set up Madrid Medical Destination, a company that aims to promote the Spanish capital as a medical tourism center. The following year he set up a supposedly not-for-profit organization called Madrid Centro Médico (MCM) aimed at "attracting high-level medical tourism" to Madrid's private clinics. At MCM's presentation in 2011, he was flanked by several senior figures from the regional government and City Hall. Among MCM's clients are Capio, MD Anderson, an international chain of privately run cancer treatment centers, and Clínica La Luz, a private hospital in Madrid.
Investment funds around the world want to invest in private healthcare"
Madrid City Hall and the regional government were closely involved in the setting up of MCM, with the latter providing a loan of 1.3 million euros from an 80-million-euro fund created by the Ministry of Science and Innovation. City Hall paid MCM 5,900 euros for the inclusion of the capital's logo on the company's website. The head of MCM, Mario Esteban, says that the company has since changed its name to Ibersalud.
At the 2011 presentation of the company, Lamela said that he was going to organize the Madrid Medical Meeting this year in conjunction with the IFEMA trade fair site. IFEMA says that the event has been "indefinitely postponed." EL PAÍS has tried to contact Lamela without success.
Juan José Güemes stood down as head of the Madrid regional government's health department in 2010, and joined the IE Business School. He also works for Swiss clinical analysis company Unilabs. Unilabs runs the laboratory of the Jiménez Díaz hospital in the capital, which is now run by Capio. EL PAÍS tried to contact him too, without success.
In Spain, two companies dominate the hospital management business: Capio, which is run by risk capital fund CVC Partners, and Ribera Salud, owned in equal parts by two former savings banks based in Valencia: Bancaixa and CAM, now owned respectively by Bankia and Sabadell. Earlier this year, Capio unsuccessfully tried to buy Ribera Salud.
Ribera Salud was created by the regional government of Valencia to build and manage the La Ribera hospital in Alzira, which opened in 1999. Adeslas supplied the medical know how. Dragados and Lubasa undertook the construction. The financial muscle came from Bancaixa and CAM.
Ribera Salud grew, and eventually became an independent healthcare provider, setting up its own projects. But the collapse of Bancaixa and CAM last year meant the company had to put itself up for sale, but it failed to reach agreement with Capio. Sabadell is now negotiating to buy CAM's 50 percent.
London-based CVC is run by Spanish financier Javier de Jaime, and has a controlling stake in Capio. CVC created Ibérica de Diagnóstico y Cirugía (IDC) in 1998, and sold it to Capio, a Swedish company, in 2005 for 331 million euros. A year later, two investment funds, Apax and Nordic Capital, bought Capio and with it, IDC. In 2011, IDC reached agreement with Capio to break away. It reached agreement with CVC, which bought it for 900 million euros.
The recent decision by the regional governments of Madrid and Castilla-La Mancha to put up for tender the management of several of its hospitals is set to create a huge market for private medical companies in Spain. As well as Capio and Ribera Salud, other companies positioning themselves are Quirón-USP, set up by the Cordón family and risk capital fund Doughty Hanson, as well as the Hospitales de Madrid group.
"One has to distinguish between ethics and politics," says José Ramón Pin of the IESE business school. "Movement between the private and public sectors is common in the United States, but is done transparently. A minister or secretary of state, for example, would have to appear before a congressional commission. Spain would do well to apply greater transparency in these matters, to have a body that could assess possible conflicts of interest," he says. Pin believes however that restricting the movement of professionals between the public and private sectors would lead to a "loss of talent." He says that the issue isn't about preventing people moving to the private sector, but about creating "mechanisms to find out whether the move is in return for favors, or because a company is looking for a capable professional."
Dr Fernando Largo, a former member of the Socialist Party, was one of the founders of Capio, leaving the company in 2005. A cardiologist, he had been the provincial director of the National Health Institute in Toledo at the beginning of the 1990s, later working for the division of the national health service that partially funds private clinics. In 1998 he joined the Recoletas private healthcare group. Today, almost two thirds of Recoletas' turnover comes from state funding.
Teresa Echániz is the sister of José Ignacio Echániz, a former head of Madrid's health department at the time Capio took over the running of the Jiménez Díaz hospital, which has a catchment area of more than 400,000 people, in 2003. He is now the head of health in the Popular Party-controlled region of Castilla-La Mancha, which is set to privatize four hospitals. Teresa Echániz now works for Capio at mid-management level. Víctor Madera, the president of Capio, says that she was hired for her knowledge of the pharmaceuticals sector. Again, EL PAÍS was unable to interview her.
Among Capio's 10,000 employees is Elena Arias, who left her job as head of human resources at Capio in 2007 to take over as head of the health service in the Asturias region. She returned to Capio in 2011.
Last year, when Capio announced it was up for sale, a number of risk capital funds showed an interest. While the state healthcare sector is frequently described unprofitable, it appears to offer potential to the private sector. "Investment funds around the world want to invest in private healthcare," says a senior member of the board of Capio.
Little wonder. At a time when the government is cutting spending, more and more of those who can afford it are taking out private health care insurance. The opportunities for profit will be even greater when, as many in the present government would like to see, the entire healthcare system is privatized.