Private equity bets on NHS backlog with recruitment agency deal

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An agency that employs NHS doctors and nurses outside their contracted hours has been bought by private equity firm Fremman Capital, in a bet that growing waiting lists will stoke demand for specialist staff and services.

UK-based Medinet, which markets itself as helping NHS organisations to reduce waiting times, has been sold by Volpi Capital to Fremman Capital for an undisclosed sum.

Private equity has growing reach in the UK health system, having expanded into private hospitals, recruitment agencies, child and elderly care, foster and mental health services. Volpi and Fremman did not respond to requests for comment. 

The Medinet deal comes amid an acute staff shortage in the NHS and a wave of industrial action by employees demanding higher pay. Nearly 48,000 junior doctors are planning the longest ever walkout with a five-day strike from July 13.

Medinet is one of about 20 providers of “insourcing”, which involves agencies signing up NHS staff and finding them work outside their regular hours to treat patients on NHS premises. One of Medinet’s competitors, 18 Week Support, was bought by US private equity firm Summit Partners last year.

Michelle Tempest, analyst at consultancy Candesic, said that insourcing and outsourcing by NHS trusts “had been increasing and would grow further as NHS trusts sought quick solutions to staff shortages”.

The NHS spent £55mn employing its own staff to do extra work through specialist agencies in 2022, down from £62mn the previous year, according to freedom of information requests by Candesic, a consultancy. General surgery, gastroenterology and endoscopy departments were the biggest users of insourced services last year.

The practice has been criticised by NHS England, which leads the service in the country. It has said it “discourages” the use of insourcing because it “doesn’t provide any additional staff”. 

Agency workers were also paid higher rates, which has a “ripple effect”, forcing other departments and trusts to raise pay, NHS England said.

Medinet posted revenues of £58.9mn last year, a 93 per cent increase on the year before, according to Companies House filings. 

“Waiting times in the NHS across the UK continue to grow and therefore demand for the business’ services will likely increase,” the company said in its annual accounts. 

Last summer, it had record demand for its services as the NHS is still dealing with a backlog of appointments that were cancelled during the pandemic. 

In April, about 371,000 patients had been waiting for more than a year for treatment, according to NHS data.

Fremman Capital was set up in 2020 by former executives from French private equity firm PAI Partners and a former Merrill Lynch banker. The firm has offices across Europe and owns companies including Kids Planet, one of the UK’s largest nursery operators.

Additional reporting by Sarah Neville in London