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Canada

False Creek private surgery clinic sold to Toronto equity company

A Toronto private-equity company has bought False Creek Healthcare Centre in Vancouver, one of B.C.’s first private surgery and diagnostic facilities.

In a memo to employees obtained by Postmedia, the owner of the facility and four others in Canada — Centric Health — says the deal is expected to close at the end of September. The buyer is Kensington Capital Advisers.

Doctors and patients can expect a “business as usual” transition followed by an improvement in facilities and quality of care, according to Kirk Hamilton, vice-president of Kensington. The company, which describes itself as an investor in “alternative assets” bought the clinics in Vancouver, Calgary, Winnipeg, Toronto and Mississauga for $35 million. The clinics will be owned by the Kensington Private Equity Fund.

False Creek was opened in the late 1990s by an entrepreneurial Vancouver anesthesiologist, Dr. Mark Godley. In 2011, he sold the Vancouver centre and a sister facility in Winnipeg to Centric Health for $24 million.

The surgical clinics have apparently been a drag on Centric’s financial bottom line. In the memo to employees, David Murphy, the Centric CEO, said the “bittersweet” transaction is the culmination of a year-long review to improve the company’s financial health.

The decision was made “that the most viable path forward was to divest some of our businesses and pursue a more focused strategy built around our seniors’ pharmacy business.”

Murphy nevertheless told employees the growth potential for the private surgery business is “immense” and that Kensington is “the right owner for this business” as it is committed to increasing investment in each of the surgical sites.

“I am confident they will partner with you to help this business realize its tremendous growth potential.”

In B.C., changing government policies initiated by the NDP have been destabilizing the private surgery business. There is the uncertain outcome of the continuing B.C. trial into the constitutionality of paying privately for expedited surgery in such clinics. Closing arguments in the three-year-long trial will not be made before the fall and a judge’s decision is not expected until sometime in 2020.

Murphy mentioned B.C.’s political and legal situation in the company’s latest quarterly report in which Centric cites risks in the private surgery business, including the B.C. trial and NDP government policies.

Asked about the wisdom of buying a private surgery centre in B.C., Hamilton said in an email: “The acquisition includes multiple facilities across Canada and isn’t limited to False Creek. Currently, the False Creek facility does not provide any services to the B.C. government. However, we would be open to providing similar patient services to the B.C. government in the future.”

He was referring to the fact that for many years, health authorities have paid several private clinics to help clear backlogs of scheduled surgeries. But most private clinics also take patients willing to pay out of pocket for expedited surgery, something the government maintains is illegal.

Last fall, the government introduced so-called compliance letters. Surgeons who do any work at private clinics that have contracts with health authorities must sign statements promising they won’t do medically necessary work in both the public and private systems. If they refuse, they could be banned from doing publicly funded operations at private clinics that have contracts with health authorities.

Vancouver Coastal Health has contracted out elective surgery cases to the False Creek clinic in the past, but last year, Health Minister Adrian Dix instructed VCH to sever its contract with False Creek because an audit showed some patients were paying privately to get expedited access, contrary to provincial law.

pfayerman@postmedia.com

Twitter: @MedicineMatters

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