The Covid pandemic has provided an illustration of the dire consequences of austerity and of the poor funding of hospitals, public healthcare systems and elderly care in general. Reduced number of hospital and ICU units, insufficient staff and poor working conditions have all exacerbated the impact of the virus, including deaths that could have been avoided.
The elderly care (or long term care) sector in particular has been at the centre of numerous scandals, especially during the first phase of the Covid pandemic. Between and 60% of all Covid deaths in the first wave of the pandemic have occurred in care homes. In Spain, the army had to be deployed in hundreds of overwhelmed care homes, with reports of patients left dead in their beds. Similarly dramatic situations have been reported in countries such as France, Italy or Belgium – often involving homes managed or owned by private care operators such as DomusVi or Korian.
And yet – in spite of the infamous record of private elderly homes and of the widespread calls for new investment in public health systems – Europe’s private care giants might actually emerge stronger, richer and more powerful from the Covid pandemic. Beneath the surface, the deeper policy trend towards ever greater privatisation of the care sector is still dominant – perhaps even more dominant than before. As long as EU governments maintain their unquestioned faith in the private sector and in liberalisation, all the sense of urgency around health systems and the quality of long term care will be at risk of capture by an increasingly concentrated private sector. And this doesn’t even take into account the longer term risk of a return of fully-fledged austerity once the pandemic has finally passed, to pay for all the bailouts and recovery funds. Public authorities – including local authorities – might come under pressure to reduce their expenses and further privatise care services.
EU funds for corporate care
Private care giants have been able to cash in on many of the emergency and longer term funding and support schemes introduced by European institutions in response to the Covid crisis.
ECB bond purchases
In March 2020, in response to the pandemic, the European Central Bank (ECB) decided to dramatically expand its asset purchase programme, which had initially been introduced following the 2008 financial crisis. 750 billion euros were injected into the Pandemic Emergency Purchase Programme with the aim of purchasing sovereign and corporate bonds. Over the following months, another 500 billion, then 600 billion were added to the fund.
Bonds are a way for businesses to finance themselves through the stock market instead of taking out a bank loan: they receive money from bond purchases which they undertake to pay back to investors over a certain period at a fixed rate. It must be noted that, in contrast to other schemes implemented during the pandemic to support the private sector, ECB bond purchases only benefits large multinational corporations – the only ones to finance themselves through corporate bonds. In practice, bond purchases made by the European Central Bank are delegated to national central banks – i.e., the Bank of France in the case of French corporations. Other investors who will also be more likely to buy bonds that they deem a “safe” choice because they were purchased by central banks.
According to the information disclosed by the ECB (which names the beneficiaries of bond purchases, but does not specify the amounts involved), at least two private care companies have benefitted from these bond purchases: the Dutch corporation Aedifica, specialised in care homes and mostly present in the North of Europe, and the German private healthcare corporation Fresenius, which has issued several bonds purchased by the European Central Bank, both directly in Germany and through the Irish subsidiary that serves as the group’s internal bank.
For the private care sector, this type of public support is actually critical. It is their superior financial firepower that allows private care corporations to penetrate a market and then seek to dominate it through a process of mergers and acquisitions, in order to reap the benefits of market power in the longer term through secured revenue. Fresenius is a typical example of this kind of expansion strategy.
European Investment Bank
The European Investment Bank (EIB) is the other key European financial institution. Owned by the EU’s member states, it is Europe’s main public bank and the largest multilateral lender in the world. Even before the pandemic, it had a long history of facilitating privatisation and public private partnerships (PPPs), including in the healthcare sector. According to a 2020 article by ReCommon and CounterBalance, “since 2008, the EIB has invested over €17 billion in the health sector, directing resources largely to support the privatisation of the sector. This support for PPPs has contributed to the “corporatization” of local health units, the dismantling of public health structures in favour of private structures, and the private management of health which strongly undermines the universal right to health.”
Many of the PPP operations financed and facilitated by the EIB involved construction corporations, in particular in relation to building or extending public hospital facilities. In spite of widespread criticism of the actual costs of these PPPs, the EIB continues to this day to prioritise this kind of arrangement, as evidenced by a recent decision to finance Italian construction companies to build a new emergency department for a hospital in Genoa. It has also used a PPP model to fund the building and renovation of elderly care units in Ireland.
As part of its Covid response, the EIB has vowed to increase its funding for healthcare, making €6 billion available for the sector (including both medical infrastructure and financing for vaccines and cures), as well as an additional €5 billion for Covid support outside of Europe. As a large proportion of these funds are distributed through deals with regional or national public authorities, it is often impossible to track the money so as to know what share of it might benefit private care companies (e.g. paying for extra hospital beds or upgrading care facilities).
There are, however, several recent EIB deals that suggest that it is also increasingly dealing directly with private care companies, both in the healthcare and long term care sector, and that these new private care giants might become regular partners for the EIB. The main example is a €135 million loan to French elderly care corporation Korian, with a first financing agreement signed in December 2020, in the middle of the pandemic. The loan, guaranteed by the European Fund for Strategic Investments, is meant to help Korian expand its Ages&Vie home network, with 4000 new beds by 2024 in France [1]. The deal was signed in presence of EU Commissioner Paolo Gentiloni, an additional sign of its importance for the EU and the EIB.
This is not the only time the EIB has dealt directly with private care companies. In 2018, it has financed Italian care corporation Gruppo Villa Maria (GVM), which owns private hospitals in Italy and France, to the tune of €100 million. In 2019, it funded elderly care group Vitalia Home to build 19 retirement homes in Spain.
National recovery (partly) privatised?
Healthcare and long term care do not feature among the top priorities of post-Covid national recovery plans – funded through the new €800 billion NextGenerationEU fund – which focus instead on climate transition and digitalisation. It has been noted, for instance, that the recovery plans of countries such as Italy and Spain dedicate more money to hydrogen projects, for instance, than to the care sector (see our report).
But even the funds in national recovery plans for the care sector tend to be directed towards projects that will benefit – directly or indirectly – the corporate sector. The Spanish recovery plan, for instance, includes just over €1 billion for healthcare, 1,5% of the total spend.74% of this money will be allocated to renovating facilities – i.e. construction companies and equipment providers. Similarly, two thirds of the €3.5 billion allocated to the care sector in general will be allocated to “deinstitutionalisation, improving equipment and technology” - which again means mostly digitalisation and renovating buildings. This focus, according to Maria Palomares Arena, executive director of the Calala Fondo de Mujeres foundation [Calala Women’s Fund], shows “a clear will to invest in private enterprise – what is more, in sectors which are highly masculinised. In this way, the generation of quality employment will be largely reserved for men”. There is even a €100 million fund for only 3 pilot projects to improve care systems) - the amounts involved making it clear that these funds will go to large private care companies, not small nonprofit organisations [2].
The French recovery plan includes €6bn for the renovation of hospitals and care facilities (funds that were originally set aside as part of the “Ségur de la Santé”, an investment plan for the healthcare sector and its workers agreed upon following the first stage of the Covid crisis). It is explicitly and repeatedly emphasised in official documents that these funds are meant for public and private hospitals and facilities alike. There is also en emphasis on improving coordination between the public and private sector at local and regional levels, in other words integrating them into one healthcare system and minimising competition. Both are long-standing demands of private healthcare companies, which want to get the same funding and the same recognition as the public healthcare system, in other words to blur the difference between the two. A good example of this is a project, funded by the recovery plan, to improve coordination between private hospitals and a hospital owned by the Elsan group in the Sarthe region. A more detailed analysis would be necessary to find out what share exactly of the recovery funds would go to private care operators. The French recovery plan also explicitly states that this investment programme will be good for the economy because it will “generate construction activities”...
Finally, it must be noted that many national recovery plans include funds for “e-health” and “digitalisation of health”, as part of the larger digitalisation agenda set out by the EU Commission. These will likely create new avenues for further privatisation of healthcare and elderly care- to the benefit both of new digital players, including Big Tech and of established private care corporations. In the French recovery plan, for instance, some of these funds are directed towards software development and implementation that will allow for seamless “inter-operability” between public and private care providers.
The lobbying behind the financial support
Both the Covid response of EU financial institutions and national recovery plans will benefit private care corporations. These new sources of funding might facilitate their further expansion and a further commodification of the European care sector, even though the pandemic has offered vivid illustrations of the problems with private care.
These streams of public funding do not explicitly prioritise private healthcare and elderly care over public care – although they sometimes come with pledges for future reforms and rationalisation in the care sector in alignment with a pro-liberalisation agenda. But essentially, the private care sector seems to have won the argument that it should be treated on the same basis as public care and benefit from the same level of support.
The private care sector has a long history of close connections with politicians and public institutions at national and local level. In France, for instance, many of today’s private care companies have been literally bred by public financial institutions such as Caisse des dépôts (see our article). Taking this into account, as well as the EU Commission’s entrenched pro-liberalisation ideology, it is perhaps not surprising that they have managed to get a slice of recovery funds.
The limited information available shows that the private care sector has also used its lobbying firepower during the pandemic to ensure that it would not be excluded from post-Covid funding and have its voice heard in the design of post-Covid plans. In France, where there is a lobbying register, we know for instance that Synerpa, the umbrella group of the private elderly care industry, has stepped up its lobbying activities in 2020 with 64 declared lobbying activities – most of which aimed at obtaining regulatory or financial advantages – and a lobbying budget of €200,000-300,000. Private care companies Korian and Orpéa also have declared substantial lobbying budgets (€100,000-200,000 and €50,000-75,000 respectively). In the private healthcare sector, the trade group Fédération de l’hospitalisation privée (FHP) has a declared lobbying budget of €100,000-200,000 for 2020, and has also stepped up its lobbying activities in comparison to previous years – a significant share of which aimed at ensuring private healthcare groups would get their share of Ségur de la Santé investments. Individual healthcare companies Ramsay and Elsan also declared lobbying expenses of €50,000-75,000 each.
The picture is not quite as clear at the European level. European-wide lobbying groups either don’t declare their lobbying expenses properly in the EU lobbying register, or are not as powerful as their national counterparts – perhaps because most funding and regulatory decisions are made at the level of member states. The European Union of Private Hospitals has a lobbying budget of “only” 50 000 - 99 999 €, although it has held several high-level meetings with the EU Commission. In terms of individual companies, only Fresenius has a significant presence in Brussels, with a lobbying budget of €200,000-300,000 (and a similar budget for its subsidiary specialised in medicines and medical technologies). In the elderly care sector, the European Ageing Network declares a budget of a little more than €111,000. It represents the interests of both public and private care operators, but as a recent report by Corporate Europe Observatory emphasised: “Some of its recommendations, however, clearly do serve the interests of its for-profit members. In a 2019 report on long-term care, for example, EAN states that “Public/private partnerships will become increasingly a source of solutions for the future”, and that private for-profit service companies “will certainly become a key player” due to increasing limitations of public funding.”
AmCham, BusinessEurope, McKinsey
Pressures to bend European policy-making in favour of the private care sector also come from other corporate lobby groups, including BusinessEurope (the main lobby group for business in general at EU level). In this field, AmCham – the international network that represents the interests of US-based corporations in different European countries and at EU level – has historically played an important role in advocating for privatisation and liberalisation in the health sector (in various forms), and for “trade in health” (sic). Its members include private care and insurance corporations such as UnitedHealth (a global giant that is not very present in Europe at the moment), pharmaceutical companies and financial firms invested in the sector.
Recently, for instance, AmCham encouraged the government of Ukraine to reform the country’s healthcare system, leaving patients free to choose their care providers, arguing that “ competition for the patient will motivate hospitals to develop, effectively invest in new equipment and management, increase doctors’ salaries, and improve service delivery”. In a paper on healthcare systems in Eastern Europe published in 2019, AmCham argued that “Where the need for investment in medical infrastructure meets tight public budgets, innovative solutions and public-private partnerships can play an important role in improving the status quo”.
Following the Covid crisis and in relation to the preparation of recovery plans, AmCham EU has published a series of recommendations for the EU and member state governments, including the promotion of private providers in the care sector. In its recommendations to the German Presidency of the Council of the EU, published juste after the first wave of the pandemic in 2020, AmCham for instance stated that “innovative public-private partnership should be encouraged, including in healthcare delivery”. Similar recommendations have been addressed to the countries that have taken up the rotating presidency of the EU after Germany, including France in the first half of 2022. True, these recommendations and other reports by AmCham EU put stronger emphasis on e-health (or tele-heath) and home-care than on public-private partnerships – perhaps because US corporations have more chances to benefit from these new markets.
An AmCham report from 2014 actually suggests that focussing on apparently harmless sectors such as e-health is a deliberate strategy, since it was seen as an easier way to create business opportunities than arguing for outright privatisation, because of the European citizen’s reluctance. “Many of our experts felt that private sector involvement in European healthcare had traditionally been frowned upon (…). Private companies will supply the IT systems and technology for eHealth, including innovations related to mobile health (mHealth) and cloud IT solutions. So it will be important for healthcare professionals to be prepared to forge relationships with private partners. To overcome these negative attitudes toward the private sector, our experts feel it will be important to distinguish between the privatisation of healthcare which is not generally supported in Europe (even though private clinics already provide a large share of hospital care in some European countries) and the involvement of for-profit enterprise.”
Another player that has attracted a lot of attention is McKinsey (and other similar consultancies such as Deloitte). It is widely seen as promoting a pro-corporate agenda in public institutions and is known to have played a role in pushing corporatisation and healthcare business models aligned with those of the private sector in countries such as the UK or France. McKinsey’s role in managing the Covid crisis and the health response has been a subject of scandal in many European countries. We know that it is still promoting the same model for healthcare (for instance in this 2021 article on “improving healthcare productivity” in Europe). We also know that the consultancy has been in touch with the Commission at various moments during the pandemic and the preparation of recovery plans. But we know little else, as all our requests for informations have been denied by the EU Commission have been denied or have come back heavily redacted [3]. This pattern of opacity around McKinsey’s relations with the EU and national governments is deeply problematic given the increasing controversies around its role.
While the Covid crisis has shed a crude light on the consequences of budget cuts in the health sector and on the poor conditions among some care providers, the policy model that has allowed private care corporations to grow and expand in Europe in the last decade is still dominant. This has allowed these same corporations to benefit from a significant share of recovery funds and other forms of public financial support introduced in response to the pandemic – and thus to potentially grow even bigger in the near future. New industry-favoured markets such as “ehealth” will likely create avenues for new forms of privatisation. It will not be sufficient to invest more money in healthcare – as many European governments are (saying they are) doing – if large chunks of it fall in the pockets of private corporations and without a more radical change of paradigm.
Olivier Petitjean (Observatoire des multinationales), partly based on research by Rachel Tansey.
