Tuesday, 22 September 2009

Capita sinks its teeth into the NHS

(By Anthony Miller – Tuesday 22nd September 2009 9:30am). Capita is soon to pick up a £100m, 7-year deal with the NHS Business Services Authority (NHSBSA) to process NHS dental claims as well as manage the entire NHSBSA IT infrastructure. The contract is expected to be signed this year. The NHSBSA handles a range of services including claims processing and payment for pharmacists as well as dentists, along with other ‘front line' services.

The deal is interesting for a couple of reasons. Firstly, it’s further evidence of Capita’s intent to more deeply penetrate the UK healthcare services market, signalled most recently by the Feb. ’09 acquisition of healthcare intelligence and benchmarking firm CHKS (see Capita makes 'intelligent' healthcare acquisition) and of Membership Management Online (MMO), a web-based service which provides NHS foundation trusts with public and staff membership services. Capita’s first major deal with the NHS was back in Nov. ’08, when it won a £60m, 3-year contract to develop and run the NHS Choices portal. Prior, Capita’s NHS presence was pretty much limited to a few payroll and pensions BPO contracts with some NHS Trusts.

Which brings us on to the second point. At first blush, you might think NHSBSA is a similar type of ‘shared service’ operation to NHS Shared Business Services (NHS SBS), the joint venture between the NHS and the erstwhile Xansa, now Steria. NHS SBS provides F&A and HR BPO services for a number of NHS Trusts and other bodies. But there is a big difference. Whereas NHS bodies can choose whether or not to use NHS SBS (over 100 of several hundred do so), if you are a dentist or a pharmacy, you have to use NHSBSA if you want to get your money! This highlights one of Capita’s immutable rules about when and when not to bid: it eschews the high-risk, ‘jam tomorrow’ deals in favour of those guaranteed to make the return to support its 11-12% group margin. In contrast, NHS SBS has only just turned profitable after nearly 5 years (see Steria UK update).

Capita now derives about 2% of its £2.4b revenues from the health sector. This is sure to grow as more NHS Trusts look to find better ways of procuring services.

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