Paul and Brett's Alpha

As our regular readers and investors will be aware, the goal of the Trust’s strategy is to invest behind those companies delivering what we see as an essential and thus inevitable transformation of the healthcare delivery paradigm. Since we are long-term, fundamental investors looking to pursue a low turnover strategy, we spend as much time trying to understand the future of the industry as we do about how to play those future trends through companies that offer operationally geared exposure to them.  

Breaking this problem down further, much of it centres around gaining an understanding of where the key issues lie. In the field of industrial process optimisation, the term ‘debottlenecking’ refers to the process of improving efficiency by finding the rate-limiting steps in a facility and correcting them. Addressing those steps will improve performance, whereas changes to non–rate-limiting steps will not affect performance (although they may lower cost). We try to apply this approach to healthcare, considering the patient journey (which runs from cradle to grave) rather like a sausage machine.  

Sometimes, one can find evident problems and interesting solutions, without them having an investable angle to them (so far, at least). One of these is an oft-recurring issue that may seem peripheral but in fact lies at the heart of the healthcare dilemma: social care provision.  

It is well understood that the burden of healthcare, both financially and societally lies overwhelmingly with the chronic disease burden of decrepitude. Poor lifestyle choices can exacerbate this burden, increasing symptom severity and speeding the age of onset. In the end though, we will all die because our bodies fail us. The societal success that developed nations have achieved in limiting the mortality impact of external factors (e.g. infectious disease and acute trauma) has led to a widening gap between health span and life span. 

Nietzsche’s aphorism “what does not kill me makes me stronger” probably had some value in the late 19th century: the survival of infectious disease typically conveyed immunity that would help to protect the patient against recurrence. Chicken pox is largely harmless to a child, but could be dangerous for an adult. Thus, in the pre-vaccine age, parents would throw ‘chicken pox parties’ to get their kids exposed and infected at an early age. To our minds, this is a classic example of what Nietzsche was referring to.  

However, in today’s world, where Toblerone rather than Typhus is more likely to contribute to your demise, this aphorism feels far less appropriate. Today, what does not kill you takes you one step closer to the nursing home (aka “gods waiting room”), where you may experience a deeply unsatisfying, hugely expensive and drawn-out twilight. No-one wants to go out this way, nor do they want to see it inflicted on their elderly loved ones. 

As well as consuming huge amounts of money (the funded aspect of adult social care costs the UK £28bn and rising, on top of the £180bn spent by the NHS on overall service provision – we’ll come to the unfunded element later), the system is largely failing to keep people out of hospitals or reduce the burden on the NHS.  

As outlined in the April 23 missive, at any given time, a teens percentage of NHS beds are filled with people who should not be there, but cannot be safely discharged. As discussed, we think the concept of virtual wards can go long way to reducing the impact of bed blocking on operating wait lists but this can only go so far in that it is unsuitable for any one with complex care needs or who is frail.  

We have looked time and again at advanced home medical care companies and still cannot find a robust investment case. Technology can allow the delivery of many complex services in the home setting (physiotherapy, dialysis, infusion, wound management, phlebotomy, etc. etc.) but as yet the payment models everywhere are too archaic to comprehend much more complexity than meals on meals and the odd sponge bath delivered by unskilled human labour paid minimum wage.  

This is despite the innumerable data from those schemes that are running which show, time and again, people do better and cost less when cared for at home. The pandemic has also done nothing positive for the perception of institutional elderly care.

Independent living keeps people engaged and purposeful; it gives them hope for the future as well as dignity and agency. With this being the case, why are such models not widely prevalent? Our UK-based readers might struggle to believe this, but the problem seems to be a lack of leadership and vision (competence?) at the governmental level. The US is similarly struggling conceptually.  

The vicious circle is arising now. If you cannot afford costly institutional or home care assistance, or do not wish for yourself or your loved one to go into such care, what options are left? In many families, the only option available is for relatives to care for one another. According to the charity Carers UK, as many as 10 million people in the UK are involved in providing care for a relative.  

There are only 41m people of working age in the country and 80% of the caring community do not work full-time, presumably because they cannot do so; 60% of respondents to the Carers UK survey in 2022 were providing 50+ hours of care per week, making work impossible. The same data said around a quarter of these carers could not afford private care and around one third did not want their loved one receiving private care, which is fair enough. The UK Government’s own census in 2021 reported 5m UK adults providing unpaid care in the UK and those numbers have surely risen post pandemic.  

The economic impact of all of this is hard to quantify, but the value to society of all of this care is massive, even if one were to apply minimum wages to it: 5m people offering 50 hours per week at the living wage of £11.44 per hour is £2.8bn per week; almost as much again in value terms as the current NHS annual budget. Because it is “free” (more like invisible), there isn’t a focus on it, but that does not diminish its societal value. 

Fascinating as these facts are, they are not the point of this month’s missive. If you look into NHS support for carers (there is a web “page” on the topic that is easy enough to find), the information is scant. It basically amounts to guidance for obtaining respite care and financial assistance. What it does not offer is any medical training in managing the care needs of those vulnerable receiving whatever care is required.

This is despite the fact that the Carers UK survey reported that 45% of respondents said they would like more support from the NHS.  

There are NICE guidelines on care provision (from 2020), the supervision of which is devolved to local authorities under the Care Act of 2014. As readers will know all too well, many UK local authorities are financially imperilled and cutting back on services. Nonetheless, they are supposed to “offer training to enable carers to provide care safely. Training could include structured programmes or one-to-one guidance from a practitioner”.  

Your managers looked for such courses in their local authority area and couldn’t even get the website to work, never mind find a course and access it. The system is broken. Do most carers even know that their local authority is supposed to be helping them?  

Why might this matter, you may ask. In the United States, where Medicaid provision is managed at the State level, you will find a patchwork of various services and ideas across the states. There, the magnitude of the carer “problem” is much larger, as you would expect, with some 50m Americans believed to be involved in caring for a relative.  

However, the disjointed nature of the services does offer opportunities for alternative care models to be developed and the notion of training carers has caught on to some extent and this enables some comparisons to be made within the country as a whole. So, what can we learn from our cousins across the pond?  

What the US data tends to show is the impact of the “social determinants of care”. We do not live in an equal society; education and wealth play an enormous role in health outcomes and, not surprisingly, they also play a role in the quality of care offered by well-meaning family members, not least in being able to navigate the labyrinthine bureaucracy that is the health service in any country. In these ‘PC’ times, it may be unpalatable to discuss such things, but that does not diminish their relevance in the real world.

If someone is being looked after by a care giver, surely it is logical to educate and support that care giver beyond financial assistance, as they themselves are inevitably one of the biggest determinants of care quality? For instance, the US data shows that carers often overuse ambulance services: they see an issue with their charge, they do not know what to do, so they call 911 and get the paramedics in; no-one is going to stand by and see a family member suffer.  

Many become frequent callers for simple, recurring issues that are easily managed on site by the paramedics (e.g. a mild hypo for a Type 1 diabetic). They could be trained to manage such episodes and trained on medication management to potentially avoid a lot of side effect issues arising in the first place.  

Why does this matter? Anything that relieves stress on unpaid carers (agency and empowerment) and stress on precious health resources is surely worth trying in and of itself. More to the point though, the medium-term data from pilot projects suggests overall savings of 15-20% (after the cost of the training) from reduced demand for healthcare services. Now that makes a lot of sense.  

This may not represent an ‘investable idea’ for the Trust, but that does not negate its potential value to society. We cannot afford a world where unpaid carers opt out; their replacement with paid services (which anyway do not exist) would be unaffordable. Even if you are the most hardened of uncaring capitalists, basic economics argues that they deserve more support.  

Fixing social care could go a long way to alleviating pressure on core health services. The fact these services are still not managed together feels almost incomprehensible. Sadly, there has been no progress on advancing a plan for social care since the Dilnot report more than 10 years ago now. Dilnot commented only a few weeks ago that that there was no «serious addressing» of the social care system by Labour or the Conservatives heading inevitably into an election campaign.  

We can only hope things will change at some point. After all, hope is all we have left. We will all get old and frail, and we all hope the services that we will inevitably need will be there when we reach that point.  

We always appreciate the opportunity to interact with our investors directly and you can submit questions regarding the Trust at any time via:  

shareholder_questions@bellevuehealthcaretrust.com  

As ever, we will endeavour to respond in a timely fashion and we thank you for your continued support during these volatile months.  

Paul Major and Brett Darke