The overstretched UK National Health Service is seeing long waiting lists, which is pushing people into private healthcare. A healthcare property investor, Assura, has bought 14 private hospitals in a £500 million deal to help cut NHS waiting lists using private facilities.

One of the huge challenges facing the NHS in the UK at the moment is the long, extensive waiting lists. This situation has become so serious that many people now turn to private healthcare. Many people pay for treatments themselves; others take out health insurance. Because of this growing demand for private healthcare, a company called Assura has decided to buy 14 private hospitals in the UK. They did this in a deal worth £500 million.

Assura is a UK-based healthcare property investor and developer. They purchased these from a Canadian company known as Northwest Healthcare Properties. Some of the notable hospitals they purchased include the Cancer Centre London and the Edgbaston Hospital based in Birmingham.

But the key driver behind this massive buy is the condition the NHS is currently in. The NHS is under extreme pressure, with millions of people waiting for treatments. Indeed, the waiting list in England was as high as 7.8 million last September, though it dropped slightly to 7.6 million; many people have waited in excess of 18 weeks for treatment. It’s because of these long waits that the NHS has begun outsourcing more procedures, like cataract surgeries, to private clinics to help clear the backlog.

All the hospitals Assura bought are spread across the UK. Among them are six Nuffield hospitals in areas like Woking, Edinburgh, and Highgate, with Cancer Centre London not left behind. On the hand, they have acquired five Circle hospitals in areas like Huddersfield, Lancaster, and Lincoln, not forgetting two Spire hospitals in Cheshire and Claremont. They also acquired Edgbaston hospital in Birmingham, which is currently closed but due to reopen this September after some renovations.

These hospitals are leased for long periods to various private healthcare providers. Treatments that more significantly drive demand to such hospitals include cataract surgery, chemotherapy, diagnostics like endoscopy and colonoscopy, and orthopedic surgeries, especially hip and knee replacements. Day-case units are those types of treatments more aptly suited for treatment, meaning patients can be allowed to go home the same day after their procedure.

It views this as a key opportunity to help reduce the burden on the NHS. Demand for private healthcare is growing, and Assura strongly believes that private providers can play a big role in reducing the NHS waiting lists. It observed that whether people are self-pay, insured, or being referred by the NHS, private healthcare is in rising demand.

The deal is important, according to Assura’s chief executive, Jonathan Murphy, as it now gives his company relationships with all the top private healthcare providers in the UK. He believes the company, on the back of this, will be able to play a leading role in finding answers to the NHS’s challenges.

This acquisition will radically change Assura’s portfolio, which, until now, was comprised of mainly NHS-run GP surgeries. This deal can be termed transformational for Assura. Before the transaction, Assura had a £2.6 billion portfolio; with the addition of these 14 hospitals, it has increased its portfolio size by almost 20%.

According to property analyst Oli Creasey, this deal will be transformational for Assura. Previously, Assura’s portfolio consisted of predominantly GP surgeries run by the NHS that were yielding lower rental growth. With these new hospitals that come with much longer leases, circa 26 years, and with rent growth index-linked, Assura’s portfolio is likely to deliver better rental growth going forward.

The deal is being funded mainly through debt, but Assura is planning a £100 million share issue to Northwest—the company from which they bought the hospitals. Also planning is the refinancing of £266 million of debt, the use of £80 million of its revolving credit facility, and the putting in of £54 million of their cash.

That is to say, Assura’s buyout of these 14 private hospitals may be considered a gargantuan move that will supposedly nibble away at the NHS’s waiting lists, all the while reshaping the very business operations of Assura. With such great strain on the NHS, it assumes greater importance for private healthcare to be part of the solution.