McKinsey’s unhealthy profits

Stewart Player and Colin Leys on the consultancy firm making a fortune from the privatisation of the NHS

If any one company has played a decisive role in the destruction of the NHS, it is the US consultancy giant McKinsey – a fact avoided by the media until the passage of Andrew Lansley’s health bill looked assured. By then the sheer scale of the company’s penetration of the corridors of power was impossible to ignore. Its influence extends far beyond the privatisation of the NHS. The former management consultant David Craig was not exaggerating when he said the company ‘has gained unprecedented power over the lives of British citizens’.

McKinsey has about 9,000 consultants in 55 countries, working with more than 90 per cent of the 100 leading global corporations and two-thirds of the Fortune 1000 list of companies. Forbes estimated the firm’s 2009 revenues at £4 billion. It consults for rival firms at the same time, and while it maintains that its left hand doesn’t tell the right hand what it is doing, this is widely disputed. It has certainly offered to share information gained from its work on privatisation for the Department of Health with private health companies seeking business from the department, as revealed in emails obtained by Spinwatch under the Freedom of Information Act.

Each of the firm’s 400 senior partners is estimated to make between £3 million and £6 million a year, and ‘junior directors’ over £1 million. Partners and other McKinsey staff regularly take senior jobs inside government. Dr David Bennett, a former senior partner, became chief of policy and strategy for Tony Blair from 2005 to 2007, and is now chairman and acting chief executive of Monitor, which will regulate the new healthcare market and play a crucial role in offering NHS business to private companies.

Dr Penny Dash was the Department of Health’s head of strategy from 2000 and a key author of the NHS Plan that set in train New Labour’s privatisation agenda. She subsequently became a McKinsey partner and played the lead role in producing New Labour’s two Darzi reports, the first of which sought to radically restrict levels of provision and staffing in London, while the second envisaged a system of privately owned polyclinics across the nation, under the guise of patient-friendly ‘clinical leadership’. In 2004 she set up the Cambridge Health Network, a McKinsey front that brings together departmental policy-makers with corporate executives at meetings sponsored by McKinsey client companies, from Halliburton to General Electric.

Besides penetrating the government McKinsey also plays a key role in the King’s Fund and the Nuffield Trust, the two dominant healthcare think tanks that have pushed the privatisation agenda. Both have senior McKinsey partners on their boards, and while they portray themselves as ‘independent’ they routinely endorse models of care that replicate the US health system – especially the concept of ‘integrated care’, which, while sounding progressive, points towards the US model of ‘managed care’, with its high insurance premiums, exorbitant CEO salaries and denial of care.

Among other key McKinsey initiatives leading up to the health bill – much of which is thought to have been drafted by McKinsey staff – were the Department of Health’s ‘World Class Commissioning’ initiative, and the ‘Framework for External Support for Commissioners’. These made it clear that private firms, not GPs, would end up spending the budgets of the new clinical commissioning groups – and McKinsey would be one of them. It was also a McKinsey report for the department in 2009 that called on the NHS to find ‘efficiency savings’ of £4 billion every year for five years, leading to the cuts now being imposed – another topic on which the media have been culpably silent, as the report was full of fallacies.

Of special relevance to the future of health care in England is a 2008 document produced by the American Association of Justice listing the ‘10 Worst Insurers’ in the US, at least three of which were advised by McKinsey. The worst was the property and auto insurer Allstate. According to the AAJ and lawyer David Berardinelli, Allstate sought, on McKinsey’s advice, to transform the very basis of the insurance relationship. Previously insurers always had a fiduciary responsibility to policyholders, but by following McKinsey’s advice to put shareholders’ interests first Allstate’s payments to policyholders fell by over 25 per cent, while its ten-year operating income leaped from £510 million to £17 billion. In effect, said Berardinelli, it institutionalised bad faith.

With the passage of the Health and Social Care Act, private health insurance and payments for care are clearly on the agenda again. With McKinsey and its clients set to play a dominant role in this shift, are we in for an English version of the Allstate model too?

Illustration by Martin Rowson