ISP Settlement statement

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

Spire Healthcare Group plc

("Spire Healthcare", "the Company" or "the Group")

Spire Healthcare, together with other respondents, reaches settlement with patients of Ian Paterson

13 September 2017

Spire Healthcare announces that it, along with the other defendants, has today reached  agreement in principle to settle all current and known claims against Spire Healthcare relating to the actions of the disgraced former consultant, Ian Paterson, with the establishment of the Ian Paterson (Liability to Private Patients) Compensation Fund (the "Fund").

The Fund will provide compensation to approximately 750 patients currently bringing claims against Spire Healthcare and will provide a mechanism for dealing with any new claims brought before 30 October, 2018.

The Fund will be managed by the lead solicitors for the claimants. It will be funded by Spire Healthcare and its co-defendants (or, in the case of Ian Paterson, his insurers) contributing a total of £37m to the Fund. Spire Healthcare's contribution will be £27.2m including a contribution to settlement costs.   

The agreement is conditional upon the parties agreeing, and the Court approving, the terms of a formal Court Order which is expected to be considered by the High Court in October.  

Once approved by the Court, the Order will conclude all current and known claims from patients against Spire Healthcare and its co-defendants, Ian Paterson and Heart of England NHS Foundation Trust. The Order will also provide for a portion of the Fund to be set aside to provide compensation for any former patient of Mr Paterson who has not yet brought a legitimate claim against Spire Healthcare and the other defendants but does so prior to 30 October 2018.

What Ian Paterson did, in both his NHS Trust and in the private sector, was unprecedented in terms of scale and impact. Spire Healthcare is determined to learn the lessons from these events to ensure they can never happen again. In 2013, Spire Healthcare commissioned an independent report by Verita and has fully implemented the recommendations of that report, significantly strengthening its clinical governance processes.

Changes since the report include the introduction of a new "ward-to-board" governance process across Spire Healthcare, the establishment of a Board committee to oversee clinical governance and safety, enhanced monitoring of consultant activity, the review of all cancer patients by a Multi-Disciplinary Team of clinicians, strengthened whistleblowing processes and improved communication and collaboration with the NHS.

Exceptional pre-taxation charge to the income statement for the 6 months ended 30 June 2017

Spire Healthcare's contribution to the settlement of £27.2m will be paid out of cash reserves. Spire Healthcare's primary layer of insurance, with RSA, has been materially exhausted, funding Spire Healthcare's defence costs to date, as well as claimants' damages and costs in a limited number of claims settled prior to this provisional agreement being reached.  A further £10m of insurance may be available from RSA, depending on whether or not the various claims against Spire Healthcare fall to be aggregated and treated as one claim under the terms of the RSA policy (which Spire Healthcare disputes). There is ongoing litigation between Spire Healthcare and RSA in this regard.

Spire Healthcare's secondary layer insurer (which provided additional cover of up to £10m for any one claim and £20m in the annual aggregate) has indicated that it is disputing coverage.  Spire Healthcare is currently reviewing its options but intends to use all legal means to pursue recovery. Meaningful progress is not expected to be made until the legal position on the primary layer is resolved.

For accounting purposes, the settlement of the Paterson claims constitutes an adjusting post balance sheet event for the reported results for the 6 months ended 30 June 2017. In determining the exceptional charge to the income statement, management have had regard to the likelihood of insurance recoveries pertaining to large claims. Management has determined that the recovery of disputed insurance amounts would not meet the very high accounting threshold for recognition of such assets at this time.

As a consequence, an exceptional pre-taxation charge of £27.6m will be reported in the results for the 6 months ended 30 June 2017, reflecting Spire Healthcare's contribution to the settlement and certain costs in achieving the settlement.  It is expected that this charge will result in a comparable cost outflow in the 12 months ended 31 December 2017.  This settlement does not have a material impact on available funding or financial covenants associated with existing indebtedness.

Simon Gordon, Interim Chief Executive Officer, said:

"Earlier this year a criminal court decided that Ian Paterson must bear responsibility for his actions, finding him guilty of assaulting a number of his patients. He behaved with clear criminal intent and abused the trust of those who looked to him for his care and relied upon his expertise.  However, whilst nothing diminishes Mr Paterson's responsibility for his actions, these events took place in our hospitals, and this should not have happened. We accept that better clinical governance in the private hospitals where Mr Paterson practised, as well as in his NHS Trust, might have led to action being taken sooner, and it is right that we have made a material contribution to the settlement announced today.

"We have apologised unreservedly to Mr Paterson's patients for their suffering and distress and we would like to repeat that apology. As soon as the criminal trial ended we were able to start liaising with claimants' lawyers to broker a settlement involving all defendants. This has resulted in the agreement announced today."

Ends

Please note that Spire Healthcare reports interim results for the six months ended 30 June 2017 on 14 September, 2017. 

For further information please contact:

Spire Healthcare

Antony Mannion, Director, Strategy and Investor Relations

+44 (0)20 7427 9160

Maitland

Neil Bennett / Tom Eckersley

+44 (0)20 7379 5151

Registered office and head office:

Spire Healthcare Group plc

3 Dorset Rise

London

EC4Y 8EN