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Psychiatric treatment business prospers from unique management style

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“To this day, I am considered eccentric because Cygnet remains the only healthcare company in Britain, of any size, that doesn’t have a headquarters building,” says Hughes who oversees the company’s 16 centres.

“That comes from my extreme conviction that as with many types of enterprises, but especially with hospital businesses, it’s important to keep the managerial talent close to the shop floor. In a business like ours, we only want people in management who enjoy being close to patients.”

As a result, Cygnet’s managers are divided up between the 16 centres it operates across the UK. Each clinic has its own local management board comprising the hospital’s most senior manager, the medical director, two executive directors from Cygnet’s main board and a staff representative.

“This local board then meets at least four times a year to discuss the policy matters of the hospital. So, decisions are made locally but with the matrix of a number of people on those local hospital boards who have had a lot of experience in different fields, as well as in different parts of the world, so they can bring some long-tooth wisdom to the process of local decision making,” explains Hughes.

“We find this works much better than having our management holed up in a headquarters building and telling people what to do from a distance.”

Today, Cygnet has 2,000 employees on the payroll and working across the clinics. Twelve of these clinics care for acutely ill psychiatric patients suffering from a broad range of psychological and emotional disorders.

The remaining four centres comprise two registered nursing homes for elderly residents, a residential care home in Kent for people with autism and Asperger’s syndrome as well as Detox5, an opiate detoxification centre in Harrogate.

Given that Cygnet’s inpatient capacity is 600 and it currently has 550 patients, the strong local clinical and administrative managerial style is clearly working.

Cygnet is also the largest outsourcing provider to the NHS of acute psychiatry, as well as Britain’s largest provider of heroin detoxification services.

The company has grown at an average of 25 per cent compound growth during the past eight years to hit £80m in turnover this year and £24m in ebidta earnings. Hughes says: “In addition to having a consistently high occupancy rate, we’ve found that we’ve been able to keep our costs down by not having a headquarters building, which is expensive to run. As a result, we’ve found that our operating margins are superior to most of our competitors and that has enabled us to plough the money back into opening new units.”

"Indeed, Cygnet now offers the widest variety of sub-specialist psychiatric treatment and we’re looking at developing two new sub-specialist units which may happen within the next year.

“We’re very good at doing start ups because all our managers are well organised so they are able to spear head new units very efficiently.”

Cygnet is now in a position to expand after a recent refinancing deal announced last month. Under the terms of the deal, the management of Cygnet Health Care bought Cygnet for £340m in conjunction with healthcare group Grove Limited, which acquired a 25 per cent stake in 2004.

Hughes started Cygnet in 1987 with his own money and that of VC investors who he has since bought out. “We got the last of them out in 2000, thank God!”. He believes this is an important reason behind the company’s successful growth.

“Almost all of our competitors, both large and many of the smaller ones, have VC or private equity investors who tend to put a suffocating hand on innovation because they operate with a very short term horizon. Their typical investment time frame is around three years or five years maximum so if they can flip it next year for a good enough profit, they do it. Just look at the Priory Group which has changed hands six times in ten years.”

In this way, by not having to answer to institutional investors and by having a decentralised managerial structure, Hughes says he has been able to give his employees a sense of empowerment, independence and personal initiatives.

“The deliberately low-key corporate structure is also good for the patients because it has helped to maintain the personal nature of our services.”

Hughes is expecting to double the current £80m turnover within the next three years through opening new units as well as increased outpatient work from the NHS.

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