Union warns CSC job cuts threaten NHS delivery as US services giant eyes healthcare growth

Profile picture for user slauchlan By Stuart Lauchlan February 7, 2017
Summary:
The UK's largest trades union has warned that CSC job cuts threaten NHS service delivery even as the US services giant expands on its healthcare ambitions.

Health NHS
CSC’s merger with HP Enterprise’s services arm is set to kick in on 1 April, AKA April Fool’s day, but for staff in the UK, there seems precious little to joke about as the services giant prepares for job cuts.

The deal will create a combined services company with sales of around $26 billion a year, with CSC and HPE shareholders holding an equal share in the new business. CSC CEO, Mike Lawrie, will become CEO of the new company and HPE CEO, Meg Whitman, will join a board of directors, with seats divided equally between CSC and HPE nominees.

The merger is also expected to create billions of dollars of operational cost savings and it’s this aspect that trades unions in the UK claim is set claim over a thousand jobs or 22% of the regional workforce. The firm had previously announced an additional 440 redundancies.

Trades union Unite is warning that the scale of the cuts may end up undermining the service provided to key UK clients, including the NHS. Unite’s Mike Eatwell says:

You cannot remove this number of jobs and not seriously undermine frontline deliveries, whatever the product or service being provided. Some of the accounts affected impact on the smooth-running of the NHS and can only worsen healthcare services, given that many of them are under strain at present. This is particularly worrying.

The NHS cannot run without effective computer support systems and the reductions - in some cases proposals to make 50 per cent redundant - could put patients’ lives in jeopardy. However, these decisions are not even made in the UK, but in America.

CSC has not commented on the allegations. Back in the US, Lawrie was looking ahead to the merger’s closure last week as he announced a 9.7% jump in third quarter revenues to $1.92 billion from $1.75 billion last year:

We have made substantial progress over the past several months, which includes completing all of our regulatory clearances required to close the merger. We continued our operational prep process via regular integration summits with HPES. We named last week a NewCo senior leadership team, and tomorrow we'll be naming NewCo's board of directors. And lastly, as we – as part of our ongoing CSC registration process, we do expect to file our next round of SEC filings in the coming weeks.

Redundancies or headcount reduction were not mentioned, but Lawrie said:

We continue to hold regular pre-merger integration summits to bring together the leaders of both organizations. Our focus has been on developing our operating model, building a one company culture, creating an optimal go-to-market strategy, and preparing detailed plans for synergies and value capture.

The CSC CEO did touch on the potential for “rationalization” however:

One is a policy harmonization between the two companies, and when I say policies, I'm talking things like travel policies and HR policies, all kinds of things. So, there's quite a bit of synergies that are just derived from normalizing those policies.

The second big area is around duplication. For example, we last week announced the regional structures. Well, there was – we had 13 regions before, and now we have six. And as we name those management teams and work down that process, there is significant synergies associated with that.

And the third big area of synergies is…the real estate footprint in terms of data centers, delivery centers, facilities in all the various countries and cities that we operate in.

Good health?

Whether Unite is correct in its downbeat assessment of the potential impact on service delivery to the NHS, the healthcare market remains a growth area for CSC in both the domestic US market and overseas. Lawrie confirmed that the firm is prioritising the growth of its digital capabilities in the healthcare sector, with some notable successes:

Based on our global experience in building population health programs, we were recently selected by the Danish Health Data Authority as the new IT partner for the national patient register program over the next six years. This is another example of land-and-expand, and this win really validates our specific IP-based next-generation expertise.

The firm has also chalked up a multiyear agreement with United Arab Emirates-based Union Insurance Company (UIC), to implement its Integral Suite, including Integral Group Health, with the objective of enabling UIC to more effectively manage its suite of group health and life insurance products.

At the end of 2016, CSC made a strategic investment into Smartlink, a next-generation provider of technology for value-based chronic care management, a further indicator of the desire to expand its vertical capabilities. Lawrie explained:

This combined with our portfolio of services, this partnership will allow us to support physicians and healthcare organizations as they optimize potential revenue, improve patient outcomes, and transform their care delivery models in preparation for value-based payments.

My take

What really struck me as a longtime CSC watcher was the absence of any reference to the NHS in Lawrie’s analyst conference call last week. CSC was right at the very heart of the single most controversial public sector IT project ever undertaken in the UK, the NHS National Programme for IT (NPfIT).

After Accenture quit NPfIT back in 2006, CSC became the sole local service provider for the North, Midlands and East of England – three fifths of the NHS. But the firm became the subject of UK legislators ire as delivery of electronic patient records failed to stay on track while the bills continued to mount.

Even after NPfIT was officially abandoned, CSC continued to see a revenue stream coming out of it, although that seems to be drying up at last. Of course there’s still considerable interest in the NHS. The firm is pushing its Chronic Care Management (CCM) service via the Digital Marketplace, for example.

But with the current Conservative government in the UK talking about privatisation of elements of NHS service delivery and with the possibility that any post-Brexit trade pact with the US might involved opening up the NHS further to US contractors, CSC’s focus on healthcare is very timely - especially now that 'oligopoly' is no longer a dirty word in government circles.