Lottery boss may take chance on VHI

The new chief executive of the Voluntary Health Insurance Board (VHI) will be at the centre of decisions which will be critical to the organisation's own health and well-being. The VHI is facing competition from an established player, albeit in the British market, and will have to contain the rising costs associated with medical care.

The emergence of Ray Bates, the director of the National Lottery as a candidate for the top job in the VHI was unexpected. However, the National Lottery is a monopoly and a good news monopoly at that.

By contrast, the VHI is a State body which needs a strategic alliance and could face competition from other players apart from BUPA, the British company which arrived in Ireland a year ago. BUPA has around 36,000 subscribers.

VHI is reportedly very pleased with itself. It gained 56,000 subscribers in the past year, a rate of more than 1,000 a week. However, BUPA claims it has a significant price advantage and rivalry between the two looks set to intensify.

The performance of both companies has also been helped by the buoyant economy. As companies expand or set up in Ireland, they get more customers.

The position of chief executive in the VHI has been vacant for more than a year and is currently being filled temporarily by Mr Aidan Walsh a partner in accountants Craig Gardner/ Price Waterhouse.

The board met last night to consider a VHI sub-committee's quest to find a chief executive, essentially a replacement for Mr Brian Duncan, who left after a clash with the then chairman Mr Noel Hanlon. Differences between the two included the future path of the VHI and staffing issues.

Before the meeting some surprise had been expressed, both within and outside the VHI at the news that Ray Bates was being put forward for the job. Director of the National Lottery since 1990, he recently described himself thus: "I'm essentially a civil servant. A very civil servant who became a very public servant."

Some sources said they understood that the VHI had "interviewed all over the world" for Mr Duncan's replacement. "I thought they were going to produce this mythical person who could do everything," said the source.

Bates is known in the business as a statistician. He was central to setting up the National Lottery system, which has been examined in detail by lotteries around the world.

He joined the Lottery in 1987 as an assistant to its first director, Mr John Fitzpatrick. To Bates's credit, the lottery went live without a hitch. He also extended the numbers in the Lottery from 36 to 39, without it affecting revenue. Lottery sources say this was a good achievement as in some other countries where this was done the lottery "bombed out".

Born in Dublin, he has degrees in computer science and statistics. His first job was as a trainee actuary in Irish Life; he also worked in the Land Commission, the Departments of Finance, Economic Planning and Development and Social Welfare as well as head of computer operations at the Paris-based Organisation for Economic Co-operation and Development (OECD).

For the VHI, a key issue is containing costs. "Medical costs are rising a lot faster than inflation," says one insider. There is also the issue of how to get the best value out of the healthcare system. It is said that hospitals buy expensive medical equipment and then use it more often than is perhaps necessary on patients to justify the cost of buying the machine in the first place.

"People expect quicker and better performances from machinery," says one source. "And they don't want to travel to Dublin for a scan for example."

Another problem is that the VHI is faced with an ageing population. As people age, more goes wrong, and medical expenses are incurred. The average age of a VHI subscriber is 33 years, said one source, and the VHI would like to push it down further to around 30 years. This would incur substantial savings for the organisation.

Industry sources believe that both the VHI and BUPA will have to increase rates next year, as the Government increased the cost of public hospital beds in the Budget.

If Bates does take over, his appointment will come at the same time as many companies renew their policies. This, say VHI and BUPA sources will give a clearer indication of how the new entrant is doing in the market.

"Many firms are now becoming more aware of health insurance, since BUPA's arrival, and are inviting in both companies to tender for their annual contracts. They are also taking the advice of independent medical consultants on the issue," says one source.

Another source said the VHI would want somebody who is sharp financially and knows the cut and thrust of competition.

Without doubt, Bates has presided over a success story. The lottery has been well marketed and such skills would be a useful asset in the battle for subscribers. Opinion differs on Bates's strengths in this regard, even among those close to him. One source said he had a very keen grip on the marketing aspect, while another said his team at National Lottery headquarters was responsible for the marketing ideas.

Ironically, it is the failure of the Millennium Clock for which Bates seems to be most widely remembered. The plan to locate the clock underwater at O'Connell Bridge in Dublin to countdown to the year 2000 had to be abandoned after a few months. The time was not visible and the clock had to be removed regularly for cleaning.

The clock was later taken away and reputedly destroyed, although several parties had expressed interest in buying it, for its novelty and collector's value. The project cost the Lottery £250,000.

Bates would not admit that the project was an ill-conceived idea, that the Liffey is an extremely dirty river and the problems should have been foreseen. Even now, his friends say, it is a very touchy subject to bring up with him.

If he has a fault, it is that he finds it hard to admit he has made a mistake, says one source. "The Millennium clock would have been seen as very much his project," says a source. "He stuck his neck out and persuaded the board to do it."

Another source, albeit a self-declared fan, says Bates is rarely wrong. The source says he is confident and this can be confused with arrogance.

Bates is renowned for being great company. Those who know him speak very highly of his ability to amuse and entertain at parties. An accomplished accordion player and also a wine buff, "his knowledge of wine is second to none," says one source. "Often he will look at the wine list and know instantly that a particular wine, which is far cheaper than many on the list, is a far better choice."

His friends also say that he does not openly flaunt his knowledge of wine.

He is said to have a well-adjusted attitude to work and does not opt for the macho approach of putting in very long hours for the sake of it. "He likes to enjoy himself," says one source.

"He balances his family and working life very well," says another.

Bates loves classical music and is also a Francophile, an interest developed when he worked in the OECD in Paris.

In fact for many years he drove an old Mercedes which he brought back from Paris. He is said to have loved and cherished the car.

His current salary is around £70,000 plus expenses. Sources in the National Lottery said staff were surprised when his name was linked to the VHI job, but pointed out that he had been there for several years and perhaps at 50 felt there was time for a change.

There is however, one stumbling block to Bates's move to the competitive sector. VHI chairman, Mr Derry Hussey, has sought Government approval for a consultancy package worth about £125,000 per annum plus very generous performance bonuses. It caused some bemusement in Government circles.

Previously the ESB board tried to offer an enhanced package to its new chief executive, Mr Ken O'Hara, reportedly with the previous Government's verbal approval. This was rejected by this Government.

Finance Minister, Mr McCreevy, is said to be against such packages and wants to hold the line until the Buckley Report, which recommended substantial pay increases for a range of senior civil servant posts, can be introduced.

Whatever the outcome, few doubt but that Bates would throw himself into the job and all its problems. "He will attack the job with gusto," said one associate. "There is no better man to take on a challenge."