Difficult in the near-term but opportunities will re-emerge, experts say
Income earned from treating patients with medical insurance accounts for 6% less of overall private hospital revenue over a five year period, according to data published this week.
However, one of the country’s leading health economists has said he is “quite sure” that the private healthcare market will eventually see an upswing in its fortunes in the future.
Nevertheless, the sector must meet the near-term challenges of a static market following an absence of real spending growth in 2010.
William Laing, chief executive of market analyst Laing & Buisson, said that proposed NHS reforms could be the catalyst for a change in the fortunes of the private healthcare market as a whole, especially of providers of out-of-hospital and home care.
However, traditional private hospitals will continue to face challenges following a contraction in income from treating self-pay patients or people with PMI. Furthermore, private hospital income from treating NHS patients may well have plateaued.
Recent years have seen independent sector hospitals turn to treating NHS-funded patients as the number of privately-funded patients – people either with private medical insurance (PMI) or those who choose to “self-pay” – has contracted.
The main funding source for the country’s independently run hospitals are patients with PMI or other forms of private medical cover. However, the proportion of business accounted for by this audience has slipped consistently over the past five years, accounting for just 59% (£2.3bn) of revenues generated in 2010, compared to 65% in 2005.
Government initiatives to cut NHS waiting lists mean that health service patients using private facilities now account for a quarter of hospital income (compared to 14% in 2005) generating £957m. The independent acute healthcare sector is estimated to have treated around 425,000 NHS patients in calendar 2010 in the UK.
But speaking last night at the launch of the 2011-2012 edition of Laing’s Healthcare Market Review, an annual report on the private healthcare sector, Laing said NHS income for private hospitals may be reaching a “cyclical high”.
NHS income from treating private patients in its hospitals was flat at £445m in 2010/11 – down 1.6% in real terms from a year earlier. Pay-as-you-go patients provided 14% of revenues (£534m) for independent medical hospitals, up by 0.5 percentage point post-recession. Other sources contribute the remaining 2.5% (£104m).
Philip Blackburn, co-author of the report, said: “There are certainly near term challenges for service providers of private acute healthcare under current market conditions, but also opportunities in the longer term.”
The ability of NHS foundation trusts to earn up to 49% of their income from treating private patients – something outlined in current Government proposals for NHS reform – could in theory present independent sector hospitals with additional competitive pressures.
But speaking last night, Laing pointed out that upturns in the fortunes of the private healthcare market have tended to come about as a result of – and not in spite of – Government policy.
Reforms put forward by the-then Health Secretary Barbara Castle in the 1970s and more recent initiatives such as the introduction of independent sector treatment centres and the patient choice agenda have all led to opportunities for the various sectors of the private healthcare market.