UK. Healthy private hospital market

Citation

(2004), "UK. Healthy private hospital market", International Journal of Health Care Quality Assurance, Vol. 17 No. 1. https://doi.org/10.1108/ijhcqa.2004.06217aab.007

UK. Healthy private hospital market

UK

Healthy private hospital market

Keywords: Market, Private treatment, Independent hospitals and clinics

The latest review from Laing and Buisson, Laing's Health-care Market Review 2003-2004 edition, says that demand for private hospital treatment remains strong and healthy. Revenues of independent hospitals and clinics in the UK (excluding NHS pay beds) reached an estimated £2,475m in calendar 2002, up 8.5 per cent on 2001 (previous year, up 11.5 per cent). Despite slowing economic expansion, demand for private acute health care remained strong, driven by robust growth in claims paid by private medical insurers amongst a static medically insured population, sustained demand for self-pay treatment, and higher spending on private hospital services by the NHS.

However, the review says plans for the NHS undoubtedly pose a threat to the traditional private hospital sector. While the government's intention to offer NHS patients choice of hospital at the point of referral from December 2005 will in theory offer private hospitals access to new markets, there are doubts over whether existing private hospitals will find NHS tariff prices sufficiently attractive. In the meantime, new independent sector treatment centres (ISTCs), run by newcomers to the UK health-care scene, are being set up under contract to the government to tackle NHS waiting lists. With high volumes of throughput and operating efficiencies, these new operators may in due course be poised to eat into existing private hospitals' core privately funded market.

Philip Blackburn, senior economist at Laing and Buisson commented: "Independent hospital groups have experienced strong levels of demand in 2002-2003, although growth has slowed a little due to a weak economy. Market strength has been underpinned by rising private medical insurance claims from a static insured population, continued demand from patients prepared to pay by cash or credit for private treatment, and increased use of private hospital beds by the NHS to bring down waiting lists and waiting times. However, future prospects are mixed as growth in "self-paying" has slowed sharply in 2003 and may have reached a peak, given current market conditions and healthcare preferences. However, increased demand from the NHS, certainly up to 2005, will more than likely compensate for this.

"NHS commissioning of independent medical hospital services continues to grow strongly, and now accounts for around 8.5 per cent of independent sector patients, virtually all of this 'spot purchasing' to clear waiting lists. The NHS, however, is set to become a much more active purchaser as long-term contracts will to some extent replace short-term purchasing in the future through the government's ISTC (Independent Sector Treatment Centres) and Patient Choice programmes. Expanding patient choice, in particular, promises to give all NHS patients realistic access to the private hospital sector. Competition within the sector will also increase in the near future as overseas ISTC providers compete with established domestic providers for NHS contracts".

Mental health services are the fastest growing sector of independent health care as NHS agencies increasingly outsource acute psychiatric care, due largely to extreme shortages of NHS in-house psychiatric inpatient capacity. Independent psychiatric hospital revenues grew strongly in 2002 to £381m, up 11 per cent on the previous year, and independent psychiatric capacity expanded as several new hospitals were opened. NHS (and local authorities) now fund about two thirds of patients in independent psychiatric hospitals, with virtually all this "spot" purchasing. By 2005, however, the government plans to bring in service level agreements between the NHS and independent sector contractors, including standardised pricing. This should promote a "level playing field" and encourage more long-term commitments.

Nursing and residential home care of older people remains by far the largest sector of the independent health and community care industry, with a 2002-2003 revenue of £8.3bn. The public sector (local authorities and NHS) providers a further £1.9bn of care in residential settings. The overall level of demand for care of older people in residential settings, at 460,000, remained virtually unchanged in the year to April 2003. However, capacity fell by nearly 10,000 to 501,900 places and as a result, private care home occupancy increased to 92 per cent at April 2003. Fees in the care home sector increased by an estimated 8 per cent in 2002-2003, ahead of wage costs for the first time for many years, as unprecedented increases in local authority baseline fees took effect (in some but not all areas), as nursing homes met low resistance to self-pay fee increases against a background of free nursing care and shortages of supply. Fees are likely to increase at a similar rate in 2003-2004 as supply becomes tighter and more local authorities have been forced to raise baseline fee rates.

Further information: Laing's Health-care Market Review 2003-2004 edition incorporating The Fitzhugh Directory of Independent Health-care Financial Information is available from Laing & Buisson, 29 Angel Gate, City Road, London EC1V 2PT (Tel: 020 7833 9123) at: www.laingbuisson.co.uk