The outlook for private sector providers

“The market is quite hard for the private sector at the moment, and I sense that things are going to remain hard for a while,” Stephen Collier told Care Conversation delegates. By the private sector, he explained, he meant the major players BMI Healthcare, Spire Healthcare, HCA, Nuffield, Ramsay and Circle, who between them accounted for 79 per cent of the sector.

However, this was after almost a decade of excellent growth, he stressed. “The sector has made a major contribution to the British economy, and NHS work was a significant proportion of it,” he told delegates. The sector was also doing well in terms of quality of delivery, although there was a need for improved transparency here.

Looking at the three main elements of the private sector – insured, self-pay and NHS – insurance penetration of the market was in decline, he said, as was the number of insured cases in hospitals. There had been a ‘material shift’, he told delegates, with an increase in NHS activity alongside the decline in insurance activity, which was particularly the case in the north of England and the Midlands.

Self-pay activity had declined in the period 2005-09, he said, which could be correlated to an extent with improvements in NHS waiting times. However, as the total amount of NHS elective surgery was itself now showing a small decline, this was beginning to have a positive impact on self-pay activity. “What we’ve seen, since the time that NHS throughput peaked in around September 2010, is the start of an 8-10% year-on-year increase in self-pay activity.”

There had also been a significant increase in the amount of NHS work carried out in the private sector, with the ‘choose and book’ activityhaving demonstrated “pretty good growth”, he said, although noting that the rate of growth had started to slow.  But he emphasised that a different NHS channel was showing growth. “As the spotlight has started to come back on to NHS waiting times, there has been an increasing amount of NHS ‘spot’ work (cases subcontracted to the private sector). Waiting times are the one thing the public looks at as an indicator of how the NHS is doing, which means intense political pressure to monitor these.  Beginning its period in office by saying ‘we’re no longer going to centrally monitor waiting times’ was not a great start for this government.”

There were also different rates of growth in the different countries of the UK, he said. “In Scotland, the SNP’s view is that you shouldn’t use the private sector to help reduce waiting lists, which means that long waiting lists are routine – it’s dogmatic. They are more pragmatic in Wales, although the waiting lists can still be lengthy.” People in England, meanwhile, still tended to have “an uncomfortable sense that they are letting the NHS down by using the private sector, rather than taking the pressure off”, he said.

The private sector as a whole was running at “sub-optimal occupancy” he told the seminar, and there would undoubtedly be short-term re-financing issues for some providers. “NHS activity will plateau, and potentially fall, as demand management bites, although the good niche operators will do really well.

The medium-term outlook is excellent, but there are going to be some choppy waters before we get there.”