Editor's blog Tuesday 13 September 2011: What is happening in parts of the private sector?
This piece in today's Guardian by Denis Campbell prompted me to wonder what exactly is happening to the private sector. It outlines a study by private industry trade paper HealthInvestor.
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If you believe the hype (which I don't), then the primary aim of the Lansley reforms is to privatise the NHS. If you believe it is, then you would think that the private sector would be rocking and rolling in no uncertain terms.
That doesn't seem to be what's happening. Anecdotally, I have heard a lot of complaints from the private sector that they are not getting any preferential treatment.
Private sector figures have also been saying in private that they do not think the NHS 'market' is unduly attractive, with a downward pressure on tariff and especially without the promise of guaranteed volumes of activity on the old-school ISTC 'take or pay' basis. This appeared to be behind NHS Partners Network lead David Worskett's October 2010 email reported in The Guardian, which described a meeting with health minister Simon Burns "We actually saw Burns last Thursday … he was dreadful … independent sector leaders are very unhappy".
So it's interesting that this HealthInvestorreport says so much that is bullish: 34% of CEs and advisors surveyed reported that NHS financial pressure was leading to increased demand for private healthcare, which the article seems to suggest is coming from self-pay.
Sigh.
Self-pay is not going to create a sustainable business model for private provision of elective care: there is a plaintive note in the phrase of one executive quoted in The Guardian piece, who says that NHS commissioners are "using us as an overflow".
Yes, they are. And they're paying NHS tariff, which is going to become lower-margin year-on-year.
Curious findings
The HealthInvestor survey also finds that 76% of those questioned agreed or strongly agreed that "continued political uncertainty around the fate of Andrew Lansley's reforms is now harming companies active in this sector".
The original Guardian article reports that "over 80% believe the public and medical backlash against Lansley's NHS shake-up has prompted many investors to leave the sector because of the risks involved".
Mmmm. This seems to sit ill with the finding that while 42% of those surveyed are not optimistic that the coalition will accelerate the private sector's role in the NHS, 55% are quite or very optimistic. The latter 55% is presumably the same group who think that handing control of £60 billion of the NHS budget to GP-led clinical commissioning groups in 2013 will ultimately produce a more plural and competitive market in healthcare.
22% of industry figures agree that "the coalition has supported the recovery of the UK independent healthcare market", while 39% disagree. We can only hope that the remaining 39% realise the deeply stupid premise of the question representing a political priority for the coalition, as opposed to being in the 'don't know' camp.
What evidence from elsewhere?
Public Finance recently ran this story on the recent survey by insolvency specialists MCR which found a 49% increase in health and social care insolvencies in the private sector over the first six months of 2011.
MCR's Sarah Bell told PF, "The poor performance of some care homes stems partly from a series of miscalculations by owner operators and misplaced assumptions about sector dynamics", leading to a "perfect storm ... even the most efficient operators are now feeling the squeeze.
"Care operators are highly operationally geared, therefore small changes in occupancy levels can have an immediate and profound impact on operational liquidity and overall profitability, which will quickly manifest itself in reduced operator investment".
These figures are curious: surely market exit by competitors should be boosting the confidence of the surviving players more than the HealthInvestor survey indicates?
And the long-troubled Healthcare Locums features on the business pages of The Independent recently, reporting its travails with minority shareholders from New York hedge funds. The company's refinancing was agreed yesterday, and its shares returned to public trading today.
And have so far been hammered, losing 1/3 in value since the start of trading at the time of writing. At one point, its shares had almost halved in value. Markets, eh?
Residential and social care isn't elective care, and will be affected significantly by the residential property market. One locum business is not the whole industry.
What would be more interesting would be to see the take-up rates of private medical insurance.