Editor's blog Tuesday 19 April 2011: Will NHS austerity mean feast or famine for the private sector?

Good day; I hope this finds you well.

Let me first direct you to the latest instalment of The Maynard Doctrine, in which the Good Professor gives choice, competition, comedy governance and the listening pause a good working over.

I was intrigued to read this survey of 500 GPs, carried out in February and March by Pulse on behalf of (and so funded by) private providers Spire Healthcare.

Of the 500 GPs surveyed, the following results were found. Most stated their PCT had restricted services as follows:
- 77% experiencing cuts in fertility services
- 70% seeing reductions in weight loss treatments
- 40% experiencing NHS restrictions in ophthalmology services.
- 30% had witnessed restrictions imposed on orthopaedic services.

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Are you waiting comfortably?
Survey responses also found that these 500 GPs reported that,
- 54% are seeing waiting times increasing for musculoskeletal work
- 42% are witnessing a rise in waiting times for NHS neurology treatment
- 29% are experiencing delays in cardiology
- 28% are seeing waiting times increase in ophthalmology.
- 10% have seen waiting times increase for oncology
- 6% are even experiencing NHS restrictions on cancer care.


It also discovered that:
- 22% of GPs are likely to refer patients to the private sector for this type of treatment (cancer).
- 39% of GPs are seeing an increase in patients asking about privately-funded treatment
- 31% plan to make more private referrals this year
- 60% of GPs would privately refer if treatment isn't available on the NHS
- 57% are unaware of the procedures no longer funded by their PCT
- 43% have concerns over the care offered by the NHS
- 49% of all GPs ask their patients if they have private medical insurance (stated incorrectly as all – relates only to the 500 GPs surveyed)
- 61% of GPs would be more likely to refer privately if there was better access to health insurance
- 40% believe lack of take-up of insurance is the biggest barrier to referral

These figures are interesting. They are not very surprising at a time of NHS funding slowdown that has been predictable since the autumn of 2007, but they are interesting.

Who are Spire?
Spire is the rebranded name given by private equity firm Cinven to a hospital group which has grown from 25 of the former BUPA Hospitals, which Cinven bought in September 2007.

Spire’s last half-year report (which their website states was produced in June 2010, but which within the document is dated September 2010 is funkily titled, ‘Continued revenue growth and efficiency improvement’.

It reveals that Spire have 37 hospitals in UK and 1,935 beds, and the half-year document states, ”as expected, Private Medical Insured (PMI) hospital activity contracted slightly in the first half of the year, consistent with fewer lives being covered by insurers during the recession. We forecast demand from PMI patients to recover into 2011.

“Self-pay patient volumes began to increase year-on-year from late 2009 and this positive trend has continued in the first half of 2010, in line with the improving economy and consumer confidence.

“NHS activity continues to be a useful source of additional volume, however, we are careful to manage the capacity we offer to the NHS so as not to undermine our core service to private patients.

At the half year point revenues were up 4% on prior year and we are trading in line with our full year plan”.

So what is happening to the private market?
It’s not wholly clear what is happening to the private medical market in the UK. It is instructive to look at insurer BUPA’s last set of figures.

BUPA sustained “Impairments to Health Dialog and Bupa Home Healthcare due to sustained weak economic conditions and uncertainty over healthcare reforms in the US and UK“. The latter created a £250 million impairment charge. The Guardianreported of the figures that BUPA had “20,000 fewer UK customers than in 2009 as companies slashed health benefits available to senior employees, and individual membership headed south. The company said there were signs a tough financial environment was hitting the middle classes and that managers could no longer take health perks for granted”.

It is also instructive to look at this report from IFA Online, a publication for independent financial advisers. Written in December 2010, it uses the respected Laing & Buisson Healthcare Market Review 2010-11 to show that private hospitals are becoming more dependent on providing NHS services as private medical insurance activity continues to fall.

While the private hospitals sector enjoyed a 7.5% rise in sales to £3.76 billion in 2009, the report points out that “its reliance on NHS services grew almost four-fold over the previous two years. 22% of mainstream independent hospital activity was paid by the NHS in 2009, compared with just 6% in 2007 (55900 cases)”.

The report also shows that insurance and self-pay had been hit. “In 2009 private medical insurance contributed 625,000 cases, just 64.1% of the workload for independent hospitals, down from almost three-quarters (73.8%, 655,700 procedures) in 2007.

“Self-paying patients suffered a similar fall from 172,300 patients (19.4% of the total) to 127,800 (just 13.1%)”.
The IFA Online report concludes that while 2010 data was not available at the time of writing, “it is believed that medical insurance and self-paid activity has stabilised”.

So.

The economic recovery is anaemic, and VAT has gone to 20% while fuel prices are high. This means that the prices of most things are rising.

And the NHS has been a very important provider of business to private hospitals, which may now not continue.

And yet the private insurance market expects private medical insurance to recover.

And private care providers expect self-pay to recover.

I wonder if there might not be a touch of optimism at work here? Or seeking to bring about climate change?

It will be very interesting to look out for Spire Healthcare’s next Annual Report.