Private Hospital Sector. Traditionally a niche resource for the class conscious. However some rather big changes have taken place over the past few years, not least through an influx of NHS riff raff, sorry patients, via the choice option, and through consultants increasingly dragooned by insurers into provider networks. Wider disparities can also be identified between the London market and the rest of the country, and monopoly control in certain areas, and hence treatment prices well above the price of capital, led to a two year Competition Commission inquiry with threats of hospital divestiture for the main offenders, BMI and HCA.
However while the inquiry revealed several areas of conflict within the sector, the major operators have at least one thing in common: a hefty and growing reliance on the NHS for their revenues. According to a LaingBuisson report in May 2016 the sector has seen a whopping 28% increase in said income over the past two years and is set to continue while the usual sources such as PMI and self pay remain flat at 4% growth. Indeed with patient choice and outsourcing to increasingly include the full range of care, including acute medical procedures, the potential for such companies is nearly unlimited. And as the NHS fashions itself into merely a payor for services the private hospital sector must be at least having thoughts of a new residential and nursing home scenario.
As LaingBuisson point out the prospects do indeed look buoyant, and considerable investment is currently taking place into new build private hospitals to include Intensive Treatment Units and hybrid operating theatres, with the aim of ensuring that relying on NHS hospitals and staff when things get complicated is a thing of the past. Also there’s growing moves towards diversification and specialisation among private groups, with hospitals becoming much more like tertiary referral hospitals. The latest figures from Spire, for example, reveal that acute work like cancer care and neurosurgery now accounts for 25% of its caseload. And prospects for growth are always reflected in the extent of healthcare REIT interest in the market, and US lenders anticipate considerable investment.
Again some differences remain among the main players though these are dwindling. BMI hospitals, for example, were always loath to admit the great unwashed and adjust their business cases to high volume and low margin treatments but they are quickly coming round to it, with NHS activity up by 13.5% in 2015 alone. Ramsay Healthcare, those Aussie arrivistes, have never had that problem and NHS revenues now constitute 75% of total income. They do however continue to product differentiate, as choice of consultant, spacious rooms and a la carte menus will still be available to self-payors while state subsidised patients will have designated consultants, wards and basic fare. We were going to say and lump it, but this is precisely what the sector expects growing numbers not to do.