Have London trusts planned for 40% growth in private hospital capacity?

Experts warn recent increase in private patient beds could come at the expense of NHS trusts

The Cleveland Clinic is an example of one of a new generation of private health clinics opening in the capital

Have London Trusts planned for the 40% growth in private hospital capacity?

The private healthcare market is growing, with experts predicting a 40% increase in hospital capacity between 2018-2023.

Hugh Risebrow, chief executive of Latchmore Associates, which provides strategic and commercial support to NHS and private healthcare organisations, said analysis had highlighted recently-completed and planned developments including the Schoen Clinic and Cleveland Clinic in London, and the Nuffield centre at Barts.

Some existing providers are also adding capacity.

“Some of these new entrants were attracted by the growth and high margins in the private market when they planned their entry,” he says.

If private hospitals were to end up with the same 70/30 private/NHS split as provincial hospitals, this would see them undertaking c£600m per year of NHS work

“The oil price shock saw a 40-plus% drop in Gulf patients as countries repatriated or sought lower cost destinations, and the domestic market isn't growing as PMI membership remains flat.

“So what will happen as extra capacity hits a flat/declining market, and why is it relevant to the NHS?”

Firstly, he says, prices are likely to fall.

“Private medical insurers have historically paid a 20-25% premium to London hospitals, partly to reflect higher costs, but mainly because the supply is consolidated,” he said.

“Once insurers can create London networks without reliance on a single provider, prices are likely to drop.

“Around 25% of the market is provided by NHS private patient units, and while they generally command lower prices than private hospitals; they will also experience downward pressure on prices.

“The second main difference between central London and provincial private markets is that provincial hospitals' activity and revenue are respectively 45% and 30% of the total, whereas private hospitals in central London provide very little NHS work - 1% of revenue according to the latest Laing Buisson report - because they can fill enough capacity with higher-price, higher-margin private work.

Unless some of the older hospitals fall out of the market, it is likely that some of the competitors will aggressively pursue NHS e-referral and or outsourced elective surgery, which will be more profitable than empty theatres and beds

“As the private patients are spread among the growing capacity, some private hospitals will fall into significant losses, profitability according to accounts at companies house already dropped significantly between 2014 and 2017, with some already losing money.

“Unless some of the older hospitals fall out of the market, it is likely that some of the competitors will aggressively pursue NHS e-referral and or outsourced elective surgery, which will be more profitable than empty theatres and beds.”

He concluded: “The private patient market in central London is worth c£1.5billion a year to hospitals, according to Laing Buisson.

“If private hospitals were to end up with the same 70/30 private/NHS split as provincial hospitals, this would see them undertaking c£600m per year of NHS work, which would be at the expense of NHS trusts.

“I wonder how many have built this into their five-year plans?”

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