BMJ 2013;347:f6592 doi: 10.1136/bmj.f6592 (Published 7 November 2013)
Page 1 of 2
Feature
FEATURE INDEPENDENT HEALTHCARE
How private providers are feeling the pinch The economic downturn has meant hard times for the UK’s private healthcare providers. Sophie Goodchild reports Sophie Goodchild freelance journalist Oxfordshire, UK
The entire privately funded healthcare market in the UK is worth £6.4bn (€7.5bn; $10.5bn), with around one in eight people belonging to a scheme. However, this is still small fry compared with public provision. The NHS is a major client for many private healthcare providers, especially the five main hospital groups (HCA, Spire, BMI Healthcare, Ramsay, and Nuffield Health), and the Health and Social Care Act creates the conditions for the expansion of the private market. So in theory, private healthcare providers have substantial opportunities to benefit from the changes—and at a rapid rate. However, the economic downturn means that some sections of the market are feeling the pinch, according to industry analysts. Revenues generated by independent hospitals were £4.14bn in 2011 and have barely grown in real terms over the past two years (2010 to 2012), according to analysts Laing and Buisson. Its latest review of the healthcare market shows that business generated through patients with private medical cover has been declining, although this is still the main source of funding for private hospitals.1
Tough times
Insured patients accounted for just over half (59%) of overall revenue generated by independent hospitals in 2010 compared with nearly two thirds (65%) in 2005. Part of the reason for this fall is a resurgence of faith in the NHS, thanks to the previous government (Labour) slicing waiting times, but the economic downturn has also led to people cutting back on insurance.
As numbers go down, so the marketing goes up, with companies trying to exploit negative stories about the NHS. Last month, a private health insurance comparison website was forced to take down an advertisement on the grounds that it was using an “appeal to fear” to sell policies. Bestmedicalcover.co.uk claimed on a web page headed, “Your 3-step guide to avoid the NHS crisis” that the NHS in England was responsible for a “staggering” 13 000 deaths since 2005. But more than 70 people complained to the Advertising Standards Authority, which said the claim was misleading.
Private providers have also been relying on NHS work to fill their beds. The independent acute sector generated £1085m in revenue from treating NHS patients in 2011, representing just over a quarter of total income compared with just 14% in 2005. However, analysts believe this business has now peaked.
Meanwhile, competition seems to be increasing. The number of independent medical hospitals rose from 454 in 2010 to 515 in 2011. Then there is the competition from NHS hospitals. Income from private patients rose 12% last year to £434m, an increase of £47m in just a year. The figures were released in a freedom of information request, which also revealed that the highest increases in revenue from private patients were occurring at London hospitals, such as Great Ormond Street and Moorfields. Aside from the competition from NHS hospitals, new operators are coming into the marketplace hungry for a piece of the shrinking pie. These include the “superspecialty” London International Hospital. Promoted as a “world centre of excellence,” this hospital in Ravenscourt Park will specialise in treating cancer as well as heart and brain diseases. The driving force behind its development is Lord Khalid Hameed, the crossbench peer and former head of the Cromwell Hospital. Another problem is the rising cost of healthcare. The initial outlay for hi-tech kit such as the gamma knife to provide cutting edge care for patients can run into millions for private hospitals.
Fair competition? Other developments could mean an uncertain future for the private healthcare market. The outcome of a Competition Commission investigation into private medicine could tighten market conditions further. The final report is not expected until April 2014, but the commission’s provisional findings are damning.2 Too many hospitals are in the hands of too few providers, it warns, and this lack of competition means private patients are paying more than they should to private medical insurers—or for self funded treatment. The commission has identified 101 hospitals that face little local competition, with
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BMJ 2013;347:f6592 doi: 10.1136/bmj.f6592 (Published 7 November 2013)
Page 2 of 2
FEATURE
some of these located in areas where there are clusters of hospitals owned by one of the major hospital groups.
The report also highlights concerns about private providers’ use of “incentives” to clinicians. The commission has evidence that doctors are being offered loyalty payments in the form of secretarial services or consulting rooms in return for sending business to hospitals. Such offers, warns the inquiry, could influence referral decisions and create an incentive for excessive diagnostic tests. General practitioners too are being encouraged by some hospitals to refer patients to consultants who use their facilities, a practice that breaches General Medical Council guidelines. Other factors that are distorting competition include a lack of performance standards, along with a lack of transparency on any data collected. It means patients’ ability to compare providers is limited so they do not know which hospital or consultant to choose.
Hospitals in the private sector have to meet the same national care standards as those in the NHS, laid down by the Care Quality Commission, such as providing safe and coordinated care. So they are regulated and inspected in the same way as NHS hospitals.
To get a better deal for patients, the Competition Commission has recommended the radical measure of selling off just under 20 hospitals owned by three companies: BMI Healthcare, Spire, and HCA. Other proposals include banning the use of incentives for consultants and measures to improve available information on consultants’ fees and quality as well as on the quality of individual hospital services.
Professional response Some doctors are disappointed that the commission has taken such an aggressive line on hospitals rather than focusing on insurers (box). They believe that the commission has missed the point: few hospital providers are making money; consultants are seeing income flatline, especially outside London; and it is the insurers that are restricting patient choice. Private providers have rejected “absolutely” that they are making excess profits at the expense of patients or exercising market power. BMI Healthcare criticises the commission for ignoring the “financial realities” of keeping hospitals equipped with increasingly expensive technology to meet the demands of not only patients but also commissioners and insurers. HCA, which the commission criticised for charging significantly higher prices to insurers than other operators, has warned that the inquiry’s recommendations could undermine London’s reputation for “world class private healthcare and could precipitate a race to the bottom.” However, bodies such as the Independent Doctors Federation, which represents more than 900 GMC registered consultants
For personal use only: See rights and reprints http://www.bmj.com/permissions
and GPs in independent practice, says the commission is “pushing at an open door” on better outcome measures and data collection, which the industry is already working towards. For example, in a new initiative launched in 2012, the Private Healthcare Information Network receives data from a dozen member organisations, including Circle Health and Nuffield Health. The network has been providing information services on the private healthcare sector since April this year. “Most doctors in the private sector would relish the opportunity to show they’re good,” says Ian Mackay, the federation chairman.
There is no doubt that the inquiry has tarnished the reputation of private providers. The likely next step is that, just as happened with airports, these providers will seek a judicial review to prevent hospital sell-offs.
Meanwhile, predicting the future of the private healthcare market is challenging. Much depends on how the NHS performs and how competition beds down. However, analysts believe that the marketplace will become a lot more competitive, regardless of the Competition Commission’s shake-up. To ensure quick access to care for patients, private hospitals maintain spare bed capacity. But some hospitals may be forced to close unless they can deliver treatments more cheaply by increasing patient throughput, say analysts.“A lot of the players doing well are relying on international patients, but some private hospitals may have to close because they just don’t have the business,” says Philip Blackburn from Laing and Buisson. Other health experts disagree. They believe private providers will benefit from the rules being applied to them. Saffron Cordery, from the Foundation Trust Network, says that there are “huge opportunities opening up” for those providers who protect patient interests, providers who are “financially viable and healthy.”
Competing interests: I have read and understood the BMJ policy on declaration of interests and declare the following interests: I have been paid by pharmaceutical companies to attend advisory boards and provide media advice and was paid by Bupa to write a report on how to involve patients more in healthcare decisions. Provenance and peer review: Commissioned; not externally peer reviewed. 1 2 3
4
Laing and Buisson. Laing’s healthcare market review 2012-13. Laing and Buisson, 2013. Competition Commission. Private healthcare market investigation. www.competitioncommission.org.uk/our-work/directory-of-all-inquiries/private-healthcare-marketinvestigation. Harrop-Griffiths W, Primrose J, Briggs T, Lund V, Schofield J, Casey A, et al. Healthcare is not a simple market: the primary relationship is intangible but always lies between the doctor and the patient. Times 2013 Sep 30. www.thetimes.co.uk/tto/opinion/letters/ article3882270.ece. BMA. Doctors’ fees increasingly threatened by insurance companies. 2013. http://bma. org.uk/news-views-analysis/news/2013/april/doctors-fees-increasingly-threatened-byinsurance-companies.
Cite this as: BMJ 2013;347:f6592 © BMJ Publishing Group Ltd 2013
Subscribe: http://www.bmj.com/subscribe
BMJ 2013;347:f6592 doi: 10.1136/bmj.f6592 (Published 7 November 2013)
Page 3 of 2
FEATURE
Are private medical insurers restricting patient choice? Patients with private cover used to be referred for treatment by their general practitioner. They put their trust in their doctor to choose a specialist with a reputation for the best outcomes. However, medical insurers—including Bupa, AXA PPP, Aviva, and PruHealth—are being accused of restricting patient choice by introducing “open” referrals. They insist that GPs now fill in a generic referral. The patient then rings a call centre and the call handler then consults a list of preferred consultants. The Competition Commission’s view is that insurers are doing “exactly what their customers would expect” by keeping premiums down and promoting competition on price and quality. Bupa argues that open referral gives patients more choice because they can pick from two or three consultants with “at least” seven years’ experience. However, doctors argue that this practice is motivated by profit and that insurers are “delisting” consultants who refuse to accept a cut in fees. Cost cutting and a reduction in medical fees has resulted in a 124% leap in Bupa’s UK profits to over £59m in the first six months of this year. In a letter to the Times in September, the leaders of 16 professional bodies representing doctors urged the Competition Commission to act.3 One of their main arguments was that private medical insurers do not have any data on the quality of medical care or a specialist’s competencies. Cardiologist Duncan Dymond, a signatory, warns that doctors will leave private practice because it will be uneconomic to continue. “There are some people milking the system, and we don’t condone that. But while fees are going down costs such as indemnity insurance are going up, and many consultants are not going into private practice.” A BMA survey published in April this year highlighted delisting and fee cutting.4 It found that eight out of 10 consultants have been challenged by private medical insurers over their fees. The report also showed a tripling (from 11% to 34%) in the proportion of consultants threatened with derecognition by private insurers from 2011 to 2013. The proportion of consultants who set their own fees has also decreased from 36% in 2009 to 26% in 2013. Instead, the majority set their fees based on an insurance schedule. The survey also found the number of doctors carrying out some private practice fell from 60% in 2005 to 45% in 2013.
For personal use only: See rights and reprints http://www.bmj.com/permissions
Subscribe: http://www.bmj.com/subscribe
Page 1 of 2
Feature
FEATURE INDEPENDENT HEALTHCARE
How private providers are feeling the pinch The economic downturn has meant hard times for the UK’s private healthcare providers. Sophie Goodchild reports Sophie Goodchild freelance journalist Oxfordshire, UK
The entire privately funded healthcare market in the UK is worth £6.4bn (€7.5bn; $10.5bn), with around one in eight people belonging to a scheme. However, this is still small fry compared with public provision. The NHS is a major client for many private healthcare providers, especially the five main hospital groups (HCA, Spire, BMI Healthcare, Ramsay, and Nuffield Health), and the Health and Social Care Act creates the conditions for the expansion of the private market. So in theory, private healthcare providers have substantial opportunities to benefit from the changes—and at a rapid rate. However, the economic downturn means that some sections of the market are feeling the pinch, according to industry analysts. Revenues generated by independent hospitals were £4.14bn in 2011 and have barely grown in real terms over the past two years (2010 to 2012), according to analysts Laing and Buisson. Its latest review of the healthcare market shows that business generated through patients with private medical cover has been declining, although this is still the main source of funding for private hospitals.1
Tough times
Insured patients accounted for just over half (59%) of overall revenue generated by independent hospitals in 2010 compared with nearly two thirds (65%) in 2005. Part of the reason for this fall is a resurgence of faith in the NHS, thanks to the previous government (Labour) slicing waiting times, but the economic downturn has also led to people cutting back on insurance.
As numbers go down, so the marketing goes up, with companies trying to exploit negative stories about the NHS. Last month, a private health insurance comparison website was forced to take down an advertisement on the grounds that it was using an “appeal to fear” to sell policies. Bestmedicalcover.co.uk claimed on a web page headed, “Your 3-step guide to avoid the NHS crisis” that the NHS in England was responsible for a “staggering” 13 000 deaths since 2005. But more than 70 people complained to the Advertising Standards Authority, which said the claim was misleading.
Private providers have also been relying on NHS work to fill their beds. The independent acute sector generated £1085m in revenue from treating NHS patients in 2011, representing just over a quarter of total income compared with just 14% in 2005. However, analysts believe this business has now peaked.
Meanwhile, competition seems to be increasing. The number of independent medical hospitals rose from 454 in 2010 to 515 in 2011. Then there is the competition from NHS hospitals. Income from private patients rose 12% last year to £434m, an increase of £47m in just a year. The figures were released in a freedom of information request, which also revealed that the highest increases in revenue from private patients were occurring at London hospitals, such as Great Ormond Street and Moorfields. Aside from the competition from NHS hospitals, new operators are coming into the marketplace hungry for a piece of the shrinking pie. These include the “superspecialty” London International Hospital. Promoted as a “world centre of excellence,” this hospital in Ravenscourt Park will specialise in treating cancer as well as heart and brain diseases. The driving force behind its development is Lord Khalid Hameed, the crossbench peer and former head of the Cromwell Hospital. Another problem is the rising cost of healthcare. The initial outlay for hi-tech kit such as the gamma knife to provide cutting edge care for patients can run into millions for private hospitals.
Fair competition? Other developments could mean an uncertain future for the private healthcare market. The outcome of a Competition Commission investigation into private medicine could tighten market conditions further. The final report is not expected until April 2014, but the commission’s provisional findings are damning.2 Too many hospitals are in the hands of too few providers, it warns, and this lack of competition means private patients are paying more than they should to private medical insurers—or for self funded treatment. The commission has identified 101 hospitals that face little local competition, with
[email protected] For personal use only: See rights and reprints http://www.bmj.com/permissions
Subscribe: http://www.bmj.com/subscribe
BMJ 2013;347:f6592 doi: 10.1136/bmj.f6592 (Published 7 November 2013)
Page 2 of 2
FEATURE
some of these located in areas where there are clusters of hospitals owned by one of the major hospital groups.
The report also highlights concerns about private providers’ use of “incentives” to clinicians. The commission has evidence that doctors are being offered loyalty payments in the form of secretarial services or consulting rooms in return for sending business to hospitals. Such offers, warns the inquiry, could influence referral decisions and create an incentive for excessive diagnostic tests. General practitioners too are being encouraged by some hospitals to refer patients to consultants who use their facilities, a practice that breaches General Medical Council guidelines. Other factors that are distorting competition include a lack of performance standards, along with a lack of transparency on any data collected. It means patients’ ability to compare providers is limited so they do not know which hospital or consultant to choose.
Hospitals in the private sector have to meet the same national care standards as those in the NHS, laid down by the Care Quality Commission, such as providing safe and coordinated care. So they are regulated and inspected in the same way as NHS hospitals.
To get a better deal for patients, the Competition Commission has recommended the radical measure of selling off just under 20 hospitals owned by three companies: BMI Healthcare, Spire, and HCA. Other proposals include banning the use of incentives for consultants and measures to improve available information on consultants’ fees and quality as well as on the quality of individual hospital services.
Professional response Some doctors are disappointed that the commission has taken such an aggressive line on hospitals rather than focusing on insurers (box). They believe that the commission has missed the point: few hospital providers are making money; consultants are seeing income flatline, especially outside London; and it is the insurers that are restricting patient choice. Private providers have rejected “absolutely” that they are making excess profits at the expense of patients or exercising market power. BMI Healthcare criticises the commission for ignoring the “financial realities” of keeping hospitals equipped with increasingly expensive technology to meet the demands of not only patients but also commissioners and insurers. HCA, which the commission criticised for charging significantly higher prices to insurers than other operators, has warned that the inquiry’s recommendations could undermine London’s reputation for “world class private healthcare and could precipitate a race to the bottom.” However, bodies such as the Independent Doctors Federation, which represents more than 900 GMC registered consultants
For personal use only: See rights and reprints http://www.bmj.com/permissions
and GPs in independent practice, says the commission is “pushing at an open door” on better outcome measures and data collection, which the industry is already working towards. For example, in a new initiative launched in 2012, the Private Healthcare Information Network receives data from a dozen member organisations, including Circle Health and Nuffield Health. The network has been providing information services on the private healthcare sector since April this year. “Most doctors in the private sector would relish the opportunity to show they’re good,” says Ian Mackay, the federation chairman.
There is no doubt that the inquiry has tarnished the reputation of private providers. The likely next step is that, just as happened with airports, these providers will seek a judicial review to prevent hospital sell-offs.
Meanwhile, predicting the future of the private healthcare market is challenging. Much depends on how the NHS performs and how competition beds down. However, analysts believe that the marketplace will become a lot more competitive, regardless of the Competition Commission’s shake-up. To ensure quick access to care for patients, private hospitals maintain spare bed capacity. But some hospitals may be forced to close unless they can deliver treatments more cheaply by increasing patient throughput, say analysts.“A lot of the players doing well are relying on international patients, but some private hospitals may have to close because they just don’t have the business,” says Philip Blackburn from Laing and Buisson. Other health experts disagree. They believe private providers will benefit from the rules being applied to them. Saffron Cordery, from the Foundation Trust Network, says that there are “huge opportunities opening up” for those providers who protect patient interests, providers who are “financially viable and healthy.”
Competing interests: I have read and understood the BMJ policy on declaration of interests and declare the following interests: I have been paid by pharmaceutical companies to attend advisory boards and provide media advice and was paid by Bupa to write a report on how to involve patients more in healthcare decisions. Provenance and peer review: Commissioned; not externally peer reviewed. 1 2 3
4
Laing and Buisson. Laing’s healthcare market review 2012-13. Laing and Buisson, 2013. Competition Commission. Private healthcare market investigation. www.competitioncommission.org.uk/our-work/directory-of-all-inquiries/private-healthcare-marketinvestigation. Harrop-Griffiths W, Primrose J, Briggs T, Lund V, Schofield J, Casey A, et al. Healthcare is not a simple market: the primary relationship is intangible but always lies between the doctor and the patient. Times 2013 Sep 30. www.thetimes.co.uk/tto/opinion/letters/ article3882270.ece. BMA. Doctors’ fees increasingly threatened by insurance companies. 2013. http://bma. org.uk/news-views-analysis/news/2013/april/doctors-fees-increasingly-threatened-byinsurance-companies.
Cite this as: BMJ 2013;347:f6592 © BMJ Publishing Group Ltd 2013
Subscribe: http://www.bmj.com/subscribe
BMJ 2013;347:f6592 doi: 10.1136/bmj.f6592 (Published 7 November 2013)
Page 3 of 2
FEATURE
Are private medical insurers restricting patient choice? Patients with private cover used to be referred for treatment by their general practitioner. They put their trust in their doctor to choose a specialist with a reputation for the best outcomes. However, medical insurers—including Bupa, AXA PPP, Aviva, and PruHealth—are being accused of restricting patient choice by introducing “open” referrals. They insist that GPs now fill in a generic referral. The patient then rings a call centre and the call handler then consults a list of preferred consultants. The Competition Commission’s view is that insurers are doing “exactly what their customers would expect” by keeping premiums down and promoting competition on price and quality. Bupa argues that open referral gives patients more choice because they can pick from two or three consultants with “at least” seven years’ experience. However, doctors argue that this practice is motivated by profit and that insurers are “delisting” consultants who refuse to accept a cut in fees. Cost cutting and a reduction in medical fees has resulted in a 124% leap in Bupa’s UK profits to over £59m in the first six months of this year. In a letter to the Times in September, the leaders of 16 professional bodies representing doctors urged the Competition Commission to act.3 One of their main arguments was that private medical insurers do not have any data on the quality of medical care or a specialist’s competencies. Cardiologist Duncan Dymond, a signatory, warns that doctors will leave private practice because it will be uneconomic to continue. “There are some people milking the system, and we don’t condone that. But while fees are going down costs such as indemnity insurance are going up, and many consultants are not going into private practice.” A BMA survey published in April this year highlighted delisting and fee cutting.4 It found that eight out of 10 consultants have been challenged by private medical insurers over their fees. The report also showed a tripling (from 11% to 34%) in the proportion of consultants threatened with derecognition by private insurers from 2011 to 2013. The proportion of consultants who set their own fees has also decreased from 36% in 2009 to 26% in 2013. Instead, the majority set their fees based on an insurance schedule. The survey also found the number of doctors carrying out some private practice fell from 60% in 2005 to 45% in 2013.
For personal use only: See rights and reprints http://www.bmj.com/permissions
Subscribe: http://www.bmj.com/subscribe
