British Private Hospitals lose out to foreign operators

The UK's largest private Hospital operators were shocked recently when none of them were given contracts to run the new fast track centres offering surgery to NHS patients. BUPA, BMI, Nuffield, HCA and Capio, who together account for 90% of the UK private market, all lost out to foreign companies from USA, Canada and South Africa.

There will be 22 new centres in various parts of the country all providing treatment for a limited range of specialties. Chief among these are orthopaedics and ophthalmology where waiting lists are longest. The new centres will be in a mixture of new and refurbished facilities and are expected to treat 250,000 patients a year. Some of the staff will be seconded from the NHS, but many will be new hires and of these a significant proportion will be recruited from abroad.

There is no doubting the potential significance of this development for the private hospital market. The traditional players are already experiencing static numbers of insured patients and a rapidly reducing self-pay market as NHS waiting lists diminish. NHS work on contract has become an essential means of filling beds, but now it seems that the Government is coming to the view that the established providers do not work as efficiently as their foreign competitors. This has much to do with the fact that UK private hospitals are geared up to be all things to all patients. The result is plenty of high quality and high cost staff and equipment that is not fully utilised.

The bad news for the big five groups may not stop here. The new entrants into the market are commercial operators and are likely to want to expand into the private sector as well. Their concentration on doing only a small range of procedures gives them a price advantage that UK insurers may want to exploit. To do so will require a culture change, however, as the main insurers, BUPA and PPP have been reluctant to encourage single specialty or limited range operators and have always excluded them from their select Networks.

Some commentators see the improvements in the NHS as a threat to the market for private medical insurance. It could, however, have just the opposite effect. The combination of greater availability of NHS care and the opportunity to obtain cheaper private care could lead to much less expensive premiums; perhaps through insurers being more innovative in the way in which they develop products that mix public and private and select the low cost providers. This might encourage employers to expand rather than contract the numbers of their employees that they cover with insurance.