BMI hospitals shift strategy to target NHS business

BMI Healthcare, the leader in the private hospital market, has announced a radical change in strategy. Up to now, it was the only one of the "big four" private hospital owners not to be competing strongly for NHS business. While BUPA, Nuffield and Capio were rapidly restructuring in order to get costs down to NHS levels, BMI positioned itself as being mainly in business to serve the private customer.

Now, however, General Healthcare Group, the owner of BMI, has declared that it will "bid aggressively" for the next wave of contracts to operate Independent Sector Treatment Centres (ISTCs). ISTCs are the central feature of the Government's plans to cut waiting lists through use of the private sector; details of the next batch of plans are expected to be announced next month.

BMI's change of heart is probably due mainly to the appointment of a new Chief Executive. However, it does show that recent trends in healthcare are continuing and, if anything, intensifying. Waiting lists continue to drop - the latest quarter figures are the lowest in 10 years and, if the figures are to be believed, it is two years since anybody waited over 12 months for any procedure. At the same time, the industry analyst, Laing & Buisson, reports that the revenues of private hospitals grew by only 3% in 2003. This is the most recent year for which full figures are available and shows the lowest growth level recorded since 1997.

Opinions differ as to whether stagnation in the private sector is a direct result of the apparent improvements in the NHS. It is probably too early to make the judgement, but it is no surprise that all private hospitals are now hunting NHS business to boost flagging incomes. BMI's strategy is not identical to its competitors' - whereas BUPA decided to restructure all their hospitals to meet NHS prices and to sell off the ones that could not be made to fit the mould, BMI has decided upon a two-tier approach. It hopes to offer NHS prices for NHS business, but not to be forced by insurers into giving huge reductions for traditional private business. BUPA, on the other hand, is actively developing products with insurers to take advantage of its new efficiencies.

All these changes have so far had no real impact on the corporate customer. Insurers are still sticking to their 10% annual inflation mantra, and there have, as yet, been no new product initiatives. Past history suggests that the corporate market will not be much attracted by lower-priced products that involve restrictions on the provider. But at some point, there should be a dividend from lower claims costs that will result from the efficiencies produced in those groups; as with BUPA, where all hospitals are being tooled up to meet the NHS market.