The latest report from industry analysts,
Laing and Buisson in Laing’s Healthcare Market Review highlights the difficult market that the private healthcare sector currently faces. A lack of growth in the private healthcare sector combined with an increased supply of facilities mean that there are tough times ahead.
Previous reports have tracked the impact of the recession on the private medical insurance sector. A fall in the number of people with medical insurance has resulted from redundancies, a reduction in corporate paid PMI, and the squeeze on domestic budgets. Around 6.9 million people (11.1% of the UK population) are covered by private medical insurance. The knock on effect of falling levels of insurance is that less people are using private hospitals.
Laing and Buisson report that in 2010 private hospital revenues remained static at £3.84 billion. The proportion of private hospital revenue which derives from insured patients has fallen to 59% of revenue in 2010 compared to 65% of revenue in 2005. At the same time, revenue from patients funded through the NHS has climbed significantly, from 14% in 2005 to 25% in 2010. It is believed that around 425,000 NHS patients (including overnight and day case patients) were treated in private hospitals in 2010. Although revenues have remained stable, the shift in the patient mix will have affected private hospital profits due to the lower margins on NHS patients compared to insured patients.
Concurrent with this period of static demand, supply of private healthcare facilities has grown to an all-time high. There are now 515 private healthcare facilities in the UK, compared to 454 in 2010. Of the 515 facilities, 211 are private hospitals with inpatient beds, and 304 are private day surgery units. There are now 73 NHS private patient units which are also fighting for a share of the private healthcare market. The government’s plan to remove the private patient cap (the restriction on the amount of revenue that an NHS hospital can earn from private patients) has the potential to generate more competition in the marketplace.
Challenges for the private hospital sector
There’s nothing to indicate that these recent trends are going to turn around any time soon. So the next year or two are going to present some interesting challenges for the private hospital sector. Static or declining demand combined with an increasing supply of beds means competition is going to hot up.
Effective marketing will be a key factor in deciding the winners and losers in this economic climate. Some companies will no doubt take the short term view.... “Cut the marketing budget” will be the call from the Finance Director’s office. But research has shown that organisations which increase and fine tune their marketing spend in a recession are those who emerge strongest when recovery comes.
Don’t panic, keep calm and carry on marketing
Companies that succeed through a recession are those that keep investing in and refining their marketing. What can you learn from companies such as these?
- People will not stop needing private healthcare. They will just be more selective and more rigorous in making the choice, especially when it’s on a self pay basis. You need to convince them that choosing your hospital/clinic/service is 100% the right decision, the safe decision, that you are the provider that they can trust.
- In a recession, you must ensure that you are “front of mind” when people are in buying mode and that means maintaining your online and offline promotional spend.
- You need a bigger emphasis than ever before on differentiating your service from the competition. Think hard... what really makes you different from the other private hospital or clinic down the road?
- Adapt..... Markets change, customers change. How close are you to your customers? What can you do differently that will really make you stand out?
- Lastly, what makes the current recession different from previous ones is the growth of the internet as a cost effective and measurable tool to test out different messages AND to get feedback from customers (Encourage your patients to contribute to Private Healthcare Ratings and Reviews).
If you want to learn more about how to market through a recession, I recommend that you download the Chartered Institute of Marketing’s White Paper on the role of marketing in a recession.
Find out about the latest private healthcare statistics in Laing's Private Healthcare Market Review 2011/12.
Date published: 30 January 2012
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